ck0001432353-20221130
|
|
|
|
|
|
Global
X Robotics & Artificial Intelligence ETF
NASDAQ:
BOTZ |
Global
X China Biotech Innovation ETF
NASDAQ:
CHB
|
Global
X Internet of Things ETF
NASDAQ:
SNSR |
Global
X Telemedicine & Digital Health ETF
NASDAQ:
EDOC |
Global
X FinTech ETF
NASDAQ:
FINX |
Global
X Aging Population ETF
NASDAQ:
AGNG |
Global
X Video Games & Esports ETF
NASDAQ:
HERO |
Global
X Health & Wellness ETF
NASDAQ:
BFIT |
Global
X Autonomous & Electric Vehicles ETF
NASDAQ:
DRIV |
Global
X CleanTech ETF
NASDAQ:
CTEC |
Global
X Cloud Computing ETF
NASDAQ:
CLOU |
Global
X U.S. Infrastructure Development ETF
Cboe
BZX: PAVE |
Global
X Data Center REITs & Digital Infrastructure ETF
NASDAQ:
VPN |
Global
X AgTech & Food Innovation ETF
NASDAQ:
KROP |
Global
X Cybersecurity ETF
NASDAQ:
BUG |
Global
X Blockchain ETF
NASDAQ:
BKCH |
Global
X Artificial Intelligence & Technology ETF
NASDAQ:
AIQ |
Global
X Clean Water ETF
NASDAQ:
AQWA |
Global
X Metaverse ETF
NASDAQ:
VR |
Global
X Hydrogen ETF
NASDAQ:
HYDR |
Global
X Millennial Consumer ETF
NASDAQ:
MILN |
Global
X Solar ETF
NASDAQ:
RAYS |
Global
X Education ETF
NASDAQ:
EDUT |
Global
X Wind Energy ETF
NASDAQ:
WNDY |
Global
X Cannabis ETF
NASDAQ:
POTX |
Global
X Green Building ETF
NASDAQ:
GRNR |
Global
X Genomics & Biotechnology ETF
NASDAQ:
GNOM |
Global
X Thematic Growth ETF
NASDAQ:
GXTG |
Prospectus
April 1,
2023
The
Securities and Exchange Commission ("SEC") has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
Shares
in a Fund (defined below) are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other agency of the U.S. Government, nor are shares
deposits or obligations of any bank. Such shares in a Fund involve investment
risks, including the loss of principal.
|
|
|
As
permitted by regulations adopted by the SEC, paper copies of the Funds’
shareholder reports will no longer be sent by mail, unless you
specifically request paper copies of the reports from your financial
intermediary (such as a broker-dealer or bank). Instead, shareholder
reports will be available on the Funds’ website (www.globalxetfs.com/explore),
and you will be notified by mail each time a report is posted and provided
with a website link to access the report. If you already elected to
receive shareholder reports electronically, you will not be affected by
this change and you need not take any action. You may elect to receive
shareholder reports and other communications from the Funds electronically
anytime by contacting your financial intermediary. You may elect to
receive all future Fund shareholder reports in paper free of charge.
Please contact your financial intermediary to inform them that you wish to
continue receiving paper copies of Fund shareholder reports and for
details about whether your election to receive reports in paper will apply
to all funds held with your financial
intermediary. |
TABLE
OF CONTENTS
|
|
|
|
|
|
FUND
SUMMARIES |
|
ADDITIONAL
INFORMATION ABOUT THE FUNDS |
|
A
FURTHER DISCUSSION OF OTHER RISKS |
|
PORTFOLIO
HOLDINGS INFORMATION |
|
FUND
MANAGEMENT |
|
DISTRIBUTOR |
|
BUYING
AND SELLING FUND SHARES |
|
FREQUENT
TRADING |
|
DISTRIBUTION
AND SERVICES PLAN |
|
DIVIDENDS
AND DISTRIBUTIONS |
|
INVESTMENTS
BY INVESTMENT COMPANIES |
|
TAXES |
|
DETERMINATION
OF NET ASSET VALUE |
|
PREMIUM/DISCOUNT
AND SHARE INFORMATION |
|
TOTAL
RETURN INFORMATION |
|
INFORMATION
REGARDING THE INDICES AND THE INDEX PROVIDERS |
|
OTHER
SERVICE PROVIDERS |
|
ADDITIONAL
INFORMATION |
|
FINANCIAL
HIGHLIGHTS |
|
OTHER
INFORMATION |
|
FUND
SUMMARIES
Global X
Robotics & Artificial Intelligence ETF
Ticker:
BOTZ
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Robotics & Artificial Intelligence ETF ("Fund")
seeks to provide investment results that correspond generally to the price and
yield performance, before fees and expenses, of the Indxx Global Robotics &
Artificial Intelligence Thematic Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.68% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.01% |
Total
Annual Fund Operating Expenses: |
0.69% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$70 |
$221 |
$384 |
$859 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 29.86% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Indxx
Global Robotics & Artificial Intelligence Thematic Index ("Underlying
Index"). The Fund's 80% investment policy is non-fundamental and requires 60
days prior written notice to shareholders before it can be changed. The Fund may
lend securities representing up to one-third of the value of the Fund’s total
assets (including the value of the collateral received).
The
Underlying Index is designed to provide exposure to exchange-listed companies in
developed markets that are involved in the development of robotics and/or
artificial intelligence, including companies involved in developing industrial
robots and production systems, automated inventory management, unmanned
vehicles, voice/image/text recognition, and medical robots or robotic
instruments (collectively, "Robotics & Artificial Intelligence Companies"),
as defined by Indxx, LLC, the provider of the Underlying Index ("Index
Provider").
The
eligible universe of the Underlying Index includes among the most liquid and
investable companies in accordance with the standard market capitalization and
liquidity criteria associated with developed markets, as defined by the Index
Provider. As of January 31, 2023, companies must have a minimum market
capitalization of $300 million and a minimum average daily turnover for the last
6 months (or since the IPO launch date for Significant IPOs as defined by the
Index Provider or 3 months,
in
the case of other IPOs) greater than or equal to $2 million in order to be
eligible for inclusion in the Underlying Index. As of January 31, 2023,
components from the following countries were eligible for inclusion in the
Underlying Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, New
Zealand, Norway, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland,
Taiwan, the United Kingdom and the United States.
From
the eligible universe, the Index Provider identifies Robotics & Artificial
Intelligence Companies by applying a proprietary analysis that consists of two
primary components: theme identification and company analysis. As part of the
theme identification process, the Index Provider analyzes industry reports,
investment research and consumer data related to the robotics and artificial
intelligence industry in order to establish the themes that are expected to
provide the most exposure to the growth of the robotics and artificial
intelligence industry. As of January 31, 2023, the Index Provider has
identified the following four robotics and artificial intelligence themes: (1)
Industrial Robotics and Automation, (2) Unmanned Vehicles and Drones, (3)
Artificial Intelligence and (4) Non-Industrial Robotics (collectively, "Robotics
& Artificial Intelligence Themes"). In order to be included in the
Underlying Index, a company must be identified as having significant exposure to
these Robotics & Artificial Intelligence Themes, as determined by the Index
Provider. In the second step of the process, companies are analyzed based on two
primary criteria: revenue exposure and primary business operations. A company is
deemed to have significant exposure to the Robotics & Artificial
Intelligence Themes if (i) according to a public filing, it derives a
significant portion of its revenue from the Robotics & Artificial
Intelligence Themes, or (ii) it has stated its primary business to be in
products and services focused on the Robotics & Artificial Intelligence
Themes, as determined by the Index Provider. Accordingly, the Fund's assets will
be concentrated (that is, it will hold 25% or more of its total assets) in
companies that provide exposure to Robotics & Artificial Intelligence
Themes.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and rebalanced annually. At the annual
rebalance, a capping methodology is applied to reduce concentration in
individual securities and increase diversification of the Underlying Index. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include industrials and information technology companies.
The Fund's investment objective and Underlying Index may be changed without
shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the machinery industry and had significant
exposure to the industrials and information technology
sectors.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment in the Fund is not
a bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Robotics & Artificial Intelligence
Companies:
Robotics & Artificial Intelligence companies may have limited product lines,
markets, financial resources or personnel. These companies typically face
intense competition and potentially rapid product obsolescence. These companies
are also heavily dependent on intellectual property rights and may be adversely
affected by loss or impairment of those rights. There can be no assurance these
companies will be able to successfully protect their intellectual property to
prevent the misappropriation of their technology, or that competitors will not
develop technology that is substantially similar or superior to such companies’
technology. Robotics & Artificial Intelligence companies typically engage in
significant amounts of spending on research and development, and there is no
guarantee that the products or services produced by these companies will be
successful. Robotics & Artificial Intelligence companies are potential
targets for cyberattacks, which can have a materially adverse impact on the
performance of these companies. Robotics & Artificial Intelligence
companies, especially smaller companies, tend to be more volatile than companies
that do not rely heavily on technology. In addition, robotics and artificial
intelligence technology could face increasing regulatory scrutiny in the future,
which may limit the development of this technology and impede the growth of
companies that develop and/or utilize this technology. Similarly, the collection
of data from consumers and other sources could face increased scrutiny as
regulators consider how the data is collected, stored, safeguarded and used.
