ck0001683471-20230531
PROSPECTUS
Alexis Practical Tactical
ETF
(LEXI)
Listed
on NYSE Arca, Inc.
September 30,
2023
The
U.S. Securities and Exchange Commission (the “SEC”) has not approved or
disapproved of these securities or passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal
offense.
The
Alexis Practical Tactical ETF (the “Fund”) seeks total return primarily through
long-term capital appreciation, with income
and capital preservation as secondary objectives.
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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Shareholder
Fees (fees
paid directly from your investment) |
None |
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 |
0.85% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses |
0.00% |
Acquired
Fund Fees and Expenses |
0.15% |
Total
Annual Fund Operating Expenses* |
1.00% |
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*
The “Total Annual Fund
Operating Expenses” in this fee table may not correlate to the expense ratios in
the Fund’s financial highlights (and the Fund’s financial statements) because
the financial highlights include only the Fund’s direct operating expenses and
do not include Acquired Fund Fees and Expenses, which represent the Fund’s pro
rata share of the fees and expenses of the exchange-traded funds (“ETFs”) in
which it invests.
Example
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other funds. The Example assumes that
you invest $10,000 in the Fund for the time periods indicated and then redeem
all of your Shares at the end of those periods. The Example also assumes that
your investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The Example does not take into account brokerage commissions
that you may pay on your purchases and sales of Shares.
Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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1
Year: |
$102 |
3
Years: |
$318 |
5
Years: |
$552 |
10
Years: |
$1,225 |
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 the Total
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
For the fiscal year ended May 31, 2023, the Fund’s portfolio turnover rate was
70% of the average
value of its portfolio.
The
Fund is an actively managed ETF. Alexis Investment Partners, LLC (the “Adviser”)
serves as the Fund’s investment adviser. In seeking to achieve its investment
objective, the Fund has the flexibility to allocate its assets among different
markets around the world and various asset classes (e.g.,
equity, fixed income, commodities (including precious metals), and real estate
(including real estate investment trusts (“REITs”))) and strategies, including
alternative strategies (e.g.,
merger arbitrage, convertible bond and options-based strategies). The Fund also
may maintain a portion of its assets in cash and cash equivalents.
The
extent of the Fund’s exposure to and among asset classes and strategies is based
on the Adviser’s assessment of a range of proprietary and non-proprietary
indicators, market cycle analysis and practical judgment. The Adviser expects
that the indicators used will evolve over time and may include consideration of:
historical risk and return characteristics; global market valuations; global
yield curves; inflation; asset class, regional, and country correlations; profit
cycle analyses; style and sector rotation; expected beta (i.e.,
a stock’s volatility relative to the movements of the overall market); estimate
revisions and earnings surprises; investor sentiment; and other factors.
The
Fund expects to obtain its desired investment exposure primarily through
investments in other ETFs not affiliated with the Fund or the Adviser. In
selecting investments for the Fund’s portfolio, the Adviser employs quantitative
screening and optimization tools to achieve desired market exposures while
seeking to manage investment specific and other observable market risks. The
portfolio is monitored on an ongoing basis and rebalanced as necessary to seek
to ensure that desired market exposures and risk parameters are maintained.
Investments may be sold if they exhibit performance that might counteract the
desired exposures, to implement a revised allocation, or if the Adviser
identifies a more attractive alternative. An investment also may be sold if the
Adviser believes it exhibits unusual price movement or volatility.
The expected long-term (over a true secular cycle
of at least 10 years) target allocation of the Fund is 70% in equity investments
and 30% in fixed income investments. There is no requirement to manage the Fund
to maintain this target allocation. Instead, the tactical nature of the Fund’s
strategy may cause its asset allocation to vary materially depending on market
conditions, and its asset allocation over shorter or longer market cycles may
differ materially from the target.
The Fund may invest without limit in both developed and emerging
markets, including frontier markets. Emerging market and frontier market
countries are those countries with low- to middle-income economies as classified
by the World Bank or included in any of the Morgan Stanley Capital International
(MSCI) emerging markets or frontier markets indices. Such investments would be
made through ETFs that may include securities denominated in foreign currencies
and securities trading in the form of depositary receipts. The Fund may invest
directly and indirectly in fixed-income securities of any credit quality
including securities rated below investment grade and comparable unrated
(“junk”) securities, and expects to invest principally in fixed-income
securities that are issued by corporations, issued or guaranteed by the U.S.
government or its agencies or instrumentalities, obligations of other sovereign
nations, municipal obligations, mortgage-backed and asset-backed securities,
inflation-linked debt securities or zero coupon bonds. The Fund also may invest
directly and indirectly in senior loans and variable rate obligations. The Fund
may invest directly and indirectly in stocks of companies of any capitalization,
publicly traded REITs and exchange-traded notes (“ETNs”). The Fund’s investments
in cash or cash equivalents may include U.S. and foreign bank certificates of
deposit, fixed time deposits, repurchase agreements, bankers’ acceptances, and
other short-term instruments with a remaining maturity of 397 days or
less.
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk
that you could lose all or a portion of your investment in the
Fund. Some or all of these risks may adversely affect the Fund’s
net asset value (“NAV”), trading price, yield, total return and/or ability to
meet its investment objective. The following risks could affect the value
of your investment in the Fund:
•Asset
Allocation Risk.
The Fund’s investment performance depends upon the successful allocation by the
Adviser of the Fund’s assets among asset classes, geographical regions, industry
sectors, and specific issuers and investments. There is no guarantee that the
Adviser’s allocation techniques and decisions will produce the desired results.
The Adviser’s selection and weighting of asset classes may cause the Fund to
underperform other funds with a similar investment objective.
•Asset-Backed
and Mortgage-Backed Securities Risk.
Investors in asset-backed securities, including mortgage-backed securities and
structured finance investments, generally receive payments that are part
interest and part return of principal. These payments may vary based on the rate
at which the underlying borrowers pay off their loans. Some asset-backed
securities, including mortgage-backed securities, may have structures that make
their performance based on changes in interest rates and other factors difficult
to predict, causing their prices to be volatile. In particular, during periods
of falling interest rates, asset-backed securities are more likely to be called
or prepaid, which can result in the Fund having to reinvest proceeds in other
investments at a lower interest rate or less advantageous terms, which would
adversely affect the Fund. Asset-backed securities are particularly subject to
interest rate and credit risks. Mortgage-backed securities are particularly
sensitive to changes in interest rates. For example, rising interest rates tend
to extend the duration of fixed-rate mortgage-backed securities. As a result, a
rising interest rate environment can cause the prices of mortgage-backed
securities to be increasingly volatile and increase the risk that payments on
principal may occur more quickly or earlier than expected, each of which may
adversely affect the Fund’s holdings of mortgage-backed securities. In addition,
in general, a decline of housing values and other economic developments (such as
a rise in unemployment rates or a slowdown in the overall economy) may cause
delinquencies or non-payment in mortgages (particularly sub-prime and non-prime
mortgages) underlying mortgage-backed securities, which would likely adversely
impact the ability of the issuer to make principal and/or interest payments
timely or at all to holders of mortgage-backed securities and negatively affect
the Fund’s investments in such mortgage-backed securities. Asset-backed
securities also are subject to liquidity and valuation risk and, therefore, may
be difficult to value accurately or sell at an advantageous time or price and
involve greater transaction costs and wider bid/ask spreads than certain other
instruments. These risks are elevated given the currently distressed economic,
market, labor and public health conditions.
•Commodities
Risk.
Exposure to investments in physical commodities subjects the Fund to greater
volatility than investments in traditional securities, such as stocks and bonds.
Investments in physical commodities, including through exchange-traded
commodities (“ETCs”), exchange-traded pooled investment vehicles, or
commodity-linked derivative instruments, such as commodity-linked futures,
forwards and swaps, are generally speculative and can be extremely volatile (see
“Derivatives Risk” below). The commodities markets 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. Variables such as disease, drought, floods, weather,
trade, embargoes, tariffs and other political events, in particular, may have a
larger impact on commodity prices than on traditional securities. The prices of
commodities can also fluctuate widely due to supply and demand disruptions in
major producing or consuming regions. Because certain commodities may be
produced in a limited number of countries and may be controlled by a small
number of producers, political, economic and supply-related events in such
countries could have a
disproportionate
impact on the prices of such commodities. To the extent the Fund has exposure to
such commodities, these factors may affect the value of the Fund in varying
ways, and different factors may cause the value and the volatility of the Fund
to move in inconsistent directions at inconsistent rates. The current or “spot”
prices of physical commodities also may affect, in a volatile and inconsistent
manner, the prices of futures contracts in respect of the relevant
commodity.
◦Commodity
Tax Risk. As
a regulated investment company (“RIC”), the Fund must derive at least 90% of its
gross income each taxable year from certain qualifying sources of income under
the U.S. Internal Revenue Code of 1986, as amended (the “Code”). The income of
the Fund from commodities and certain commodity-linked derivatives is treated as
non-qualifying income for purposes of the Fund’s qualification as a RIC, in
which case, the Fund might fail to qualify as a RIC and cause the Fund to be
subject to federal income tax. To the extent the Fund invests in commodities and
commodity-linked derivatives, the Fund will seek to restrict its income from
such instruments that do not generate qualifying income to a maximum of 10% of
its gross income (when combined with its other investments that produce
non-qualifying income) to comply with the qualifying income test necessary for
the Fund to qualify as a RIC under Subchapter M of the Code. However, the Fund
may generate more non-qualifying income than anticipated, may not be able to
generate qualifying income in a particular taxable year at levels sufficient to
meet the qualifying income test, or may not be able to accurately predict the
non-qualifying income from these investments.
The
extent to which the Fund invests in commodities and commodity-linked derivatives
may be limited by the qualifying income and asset diversification tests, which
the Fund must continue to satisfy to maintain its status as a RIC. If the Fund
does not qualify as a RIC for any taxable year and certain relief provisions are
not available, the Fund’s taxable income would be subject to tax at the Fund
level and to a further tax at the shareholder level when such income is
distributed. Failure to comply with the requirements for qualification as a RIC
would have significant negative tax consequences to Fund shareholders. Under
certain circumstances, the Fund may be able to cure a failure to meet the
qualifying income requirement, but in order to do so the Fund may incur
significant Fund-level taxes, which would effectively reduce (and could
eliminate) the Fund’s returns. The tax treatment of certain commodity-linked
derivatives may be affected by future regulatory or legislative changes that
could affect the character, timing and/or amount of the Fund’s taxable income or
gains and distributions.
•Counterparty
Risk.
The Fund will be subject to credit risk with respect to the counterparties with
which the Fund enters into derivatives contracts, repurchase agreements, reverse
repurchase agreements, and other transactions. If a counterparty fails to meet
its contractual obligations, the Fund may be unable to terminate or realize any
gain on the investment or transaction, or to recover collateral posted to the
counterparty, resulting in a loss to the Fund. If the Fund holds collateral
posted by its counterparty, it may be delayed or prevented from realizing on the
collateral in the event of a bankruptcy or insolvency proceeding relating to the
counterparty.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, and/or other
service providers (including custodians and financial intermediaries) to suffer
data breaches or data corruption. Additionally, cybersecurity failures or
breaches of the electronic systems of the Fund, the Adviser, or the Fund’s other
service providers, market makers, Authorized Participants (“APs”), the Fund’s
primary listing exchange, or the issuers of securities in which the Fund invests
have the ability to disrupt and negatively affect the Fund’s business
operations, including the ability to purchase and sell Shares, potentially
resulting in financial losses to the Fund and its shareholders.