Robotics & Artificial Intelligence companies face increased risk from trade
agreements between countries that develop these technologies and countries in
which customers of these technologies are based. Lack of resolution or potential
imposition of trade tariffs may hinder the companies’ ability to successfully
deploy their inventories. The customers and/or suppliers of Robotics &
Artificial Intelligence companies may be concentrated in a particular country,
region or industry. Any adverse event affecting one of these countries, regions
or industries could have a negative impact on Robotics & Artificial
Intelligence companies. Through its portfolio companies’ customers and
suppliers, the Fund is specifically exposed to Asian
Economic Risk
and European
Economic Risk.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Industrials Sector:
Companies in the industrials sector are subject to fluctuations in supply and
demand for their specific product or service. The products of manufacturing
companies may face product obsolescence due to rapid technological developments.
Government regulation, world events and economic conditions affect the
performance of companies in the industrials sector. Companies also may be
adversely affected by environmental damage and product liability claims.
Companies in the Industrial Sector face increased risk from trade agreements
between countries that develop these technologies and countries in which
customers of these technologies are based. Lack of resolution or potential
imposition of trade tariffs may hinder the companies’ ability to successfully
deploy their inventories.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Risks
Related to Investing in the Machinery Industry:
The machinery industry is capital-intensive. Working capital and cash flow
management can be crucial to a company's success, as investments in research and
development and acquisitions may be important to maintain sales and earnings. A
long capital investment cycle can add challenges to management decisions
regarding the expansion of capacity, which may limit a company’s ability to grow
during periods of increasing demand and may result in overcapacity during
periods of decreasing demand. The performance of the machinery industry may
therefore be highly dependent on the business cycle and highly correlated with
the performance of the broader equity market. Machinery industry companies with
large barriers to entry based on proprietary technology may face potentially
rapid product obsolescence. Conversely, machine industry companies that produce
commodity-like offerings are likely to face thin margins and must maintain
expansive distribution and support networks in order to maintain adequate
volume.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed
countries
tend to represent a significant portion of the global economy and have generally
experienced slower economic growth than some less developed countries. Certain
developed countries have experienced security concerns, such as terrorism and
strained international relations. Incidents involving a country’s or region’s
security may cause uncertainty in its markets and may adversely affect its
economy and the Fund’s investments. In addition, developed countries may be
impacted by changes to the economic conditions of certain key trading partners,
regulatory burdens, debt burdens and the price or availability of certain
commodities.
Risk
of Investing in Japan:
The Japanese economy may be subject to considerable degrees of economic,
political and social instability, which could have a negative impact on Japanese
securities. Japan’s economy has suffered from low growth and low inflation for a
prolonged period of time since the collapse of its bubble economy, and that may
continue despite the efforts of the Bank of Japan and policymakers. In addition,
Japan is subject to the risk of natural disasters, such as earthquakes,
volcanoes, typhoons and tsunamis, which could negatively affect the Fund.
Japan’s relations with its neighbors have at times been strained, and strained
relations with its neighbors or trading partners may cause uncertainty in the
Japanese markets and adversely affect the overall Japanese economy.
Risk
of Investing in Switzerland: Investments
in Swiss issuers may subject the Fund to legal, regulatory, political, currency,
security, and economic risks specific to Switzerland. International trade is a
large component of the Swiss economy and Switzerland depends upon exports to
generate economic growth. The Swiss economy relies on certain key trading
partners in order to sustain continued economic growth. Switzerland’s economic
growth generally mirrors slowdowns and growth spurts experienced in other
countries, including the U.S. and certain Western European
countries.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed
or inadequate processes and technology or systems failures. Additionally, cyber
security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market
for
the Shares may become less liquid in response to the deteriorating liquidity of
the Fund’s portfolio. This adverse effect on the liquidity of the Shares, as
well as disruptions to creations and redemptions, the existence of extreme
market volatility or potential lack of assets in the Fund or an active trading
market for Shares may result in Shares trading at a significant premium or
discount to NAV. If a shareholder purchases Shares at a time when the market
price is at a premium to the NAV or sells Shares at a time when the market price
is at a discount to the NAV, the shareholder may sustain losses. The NAV of the
Fund is calculated at the end of each business day and fluctuates with changes
in the market value of the Fund’s holdings. The trading price of the Fund’s
shares fluctuates, in some cases materially, throughout trading hours in
response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
31.02% |
Worst
Quarter: |
6/30/2022 |
-30.31% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (09/12/2016) |
Global
X Robotics & Artificial Intelligence ETF: |
|
|
|
·Return
before taxes |
-42.49% |
-2.16% |
5.87% |
·Return
after taxes on distributions1 |
-42.46% |
-2.23% |
5.81% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-25.09% |
-1.59% |
4.67% |
Indxx
Global Robotics & Artificial Intelligence Thematic Index
(net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-42.20% |
-1.69% |
6.26% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
5.23% |
8.08% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager
of
the Fund since March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund
since March 1, 2019. Ms. Chan has been a Portfolio Manager of the Fund since
June 10, 2019. Ms. Yang has been a Portfolio Manager of the Fund since December
2020. Mr. Lu has been a Portfolio Manager of the Fund since April
2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
Internet of Things ETF
Ticker:
SNSR
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Internet of Things ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the Indxx Global Internet of Things Thematic Index
("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.68% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.68% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$69 |
$218 |
$379 |
$847 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 8.40% of the average value of its
portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Indxx
Global Internet of Things Thematic Index ("Underlying Index"). The Fund's 80%
investment policy is non-fundamental and requires 60 days prior written notice
to shareholders before it can be changed. The Fund may lend securities
representing up to one-third of the value of the Fund’s total assets (including
the value of the collateral received).
The
Underlying Index is designed to provide exposure to exchange-listed companies in
developed markets that facilitate the Internet of Things industry, including
companies involved in wearable technology, home automation, connected automotive
technology, sensors, networking infrastructure/software, smart metering and
energy control devices (collectively, "Internet of Things Companies"), as
defined by Indxx, LLC, the provider of the Underlying Index ("Index Provider").
The Internet of Things refers to the network of physical objects (such as
electronic devices, wearables, connected vehicles, infrastructure, equipment,
smart home appliances, buildings) that are connected to the internet. Such
objects often utilize embedded semiconductors, sensors, and software to collect,
analyze, receive, and transfer data via networks enabled by technologies such as
WiFi, 4G and 5G telecommunications infrastructure, and fiber
optics.
The
eligible universe of the Underlying Index includes among the most liquid and
investable companies in accordance with the standard market capitalization and
liquidity criteria associated with developed markets, as defined by the Index
Provider. As of January 31, 2023, companies must have a minimum market
capitalization of $300 million and a minimum average daily turnover for the last
6 months (or since the IPO launch date for Significant IPOs as defined by the
Index Provider or 3 months,
in
the case of other IPOs) greater than or equal to $2 million in order to be
eligible for inclusion in the Underlying Index. As of January 31, 2023,
components from the following countries were eligible for inclusion in the
Underlying Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, New
Zealand, Norway, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland,
Taiwan, the United Kingdom and the United States.
From
the eligible universe, the Index Provider identifies Internet of Things
Companies by applying a proprietary analysis that consists of two primary
components: theme identification and company analysis. As part of the theme
identification process, the Index Provider analyzes industry reports, investment
research and consumer data related to the Internet of Things industry in order
to establish the themes that are expected to provide the most exposure to the
growth of the Internet of Things industry. As of January 31, 2023, the
Index Provider has identified the following four Internet of Things themes: (1)
Consumer Internet of Things Technology, (2) Equipment, Vehicle, and
Infrastructure/Building Technology, (3) Semiconductors and Sensors and (4)
Networking Infrastructure/Software (collectively, "Internet of Things Themes").
In order to be included in the Underlying Index, a company must be identified as
having significant exposure to these Internet of Things Themes, as determined by
the Index Provider. In the second step of the process, companies are analyzed
based on two primary criteria: revenue exposure and primary business operations.
A company is deemed to have significant exposure to the Internet of Things
Themes if (i) according to a public filing, it derives a significant portion of
its revenue from the Internet of Things Themes, or (ii) it has stated its
primary business to be in products and services focused on the Internet of
Things Themes, as determined by the Index Provider. In addition, companies with
more diversified revenue streams may also be included in the Underlying Index if
they meet the following criteria: (1) identified as being critical to the
Internet of Things ecosystem due to scale in certain Internet of Things
technologies and services, (2) have a distinct business unit focused on Internet
of Things products and services, and (3) have a core competency that is expected
to benefit from increased adoption of Internet of Things, as determined by the
Index Provider. Companies that meet these criteria are eligible for inclusion in
the Underlying Index with a weighting cap of 2%. Accordingly, the Fund assets
will be concentrated (that is, it will hold 25% or more of its total assets) in
companies that provide products and services that provide exposure to Internet
of Things Themes.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and rebalanced annually. At the annual
rebalance, a capping methodology is applied to reduce concentration in
individual securities and increase diversification of the Underlying Index. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include industrials and information technology companies.
The Fund's investment objective and Underlying Index may be changed without
shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the semiconductors and semiconductor
equipment industry and had significant exposure to the information technology
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Internet of Things Companies: Internet
of Things companies may have limited product lines, markets, financial resources
or personnel. These companies typically face intense competition and potentially
rapid product obsolescence. In addition, many Internet of Things companies store
sensitive consumer information and could be the target of cybersecurity attacks
and other types of theft, which could have a negative impact on these companies.
As a result, Internet of Things companies may be adversely impacted by
government regulations, and may be subject to additional regulatory oversight
with regard to privacy concerns and cybersecurity risk. These companies are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. Internet of Things companies could be
negatively impacted by disruptions in service caused by hardware or software
failure, or by interruptions or delays in service by third-party data center
hosting facilities and maintenance providers. Internet of Things companies,
especially smaller companies, tend to be more volatile than companies that do
not rely heavily on technology. The customers and/or suppliers of Internet of
Things companies may be concentrated in a particular country, region or
industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on Internet of Things companies. Through
its portfolio companies’ customers and suppliers, the Fund is specifically
exposed to Asian
Economic Risk and
European
Economic Risk.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which
may
include, but are not limited to, the following: general economic conditions or
cyclical market patterns that could negatively affect supply and demand;
competition for resources; adverse labor relations; political or world events;
obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular industry or sector. As a result, the value of the Fund’s investments
may rise and fall more than the value of shares of a fund that invests in
securities of companies in a broader range of industries or sectors.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Risks
Related to Investing in the Semiconductors and Semiconductor Equipment
Industry:
The semiconductors and semiconductor equipment industry is highly competitive,
and certain companies in this industry may be restricted from operating in
certain markets due to the sensitive nature of these technologies. Companies in
this space generally seek to increase silicon capacity, improve yields, and
reduce die size in their product designs which may result in significant
increases in worldwide supply and downward pressure on prices. Companies
involved in the semiconductors and semiconductor equipment industry face
increased risk from trade agreements between countries that develop these
technologies and countries in which customers of these technologies are based.
Lack of resolution or potential imposition of trade tariffs may hinder the
companies’ ability to successfully deploy their inventories. The success of such
companies frequently depends on the ability to develop and produce competitive
new semiconductor technologies. Companies in this industry frequently undertake
substantial research and development expenses in order to remain competitive,
and a failure to successfully demonstrate advanced functionality and performance
can have a material impact on the company’s business.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:
The Fund targets Internet of Things Companies globally and is expected to invest
in securities in emerging market countries. Investments in emerging markets may
be subject to a greater risk of loss than investments in developed markets.
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as
extensive
and frequent accounting, financial, and other reporting requirements as the
securities markets of more developed countries, and there may be greater risk
associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Taiwan: Investments
in Taiwanese issuers involve risks that are specific to Taiwan, including legal,
regulatory, political and economic risks. Political and economic developments of
Taiwan’s neighbors may have an adverse effect on Taiwan’s economy. Specifically,
Taiwan’s geographic proximity and history of political contention with China
have resulted in ongoing tensions, which may materially affect the Taiwanese
economy and its securities market.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to
reduce
these operational risks through controls and procedures. However, these measures
do not address every possible risk and may be inadequate for those risks that
they are intended to address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares
trading
at a significant premium or discount to NAV. If a shareholder purchases Shares
at a time when the market price is at a premium to the NAV or sells Shares at a
time when the market price is at a discount to the NAV, the shareholder may
sustain losses. The NAV of the Fund is calculated at the end of each business
day and fluctuates with changes in the market value of the Fund’s holdings. The
trading price of the Fund’s shares fluctuates, in some cases materially,
throughout trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
32.24% |
Worst
Quarter: |
6/30/2022 |
-22.57% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (09/12/2016) |
Global
X Internet of Things ETF: |
|
|
|
·Return
before taxes |
-25.33% |
9.01% |
11.95% |
·Return
after taxes on distributions1 |
-25.48% |
8.80% |
11.70% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-14.89% |
7.09% |
9.61% |
Indxx
Global Internet of Things Thematic Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-25.17% |
9.35% |
12.30% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
5.23% |
8.08% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
FinTech ETF
Ticker:
FINX
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X FinTech ETF ("Fund") seeks to provide investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Indxx Global Fintech Thematic Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.68% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.68% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$69 |
$218 |
$379 |
$847 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 38.15% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Indxx
Global Fintech Thematic Index ("Underlying Index"). The Fund's 80% investment
policy is non-fundamental and requires 60 days prior written notice to
shareholders before it can be changed. The Fund may lend securities representing
up to one-third of the value of the Fund’s total assets (including the value of
the collateral received).
The
Underlying Index is designed to provide exposure to exchange-listed companies in
developed markets that provide financial technology products and services,
including companies involved in mobile payments, peer-to-peer ("P2P") and
marketplace lending, financial analytics software and alternative currencies
(collectively, "FinTech Companies"), as defined by Indxx, LLC, the provider of
the Underlying Index ("Index Provider").
The
eligible universe of the Underlying Index includes among the most liquid and
investable companies in accordance with the standard market capitalization and
liquidity criteria associated with developed markets, as defined by the Index
Provider. As of January 31, 2023, companies must have a minimum market
capitalization of $300 million and a minimum average daily turnover for the last
6 months (or since the IPO launch date for Significant IPOs as defined by the
Index Provider or 3 months, in the case of other IPOs) greater than or equal to
$2 million in order to be eligible for inclusion in the Underlying Index. As of
January 31, 2023, components from the following countries were eligible for
inclusion in the Underlying Index: Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg,
Netherlands,
New Zealand, Norway, Portugal, Singapore, South Korea, Spain, Sweden,
Switzerland, Taiwan, the United Kingdom and the United States.
From
the eligible universe, the Index Provider identifies FinTech Companies by
applying a proprietary analysis that consists of two primary components: theme
identification and company analysis. As part of the theme identification
process, the Index Provider analyzes industry reports, investment research and
consumer data related to the fintech industry in order to establish the themes
that are expected to provide the most exposure to the growth of the fintech
industry. As of January 31, 2023, the Index Provider has identified the
following six fintech themes: (1) Mobile Payments, (2) P2P and Marketplace
Lending, (3) Enterprise Solutions, (4) Blockchain and Alternative Currencies,
(5) Crowdfunding, and (6) Personal Finance Software and Automated Wealth
Management/Trading (collectively, "FinTech Themes"). In order to be included in
the Underlying Index, a company must be identified as having significant
exposure to these FinTech Themes, as determined by the Index Provider. In the
second step of the process, companies are analyzed based on two primary
criteria: revenue exposure and primary business operations. A company is deemed
to have significant exposure to the FinTech Themes if (i) it derives a
significant portion of its revenue from the FinTech Themes, or (ii) it has
stated its primary business to be in products and services focused on the
FinTech Themes, in each case as determined by the Index Provider. Accordingly,
the Fund assets will be concentrated (that is, it will hold 25% or more of its
total assets) in companies that provide exposure to FinTech Themes.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and rebalanced annually. At the annual
rebalance, a capping methodology is applied to reduce concentration in
individual securities and increase diversification of the Underlying Index. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include financial and information technology companies. The
Fund's investment objective and Underlying Index may be changed without
shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the IT services and software industries and
had significant exposure to the information technology
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in FinTech Companies:
FinTech companies may be adversely impacted by government regulations, economic
conditions, and deterioration in credit markets. These companies may have
significant exposure to consumers and businesses (especially small businesses)
in the form of loans and other financial products or services. FinTech companies
typically face intense competition and potentially rapid product obsolescence.
In addition, many FinTech companies store sensitive consumer information and
could be the target of cybersecurity attacks and other types of theft, which
could have a negative impact on these companies. Many FinTech companies
currently operate under less regulatory scrutiny than traditional financial
services companies and banks, but there is significant risk that regulatory
oversight could increase in the future. Higher levels of regulation could
increase costs and adversely impact the current business models of some FinTech
companies. These companies could be negatively impacted by disruptions in
service caused by hardware or software failure, or by interruptions or delays in
service by third-party data center hosting facilities and maintenance providers.
FinTech companies involved in alternative currencies may face slow adoption
rates and be subject to higher levels of regulatory scrutiny in the future,
which could severely impact the viability of these companies. FinTech companies
with significant alternative currency exposure may also be negatively impacted
during high periods of volatility within the crypto markets. FinTech companies,
especially smaller companies, tend to be more volatile than companies that do
not rely heavily on technology. The customers and/or suppliers of FinTech
companies may be concentrated in a particular country, region, or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on FinTech companies. Through its portfolio companies’
customers and suppliers, the Fund is specifically exposed to Asian Economic
Risk, European Economic Risk and Latin American Economic Risk.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk: Compared
to mid- and large-capitalization companies, small-capitalization companies may
be less stable and more susceptible to adverse developments, and their
securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Risks
Related to Investing in the IT Services Industry: The
IT services industry can be significantly affected by competitive pressures,
such as technological developments, fixed-rate pricing, and the ability to
attract and retain skilled employees, and the success of companies in the
industry is subject to continued demand for IT services.