•Depositary
Receipt Risk.
Depositary receipts, including American Depositary Receipts (“ADRs”), involve
risks similar to those associated with investments in foreign securities, such
as changes in political or economic conditions of other countries and changes in
the exchange rates of foreign currencies. Depositary receipts listed on U.S.
exchanges are issued by banks or trust companies and entitle the holder to all
dividends and capital gains that are paid out on the underlying foreign shares
(“Underlying Shares”). When the Fund invests in depositary receipts as a
substitute for an investment directly in the Underlying Shares, the Fund is
exposed to the risk that the depositary receipts may not provide a return that
corresponds precisely with that of the Underlying Shares.
•Emerging
Markets Risk.
Emerging markets are subject to greater market volatility, lower trading volume,
political and economic instability, uncertainty regarding the existence of
trading markets and more governmental limitations on foreign investment than
more developed markets. In addition, securities in emerging markets may be
subject to greater price fluctuations than securities in more developed markets.
Differences in regulatory, accounting, auditing, and financial reporting and
recordkeeping standards could impede the Adviser’s ability to evaluate local
companies and impact the Fund’s performance.
•Equity
Market Risk. The
equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, sectors or companies in which the Fund invests.
Common stocks are generally exposed to greater risk than other types of
securities, such as preferred stocks and debt obligations, because common
stockholders generally have inferior rights to receive payment from issuers.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the NYSE Arca, Inc. (the “Exchange”) and may be
traded on U.S. exchanges other than the Exchange, there can be no assurance that
Shares will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of Shares may begin to mirror the liquidity of
the Fund’s underlying portfolio holdings, which can be significantly less liquid
than the Shares.
•ETN
Risk. An
ETN is a senior, unsecured unsubordinated debt securities issued by an
underwriting bank that is designed to provide returns that are linked to a
particular reference asset or benchmark less investor fees. ETNs have a maturity
date and generally are backed only by the creditworthiness of the issuer. As a
result, the value of an ETN may be influenced by time to maturity, level of
supply and demand for the ETN, volatility and lack of liquidity in the
underlying market (e.g.,
the commodities market), changes in the applicable interest rates, and changes
in the issuer’s credit rating and economic, legal, political or geographic
events that affect the underlying market. An ETN also may be subject to
commodities market risk and credit risk.
•Fixed
Income Risk.
Fixed income securities are subject to call, credit, extension, and interest
rate risk.
◦Call
Risk.
During periods of falling interest rates, an issuer of a callable bond held by
the Fund may “call” or repay the security before its stated maturity, and the
Fund may have to reinvest the proceeds at lower interest rates, resulting in a
decline in the Fund’s income.
◦Credit
Risk.
An issuer of a fixed income security, such as a corporate bond, may be unable or
unwilling to make interest and principal payments when due. The Fund also is
subject to the related risk that the value of a fixed income security may
decline because of concerns about the issuer’s creditworthiness. Credit risk is
heightened to the extent the Fund invests in below investment-grade securities,
which also are referred to as high-yield securities or junk bonds.
◦Extension
Risk.
During periods of rising interest rates, certain debt obligations will be paid
off substantially more slowly than originally anticipated and the value of those
securities may fall sharply, resulting in a decline in the Fund’s income and
potentially in the value of the Fund’s investments.
◦Interest
Rate Risk.
An increase in interest rates may cause the value of fixed-income securities
held by the Fund to decline. Variable and floating rate securities generally
increase or decrease in value in response to changes in interest rates, although
generally to a lesser degree than fixed-rate securities. The Fund may be subject
to a greater risk of rising interest rates due to the current period of
historically low rates and the effect of potential government fiscal policy
initiatives and resulting market reaction to those initiatives.
•Foreign
Markets Risk. Investments
in ADRs and ETFs that provide exposure to non-U.S. securities involve certain
risks that may not be present with investments in U.S. securities. For example,
the value of non-U.S. securities may be subject to risk of decline due to
foreign currency fluctuations or to political or economic instability.
Investments in ADRs also may be subject to withholding or other taxes and may be
indirectly subject to additional trading, settlement, custodial, and operational
risks. These and other factors can make investments in the Fund more volatile
and potentially less liquid than other types of investments.
•Frontier
Markets Risk. Certain
foreign markets are only in the earliest stages of development and may be
considered “frontier markets.” Frontier financial markets generally are less
liquid and more volatile than other markets, including markets in developing and
emerging economies. Securities may have limited marketability and be subject to
erratic price movements. Frontier markets may be impacted by political
instability, war, terrorist activities and religious, ethnic and/or
socioeconomic unrest. These and other factors make investing in frontier market
countries significantly riskier than investing in developed market or emerging
market countries.
•Growth
Investing Risk. Growth
stocks can be volatile for several reasons. Since those companies usually invest
a high portion of earnings in their businesses, they may lack the dividends of
value stocks that can cushion stock prices in a falling market. The
prices
of growth stocks are based largely on projections of the issuer’s future
earnings and revenues. If a company’s earnings or revenues fall short of
expectations, its stock price may fall dramatically.
•High
Yield and Unrated Securities Risk.
High yield, below investment grade and unrated high risk debt securities (which
also may be known as “junk bonds”) may present additional risks because these
securities may be less liquid, and therefore more difficult to value accurately
and sell at an advantageous price or time. High yield securities also present
more credit risk than investment grade bonds. The price of high yield securities
tends to be subject to greater volatility due to issuer-specific factors, such
as operating results and outlook and to real or perceived adverse economic and
competitive industry conditions. This exposure may be obtained through
investments in other investment companies. High yield securities structured as
zero-coupon bonds tend to be especially volatile as they are particularly
sensitive to downward pricing pressures from rising interest rates or widening
spreads and may require the Fund to make taxable distributions of imputed income
without receiving the actual cash currency.
•Inflation-Indexed
Securities Risk.
The principal amount of an inflation-indexed security typically increases with
inflation and decreases with deflation, as measured by a specified index. It is
possible that, in a period of declining inflation rates, the Fund could receive
at maturity less than the initial principal amount of an inflation-indexed
security. Changes in the values of inflation-indexed securities may be difficult
to predict, and it is possible that an investment in such securities will have
an effect different from that anticipated.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk. The
Fund is actively managed and its ability to achieve its investment objective is
dependent on the Adviser’s successful implementation of the Fund’s investment
strategies. The Adviser’s evaluations and assumptions regarding issuers,
securities, and other factors may not successfully achieve the Fund’s investment
objective given actual market conditions.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing Risk.
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and, therefore, subject to slower growth during
times of economic expansion. Large-capitalization companies also may be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
◦Mid-Capitalization
Investing Risk.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole.
◦Small-Capitalization
Investing Risk.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
•Models
and Data Risk.
The Adviser may rely on proprietary models and analysis (“Models and Data”) to
make decisions about which securities to purchase or sell or the timing of such
transactions. If Models and Data prove to be incorrect or incomplete, any
decisions made in reliance thereon expose the Fund to potential risks. Some of
the models used to construct the Fund are predictive in nature. The use of
predictive models has inherent risks. For example, such models may incorrectly
forecast future behavior, leading to potential losses. In addition, in
unforeseen or certain low-probability scenarios (often involving a market
disruption
of some kind), such models may produce unexpected results, which can result in
losses for the Fund. Furthermore, because predictive models are usually
constructed based on historical data supplied by third parties, the success of
relying on such models may depend heavily on the accuracy and reliability of the
supplied historical data.
•Municipal
Obligations Risk.
Issuers, including governmental issuers, may be unable to pay their obligations
as they come due. The values of municipal obligations may be adversely affected
by local political and economic conditions and developments. In addition, the
values of municipal obligations that depend on a specific revenue source to fund
their payment obligations may fluctuate as a result of actual or anticipated
changes in the cash flows generated by the revenue source or changes in the
priority of the municipal obligation to receive the cash flows generated by the
revenue source. Municipal obligations may be more susceptible to downgrades or
defaults during recessions or similar periods of economic stress. In addition,
changes in federal tax laws or the activity of an issuer may adversely affect
the tax-exempt status of municipal obligations. Loss of tax-exempt status may
cause interest received and distributed by the Fund to shareholders to be
taxable and may result in a significant decline in the values of such municipal
obligations.
•Other
Investment Company Risk.
The risks of investment in other investment companies, including ETFs, typically
reflect the risks of the types of instruments in which the investment companies
invest. By investing in another investment company, the Fund becomes a
shareholder of that investment company and bears its proportionate share of the
fees and expenses of the other investment company. Investments in ETFs are also
subject to the “ETF Risks” described above.
•REIT
Risk. Investment
in real estate companies, including REITs, exposes the Fund to the risks of
owning real estate directly. Real estate is highly sensitive to general and
local economic conditions and developments. The U.S. real estate market may
experience and has, in the past, experienced a decline in value, with certain
regions experiencing significant losses in property values. Many real estate
companies, including REITs, utilize leverage (and some may be highly leveraged),
which increases investment risk and the risk normally associated with debt
financing, and could potentially increase the Fund’s volatility and losses.
Exposure to such real estate may adversely affect Fund performance. Further,
REITs are dependent upon specialized management skills, and their investments
may be concentrated in relatively few properties, or in a small geographic area
or a single property type. REITs also are subject to heavy cash flow dependency
and, as a result, are particularly reliant on the proper functioning of capital
markets. A variety of economic and other factors may adversely affect a lessee's
ability to meet its obligations to a REIT. In the event of a default by a
lessee, the REIT may experience delays in enforcing its rights as a lessor and
may incur substantial costs associated in protecting its investments. In
addition, a REIT could fail to qualify for favorable regulatory treatment.
•Sector
Risk. To
the extent the Fund invests more heavily in particular sectors of the economy,
its performance will be especially sensitive to developments that significantly
affect those sectors. The Fund may invest a significant portion of its assets in
the following sector and, therefore, the performance of the Fund could be
negatively impacted by events affecting this sector.
•Senior
Loan Risk.
Investments in senior loans are subject to credit risk and general investment
risk. Credit risk refers to the possibility that the borrower of a senior loan
will be unable and/or unwilling to make timely interest payments and/or repay
the principal on its obligation. Default in the payment of interest or principal
on a senior loan will result in a reduction in the value of the senior loan and
consequently a reduction in the value of the Fund's investments and a potential
decrease in the NAV of the Fund. Senior loans also are subject to the risk that
the value of the collateral securing a senior loan may decline, be insufficient
to meet the obligations of the borrower or be difficult to liquidate. In
addition, the Fund's access to the collateral may be limited by bankruptcy or
other insolvency laws. Further, loans held by the Fund may not be considered
securities and, therefore, purchasers, such as the Fund, may not be entitled to
rely on the strong anti-fraud protections of the federal securities laws. Some
senior loans are subject to the risk that a court, pursuant to fraudulent
conveyance or other similar laws, could subordinate the senior loans to
presently existing or future indebtedness of the borrower or take other action
detrimental to lenders, including the Fund, such as invalidation of senior loans
or causing interest previously paid to be refunded to the borrower. Senior loans
also are subject to high yield securities risks and liquidity risks described
above.
•Sovereign
Debt Risk.
Sovereign debt instruments are subject to the risk that a governmental entity
may delay or refuse to pay interest or repay principal on its sovereign
debt.