Risks
Related to Investing in the Software Industry:
The software industry can be significantly affected by intense competition,
aggressive pricing, technological innovations, and product obsolescence.
Companies in the application software industry, in particular, may also be
negatively affected by the decline or fluctuation of subscription renewal rates
for their products and services, which may have an adverse effect on profit
margins. Companies in the systems software industry may be adversely affected
by, among other things, actual or perceived security vulnerabilities in their
products and services, which may result in individual or class action lawsuits,
state or federal enforcement actions and other remediation costs.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:
The Fund targets FinTech Companies globally and is expected to invest in
securities in emerging market countries. Investments in emerging markets may be
subject to a greater risk of loss than investments in developed markets.
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries, and there may be greater risk associated
with the custody of securities in emerging markets. It may be difficult or
impossible for the Fund to pursue claims against an emerging market issuer in
the courts of an emerging market country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic
conditions
than more developed markets. Emerging market economies’ exposure to specific
industries, such as tourism, and lack of efficient or sufficient health care
systems, could make these economies especially vulnerable to global crises,
including but not limited to, pandemics such as the global COVID-19 pandemic.
Certain emerging market countries may have privatized, or have begun the process
of privatizing, certain entities and industries. Privatized entities may lose
money or be re-nationalized.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index.
Errors
in index data, index computations and/or the construction of the Underlying
Index in accordance with its methodology may occur from time to time and may not
be identified and corrected by the Index Provider for a period of time or at
all, which may have an adverse impact on the Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
36.97% |
Worst
Quarter: |
6/30/2022 |
-33.44% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (09/12/2016) |
Global
X FinTech ETF: |
|
|
|
·Return
before taxes |
-52.01% |
-1.50% |
4.82% |
·Return
after taxes on distributions1 |
-52.01% |
-1.91% |
4.47% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-30.79% |
-1.14% |
3.77% |
Indxx
Global Fintech Thematic Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-51.92% |
-0.96% |
5.40% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
5.23% |
8.08% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales
persons
or other intermediary or its employees or associated persons to recommend the
Fund over another investment. Ask your financial adviser or visit your financial
intermediary’s website for more information.
Global X Video
Games & Esports ETF
Ticker:
HERO
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Video Games & Esports ETF ("Fund") seeks to
provide investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Solactive Video Games &
Esports Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 55.72% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Solactive
Video Games & Esports Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund will also invest, under normal
circumstances, at least 80% of its net assets, plus borrowings for investment
purposes (if any), in Video Games & Esports Companies (as defined below),
and in ADRs and GDRs based on such securities. The Fund's 80% investment
policies are non-fundamental and require 60 days prior written notice to
shareholders before they can be changed. The Fund may lend securities
representing up to one-third of the value of the Fund’s total assets (including
the value of the collateral received).
The
Underlying Index is designed to provide exposure to exchange-listed companies
that are positioned to benefit from increased consumption related to video games
and esports, including companies whose principal business is in video game
development/publishing, video game and esports content distribution and
streaming, operating/owning esports leagues/teams, and producing video
game/esports hardware (collectively, "Video Games & Esports Companies"), as
defined by Solactive AG, the provider of the Underlying Index ("Index
Provider").
In
constructing the Underlying Index, the Index Provider first applies a
proprietary natural language processing algorithm to the eligible universe,
which screens filings, disclosures and other public information (e.g.,
regulatory filings, earnings transcripts, etc.) for keywords that describe the
index theme, to identify and rank companies with direct exposure to the video
games and esports industry. Companies identified by the natural language
processing algorithm, as of the selection date, are further reviewed by the
Index Provider on the basis of revenue related to video games and esports
activities. To be eligible for the Underlying Index, a company is considered by
the Index Provider to be a Video Games & Esports Company if the company
generates at least 50% of its revenues from video games and esports activities,
as determined by the Index Provider. Video Games & Esports Companies are
those companies that (i) develop and/or publish video games, (ii) facilitate the
streaming or distribution of video gaming and/or esports content, (iii) operate
and/or own competitive esports leagues and/or competitive esports teams, and/or
(iv) produce hardware used in video games and/or esports, including augmented
and virtual reality.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index Provider,
must be met. As of January 31, 2023, companies must have a minimum market
capitalization of $200 million and a minimum average daily turnover for the last
6 months greater than or equal to $2 million in order to be eligible for
inclusion in the Underlying Index. As of January 31, 2023, companies listed
in the following countries were eligible for inclusion in the Underlying Index:
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Poland,
Portugal, Singapore, Spain, Sweden, Switzerland, South Korea, Taiwan, the United
Kingdom, and the United States.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
Generally speaking, this approach will limit the amount of concentration in the
largest market capitalization companies and increase company-level
diversification. The Underlying Index may include large-, mid- or
small-capitalization companies. As of January 31, 2023, the Underlying
Index had 50 constituents. The Fund's investment objective and Underlying Index
may be changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the entertainment industry and had
significant exposure to the communication services
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well
as
other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Video Game & Esports Companies:
Video Game & Esports companies may have limited product lines, markets,
financial resources or personnel. These companies typically face intense
competition and potentially rapid product obsolescence. Video Game & Esports
companies may be dependent on one or a small number of product or product
franchises for a significant portion of their revenue and profits. They may also
be subject to shifting consumer preferences, including preferences with respect
to gaming console platforms, and changes in consumer discretionary spending.
Video Game & Esports companies may be adversely impacted by government
regulations, and may be subject to additional regulatory oversight with regard
to privacy concerns and cybersecurity risk. Recently, Video Game & Esports
companies have faced enhanced regulatory scrutiny, and certain regulators have
at times suspended the issuance of licenses for new video games or limited the
hours that video games can be played by individuals. These companies are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. Video Game & Esports companies could
be negatively impacted by disruptions in service caused by hardware or software
failure. Video Game & Esports companies, especially smaller companies, tend
to be more volatile than companies that do not rely heavily on technology. The
customers and/or suppliers of Video Game & Esports companies may be
concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on Video Game & Esports companies. Through its portfolio companies’
customers and suppliers, the Fund is specifically exposed to Asian
Economic Risk and
European
Economic Risk.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which
may
include, but are not limited to, the following: general economic conditions or
cyclical market patterns that could negatively affect supply and demand;
competition for resources; adverse labor relations; political or world events;
obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular industry or sector. As a result, the value of the Fund’s investments
may rise and fall more than the value of shares of a fund that invests in
securities of companies in a broader range of industries or sectors.
Risks
Related to Investing in the Communication Services Sector: Companies
in the communication services sector may be affected by industry competition,
substantial capital requirements, government regulation, cyclicality of revenues
and earnings, obsolescence of communications products and services due to
technological advancement, a potential decrease in the discretionary income of
targeted individuals and changing consumer tastes and interests.
Risks
Related to Investing in the Entertainment Industry:
Entertainment companies may be impacted by high costs of research and
development of new content and services in an effort to stay relevant in a
highly competitive industry, and entertainment products may face a risk of rapid
obsolescence. Entertainment companies are subject to risks that include
cyclicality of revenues and earnings, changing tastes and topical interests, and
decreases in the discretionary income of their targeted consumers. Sales of
content through physical formats and traditional content delivery services may
be displaced by new content delivery mechanisms, such as streaming technology,
and it is possible that such new content delivery mechanisms may themselves
become obsolete over time. The entertainment industry is regulated, and
changes to rules regarding advertising and the content produced by entertainment
companies can increase overall production and distribution costs. Companies in
the entertainment industry have at times faced increased regulatory pressure
which has delayed or prohibited the release of entertainment content.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal
proceedings
or if any physical instruments for authenticating documentation, such as chops
and seals, are used without the Chinese-based issuer’s authorization to enter
into contractual arrangements in China. Chops and seals, which are carved stamps
used to sign documents, represent a legally binding commitment by the company.
Moreover, any future regulatory action may prohibit the ability of the shell
company to receive the economic benefits of the Chinese-based operating company,
which may cause the value of the Fund’s investment in the listed shell company
to suffer a significant loss. For example, in 2021, the Chinese government
prohibited use of the VIE structure for investment in after-school tutoring
companies. There is no guarantee that the Chinese government will not place
similar restrictions on other industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access. As of January 31, 2023, the Fund had significant exposure to VIEs,
as defined above.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Japan:
The Japanese economy may be subject to considerable degrees of economic,
political and social instability, which could have a negative impact on Japanese
securities. Japan’s economy has suffered from low growth and low inflation for a
prolonged period of time since the collapse of its bubble economy, and that may
continue despite the efforts of the Bank of Japan and policymakers. In addition,
Japan is subject to the risk of natural disasters, such as earthquakes,
volcanoes, typhoons and tsunamis, which could negatively affect the Fund.
Japan’s relations with its neighbors have at times been strained, and strained
relations with its neighbors or trading partners may cause uncertainty in the
Japanese markets and adversely affect the overall Japanese economy.
Risk
of Investing in South Korea: Investments
in South Korean issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risks that are specific to South Korea. In
addition, economic and political developments of South Korea’s neighbors,
including escalated tensions involving North Korea and any outbreak of
hostilities involving North Korea, or even the threat of an outbreak of
hostilities, may have a severe adverse effect on the South Korean
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market
volatility
or other unusual market conditions. Tracking error also may result because the
Fund incurs fees and expenses, while the Underlying Index does not. ETFs that
track indices with significant weight in emerging markets issuers may experience
higher tracking error than other ETFs that do not track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
40.47% |
Worst
Quarter: |
6/30/2022 |
-16.70% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (10/25/2019) |
Global
X Video Games & Esports ETF: |
|
|
·Return
before taxes |
-33.52% |
7.94% |
·Return
after taxes on distributions1 |
-33.53% |
7.77% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-19.84% |
6.18% |
Solactive
Video Games & Esports Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-33.32% |
8.43% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
5.87% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan have been Portfolio
Managers of the Fund since the Fund's inception. Ms. Yang has been a Portfolio
Manager of the Fund since December 2020. Mr. Lu has been a Portfolio Manager of
the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
Autonomous & Electric Vehicles ETF
Ticker:
DRIV
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Autonomous & Electric Vehicles ETF ("Fund") seeks
to provide investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Solactive Autonomous &
Electric Vehicles Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.68% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.68% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$69 |
$218 |
$379 |
$847 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 34.76% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Solactive
Autonomous & Electric Vehicles Index ("Underlying Index"). The Fund's 80%
investment policy is non-fundamental and requires 60 days prior written notice
to shareholders before it can be changed. The Fund may lend securities
representing up to one-third of the value of the Fund’s total assets (including
the value of the collateral received).
The
Underlying Index is designed to provide exposure to exchange-listed companies
that are involved in the development of electric vehicles and/or autonomous
vehicles, including companies that produce electric/hybrid vehicles,
electric/hybrid vehicle components and materials, autonomous driving technology,
and network connected services for transportation, (collectively, "Autonomous
and Electric Vehicle Companies"), as defined by Solactive AG, the provider of
the Underlying Index ("Index Provider").
The
eligible universe of the Underlying Index includes among the most liquid and
investable companies in accordance with the market capitalization and liquidity
criteria associated with the eligible markets, as defined by the Index Provider.
As of January 31, 2023, companies must have a minimum market capitalization
of $500 million and a minimum average daily turnover for the last 6 months
greater than or equal to $2 million in order to be eligible for inclusion in the
Underlying Index. As of January 31, 2023, companies from the following
countries were eligible for inclusion in the Underlying Index: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Israel, Italy, Japan, Netherlands, New
Zealand,
Norway, Poland, Portugal, Singapore, Spain, Sweden, Switzerland, South Korea,
Taiwan, the United Kingdom, and the United States.
From
the eligible universe, the Index Provider identifies Autonomous and Electric
Vehicle Companies by applying a proprietary natural language processing
algorithm process that seeks to identify companies with exposure to the
following categories:
•Electric
Vehicles ("EV")
- companies that produce electric/hybrid vehicles, including cars, trucks,
motorcycles/scooters, buses, and electric rail.
•Electric
Vehicle Components ("EVC")
- companies that produce electric/hybrid vehicle components, including electric
drivetrains, lithium-ion and other types of electric batteries, and fuel cells.
In addition, companies that produce the chemicals and raw materials (including
but not limited to lithium and cobalt) that comprise these electric/hybrid
vehicle components are eligible for inclusion.
•Autonomous
Vehicle Technology ("AVT")
- companies that build autonomous vehicles and/or develop hardware and software
that facilitates the development of autonomous vehicles, including sensors,
mapping technology, artificial intelligence, advanced driver assistance systems,
ride-share platforms, and network-connected services for
transportation.
In
order to be included in the Underlying Index, a company must be identified as
having exposure to these categories based on the ranking it receives from the
natural language processing algorithm ("Segment Score"), as determined by the
Index Provider. Within each category listed above, companies are ranked by the
Index Provider according to their respective Segment Score. The Index Provider
then reviews the companies to ensure relevance to one or more of the categories
above based on the business operations of the company. The Underlying Index is
comprised of the highest ranking 15 companies in the EV segment, the highest
ranking 30 companies in the EVC segment, and the highest ranking 30 companies in
the AVT segment, as determined by the Index Provider and subject to certain
buffer rules intended to reduce turnover. Accordingly, the Fund assets will be
concentrated (that is, it will hold 25% or more of its total assets) in
companies that provide exposure to electric vehicles and autonomous
vehicles.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted semi-annually. At the semi-annual
reconstitution, a capping methodology is applied to reduce concentration in
individual securities and increase diversification of the Underlying Index. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include industrials, information technology, materials, and
consumer discretionary companies. The Fund's investment objective and Underlying
Index may be changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the Lithium-Ion Battery industry and had
significant exposure to the consumer discretionary and information technology
sectors.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Autonomous & Electric Vehicle Companies:
Autonomous
& Electric Vehicle companies typically face intense competition and
potentially rapid product obsolescence. Many of these companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. Autonomous & Electric Vehicle companies typically engage in
significant amounts of spending on research and development, capital
expenditures and mergers and acquisitions, and there is no guarantee that the
products or services produced by these companies will be successful. Companies
that produce the raw materials that are used in electric vehicles may be
concentrated in certain commodities, and therefore be exposed to the price
fluctuations of those commodities. In addition, autonomous vehicle technology
could face increasing regulatory scrutiny in the future, which may limit the
development of this technology and impede the growth of companies that develop
and/or utilize this technology. Autonomous & Electric Vehicle companies are
also potential targets for cyberattacks, which can have a materially adverse
impact on the performance of these companies. Autonomous & Electric Vehicle
companies rely on artificial intelligence and big data technologies for the
development of their platforms and, as a result, could face increased scrutiny
as regulators consider how the data is collected, stored, safeguarded and used.
The customers and/or suppliers of Autonomous & Electric Vehicle companies
may be concentrated in a particular country, region or industry. Any adverse
event affecting one of these countries, regions or industries could have a
negative impact on Autonomous & Electric Vehicle companies. Through its
portfolio companies’ customers and suppliers, the Fund is specifically exposed
to Asian
Economic Risk,
European
Economic Risk
and North
American Economic Risk.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Automobiles Industry: The
automobiles industry can be highly cyclical, and companies in the industry may
suffer periodic operating losses. The industry can be significantly affected by
labor relations and fluctuating component prices. While most of the major
manufacturers are large, financially strong companies, many others are small and
can be non-diversified in both product line and customer base. Additionally,
developments in automotive technologies (e.g., autonomous vehicle technologies)
may require significant capital expenditures that may not generate profits for
several years, if any.
Risks
Related to Investing in the Consumer Discretionary Sector: The
consumer discretionary sector may be affected by changes in domestic and
international economies, exchange and interest rates, competition, consumers’
disposable income and consumer preferences, social trends and marketing
campaigns.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Risks
Related to Investing in the Lithium-Ion Battery Industry:
Securities in the Fund’s portfolio involved in the manufacturing of lithium-ion
batteries are subject to the effects of price fluctuations of traditional and
alternative sources of energy, developments in battery and alternative energy
technology, the possibility that government subsidies for alternative energy
will be eliminated and the possibility that lithium-ion technology is not
suitable for widespread adoption.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:
The Fund targets Autonomous and Electric Vehicles Companies globally and is
expected to invest in securities in emerging market countries. Investments in
emerging markets may be subject to a greater risk of loss than investments in
developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries, and there may be greater
risk associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to
global
crises, including but not limited to, pandemics such as the global COVID-19
pandemic. Certain emerging market countries may have privatized, or have begun
the process of privatizing, certain entities and industries. Privatized entities
may lose money or be re-nationalized.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or
that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2020 |
42.08% |
Worst
Quarter: |
3/31/2020 |
-24.71% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (04/13/2018) |
Global
X Autonomous & Electric Vehicles ETF: |
|
|
·Return
before taxes |
-33.63% |
7.66% |
·Return
after taxes on distributions1 |
-33.82% |
7.33% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-19.77% |
5.95% |
Solactive
Autonomous & Electric Vehicles Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-33.57% |
7.85% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
5.54% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
the Fund's inception. Mr. Xie has been a Portfolio Manager of the Fund since
March 1, 2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10,
2019. Ms. Yang has been a Portfolio Manager of the Fund since December 2020. Mr.
Lu has been a Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X Cloud
Computing ETF
Ticker:
CLOU
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Cloud Computing ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the Indxx Global Cloud Computing Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.68% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.68% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$69 |
$218 |
$379 |
$847 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 31.21% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Indxx
Global Cloud Computing Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed. The Fund may lend securities representing up to one-third of
the value of the Fund’s total assets (including the value of the collateral
received).