•Temporary
Defensive Position Risk.
If the Fund takes a temporary defensive position, it may invest all or a large
portion of its assets in cash and/or cash equivalents. If the Fund takes a
temporary defensive position, it may not achieve its investment
objective.
•U.S.
Government Securities Risk.
Certain U.S. government securities are supported by the full faith and credit of
the United States; others are supported by the right of the issuer to borrow
from the U.S. Treasury; others are supported by the discretionary authority of
the U.S. government to purchase the agency's obligations; and still others are
supported only by the credit of the issuing agency, instrumentality, or
enterprise. U.S. government securities are subject to price fluctuations and to
default in the event that an agency or instrumentality defaults on an obligation
not backed by the full faith and credit of the United
States.
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Fund’s performance for the most
recent calendar year ended December 31. The table illustrates how the Fund’s
average annual returns for the 1-year and since inception periods compare with
those of the S&P 500®
Index, which reflects a broad measure of market performance. Performance also is
shown for the 35% S&P 500®
Index/35%
Morningstar Global Markets Index/30% Bloomberg U.S. Aggregate Bond Index, a
blended comparative index that represents the asset classes in which the Fund
invests. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is available on the
Fund’s website at www.lexietf.com.
Calendar Year Return as of
December 31
The
Fund’s calendar year-to-date return as of June 30, 2023 was 8.89%.
During the period shown in the bar chart, the best
performance for a quarter was 9.20% (for the quarter ended
December 31, 2022) and
the worst performance was
-13.26% (for the quarter ended June 30,
2022).
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Average Annual
Total Returns (for the Periods Ended December 31,
2022) |
| 1-Year |
Since
Inception
(6/30/21) |
Return Before
Taxes |
-14.38% |
-4.73% |
Return After
Taxes on Distributions |
-14.57% |
-4.91% |
Return After
Taxes on Distributions and Sale of Fund Shares |
-8.37% |
-3.59% |
S&P
500®
Index
(reflects no deductions for
fees, expenses, or taxes) |
-18.11% |
-5.77% |
35%
S&P 500®
Index/35% Morningstar Global Markets
Index/30%
Bloomberg U.S. Aggregate Bond Index
(reflects
no deductions for fees, expenses, or
taxes) |
-16.27% |
-7.62% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual
after-tax returns depend on an investor’s tax situation and may differ from
those shown. After-tax returns shown are not relevant to investors who hold
their Shares through tax-deferred arrangements such as an individual retirement
account (“IRA”) or other tax-advantaged accounts. In
certain cases, the figure representing “Return After Taxes on Distributions and
Sale of Shares” may be higher than the other return figures for the same period.
A higher after-tax return results when a capital loss occurs upon redemption and
provides an assumed tax deduction that benefits the
investor.
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Adviser |
Alexis
Investment Partners, LLC |
Portfolio
Managers |
Jason
Browne, President of the Adviser, and Alexis Browne, Chief Operating
Officer of the Adviser, have been the portfolio managers of the Fund since
its inception in 2021 |
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.lexietf.com.
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an individual retirement account (“IRA”) or other tax-advantaged
account. Distributions on investments made through tax-deferred arrangements may
be taxed later upon withdrawal of assets from those accounts.
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
The
Fund’s investment objective may be changed by the Board of Trustees (the
“Board”) of Listed Funds Trust (the “Trust”) without shareholder approval upon
written notice to shareholders.
The
Fund is a registered investment company, and the acquisition of Fund shares by
other investment companies is subject to the restrictions of Section 12(d)(1) of
the Investment Company Act of 1940 (the “1940 Act”). Any investment company
considering purchasing shares of the Fund in an amount that would exceed the
limits set forth in Section 12(d)(1) should first contact the Trust to determine
if the Fund may accept such investment. The SEC recently adopted Rule 12d1-4
under the 1940 Act, which permits registered investment companies to invest in
the Fund beyond the limits of Section 12(d)(1) subject to certain terms and
conditions, including that such registered investment companies enter into an
agreement with the Trust. However, because the Fund intends to invest in other
ETFs beyond the limits set forth in Section 12(d)(1) in reliance on Rule 12d1-4,
it may not be permitted to accept such an investment by another investment
company.
From
time to time, the Fund may engage in derivative transactions to seek income,
including by selling covered call options or covered put options, to hedge
against fluctuations in securities prices or currency exchange rates or interest
rates, to manage certain investment risks and/or to provide exposure to
securities or commodities. The Fund generally expects any such derivatives
exposure to be minimal.
An
investment in the Fund entails risks. The Fund could lose money, or its
performance could trail that of other investment alternatives. The following
provides additional information about the Fund’s principal risks. It is
important that investors closely review and understand these risks before making
an investment in the Fund. Just as in the Fund’s summary section, the principal
risks are presented in alphabetical order to facilitate finding particular risks
and comparing them with those of other funds. Each risk summarized below is
considered a “principal risk” of investing in the Fund, regardless of the order
in which it appears.
•Asset
Allocation Risk.
The Fund’s investment performance depends upon the successful allocation by the
Adviser of the Fund’s assets among asset classes, geographical regions, industry
sectors, and specific issuers and investments. There is no guarantee that the
Adviser’s allocation techniques and decisions will produce the desired results.
The Adviser’s selection and weighting of asset classes may cause the Fund to
underperform other funds with a similar investment objective. In particular, the
prices of stocks and bonds in the Fund’s portfolio may fall or fail to rise over
extended periods of time for a variety of reasons, including both general
financial market conditions and factors related to a specific issuer or
industry. These risks are generally greater for small- and medium-sized
companies. The Fund may invest in securities that are susceptible to specific
investment risks. Dividend-paying common stocks tend to go through cycles of
doing better (or worse) than the stock market in general. These periods have, in
the past, lasted for as long as several years. If stocks held by the Fund reduce
or stop paying dividends, the Fund’s ability to generate income may be affected.
Growth companies are those whose earnings growth potential appears to be greater
than that of the market in general, and whose revenue growth is expected to
continue for an extended period of time. Stocks of growth companies or “growth
securities” have market values that may be more volatile than those of other
types of investments. Growth companies typically do not pay a dividend, and
dividends can help cushion stock prices in market downturns and reduce potential
losses. Value companies are those whose stocks appear to be priced at a material
discount to the underlying value of the issuing company. The reason for the
apparent discount may reflect an underlying business condition that is more
serious or permanent than anticipated, and stocks of value companies may remain
depressed for extended periods of time, or may never realize their expected
potential value. Companies with an apparently attractive financial condition and
prospects for ongoing financial stability may experience adverse business
conditions specific to their industry or enterprise that cause their financial
condition and prospects to deteriorate. To the extent the Fund invests in
dividend-paying common stocks, growth stocks, value stocks or the stocks of
companies that experience negative developments in their financial condition,
the Fund may underperform funds that invest in other types of securities. These
instruments are particularly subject to interest rate, credit and liquidity and
valuation risks.
•Asset-Backed
and Mortgage-Backed Securities Risk.
Asset-backed securities represent interests in pools of underlying assets such
as motor vehicle installment sales or installment loan contracts, leases of
various types of real and personal property, and receivables from credit card
agreements. Mortgage-backed securities represent interests in pools of
residential mortgage loans purchased from individual lenders by a federal agency
or originated and issued by private lenders. The impairment of the value of
collateral or other assets underlying a mortgage-backed or asset-backed
security, such as that resulting from non-payment of loans, may result in a
reduction in the value of such security and losses to the Fund. Early payoffs in
the loans underlying such securities may result in the Fund receiving less
income than originally anticipated. The variability in prepayments will tend to
limit price gains when interest rates drop and exaggerate price declines when
interest rates rise. In the event of high prepayments, the Fund may be required
to invest proceeds at lower interest rates, causing the Fund to earn less than
if the prepayments had not occurred. Conversely, rising interest rates may cause
prepayments to occur at a slower than expected rate, which may effectively
change
a security that was considered short- or intermediate-term into a long-term
security. Long-term securities tend to fluctuate in value more widely in
response to changes in interest rates than shorter-term securities.
•Commodities
Risk. Exposure
to investments in physical commodities subjects the Fund to greater volatility
than investments in traditional securities, such as stocks and bonds. Investing
in physical commodities, including through ETCs or commodity-linked derivative
instruments such as commodity-linked futures, forwards, and swaps, is
speculative and can be extremely volatile (see “Derivatives Risk” below).
Volatility in the commodities markets may be caused by changes in overall market
movements; economic events and policies; war; acts of terrorism; natural
disasters; and technological developments. The current or “spot” prices of
physical commodities also may affect, in a volatile and inconsistent manner, the
prices of futures contracts in respect of the relevant commodity. Certain
commodities are used primarily in one industry, and fluctuations in levels of
activity in one industry may have a disproportionate effect on global demand for
a particular commodity. Moreover, recent growth in industrial production and
gross domestic product has made some developing nations oversized users of
commodities and has increased the extent to which certain commodities prices are
influenced by those markets. ETCs used by the Fund are expected to be pooled
investment vehicles with exposure to commodities such as foreign currencies,
precious metals, and other physical or non-physical commodities.
◦Commodity-Linked
Tax Risk. As
a RIC, the Fund must derive at least 90% of its gross income for each taxable
year from sources treated as qualifying income under the Code. The income of the
Fund from commodities and certain commodity-linked derivatives is treated as
non-qualifying income for purposes of the Fund’s qualification as a RIC, in
which case, the Fund might fail to qualify as a RIC and cause the Fund to be
subject to federal income tax. To the extent the Fund invests in commodities and
commodity-linked derivatives, the Fund will seek to restrict its income from
such instruments that do not generate qualifying income to a maximum of 10% of
its gross income (when combined with its other investments that produce
non-qualifying income) to comply with the qualifying income test necessary for
the Fund to qualify as a RIC under Subchapter M of the Code. However, the Fund
may generate more non-qualifying income than anticipated, may not be able to
generate qualifying income in a particular taxable year at levels sufficient to
meet the qualifying income test, or may not be able to accurately predict the
non-qualifying income from these investments.
The
extent to which the Fund invests in commodities and commodity-linked derivatives
may be limited by the qualifying income and asset diversification tests, which
the Fund must continue to satisfy to maintain its status as a RIC. If the Fund
does not qualify as a RIC for any taxable year and certain relief provisions are
not available, the Fund’s taxable income would be subject to tax at the Fund
level and to a further tax at the shareholder level when such income is
distributed. Failure to comply with the requirements for qualification as a RIC
would have significant negative tax consequences to Fund shareholders. Under
certain circumstances, the Fund may be able to cure a failure to meet the
qualifying income requirement, but in order to do so the Fund may incur
significant Fund-level taxes, which would effectively reduce (and could
eliminate) the Fund’s returns. The tax treatment of certain commodity-linked
derivatives may be affected by future regulatory or legislative changes that
could affect the character, timing and/or amount of the Fund’s taxable income or
gains and distributions.
•Counterparty
Risk.