The
Underlying Index is designed to provide exposure to exchange-listed companies
that are positioned to benefit from the increased adoption of cloud computing
technology, including but not limited to companies whose principal business is
in offering computing Software-as-a-Service ("SaaS"), Platform-as-a-Service
("PaaS"), Infrastructure-as-a-Service ("IaaS"), managed server storage space and
data center real estate investment trusts ("REITs"), and/or cloud and edge
computing infrastructure and hardware (collectively, "Cloud Computing
Companies"), as defined by Indxx LLC, the provider of the Underlying Index
("Index Provider").
In
constructing the Underlying Index, the Index Provider first identifies FactSet
Industries related to cloud computing. Companies within these Industries, as of
the selection date, are further reviewed by the Index Provider on the basis of
revenue related to cloud computing activities. To be eligible for the Underlying
Index, a company is considered by the Index Provider to be a Cloud Computing
Company if the company generates at least 50% of its revenues from cloud
computing activities, as determined by the Index Provider. The Index Provider
classifies Cloud Computing Companies as those companies that (i)
license
and deliver software over the internet on a subscription basis (SaaS), (ii)
provide a platform for creating software applications which are delivered over
the internet (PaaS), (iii) provide virtualized computing infrastructure over the
internet (IaaS), (iv) own and manage facilities customers use to store data and
servers, including data center REITs, and/or (v) manufacture or distribute
infrastructure and/or hardware components used in cloud and edge computing
activities, as determined by the Index Provider. In addition, companies that
generate at least $500 million of revenue from providing public cloud
infrastructure (but less than 50% of their overall revenues), are eligible for
inclusion in the Underlying Index. These companies are subject to an individual
weight cap of 2% and an aggregate weight cap of 10% at each semi-annual
rebalance.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index Provider,
must be met. As of January 31, 2023, companies must have a minimum market
capitalization of $200 million and a minimum average daily turnover for the last
6 months (or since the IPO launch date for Significant IPOs as defined by the
Index Provider) greater than or equal to $2 million in order to be eligible for
inclusion in the Underlying Index. As of January 31, 2023, companies listed
in the following countries were eligible for inclusion in the Indxx Global Cloud
Computing Index: Australia, Austria, Belgium, Brazil, Canada, Chile, China,
Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong
Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia,
Mexico, Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal,
Qatar, South Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan,
Thailand, Turkey, United Arab Emirates, the United Kingdom, and the United
States.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
Generally speaking, this approach will limit the amount of concentration in the
largest market capitalization companies and increase company-level
diversification. The Underlying Index may include large-, mid- or
small-capitalization companies, and components primarily include information
technology companies. As of January 31, 2023, the Underlying Index had 36
constituents. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the software industry and had significant
exposure to the information technology
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well
as
other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Real
Estate Stocks and Real Estate Investment Trusts (REITs) Investment
Risk:
The Fund may have exposure to companies that invest in real estate, such as
REITs, which exposes investors in the Fund to the risks of owning real estate
directly, as well as to risks that relate specifically to the way in which real
estate companies are organized and operated. Real estate is highly sensitive to
general and local economic conditions and developments and characterized by
intense competition and periodic overbuilding. Many real estate companies,
including REITs, utilize leverage (and some may be highly leveraged), which
increases risk and could adversely affect a real estate company's operations and
market value in periods of rising interest rates.
Associated
Risks Related to Investing in Cloud Computing Companies: Cloud
Computing companies may have limited product lines, markets, financial resources
or personnel. These companies typically face intense competition and potentially
rapid product obsolescence. In addition, many Cloud Computing companies store
sensitive consumer information and could be the target of cybersecurity attacks
and other types of theft, which could have a negative impact on these companies.
As a result, Cloud Computing companies may be adversely impacted by government
regulations, and may be subject to additional regulatory oversight with regard
to privacy concerns and cybersecurity risk. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. Cloud Computing companies could be negatively
impacted by disruptions in service caused by hardware or software failure, or by
interruptions or delays in service by third-party data center hosting facilities
and maintenance providers. Cloud Computing companies, especially smaller
companies, tend to be more volatile than companies that do not rely heavily on
technology. The customers and/or suppliers of Cloud Computing companies may be
concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on Cloud Computing companies. Cloud Computing companies may participate
in monopolistic practices that could make them subject to higher levels of
regulatory scrutiny and/or potential break ups in the future, which could
severely impact the viability of these companies.
Through
its portfolio companies’ customers and suppliers, the Fund is specifically
exposed to Asian
Economic Risk,
European
Economic Risk
and North
American Economic Risk.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk: Compared
to mid- and large-capitalization companies, small-capitalization companies may
be less stable and more susceptible to adverse developments, and their
securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Risks
Related to Investing in the Software Industry:
The software industry can be significantly affected by intense competition,
aggressive pricing, technological innovations, and product obsolescence.
Companies in the application software industry, in particular, may also be
negatively affected by the decline or fluctuation of subscription renewal rates
for their products and services, which may have an adverse effect on profit
margins. Companies in the systems software industry may be adversely affected
by, among other things, actual or perceived security vulnerabilities in their
products and services, which may result in individual or class action lawsuits,
state or federal enforcement actions and other remediation costs.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of
constraints,
may cause the Fund to underperform the market or its relevant benchmark or
adversely affect the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
46.55% |
Worst
Quarter: |
6/30/2022 |
-24.98% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (04/12/2019) |
Global
X Cloud Computing ETF: |
|
|
·Return
before taxes |
-39.52% |
2.19% |
·Return
after taxes on distributions1 |
-39.52% |
2.08% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-23.39% |
1.74% |
Indxx
Global Cloud Computing Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-39.10% |
2.83% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
5.89% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie have been Portfolio Managers of the
Fund since the Fund's inception. Ms. Chan has been a Portfolio Manager of the
Fund since June 10, 2019. Ms. Yang has been a Portfolio Manager of the Fund
since December 2020. Mr. Lu has been a Portfolio Manager of the Fund since April
2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X Data
Center REITs & Digital Infrastructure ETF
Ticker:
VPN
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Data Center REITs & Digital Infrastructure ETF
("Fund") seeks to provide investment results that correspond generally to the
price and yield performance, before fees and expenses, of the Solactive Data
Center REITs & Digital Infrastructure Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 36.96% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the Solactive Data Center REITs &
Digital Infrastructure Index (the "Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed.
The
Underlying Index is designed to provide exposure to companies that have business
operations in the fields of data centers, cellular towers, and/or digital
infrastructure hardware. Specifically, the Underlying Index will include
securities issued by “Data Center REITs & Digital Infrastructure Companies”
as defined by Solactive AG, the provider of the Underlying Index (the "Index
Provider"). Data Center REITs & Digital Infrastructure Companies are those
companies that derive at least 50% of their revenues, operating income, or
assets from the following business activities:
i.Data
Center Companies: Companies that own, operate, and/or develop data centers
(including data center REITs (as defined below)), which are publicly-listed
companies that own and manage facilities that customers use to safely and
efficiently store computer servers and data. Data Center Companies offer a range
of products and services to help secure, maintain, and facilitate the use of
servers and data within data centers, including providing uninterruptable power
supplies, temperature regulation, and physical security.
ii.Cellular
Tower Companies: Companies that own, operate and/or develop cellular towers
(including cellular tower REITs), which are publicly-listed companies that lease
antennae and equipment space on cellular towers to wireless carriers. Wireless
carriers utilize the cellular tower space provided by Cellular Tower Companies
to operate antennae and equipment that transmit and receive the signal reception
of cellular phones, televisions, radios, and other wireless communication
devices.
iii.Digital
Infrastructure Hardware Companies: Companies that manufacture, design, and/or
assemble the servers and/or other hardware often used in data centers and
cellular towers, including data center servers, processors and data center
switches.
Data
Center Companies and Cellular Tower Companies can be (but are not required to
be) structured as real estate investment trusts (“REITs”), which are publicly
listed companies that own or finance income-producing real estate assets. In
order to qualify as a REIT under the Internal Revenue Code of 1986, as amended,
a company needs to satisfy several regulatory requirements including but not
limited to:
i.Investing
at least 75% of its assets in real estate.
ii.Deriving
at least 75% of its gross income from rents from real property, interest on
mortgages financing real property, or from sales of real estate.
iii.Distributing
at least 90% of its taxable income in the form of shareholder dividends each
year.
In
constructing the Underlying Index, the Index Provider first applies a
proprietary natural language processing algorithm to the eligible universe,
which seeks to identify and rank companies that operate data centers and/or
companies with direct exposure to digital infrastructure based on filings,
disclosures and other public information (e.g. regulatory filings, earnings
transcripts, etc.). The highest ranking companies identified by the natural
language processing algorithm, as of the selection date, are further reviewed by
the Index Provider to confirm they derive at least 50% of their revenues,
operating income, or assets from Data Center REITs and/or Digital
Infrastructure.