The Fund will be subject to credit risk with respect to the counterparties with
which the Fund enters into derivatives contracts and other transactions such as
repurchase agreements or reverse repurchase agreements. The Fund's ability to
profit from these types of investments and transactions will depend on the
willingness and ability of its counterparty to perform its obligations. If a
counterparty fails to meet its contractual obligations, the Fund may be unable
to terminate or realize any gain on the investment or transaction, resulting in
a loss to the Fund. The Fund may experience significant delays in obtaining any
recovery in an insolvency, bankruptcy, or other reorganization proceeding
involving its counterparty (including recovery of any collateral posted by it)
and may obtain only a limited recovery or may obtain no recovery in such
circumstances. If the Fund holds collateral posted by its counterparty, it may
be delayed or prevented from realizing on the collateral in the event of a
bankruptcy or insolvency proceeding relating to the counterparty. Under
applicable law or contractual provisions, including if the Fund enters into an
investment or transaction with a financial institution and such financial
institution (or an affiliate of the financial institution) experiences financial
difficulties, then the Fund may in certain situations be prevented or delayed
from exercising its rights to terminate the investment or transaction, or to
realize on any collateral and may result in the suspension of payment and
delivery obligations of the parties under such investment or transactions or in
another institution being substituted for that financial institution without the
consent of the Fund. Further, the Fund may be subject to “bail-in” risk under
applicable law whereby, if required by the financial institution's authority,
the financial institution's liabilities could be written down, eliminated or
converted into equity or an alternative instrument of ownership. A bail-in of a
financial institution may result in a reduction in value of some or all of its
securities and, if the Fund holds such securities or has entered into a
transaction with such a financial security when a bail-in occurs, the Fund also
may be similarly impacted.
•Cybersecurity
Risk.
With the increased use of technologies such as the Internet and the dependence
on computer systems to perform business and operational functions, funds (such
as the Fund) and their service providers may be prone to operational and
information security risks resulting from cyber-attacks and/or technological
malfunctions. In general, cyber-attacks are deliberate, but unintentional events
may have similar effects. Cyber-attacks include, among others, stealing or
corrupting data maintained online or digitally, preventing legitimate users from
accessing information or services on a website, releasing confidential
information
without authorization, and causing operational disruption. Cybersecurity
incidents may allow an unauthorized party to gain access to Fund assets or
proprietary information, or cause the Fund, the Adviser, and/or other service
providers (including custodians and financial intermediaries) to suffer data
breaches or data corruption. Additionally, cybersecurity failures or breaches of
the electronic systems of the Fund, the Adviser, or the Fund’s other service
providers, market makers, APs, the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders. For instance, cyber-attacks or technical malfunctions may
interfere with the processing of shareholder or other transactions, affect the
Fund’s ability to calculate its NAV, cause the release of private shareholder
information or confidential Fund information, impede trading, cause reputational
damage, and subject the Fund to regulatory fines, penalties or financial losses,
reimbursement or other compensation costs, and additional compliance costs.
Cyber-attacks or technical malfunctions may render records of Fund assets and
transactions, shareholder ownership of Shares, and other data integral to the
functioning of the Fund inaccessible or inaccurate or incomplete. The Fund also
may incur substantial costs for cybersecurity risk management to prevent cyber
incidents in the future. The Fund and its shareholders could be negatively
impacted as a result.
•Depositary
Receipt Risk.
The Fund may hold the securities of non-U.S. companies in the form of depository
receipts, including ADRs and Global Depositary Receipts (“GDRs”). ADRs are
negotiable certificates issued by a U.S. financial institution that represent a
specified number of shares in a foreign stock and trade on a U.S. national
securities exchange, such as the New York Stock Exchange (“NYSE”). Sponsored
ADRs are issued with the support of the issuer of the foreign stock underlying
the ADRs and carry all of the rights of common shares, including voting rights.
GDRs are similar to ADRs but may be issued in bearer form and are typically
offered for sale globally and held by a foreign branch of an international bank.
The underlying issuers of certain depositary receipts, particularly unsponsored
or unregistered depositary receipts, are under no obligation to distribute
shareholder communications to the holders of such receipts, or to pass through
to them any voting rights with respect to the deposited securities. Issuers of
unsponsored depositary receipts are not contractually obligated to disclose
material information in the U.S. and, therefore, such information may not
correlate to the market value of the unsponsored depositary receipt. The
Underlying Shares in the Fund’s portfolio are usually denominated or quoted in
currencies other than the U.S. Dollar. As a result, changes in foreign currency
exchange rates may affect the value of the Fund’s portfolio. In addition,
because the Underlying Shares trade on foreign exchanges at times when the U.S.
markets are not open for trading, the value of the Underlying Shares may change
materially at times when the U.S. markets are not open for trading, regardless
of whether there is an active U.S. market for Shares.
•Emerging
Markets Risk.
Emerging markets are subject to greater market volatility, lower trading volume,
political and economic instability, uncertainty regarding the existence of
trading markets and more governmental limitations on foreign investment than
more developed markets. In addition, securities in emerging markets may be
subject to greater price fluctuations than securities in more developed markets.
Differences in regulatory, accounting, auditing, and financial reporting and
recordkeeping standards could impede the Adviser’s ability to evaluate local
companies and impact the Fund’s performance. There also may be limitations on
the rights and remedies available to investors in emerging market companies
compared to those associated with U.S. companies. In addition, brokerage and
other transaction costs on foreign securities exchanges are often higher than in
the U.S. and there is generally less government supervision and regulation of
exchanges, brokers and issuers in foreign countries.
•Equity
Market Risk. Common
stocks are susceptible to general stock market fluctuations and to volatile
increases and decreases in value as market confidence in and perceptions of
their issuers change. These investor perceptions are based on various and
unpredictable factors including: expectations regarding government, economic,
monetary and fiscal policies; inflation and interest rates; economic expansion
or contraction; and global or regional political, economic and banking crises.
If you held common stock, or common stock equivalents, of any given issuer, you
would generally be exposed to greater risk than if you held preferred stocks and
debt obligations of the issuer because common stockholders, or holders of
equivalent interests, generally have inferior rights to receive payments from
issuers in comparison with the rights of preferred stockholders, bondholders,
and other creditors of such issuers.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk.
The Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Investors buying or selling Shares in the secondary market will pay brokerage
commissions or other charges imposed by brokers, as determined by that broker.
Brokerage commissions are often a fixed amount and may be a significant
proportional cost for investors seeking to buy or sell relatively small amounts
of Shares. In addition, secondary market investors also will incur the cost of
the difference between the price at which an investor is willing to buy Shares
(the “bid” price) and the price at which an investor is willing to sell Shares
(the “ask” price). This difference in bid and ask prices is often referred to as
the “spread” or “bid/ask spread.” The bid/ask spread varies over time
for
Shares based on trading volume and market liquidity and is generally lower if
Shares have more trading volume and market liquidity and higher if Shares have
little trading volume and market liquidity. Further, a relatively small investor
base in the Fund, asset swings in the Fund and/or increased market volatility
may cause increased bid/ask spreads. Due to the costs of buying or selling
Shares, including bid/ask spreads, frequent trading of Shares may significantly
reduce investment results and an investment in Shares may not be advisable for
investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility or periods of
steep market declines and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant. The market price of Shares during the trading day, like the price
of any exchange-traded security, includes a “bid/ask” spread charged by the
exchange specialist, market makers or other participants that trade Shares. In
times of severe market disruption, the bid/ask spread can increase
significantly. At those times, Shares are most likely to be traded at a discount
to NAV, and the discount is likely to be greatest when the price of Shares is
falling fastest, which may be the time that you most want to sell your Shares.
The Adviser believes that, under normal market conditions, large market price
discounts or premiums to NAV will not be sustained because of arbitrage
opportunities. Because the Fund may hold securities that trade on foreign
exchanges that are closed when the Fund’s primary listing exchange is open, the
Fund is likely to experience premiums or discounts greater than those of ETFs
that invest in and hold only securities and other investments that are listed
and trade in the U.S.
◦Trading
Risk.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can
be no assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 500®
Index during a single day reaches certain thresholds (e.g.,
7%, 13%, and 20%). Additional rules applicable to the Exchange may halt trading
in Shares when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance that Shares will trade with
any volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than Shares.
•ETNs
Risk.
ETNs are subject to the credit risk of the issuer, and the value of an ETN may
drop due to a downgrade in the issuer’s credit rating, despite the underlying
market benchmark or assets remaining unchanged. The value of an ETN also may be
influenced by time to maturity, level of supply and demand for the ETN,
volatility and illiquidity in the underlying market, changes in the applicable
interest rates, and economic, legal, political, or geographic events that affect
the referenced underlying market or assets. ETNs also are subject to the risk
that the other party to the contract will not fulfill its contractual
obligations, which may cause losses or additional costs to the Fund. When the
Fund invests in ETNs it will bear its proportionate share of any fees and
expenses borne by the ETN. For certain ETNs, there may be restrictions on the
Fund’s right to redeem its investment in the ETN, which is meant to be held
until maturity.
•Fixed
Income Risk. Fixed
income securities are debt obligations issued by corporations, municipalities
and other borrowers and are subject to various risks, including call, credit,
extension and interest rate risks. Fixed income securities typically do not
provide any voting rights, except in cases when interest payments have not been
made and the issuer is in default. Fixed income securities with longer
maturities or durations may be subject to greater price fluctuations due to
interest rate, tax law, and general market changes than securities with shorter
maturities or durations. Coupons may be fixed or adjustable, based on a pre-set
formula. The prices of high-yield bonds, unlike those of investment-grade bonds,
may fluctuate unpredictably and not necessarily inversely with changes in
interest rates. Changes in the value of portfolio securities will not affect
cash income derived from these securities but will affect the Fund’s
NAV.
◦Call
Risk.
During periods of falling interest rates, an issuer of a callable bond held by
the Fund may “call” or repay the security before its stated maturity, and the
Fund may have to reinvest the proceeds at lower interest rates, resulting in a
decline in the Fund’s income.
◦Credit
Risk.
Credit risk is the risk that the Fund could lose money if an issuer or guarantor
of a debt instrument in which the Fund invests becomes unwilling or unable to
make timely principal and/or interest payments, or to otherwise meet its
obligations. To the extent the Fund has short exposure to the issuers of certain
fixed income securities, the Fund is subject to the risk that its investment in
a debt instrument could decline because of concerns about the issuer’s credit
quality or perceived financial condition. Fixed income securities are subject to
varying degrees of credit risk, which are sometimes reflected in credit ratings.
◦Extension
Risk.
During periods of rising interest rates, certain debt obligations will be paid
off substantially more slowly than originally anticipated and the value of those
securities may fall sharply, resulting in a decline in the Fund’s income and
potentially in the value of the Fund’s investments.
◦Interest
Rate Risk.
The values of debt securities usually rise and fall in response to changes in
interest rates. An increase in interest rates may cause the value of
fixed-income securities held by the Fund to decline. Changes in a debt
instrument’s value usually will not affect the amount of interest income paid to
the Fund, but will affect the value of the Fund’s shares. Interest rate risk is
generally greater for investments with longer maturities. Certain securities pay
interest at variable or floating rates. Variable rate securities reset at
specified intervals, while floating rate securities reset whenever there is a
change in a specified index rate. In most cases, these reset provisions reduce
the effect of changes in market interest rates on the value of the security.
However, some securities do not track the underlying index directly, but reset
based on formulas that can produce an effect similar to leveraging; others also
may provide for interest payments that vary inversely with market rates. The
market prices of these securities may fluctuate significantly when interest
rates change. Interest rate changes can be sudden and unpredictable, and are
influenced by a number of factors, including government policy, monetary policy,
inflation expectations, perceptions of risk, and supply and demand for bonds.
Changes in government or central bank policy, including changes in tax policy or
changes in a central bank’s implementation of specific policy goals, may have a
substantial impact on interest rates. This could lead to heightened levels of
interest rate, volatility and liquidity risks for the fixed income markets
generally and could have a substantial and immediate effect on the values of the
Fund's investments. There can be no guarantee that any particular government or
central bank policy will be continued, discontinued or changed, nor that any
such policy will have the desired effect on interest rates. The Fund may be
subject to a greater risk of rising interest rates due to the current period of
historically low rates and the effect of potential government fiscal policy
initiatives and resulting market reaction to those initiatives.
•Foreign
Markets Risk.
Investments in ADRs and ETFs that provide exposure to non-U.S. companies involve
certain risks that may not be present with investments in U.S. companies. For
example, investments in non-U.S. companies may be subject to risk of loss due to
foreign currency fluctuations or to political or economic instability. There may
be less information publicly available about a non-U.S. issuer than a U.S.
issuer. Securities of non-U.S. companies may be subject to different accounting,
auditing, financial reporting and investor protection standards than those of
U.S. companies. Investments tied to non-U.S. companies may be subject to
withholding or other taxes and may be subject to additional trading, settlement,
custodial, and operational risks. Because legal systems differ, there also is
the possibility that it will be difficult to obtain or enforce legal judgments
in certain countries. Since foreign exchanges may be open on days when the Fund
does not price their Shares, the value of the securities in the Fund’s
portfolios may change on days when shareholders will not be able to purchase or
sell Shares. Conversely, Shares may trade on days when foreign exchanges are
closed. Each of these factors can make investments in the Fund more volatile and
potentially less liquid than other types of investments.
•Frontier
Markets Risk. Certain
foreign markets are only in the earliest stages of development and may be
considered “frontier markets.” Frontier financial markets generally are less
liquid and more volatile than other markets, including markets in developing and
emerging economies. Frontier markets have a high concentration of market
capitalization and trading volume in a small number of issuers representing a
limited number of industries. Securities may have limited marketability and be
subject to erratic price movements. Frontier market governments typically
exercise substantial influence over many aspects of the private sector. In
certain cases, the government owns or controls many companies, including the
largest company in the country. Accordingly, governmental actions in the future
could have a significant effect on economic conditions in frontier market
countries. This could affect private sector companies and the Fund, as well as
the value of securities in the Fund’s portfolio. Further, substantial
limitations may exist in certain frontier market countries with respect to the
Fund’s ability to protect its legal interests and ability to repatriate its
investment, investment income or capital gains. The Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to the Fund of any
restrictions on investment. Procedures concerning transaction settlement and
dividend collection may be less reliable than in developed markets and larger
emerging markets. Frontier markets have been, and may continue to be, impacted
by political instability, war, terrorist activities and religious, ethnic and/or
socioeconomic unrest. These and other factors make investing in frontier market
countries significantly riskier than investing in developed market or emerging
market countries.
•Growth
Investing Risk. Growth
stocks can be volatile for several reasons. Since those companies usually invest
a high portion of earnings in their businesses, they may lack the dividends of
value stocks that can cushion stock prices in a falling market. The prices of
growth stocks are based largely on projections of the issuer’s future earnings
and revenues. If a company’s earnings or revenues fall short of expectations,
its stock price may fall dramatically. Growth stocks may be more expensive
relative to their earnings or assets compared to value or other stocks.
•High
Yield and Unrated Securities Risk. The
Fund may invest in high yield securities and unrated securities of similar
credit quality (commonly known as “junk bonds”). High yield securities generally
pay higher yields (greater income) than investment in higher quality securities;
however, high yield securities may be subject to greater levels of interest
rate, credit and liquidity risk than funds that do not invest in such
securities, and are considered predominantly speculative with respect to an
issuer’s continuing ability to make principal and interest payments. Successful
investment high yield securities and unrated securities of
similar
quality involves greater investment risk and is highly dependent on the
Adviser’s credit analysis. The value of these securities often fluctuates in
response to company, political or economic developments and declines
significantly over short periods of time or during periods of general economic
difficulty. An economic downturn or period of rising interest rates could
adversely affect the market for these securities and reduce the ability of the
Fund to sell these securities (liquidity risk). These risks are especially
heightened under current conditions. High yield securities structured as
zero-coupon bonds tend to be especially volatile as they are particularly
sensitive to downward pricing pressures from rising interest rates or widening
spreads and may require the Fund to make taxable distributions of imputed income
without receiving the actual cash currency. High yield securities also can be
thinly traded or have restrictions on resale, making them difficult to sell at
an acceptable price. Because objective pricing data may be less available,
judgment may play a greater role in the valuation process. If the issuer of a
security is in default with respect to interest or principal payments, the Fund
may lose its entire investment.
•Inflation-Indexed
Securities Risk. The
principal amount of an inflation-indexed security typically increases with
inflation and decreases with deflation, as measured by a specified index. It is
possible that, in a period of declining inflation rates, the Fund could receive
at maturity less than the initial principal amount of an inflation-indexed
security. Although the holders of U.S. TIPS receive no less than the par value
of the security at maturity, if the Fund purchases U.S. TIPS in the secondary
market whose principal values have previously been adjusted upward and there is
a period of subsequent declining inflation rates, the Fund may receive at
maturity less than it invested. Depending on the changes in inflation rates
during the period the Fund holds an inflation-indexed security, the Fund may
earn less on the security than on a conventional bond. The principal amounts of
inflation-indexed securities are typically only adjusted periodically, and
changes in the values of the securities may only approximately reflect changes
in inflation rates and may occur substantially after the changes in inflation
rates in question occur.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk. The
Fund is actively managed and uses proprietary investment strategies and
processes. There can be no guarantee that the Adviser’s judgments about the
attractiveness, value and potential appreciation of particular investments and
strategies for the Fund will be correct or produce the desired 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. If the
Adviser fails to accurately evaluate market risk or appropriately react to
current and developing market conditions, the Fund’s share price may be
adversely affected. Securities selected by the Adviser may not perform as
expected. This could result in the Fund’s underperformance compared to other
funds with similar investment objectives.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing Risk.
The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and, therefore, subject to slower growth during times of
economic expansion. Large-capitalization companies also may be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
◦Mid-Capitalization
Investing Risk.
The
securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole. Some mid-capitalization companies have limited product lines,
markets, financial resources, and management personnel and tend to concentrate
on fewer geographical markets relative to large-capitalization companies.
◦Small-Capitalization
Investing Risk.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
larger-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than larger capitalization stocks or the stock
market as a whole. Some small-capitalization companies have limited product
lines, markets, and financial and managerial resources and tend to concentrate
on fewer geographical markets relative to larger capitalization companies. There
is typically less publicly available information concerning
smaller-capitalization companies than for larger, more established companies.
Small-capitalization companies also may be particularly sensitive to changes in
interest rates, government regulation, borrowing costs and
earnings.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
economic, political and global macro factors, including public health issues,
growth concerns in the U.S. and overseas, uncertainties regarding interest
rates, trade tensions and the threat of tariffs imposed by the U.S. and other
countries. In addition, local, regional or global events such as war, including
Russia’s invasion of Ukraine, acts of terrorism, spread of infectious diseases
or other public health issues, recessions, rising inflation, or other events
could have a significant negative impact on the
performance
of the Fund and its investments. These developments as well as other events
could result in further market volatility and negatively affect financial asset
prices, the liquidity of certain securities and the normal operations of
securities exchanges and other markets, which could have an adverse effect on
the Fund.
The
respiratory illness COVID-19 has spread globally for over three years, resulting
in a global pandemic and major disruption to economies and markets around the
world, including the United States. During this time, financial markets have
experienced extreme volatility and severe losses, and trading in many
instruments has been disrupted or suspended. Liquidity for many instruments has
been greatly reduced for periods of time. Some sectors of the economy and
individual issuers have experienced particularly large losses. Governments and
central banks, including the Federal Reserve in the U.S., have taken
extraordinary and unprecedented actions to support local and global economies
and the financial markets. The impact of these measures, and whether they will
be effective to mitigate the economic and market disruption, will not be known
for some time. However, the rapid COVID-19 vaccination rollout in the United
States and certain other developed countries, coupled with the passage of
stimulus programs in the U.S. and abroad, have resulted in the re-opening of
businesses, the elimination or reduction of quarantine and masking requirements,
increased consumer demand, and the resumption of in-person schooling, travel and
events. As a result, many global economies, including the U.S. economy, have
either re-opened fully or decreased significantly the number of public safety
measures in place that are designed to mitigate virus transmission. Despite
these positive trends, the prevalence of new COVID-19 variants or other
unforeseen circumstances may result in the continued spread of the virus
throughout unvaccinated populations or a resurgence in infections among
vaccinated individuals. As a result, it remains unclear if recent positive
trends will continue in developed markets and whether such trends will spread
world-wide to countries with limited access to effective vaccines that are still
experiencing rising COVID-19 hospitalizations and deaths.
•Models
and Data Risk. When
Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon expose the Fund to potential risks. For example, by relying on
Models and Data, the Adviser may be induced to buy certain investments at prices
that are too high, to sell certain other investments at prices that are too low,
or to miss favorable opportunities altogether. Similarly, any hedging based on
faulty Models and Data may prove to be unsuccessful.
Some
of the models used by the Adviser for the Fund are predictive in nature. The use
of predictive models has inherent risks. For example, such models may
incorrectly forecast future behavior, leading to potential losses on a cash flow
and/or a mark-to-market basis. In addition, in unforeseen or certain
low-probability scenarios (often involving a market disruption of some kind),
such models may produce unexpected results, which can result in losses for the
Fund. Furthermore, because predictive models are usually constructed based on
historical data supplied by third parties, the success of relying on such models
may depend heavily on the accuracy and reliability of the supplied historical
data.
All
models rely on correct market data inputs. If incorrect market data is entered
into even a well-founded model, the resulting information will be incorrect.
However, even if market data is input correctly, “model prices” will often
differ substantially from market prices, especially for instruments with complex
characteristics, such as derivative instruments.
•Municipal
Obligations Risk.
The U.S. municipal securities market is volatile and can be significantly
affected by adverse tax, legislative, or political changes and the financial
condition of the issuers of municipal securities. Municipal obligations include
revenue obligations, which are generally backed by the revenues generated from a
specific project or facility and include private activity bonds and industrial
development bonds. Private activity and industrial development bonds are
dependent on the ability of the facility's user to meet its financial
obligations and on the value of any real or personal property pledged as
security for such payment. Private activity and industrial development bonds,
although issued by industrial development authorities, may be backed only by the
assets of the non-governmental user. Because many municipal securities are
issued to finance projects relating to education, health care, transportation
and utilities, conditions in those sectors can affect the overall municipal
securities market. In addition, municipal securities backed by current or
anticipated revenues from a specific project or specific asset can be negatively
affected by the discontinuance or reduction in the rate of the taxation
supporting the project or asset or the inability to collect revenues for the
project or from the assets. If the Internal Revenue Services (“IRS”) determines
the issuer of a municipal security has not complied with applicable tax
requirements, interest from the security could become taxable, and the security
could decline in value. Municipal obligations also may be subject to prepayment
risk and extension risk. Certain states and other governmental entities have
experienced, and may continue to experience, extreme financial pressures in
response to financial, economic and other factors, and may be, or be perceived
to be, unable to meet all of their obligations under municipal bonds issued or
guaranteed by them; such factors may result in substantial volatility in
municipal securities markets and losses to the Fund. Additionally, the Fund's
portfolio may have greater exposure to liquidity risk since the markets for such
securities may be less liquid than the traditional bond markets. There also may
be less information available on the financial condition of issuers of these
types of securities than for public corporations. This means that it may be
harder to buy and sell such securities, especially on short notice, and these
securities may be more difficult for the Fund to value accurately than
securities of public corporations.