The
eligible universe of the Underlying Index includes exchange-listed companies
that meet minimum market capitalization and liquidity criteria, as defined by
the Index Provider. As of January 31, 2023, companies must have a minimum
market capitalization of $200 million and a minimum average daily turnover for
the last 6 months greater than or equal to $2 million in order to be eligible
for inclusion in the Underlying Index. As of January 31, 2023, companies
listed in the following countries were eligible for inclusion in the Underlying
Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Indonesia, Ireland, Israel, Italy, Japan, Netherlands, New Zealand,
Norway, Poland, Portugal, Singapore, Spain, Sweden, Switzerland, South Korea,
Taiwan, the United Kingdom, and the United States. The Fund may invest in
securities denominated in foreign currencies.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
During each rebalance, the maximum weight of a Data Center Company or Cellular
Tower Company (defined by the Index Provider as companies that own, operate,
and/or develop data centers (including data center REITs) and cellular towers
(including Cellular Tower REITs)), respectively, is capped at 12% and the
maximum weight of a Digital Infrastructure Hardware Company (defined by the
Index Provider as companies that manufacture the servers and/or other hardware
often used in data centers and cellular towers, including semiconductors,
integrated circuits, and processors) is capped at 2%, the aggregate weight of
companies with a weight greater than or equal to 4.5% is capped at 45%, all
remaining companies are capped at a weight of 4.5%, and all constituents are
subject to a minimum weight of 0.3%. Generally speaking, this approach will
limit the amount of concentration in the largest market capitalization companies
but may increase the number of constituents included within the Underlying
Index. The Underlying Index may include large-, mid- or small-capitalization
companies, and components primarily include real estate and information
technology companies. As of January 31, 2023, the Underlying Index had 24
constituents. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The
Fund is classified as "non-diversified," which means it may invest a larger
percentage of its assets in a smaller number of issuers than a diversified fund.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the equity real estate investment industry
and had significant exposure to the real estate and information technology
sectors.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Real
Estate Stocks and Real Estate Investment Trusts (REITs) Investment
Risk:
The Fund may have exposure to companies that invest in real estate, such as
REITs, which exposes investors in the Fund to the risks of owning real estate
directly, as well as to risks that relate specifically to the way in which real
estate companies are organized and operated. Real estate is highly sensitive to
general and local economic conditions and developments and characterized by
intense competition and periodic overbuilding. Many real estate companies,
including REITs, utilize leverage (and some may be highly leveraged), which
increases risk and could adversely affect a real estate company's operations and
market value in periods of rising interest rates.
Associated
Risks Related to Investing in Data Center REITs and Digital Infrastructure
Companies:
Data Center REITs and Digital Infrastructure Companies are exposed to the risks
specific to the real estate market as well as the risks that relate specifically
to the way in which Data Center REITs and Digital Infrastructure Companies are
utilized and operated. Data Center REITs and Digital Infrastructure Companies
may be affected by unique supply and demand factors that do not apply to other
real estate sectors, such as changes in demand for communications
infrastructure, consolidation of tower sites, and new technologies that may
affect demand for data centers. Data Center REITs and Digital Infrastructure
Companies are particularly affected by changes in demand for wireless
infrastructure and wireless connectivity. Such demand is affected by numerous
factors including, but not limited to, consumer demand for wireless
connectivity; availability or capacity of wireless infrastructure or associated
land interests; location of wireless infrastructure; financial condition of
customers; increased use of network sharing, roaming, joint development, or
resale agreements by customers; mergers or consolidations by and among
customers;
governmental regulations, including local or state restrictions on the
proliferation of wireless infrastructure; and technological changes, including
those affecting the number or type of wireless infrastructure needed to provide
wireless connectivity to a given geographic area or resulting in the
obsolescence or decommissioning of certain existing wireless networks. Data
Center REITs and Digital Infrastructure Companies may be subject to external
risks including, but not limited to, natural disasters and supplier outages.
Certain geographical areas may be at higher risk for natural disasters, which
can increase the likelihood of power surges and supplier outages. Natural
disasters and supplier outages can lead to significant downtime, data loss, and
associated expenses. Data Center REITs and Digital Infrastructure Companies may
be subject to internal risks including, but not limited to, water supply and
climate risk and data security risk. Water damage or an imprecise climate may
cause extensive damage to critical infrastructure if adequate systems aimed at
water penetration and climate control are not installed. Data centers
increasingly rely on the use of electronic data, which may make them more
vulnerable to data security risk. Data centers are potential targets for
cyberattacks, which may have a materially adverse impact on the performance of
these companies. Data centers that do not implement more advanced access control
and security monitoring in response to internal and external threats may be at
greater risk of potential breaches or damage to data integrity.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk: Compared
to mid- and large-capitalization companies, small-capitalization companies may
be less stable and more susceptible to adverse developments, and their
securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Equity Real Estate Investment Industry:
The Fund is concentrated in the Equity Real Estate Investment Industry, which
comprises Real Estate Investment Trusts (REITs). For more information, see
Asset
Class Risk - Real Estate Stocks and Real Estate Investment Trusts (REITs)
Investment Risk in
the SUMMARY
OF PRINCIPAL RISKS
and A
FURTHER DISCUSSION OF PRINCIPAL RISKS
sections of the Prospectus.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Risks
Related to Investing in the Real Estate Sector:
The real estate sector includes real estate companies focused on commercial and
residential real estate development, sales, operations, and services, as well as
real estate investment trusts (“REITs”). Real estate is highly sensitive to
general and local economic conditions and developments and characterized by
intense competition and periodic overbuilding. Many real estate companies
utilize leverage (and some may be highly leveraged), which increases risk and
could adversely affect a real estate company's operations and market value in
periods of rising interest rates.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in the Southeast Asian Nations (ASEAN) Region: Investments
in the ASEAN region involve risks not typically associated with investments in
securities of issuers in more developed countries that may negatively affect the
value of your investment in the Fund. Singapore, Malaysia, Thailand, Indonesia
and the Philippines present different economic and political conditions from
those in Western markets, and less social, political and economic stability. In
the past, some of these economies have experienced high interest rates, economic
volatility, inflation, currency devaluations and high unemployment rates.
Political instability could have an adverse effect on economic or social
conditions in these economies and may result in outbreaks of civil unrest,
terrorist attacks or threats or acts of war in the affected areas, any of which
could materially and adversely affect the companies in which the Fund may
invest.
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property
protections,
may have a substantial impact on the Chinese economy. Reduction in spending on
Chinese products and services, institution of additional tariffs or other trade
barriers (including as a result of heightened trade tensions between China and
the U.S. or in response to actual or alleged Chinese cyber activity), or a
downturn in any of the economies of China’s key trading partners may have an
adverse impact on the Chinese economy. The continuation or worsening of the
current political climate between China and the U.S. could result in additional
regulatory restrictions being contemplated or imposed in the U.S. or in China
that could impact the Fund’s ability to invest in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based
operating
company, which may cause the value of the Fund’s investment in the listed shell
company to suffer a significant loss. For example, in 2021, the Chinese
government prohibited use of the VIE structure for investment in after-school
tutoring companies. There is no guarantee that the Chinese government will not
place similar restrictions on other industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access. As of January 31, 2023, the Fund had significant exposure to VIEs,
as defined above.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market country. There may
be significant obstacles to obtaining information necessary for investigations
into or litigation against emerging market companies and shareholders may have
limited legal rights and remedies. Emerging markets may be more likely to
experience inflation, political turmoil and rapid changes in economic conditions
than more developed markets. Emerging market economies’ exposure to specific
industries, such as tourism, and lack of efficient or sufficient health care
systems, could make these economies especially vulnerable to global crises,
including but not limited to, pandemics such as the global COVID-19 pandemic.
Certain emerging market countries may have privatized, or have begun the process
of privatizing, certain entities and industries. Privatized entities may lose
money or be re-nationalized.
Risk
of Investing in Indonesia: Investments
in Indonesian issuers may subject the Fund to legal, regulatory, political,
security and economic risk specific to Indonesia. Among other things, the
Indonesian economy is heavily dependent on trading relationships with certain
key trading partners, including China, Japan, Singapore and the United States.
In the past, Indonesia has experienced acts of terrorism, predominantly targeted
at foreigners. Such acts of terrorism have had a negative impact on tourism, an
important sector of the Indonesian economy.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Reliance
on Trading Partners Risk: The
Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy and on the companies in which the Fund invests.
Because of this interdependence, the Fund may be indirectly exposed to downturns
in other markets, and may be exposed to Asian Economic Risk, European Economic
Risk, and North American Economic Risk, as discussed more fully in the
Prospectus.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2021 |
11.62% |
Worst
Quarter: |
9/30/2022 |
-17.14% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (10/27/2020) |
Global
X Data Center REITs & Digital Infrastructure ETF: |
|
|
·Return
before taxes |
-30.47% |
-6.16% |
·Return
after taxes on distributions1 |
-31.06% |
-6.79% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-17.93% |
-4.82% |
Solactive
Data Center REITs & Digital Infrastructure Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-30.51% |
-6.19% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
4.33% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan
have
been Portfolio Managers of the Fund since the Fund's inception. Ms. Yang has
been a Portfolio Manager of the Fund since December 2020. Mr. Lu has been a
Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X
Cybersecurity ETF
Ticker:
BUG
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Cybersecurity ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the Indxx Cybersecurity Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.01% |
Total
Annual Fund Operating Expenses: |
0.51% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$52 |
$164 |
$285 |
$640 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 57.81% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Indxx
Cybersecurity Index ("Underlying Index") and in American Depositary Receipts
("ADRs") and Global Depositary Receipts ("GDRs") based on the securities in the
Underlying Index. The Fund will also invest, under normal circumstances, at
least 80% of its net assets, plus borrowings for investment purposes (if any),
in Cybersecurity Companies (as defined below), and in ADRs and GDRs based on
such securities. The Fund's 80% investment policies are non-fundamental and
require 60 days prior written notice to shareholders before they can be changed.