•Other
Investment Companies Risk.
The risks of investment in other investment companies, including ETFs, typically
reflect the risks of the types of instruments in which the investment companies
invest. The Fund’s exposure to a particular risk will be proportionate to the
Fund’s overall allocation to the ETFs and the ETFs’ asset allocation. By
investing in another investment company, the Fund becomes a shareholder of that
investment company and bears its proportionate share of the fees and expenses of
the other investment company. Investments in ETFs also are subject to the “ETF
Risks” described above.
•REITs
Risk.
Investment in real estate companies, including REITs, exposes the Fund to the
risks of owning real estate directly. These include risks related to general,
regional and local economic conditions; fluctuations in interest rates and
property tax rates; shifts in zoning laws, environmental regulations and other
governmental action such as the exercise of eminent domain; increased operating
expenses; lack of availability of mortgage funds or other limits to accessing
the credit or capital markets; losses due to natural disasters; overbuilding;
losses due to casualty or condemnation; changes in property values and rental
rates; and other factors. Real estate is highly sensitive to general and local
economic conditions and developments. The U.S. real estate market may, in the
future, experience and has, in the past, experienced a decline in value, with
certain regions experiencing significant losses in property values. Many real
estate companies, including REITs, utilize leverage (and some may be highly
leveraged), which increases investment risk and the risk normally associated
with debt financing, and could potentially increase the Fund’s volatility and
losses. Exposure to such real estate may adversely affect Fund
performance.
Investments
in REITs involve unique risks. REITs may have limited financial resources, may
trade less frequently and in limited volume, and may be more volatile than other
securities. In addition, to the extent the Fund holds interests in REITs, it is
expected that investors in the Fund will bear two layers of asset-based
management fees and expenses (directly at the Fund level and indirectly at the
REIT level). In addition, REITs are dependent upon management skills and
generally may not be diversified. REITs also are subject to heavy cash flow
dependency, defaults by borrowers or lessees and self-liquidation. In addition,
U.S. REITs are subject to special U.S. federal tax requirements. A U.S. REIT
that fails to comply with such tax requirements may be subject to U.S. federal
income taxation, which may affect the value of the REIT and the characterization
of the REIT’s distributions. The U.S. federal tax requirement that a REIT
distributes substantially all of its net income to its shareholders may result
in the REIT having insufficient capital for future expenditures. A REIT that
successfully maintains its qualification may still become subject to U.S.
federal, state and local taxes, including excise, penalty, franchise, payroll,
mortgage recording, and transfer taxes, both directly and indirectly through its
subsidiaries. In the event of a default by a borrower or lessee, the REIT may
experience delays in enforcing its rights as a mortgagee or lessor and may incur
substantial costs associated with protecting investments.
•Sector
Risk. The
Fund’s investing approach may result in an emphasis on certain sectors or
sub-sectors of the market at any given time. To the extent the Fund invests more
heavily in one sector or sub-sector of the market, it thereby presents a more
concentrated risk and its performance will be especially sensitive to
developments that significantly affect those sectors or sub-sectors. In
addition, the value of Shares may change at different rates compared to the
value of shares of a fund with investments in a more diversified mix of sectors
and industries. An individual sector or sub-sector of the market may have
above-average performance during particular periods, but also may move up and
down more than the broader market. The several industries that constitute a
sector may all react in the same way to economic, political or regulatory
events. The Fund’s performance could also be affected if the sectors or
sub-sectors do not perform as expected. Alternatively, the lack of exposure to
one or more sectors or sub-sectors may adversely affect performance.
•Senior
Loan Risk. Investments
in senior loans are subject to credit risk and general investment risk. Credit
risk refers to the possibility that the borrower of a senior loan will be unable
and/or unwilling to make timely interest payments and/or repay the principal on
its obligation. Default in the payment of interest or principal on a senior loan
will result in a reduction in the value of the senior loan and consequently a
reduction in the value of the Fund’s investments and a potential decrease in the
NAV of the Fund. Senior loans also are subject to the risk that the value of the
collateral securing a senior loan may decline, be insufficient to meet the
obligations of the borrower or be difficult to liquidate. In addition, the
Fund's access to the collateral may be limited by bankruptcy or other insolvency
laws. Further, loans held by the Fund may not be considered securities and,
therefore, purchasers, such as the Fund, may not be entitled to rely on the
strong anti-fraud protections of the federal securities laws. Some senior loans
are subject to the risk that a court, pursuant to fraudulent conveyance or other
similar laws, could subordinate the senior loans to presently existing or future
indebtedness of the borrower or take other action detrimental to lenders,
including the Fund, such as invalidation of senior loans or causing interest
previously paid to be refunded to the borrower. Senior loans also are subject to
high yield securities risks and liquidity risks described above. In addition,
bank loans may be subject to extended settlement periods, which may impair the
Fund's ability to sell or realize the full value of its loans in the event of a
need to liquidate such loans in a compressed period of time. Some of the loans
in which the Fund may invest or obtain exposure to may be “covenant-lite” loans.
Covenant-lite loans may contain fewer or no maintenance covenants compared to
other loans and may not include terms which allow the lender to monitor the
performance of the borrower and declare a default if certain criteria are
breached. The Fund may experience relatively greater realized or unrealized
losses or delays in enforcing its rights on its holdings of covenant-lite loans
than its holdings of loans with the usual covenants.
•Sovereign
Debt Risk.
The Fund may invest in securities issued or guaranteed by foreign governmental
entities (known as sovereign debt securities). These investments are subject to
the risk of payment delays or defaults, due, for example, to cash flow problems,
insufficient foreign currency reserves, political considerations, large debt
positions relative to the country’s economy, or failure to implement economic
reforms. There is no legal or bankruptcy process for collecting sovereign debt.
Certain issuers of sovereign debt may be dependent on disbursements from foreign
governments, multilateral agencies and others abroad to reduce principal and
interest liabilities on their debt. Such disbursements may be conditioned upon a
debtor’s implementation of economic reforms and/or economic performance and the
timely service of such debtor’s obligations. A failure on the part of the debtor
to implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may
result
in the cancellation of such third parties’ commitments to lend funds to the
debtor, which may impair the debtor’s ability to service its debts on a timely
basis. As a holder of sovereign debt, the Fund may be requested to participate
in the restructuring of such sovereign indebtedness, including the rescheduling
of payments and the extension of further loans to debtors, which may adversely
affect the Fund. There can be no assurance that such restructuring will result
in the repayment of all or part of the debt.
•Temporary
Defensive Position Risk. If
the Fund takes a temporary defensive position, it may invest all or a large
portion of its assets in cash and/or cash equivalents. If the Fund takes a
temporary defensive position, it may not achieve its investment
objective.
•U.S.
Government Securities Risk.
Obligations issued or guaranteed by the U.S. government, its agencies,
authorities and instrumentalities and backed by the full faith and credit of the
United States only guarantee principal and interest will be timely paid to
holders of the securities. The entities do not guarantee that the value of the
securities will increase and, in fact, the market values of such obligations may
fluctuate. In addition, not all U.S. government securities are backed by the
full faith and credit of the United States; some are the obligation solely of
the entity through which they are issued. There is no guarantee that the U.S.
government would provide financial support to its agencies and instrumentalities
if not required to do so by law.
The
Fund may lend portfolio securities to brokers, dealers and other financial
organizations that meet capital and other credit requirements or other criteria
established by the Board. These loans, if and when made, may not exceed 33 1/3%
of the total asset value of the Fund (including the loan collateral). Such loans
may be terminated at any time. Any such loans must be continuously secured by
collateral maintained on a current basis in an amount at least equal to the
market value of the securities loaned by the Fund. In a loan transaction, as
compensation for lending its securities, the Fund will receive a portion of the
dividends or interest accrued on the securities held as collateral or, in the
case of cash collateral, a portion of the income from the investment of such
cash. In addition, the Fund will receive the amount of all dividends, interest
and other distributions on the loaned securities. However, the borrower has the
right to vote the loaned securities. The Fund will call loans to vote proxies if
a material issue affecting the investment is to be voted upon. Loans are made
only to borrowers that are deemed by the securities lending agent to be of good
financial standing. Should the borrower of the securities fail financially, the
Fund may experience delays in recovering the securities or exercising its rights
in the collateral. In a loan transaction, the Fund also will bear the risk of
any decline in value of securities acquired with cash collateral. The Fund will
attempt to minimize this risk by limiting the investment of cash collateral to
high quality instruments of short maturity.
To
respond to adverse market, economic, political, or other conditions, the Fund
may invest up to 100% of its assets in a temporary defensive manner by holding
all or a substantial portion of its assets in cash, cash equivalents, or other
high quality short-term investments. Temporary defensive investments generally
may include short-term U.S. government securities, commercial paper, bank
obligations, repurchase agreements, money market fund shares, other money market
instruments, and ETFs that invest in the foregoing instruments. The Adviser also
may invest in these types of securities or hold cash while looking for suitable
investment opportunities or to maintain liquidity. In these circumstances, the
Fund may be unable to achieve its investment objective.
Information
about the Fund’s daily portfolio holdings is available at www.lexietf.com. A
complete description of the Fund’s policies and procedures with respect to the
disclosure of the Fund’s portfolio holdings is available in the Fund’s Statement
of Additional Information (the “SAI”).
Alexis
Investment Partners, LLC, located at 103 Casterly Green Court, Montgomery, Texas
77316, serves as the investment adviser for the Fund. The Adviser, subject to
the oversight of the Board, provides an investment management program for the
Fund and manages the day-to-day investment of the Fund’s assets. The Adviser
also arranges for transfer agency, custody, fund administration, distribution
and all other services necessary for the Fund to operate. The Adviser is an
SEC-registered investment adviser that provides investment advisory services to
institutional clients, in addition to providing investment advisory services to
the Fund. As of June 30, 2023, the Adviser had approximately $157.7 million in
assets under management.
For
the services it provides to the Fund, the Adviser is entitled to a unified
management fee, which is calculated daily and paid monthly, at an annual rate
based on the Fund’s average daily net assets, as follows:
|
| |
0.85%
on first $250,000,000 |
0.75%
on the next $250,000,000 |
0.65%
in excess of $500,000,000 |
Pursuant
to an investment advisory agreement between the Trust, on behalf of the Fund,
and the Adviser (the “Advisory Agreement”), the Adviser has agreed to pay all
expenses of the Fund except the fee payable to the Adviser under the Advisory
Agreement, interest charges on any borrowings, dividends, and other expenses on
securities sold short, taxes, brokerage commissions and other expenses incurred
in placing orders for the purchase and sale of securities and other investment
instruments, acquired fund fees and expenses, accrued deferred tax liability,
extraordinary expenses, and distribution fees and expenses paid by the Trust
under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act.
A
discussion of the basis for the Board’s approval of the Advisory Agreement is
available in the Fund’s Annual
Report to Shareholders
for the fiscal year ended May 31, 2023.
Jason
Browne and Alexis Browne are jointly and primarily responsible for the
day-to-day management of the Fund’s portfolio.
Mr.
Browne is the President and founder of the Adviser and serves as Lead Portfolio
Manager and Chief Compliance Officer. He has decades of experience investing for
individual and institutional clients and as portfolio manager and chief
investment strategist for a series of mutual funds. Prior to founding the
Adviser, Mr. Browne served as Chief Investment Strategist and Portfolio Manager
(2018-2019), Chief Investment Officer (2011-2018), and Portfolio Manager
(2000-2011) at FundX Investment Group. Among other responsibilities, he directed
options trading and tactical decisions for FundX Investment Group’s long/short
equity mutual fund. He also served as Principal Executive Officer and President
of FundX Investment Trust (2014-2018). Mr. Browne earned his MBA from St Mary’s
College in 2008 and his BA from San Francisco State University in 1994. He also
maintains his ChFC and AIF designations.
Ms.
Browne serves as a Portfolio Manager and Chief Operating Officer of the Adviser.
She is heavily involved in client relationships, trading decisions, back office
and day-to-day operations, and research projects. Prior to joining the Adviser
in 2018, Ms. Browne had engaged in a series of research projects at FundX
Investment Group during summer internships in 2016 and 2017. From 2019 to 2020,
she served on the Thompson Portfolio Board, where she managed part of Lehigh
University’s endowment. Ms. Browne graduated with a BA in Economics from Lehigh
University with High Honors in 2020.
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.
Foreside
Fund Services, LLC, a wholly-owned subsidiary of Foreside Financial Group, LLC
(doing business as ACA Group) (the “Distributor”), serves as the principal
underwriter and distributor of the Fund’s Shares. The Distributor’s principal
address is Three Canal Plaza, Suite 100, Portland, Maine 04101. The Distributor
will not distribute Shares in less than whole Creation Units, and it does not
maintain a secondary market in the Shares. The Distributor is a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
Financial Industry Regulatory Authority, Inc. (“FINRA”). The Distributor has no
role in determining the policies of the Fund or the securities that are
purchased or sold by the Fund and is not affiliated with the Adviser or any of
its affiliates.
U.S.
Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services,
located at 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as the
administrator and transfer agent for the Fund.
U.S.
Bank National Association, located at 1555 North Rivercenter Drive, Suite 302,
Milwaukee, Wisconsin 53212, serves as the custodian for the Fund.
Morgan,
Lewis & Bockius LLP, located at 1111 Pennsylvania Avenue, N.W., Washington,
D.C. 20004, serves as legal counsel to the Trust.
Cohen
& Company, Ltd., located at 1350 Euclid Avenue, Suite 800, Cleveland, Ohio
44115, serves as the Fund’s independent registered public accounting firm. The
independent registered public accounting firm is responsible for auditing the
annual financial statements of the Fund.
The
Fund issues and redeems Shares only in Creation Units at the NAV per share next
determined after receipt of an order from an AP. Only APs may acquire Shares
directly from the Fund, and only APs may tender their Shares for redemption
directly to the Fund, at NAV. APs must be a member or participant of a clearing
agency registered with the SEC and must execute a Participant Agreement that has
been agreed to by the Distributor, and that has been accepted by the Fund’s
transfer agent, with respect to purchases and redemptions of Creation Units.
Once created, Shares trade in the secondary market in quantities less than a
Creation Unit.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Individual Shares are listed for trading on the secondary market on the Exchange
and can be bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the
bid and the offer price in the secondary market on each leg of a round trip
(purchase and sale)
transaction.
In addition, because secondary market transactions occur at market prices, you
may pay more than NAV when you buy Shares and receive less than NAV when you
sell those Shares.
Shares
are held in book-entry form, which means that no stock certificates are issued.
The Depository Trust Company (the “DTC”) or its nominee is the record owner of
all outstanding Shares.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares. DTC’s
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other institutions that directly or indirectly
maintain a custodial relationship with DTC. As a beneficial owner of Shares, you
are not entitled to receive physical delivery of stock certificates or to have
Shares registered in your name, and you are not considered a registered owner of
Shares. Therefore, to exercise any right as an owner of Shares, you must rely
upon the procedures of DTC and its participants. These procedures are the same
as those that apply to any other securities that you hold in book entry or
“street name” through your brokerage account.
The
Fund imposes no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly from the Fund, are an essential part of the ETF process and help
keep Share trading prices in line with NAV. As such, the Fund accommodates
frequent purchases and redemptions by APs. However, frequent purchases and
redemptions for cash may increase tracking error and portfolio transaction costs
and lead to the realization of capital gains. The Fund’s fair valuation of its
holdings consistent with the 1940 Act and Rule 2a-5 thereunder and its ability
to impose transaction fees on purchases and redemptions of Creation Units to
cover the custodial and other costs incurred by the Fund in effecting trades
help to minimize the potential adverse consequences of frequent purchases and
redemptions.
The
Fund’s NAV is calculated as of the scheduled close of regular trading on the New
York Stock Exchange (the “NYSE”), generally 4:00 p.m. Eastern time, each day the
NYSE is open for business. The NAV is calculated by dividing the Fund’s net
assets by its Shares outstanding.
In
calculating its NAV, the Fund generally values its assets on the basis of market
quotations, last sale prices, or estimates of value furnished by a pricing
service or brokers who make markets in such instruments. For example, the Fund
generally values equity securities at their readily available market quotations.
If such information is not available for an investment held by the Fund or is
determined to be unreliable, the investment will be valued by the Adviser at
fair value pursuant to procedures established by the Adviser and approved by the
Board (as described below).
The
Adviser has been designated by the Board as the valuation designee for the Fund
pursuant to Rule 2a-5 under the 1940 Act. In its capacity as valuation designee,
the Adviser has adopted procedures and methodologies to fair value Fund
investments whose market prices are not “readily available” or are deemed to be
unreliable. For example, such circumstances may arise when: (i) an investment
has been de-listed or has had its trading halted or suspended; (ii) an
investment’s primary pricing source is unable or unwilling to provide a price;
(iii) an investment’s primary trading market is closed during regular market
hours; or (iv) an investment’s value is materially affected by events occurring
after the close of the investment’s primary trading market. Generally, when fair
valuing an investment held by the Fund, the Adviser will take into account all
reasonably available information that may be relevant to a particular valuation
including, but not limited to, fundamental analytical data regarding the issuer,
information relating to the issuer’s business, recent trades or offers of the
investment, general and/or specific market conditions and the specific facts
giving rise to the need to fair value the investment. Fair value determinations
are made in good faith and in accordance with the fair value methodologies
established by the Adviser. Due to the subjective and variable nature of
determining the fair value of a security or other investment, there can be no
assurance that the Adviser’s determined fair value will match or closely
correlate to any market quotation that subsequently becomes available or the
price quoted or published by other sources. In addition, the Fund may not be
able to obtain the fair value assigned to an investment if the Fund were to sell
such investment at or near the time its fair value is determined.
Section
12(d)(1) of the 1940 Act and the rules thereunder limit investments by
registered investment companies in the securities of other investment companies.
Registered investment companies are permitted to invest in the Fund beyond the
limits set forth in section 12(d)(1), subject to certain terms and conditions,
including that such investment companies enter into an agreement with the
Fund.
The
Fund intends to pay out dividends in cash, if any, and distribute any net
realized capital gains to its shareholders at least annually. The Fund will
declare and pay capital gain distributions in cash, if any. Distributions in
cash may be reinvested automatically in additional whole Shares only if the
broker through whom you purchased Shares makes such option available. Your
broker is responsible for distributing the income and capital gain distributions
to you.
The
following discussion is a summary of certain important U.S. federal income tax
considerations generally applicable to investments in the Fund. Your investment
in the Fund may have other tax implications. Please consult your tax adviser
about the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws. This summary does not apply
to Shares held in an IRA or other tax-qualified plans, which are generally not
subject to current tax. Transactions relating to Shares held in such accounts
may, however, be taxable at some time in the future. This summary is based on
current tax laws, which may change.
The
Fund intends to qualify each year for treatment as a RIC. If it meets certain
minimum distribution requirements, a RIC is not subject to tax at the fund level
on income and gains from investments that are timely distributed to
shareholders. However, the Fund’s failure to qualify as a RIC or to meet minimum
distribution requirements would result (if certain relief provisions were not
available) in fund-level taxation and, consequently, a reduction in income
available for distribution to shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA, you need to be aware of the possible tax consequences
when the Fund makes distributions, when you sell your Shares listed on the
Exchange, and when you purchase or redeem Creation Units (APs only).
The
Fund intends to distribute, at least annually, substantially all of its net
investment income and net capital gains. For federal income tax purposes,
distributions of investment income are generally taxable as ordinary income or
qualified dividend income. Taxes on distributions of capital gains (if any) are
determined by how long the Fund owned the investments that generated them,
rather than how long a shareholder has owned his or her Shares. Sales of assets
held by the Fund for more than one year generally result in long-term capital
gains and losses, and sales of assets held by the Fund for one year or less
generally result in short-term capital gains and losses. Distributions of the
Fund’s net capital gain (the excess of net long-term capital gains over net
short-term capital losses) that are reported by the Fund as capital gain
dividends (“Capital Gain Dividends”) will be taxable as long-term capital gains,
which for non-corporate shareholders are subject to tax at reduced rates of up
to 20% (lower rates apply to individuals in lower tax brackets). Distributions
of short-term capital gain will generally be taxable as ordinary income.
Dividends and distributions are generally taxable to you whether you receive
them in cash or reinvest them in additional Shares.
Distributions
reported by the Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income derived from dividends paid by U.S. corporations or
certain foreign corporations that are either incorporated in a U.S. possession
or eligible for tax benefits under certain U.S. income tax treaties. In
addition, dividends that the Fund receives in respect of stock of certain
foreign corporations may be qualified dividend income if that stock is readily
tradable on an established U.S. securities market. Corporate shareholders may be
entitled to a dividends received deduction for the portion of dividends they
receive from the Fund that are attributable to dividends received by the Fund
from U.S. corporations, subject to certain limitations. For such dividends to be
taxed as qualified dividend income to a non-corporate shareholder, the Fund must
satisfy certain holding period requirements with respect to the underlying stock
and the non-corporate shareholder must satisfy holding period requirements with
respect to his or her ownership of the Fund’s Shares. Holding periods may be
suspended for these purposes for stock that is hedged. Certain of the Fund’s
investment strategies may limit its ability to make distributions eligible to be
treated as qualified dividend income.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from the Fund.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable even if they are paid from income or gains earned by the Fund before
your investment (and thus were included in the Shares’ NAV when you purchased
your Shares).
You
may wish to avoid investing in the Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your
investment.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
the Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. Gains from the sale or other disposition of
your Shares from non-U.S. shareholders generally are not subject to U.S.
taxation, unless you are a nonresident alien individual who is physically
present in the U.S. for 183 days or more per year. The Fund may, under
certain
circumstances, report all or a portion of a dividend as an “interest-related
dividend” or a “short-term capital gain dividend,” which would generally be
exempt from this 30% U.S. withholding tax, provided certain other requirements
are met. Different tax consequences may result if you are a foreign shareholder
engaged in a trade or business within the United States or if a tax treaty
applies.
The
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage of the taxable distributions and sale proceeds paid to any
shareholder who fails to properly furnish a correct taxpayer identification
number, who has underreported dividend or interest income, or who fails to
certify that the shareholder is not subject to such withholding.
Provided
that a shareholder holds Shares as capital assets, any capital gain or loss
realized upon a sale or exchange of Shares generally is treated as a long-term
capital gain or loss if Shares have been held for more than one year and as a
short-term capital gain or loss if Shares have been held for one year or less.
However, any capital loss on a sale of Shares held for six months or less is
treated as long-term capital loss to the extent of Capital Gain Dividends paid
with respect to such Shares. Any loss realized on a sale will be disallowed to
the extent Shares are acquired, including through reinvestment of dividends,
within a 61-day period beginning 30 days before and ending 30 days after the
disposition of Shares. The ability to deduct capital losses may be
limited.
The
cost basis of Shares acquired by purchase will generally be based on the amount
paid for the Shares and then may be subsequently adjusted for other applicable
transactions as required by the Code. The difference between the selling price
and the cost basis of Shares generally determines the amount of the capital gain
or loss realized on the sale or exchange of Shares. Contact the broker through
whom you purchased your Shares to obtain information with respect to the
available cost basis reporting methods and elections for your
account.
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered, plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The IRS may
assert, however, that a loss that is realized upon an exchange of securities for
Creation Units may not be currently deducted under the rules governing “wash
sales” (for an AP who does not mark-to-market its holdings) or on the basis that
there has been no significant change in economic position. APs exchanging
securities should consult their own tax adviser with respect to whether wash
sale rules apply and when a loss might be deductible.
The
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. The Fund may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause the Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in kind. As a result, the Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Certain
of the Fund’s investments, such as investments in commodities and certain
commodity-linked derivatives, when made directly, will not produce qualifying
income to the Fund. To the extent the Fund invests in commodity-linked
derivatives, the Fund will seek to restrict its income from such instruments
that do not generate qualifying income to a maximum of 10% of its gross income
(when combined with its other investments that produce non-qualifying income).
If
the Fund fails to qualify as a RIC and to avail itself of certain relief
provisions, it would be subject to tax at the regular corporate rate without any
deduction for distributions to shareholders, and its distributions would
generally be taxable as dividends. Please see the SAI for a more detailed
discussion, including the availability of certain relief provisions for certain
failures by the Fund to qualify as a RIC.
The
Fund may invest in REITs. “Qualified REIT dividends” (i.e.,
ordinary REIT dividends other than capital gain dividends and portions of REIT
dividends designated as qualified dividend income eligible for capital gain tax
rates) are eligible for a 20% deduction by non-corporate taxpayers. This
deduction, if allowed in full, equates to a maximum effective tax rate of 29.6%
(37% top rate applied to income after 20% deduction). Distributions by the Fund
to its shareholders that are attributable to qualified REIT dividends received
by the Fund and which the Fund properly reports as “section 199A dividends,” are
treated as “qualified REIT dividends” in the hands of non-corporate
shareholders. A section 199A dividend is treated as a qualified REIT dividend
only if the shareholder receiving such dividend holds the dividend-paying RIC
shares for at least 46 days of the 91-day period beginning 45 days before the
shares become ex-dividend, and is not under an obligation to make related
payments with respect to a position in substantially similar or related
property. The Fund is permitted to report such part of its dividends as section
199A dividends as are eligible, but is not required to do
so.
Unless later extended or made permanent, this 20% deduction will no longer be
available for taxable years beginning after December 31, 2025.
REITs
in which the Fund invests often do not provide complete and final tax
information to the Fund until after the time that the Fund issues a tax
reporting statement. As a result, the Fund may at times find it necessary to
reclassify the amount and character of its distributions to you after it issues
your tax reporting statement. When such reclassification is necessary, the Fund
(or its administrative agent) will send you a corrected, final Form 1099-DIV to
reflect the reclassified information. If you receive a corrected Form 1099-DIV,
use the information on this corrected form, and not the information on the
previously issued tax reporting statement, in completing your tax
returns.
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8% tax
on all or a portion of their “net investment income,” which includes interest,
dividends, and certain capital gains (generally including capital gains
distributions and capital gains realized on the sale of Shares). This 3.8% tax
also applies to all or a portion of the undistributed net investment income of
certain shareholders that are estates and trusts.
Interest
and other income received by the Fund with respect to foreign securities may
give rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If as of the close of a taxable year more than 50% of the
value of the Fund’s assets consists of certain foreign stock or securities, the
Fund will be eligible to elect to “pass through” to investors the amount of
foreign income and similar taxes (including withholding taxes) paid by the Fund
during that taxable year. This means that investors would be considered to have
received as additional income their respective shares of such foreign taxes, but
may be entitled to either a corresponding tax deduction in calculating taxable
income, or, subject to certain limitations, a credit in calculating federal
income tax. If the Fund does not so elect, it will be entitled to claim a
deduction for certain foreign taxes incurred by the Fund. The Fund (or a
financial intermediary, such as a broker, through which a shareholder owns
Shares) will notify you if it makes such an election and provide you with the
information necessary to reflect foreign taxes paid on your income tax
return.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in the Fund. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Fund
distributions and sales of Shares. Consult your personal tax adviser about the
potential tax consequences of an investment in Shares under all applicable tax
laws. For more information, please see the section entitled “Federal Income
Taxes” in the SAI.
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, the Fund is authorized to
pay an amount up to 0.25% of its average daily net assets each year for certain
distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no plans to impose
these fees. However, in the event Rule 12b-1 fees are charged in the future,
because the fees are paid out of Fund assets, over time these fees will increase
the cost of your investment and may cost you more than certain other types of
sales charges.
Information
regarding how often Shares traded on the Exchange at a price above (i.e.,
at a premium) or below (i.e.,
at a discount) the NAV per share is available on the Fund’s website at
www.lexietf.com.
The
Shares are not sponsored, endorsed, or promoted by the Exchange. The Exchange is
not responsible for, nor has it participated in the determination of the timing,
prices, or quantities of Shares to be issued, nor in the determination or
calculation of the equation by which the Shares are redeemable. The Exchange has
no obligation or liability to owners of Shares in connection with the
administration, marketing, or trading of Shares.
Without
limiting any of the foregoing, in no event shall the Exchange have any liability
for any lost profits or indirect, punitive, special, or consequential damages
even if notified of the possibility thereof.
The
Adviser and the Fund make no representation or warranty, express or implied, to
the owners of Shares or any member of the public regarding the advisability of
investing in securities generally or in the Fund particularly.
The
financial highlights table below shows the financial performance information for
the Fund’s five most recent fiscal years (or the life of the Fund, if shorter).
Certain information reflects financial results for a single share of the Fund.
The total returns in the table represent the rate that you would have earned or
lost on an investment in the Fund (assuming you reinvested all distributions).
This information has been audited by Cohen & Company, Ltd., the independent
registered public accounting firm of the Fund, whose report, along with the
Fund’s financial statements, is included in the Fund’s Annual
Report,
which is available upon request.
For
a Share Outstanding Throughout each Period
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Year
Ended May 31, 2023 |
|
Period
Ended
May
31,
2022(1) |
|
Net
Asset Value, Beginning of Period |
$ |
24.33 |
|
| $ |
25.00 |
| |
Income
(Loss) from Investment Operations: |
|
|
| |
Net
investment income(2) |
0.28 |
|
| 0.08 |
| |
Net
realized and unrealized gain (loss) on investments |
(0.84) |
|
| (0.69) |
| |
Total
from investment operations |
(0.56) |
|
| (0.61) |
| |
Less
Distributions: |
|
|
| |
From
net investment income |
(0.22) |
|
| (0.06) |
| |
|
|
|
| |
Total
distributions |
(0.22) |
|
| (0.06) |
| |
Net
Asset Value, End of Period |
$ |
23.55 |
|
| $ |
24.33 |
| |
Total
Return, at NAV(3) |
-2.29 |
% |
| -2.44 |
% |
(5) |
Total
Return, at Market(4) |
-2.30 |
% |
| -2.44 |
% |
(5) |
Supplemental
Data and Ratios: |
|
|
| |
Net
assets, end of period (000’s) |
$ |
63,047 |
|
| $ |
52,727 |
| |
Ratio
of expenses to average net assets(8) |
0.85% |
| 0.85 |
% |
(6) |
Ratio
of net investment income to average net assets(8)(9) |
1.18% |
| 0.32 |
% |
(6) |
Portfolio
turnover rate(7) |
70% |
| 51 |
% |
(5) |
(1) The
Fund commenced investment operations on June 30, 2021.
(2)
Per
share net investment income was calculated using average shares
outstanding.
(3)
Net
asset value total return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, if any, and
redemption on the last day of the period at net asset value. This percentage is
not an indication of the performance of a shareholder’s investment in the Fund
based on market value due to the differences between the market price of the
shares and the net asset value per share of the Fund.
(4)
Market
value total return is calculated assuming an initial investment made at market
value at the beginning of the period, reinvestment of all dividends and
distributions at market value during the period, if any, and redemption on the
last day of the period at market value. Market value is determined by the
composite closing price. Composite closing security price is defined as the last
reported sale price on the NYSE Arca. The composite closing price is the last
reported sale, regardless of volume, and not an average price, and may have
occurred on a date prior to the close of the reporting period. Market value may
be greater or less than net asset value, depending on the Fund’s closing price
on the NYSE Arca.
(5)
Not
annualized for periods less than one year.
(6)
Annualized for periods less than one year.
(7)
Excludes in-kind transactions associated with creations
and redemptions of the Fund.
(8)
Does not include income and expenses of exchange traded
funds in which the Fund invests.
(9)
Ratio is impacted by the timing of underlying fund
distributions.
Alexis
Practical Tactical ETF
|
|
|
|
|
|
|
|
|
|
| |
Adviser |
Alexis
Investment Partners, LLC
103
Casterly Green Court
Montgomery,
Texas 77316 |
Transfer
Agent, Fund Accounting Agent, and Administrator |
U.S.
Bancorp Fund Services, LLC
d/b/a
U.S. Bank Global Fund Services
615
East Michigan Street
Milwaukee,
Wisconsin 53202 |
Custodian |
U.S.
Bank National Association
1555
North Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212
|
Distributor |
Foreside
Fund Services, LLC
Three
Canal Plaza, Suite 100
Portland,
Maine 04101 |
Independent
Registered Public Accounting Firm |
Cohen
& Company, Ltd.
1350
Euclid Avenue, Suite 800
Cleveland,
Ohio 44115 |
Legal
Counsel |
Morgan,
Lewis & Bockius LLP
1111
Pennsylvania Avenue, NW
Washington,
DC 20004-2541 |
Investors
may find more information about the Fund in the following
documents:
Statement
of Additional Information: The
Fund’s SAI provides additional details about the investments of the Fund and
certain other additional information. The SAI is on file with the SEC and is
incorporated herein by reference into this Prospectus. It is legally considered
a part of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about the Fund’s investments is available in the Fund’s Annual and
Semi-Annual reports to shareholders. In the Annual Report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund’s performance.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Fund by contacting the Fund at c/o U.S. Bank Global
Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or by calling
866-LEXI-ETF (1-866-539-4383).
Shareholder
reports and other information about the Fund also are available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov;
•Free
of charge from the Fund’s Internet web site at www.lexietf.com; or
(SEC
Investment Company Act File No. 811-23226)