The Fund may lend securities representing up to one-third of the value of the
Fund’s total assets (including the value of the collateral received).
The
Underlying Index is designed to provide exposure to exchange-listed companies
that are positioned to benefit from increased adoption of cybersecurity
technology, including but not limited to companies whose principal business is
in the development and management of security protocols preventing intrusion and
attacks to systems, networks, applications, computers, and mobile devices
(collectively, "Cybersecurity Companies"), as determined by Indxx LLC, the
provider of the Underlying Index ("Index Provider").
In
constructing the Underlying Index, the Index Provider first identifies FactSet
Industries related to cybersecurity. Companies within these FactSet Industries,
as of the selection date, are further reviewed by the Index Provider on the
basis of revenue related to cybersecurity activities. To be eligible for the
Underlying Index as a Cybersecurity Company, a company must generate at least
50% of its revenues from cybersecurity activities, which the Index Provider
classifies as the development and
management
of security protocols preventing intrusion and attacks to systems, networks,
applications, computers, and mobile devices.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index Provider,
must be met. As of January 31, 2023, companies must have a minimum market
capitalization of $200 million and a minimum average daily turnover for the last
six months (or since the IPO launch date for Significant IPOs as defined by the
Index Provider) greater than or equal to $2 million in order to be eligible for
inclusion in the Underlying Index. As of January 31, 2023, companies listed
in the following countries were eligible for inclusion in the Underlying Index:
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, Mexico,
Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar,
South Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan,
Thailand, Turkey, United Arab Emirates, the United Kingdom, and the United
States.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
Generally speaking, this approach will limit the amount of concentration in the
largest market capitalization companies and thereby increase exposure to other
companies. The Underlying Index may include large-, mid- or small-capitalization
companies, and components primarily include mid-capitalization companies. As of
January 31, 2023, the Underlying Index had 23 constituents. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the software industry and had significant
exposure to the information technology
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Cybersecurity Companies:
Cybersecurity companies may have limited product lines, markets, financial
resources or personnel. These companies typically face intense competition and
potentially rapid product obsolescence. Cybersecurity companies may be adversely
impacted by government regulations and actions, and may be subject to additional
regulatory oversight with regard to privacy concerns and cybersecurity risk.
Cybersecurity companies may also be negatively affected by the decline or
fluctuation of subscription renewal rates for their products and services, which
may have an adverse effect on profit margins. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. Cybersecurity companies, especially smaller
companies, tend to be more volatile than companies that do not rely heavily on
technology. The customers and/or suppliers of Cybersecurity companies may be
concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on Cybersecurity companies. Confronting cyberthreats amid increasing
remote work environments could result in challenges for Cybersecurity companies.
Through its portfolio companies’ customers and suppliers, the Fund is
specifically exposed to Asian
Economic Risk and
European
Economic Risk.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and
increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Risks
Related to Investing in the Software Industry:
The software industry can be significantly affected by intense competition,
aggressive pricing, technological innovations, and product obsolescence.
Companies in the application software industry, in particular, may also be
negatively affected by the decline or fluctuation of subscription renewal rates
for their products and services, which may have an adverse effect on profit
margins. Companies in the systems software industry may be adversely affected
by, among other things, actual or perceived security vulnerabilities in their
products and services, which may result in individual or class action lawsuits,
state or federal enforcement actions and other remediation costs.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in South Korea: Investments
in South Korean issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risks that are specific to South Korea. In
addition, economic and political developments of South Korea’s neighbors,
including escalated tensions involving North Korea and any outbreak of
hostilities involving North Korea, or even the threat of an outbreak of
hostilities, may have a severe adverse effect on the South Korean
economy.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce
or
eliminate its holdings in that company. The reduction or elimination of the
Fund’s holdings in the company may have an adverse impact on the liquidity of
the Fund’s overall portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of
dividends
or interest, tax gains or losses, changes to the Underlying Index or the costs
to the Fund of complying with various new or existing regulatory requirements.
This risk may be heightened during times of increased market volatility or other
unusual market conditions. Tracking error also may result because the Fund
incurs fees and expenses, while the Underlying Index does not. ETFs that track
indices with significant weight in emerging markets issuers may experience
higher tracking error than other ETFs that do not track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
32.85% |
Worst
Quarter: |
6/30/2022 |
-20.48% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (10/25/2019) |
Global
X Cybersecurity ETF: |
|
|
·Return
before taxes |
-33.68% |
11.19% |
·Return
after taxes on distributions1 |
-33.92% |
10.91% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-19.76% |
8.75% |
Indxx
Cybersecurity Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-33.28% |
11.67% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
5.87% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan have been Portfolio
Managers of the Fund since the Fund's inception. Ms. Yang has been a Portfolio
Manager of the Fund since December 2020. Mr. Lu has been a Portfolio Manager of
the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
Artificial Intelligence & Technology ETF
Ticker:
AIQ
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Artificial Intelligence & Technology ETF ("Fund")
seeks to provide investment results that correspond generally to the price and
yield performance, before fees and expenses, of the Indxx Artificial
Intelligence & Big Data Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.68% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.68% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$69 |
$218 |
$379 |
$847 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 21.28% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Indxx
Artificial Intelligence & Big Data Index ("Underlying Index"). The
Underlying Index is designed to track the performance of companies involved in
the development and utilization of artificial intelligence ("AI") and big data.
The Fund's 80% investment policy is non-fundamental and requires 60 days prior
written notice to shareholders before it can be changed. The Fund may lend
securities representing up to one-third of the value of the Fund’s total assets
(including the value of the collateral received).
The
Underlying Index is designed to provide exposure to exchange-listed companies
that are positioned to benefit from the further development and utilization of
artificial intelligence technology in their products and services, as well as to
companies that provide hardware which facilitates the use of artificial
intelligence for the analysis of big data (collectively, "Artificial
Intelligence & Big Data Companies"), as defined by Indxx, LLC the provider
of the Underlying Index (the "Index Provider").
As
technology continues to advance, artificial intelligence and big data are
converging as complementary technology themes that enable companies to extract
useful information from large and complex data sets. The increasing availability
and accessibility of big data is creating more potential applications for
artificial intelligence technology, which further incentivizes companies to
develop capabilities in this area. Advances in artificial intelligence and big
data technology have the potential to impact companies across many sectors, and
are particularly applicable to companies that have acquired significant amounts
of consumer, industrial, financial or other types of
data.
The
eligible universe of the Underlying Index includes exchange-listed companies
that meet minimum market capitalization and liquidity criteria, as defined by
the Index Provider. As of January 31, 2023, companies must have a minimum
market capitalization of $500 million and a minimum average daily turnover for
the last 6 months (or since the IPO launch date for Significant IPOs as defined
by the Index Provider or 3 months, in the case of other IPOs) greater than or
equal to $2 million in order to be eligible for inclusion in the Underlying
Index. As of January 31, 2023, companies listed or incorporated in the
following countries were eligible for inclusion in the Underlying Index:
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal,
Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, the United Kingdom,
and the United States. In addition, ADRs and GDRs of companies incorporated or
with primary listing in China are eligible for inclusion.
From
the eligible universe, the Index Provider identifies Artificial Intelligence
& Big Data Companies by applying a proprietary analysis that seeks to
identify companies that can be classified in the following
categories:
•Artificial
Intelligence Developers
▪Artificial
Intelligence Applied to Products and Services - Companies
that have developed internal artificial intelligence capabilities (organically
or through acquisition) and are applying artificial intelligence technology
directly in their products and services. Artificial intelligence applications
include but are not limited to language/ image processing and recognition,
automated communications, threat detection, recommendation generation, and other
predictive analytics.
▪Artificial
Intelligence-as-a-Service ("AIaaS") for Big Data Applications - Companies
that provide artificial intelligence capabilities to their customers as a
service. Companies in this segment typically offer cloud-based platforms that
allow their customers to apply artificial intelligence techniques to big data
without the need for a direct investment in their own artificial
intelligence-related infrastructure or capabilities.
Many
companies in the Artificial Intelligence Developers category are considered "big
data owners" due to the large amounts of consumer, industry, financial or other
types of data that has been acquired through their platforms, products and
services. These companies have typically developed internal capabilities
in artificial intelligence technology and are using these capabilities to create
competitive advantage in their businesses. This category may include
companies from sectors including, but not limited to, Information Technology,
Industrials, Financials, and Consumer Discretionary.
•Artificial
Intelligence and Big Data Analytics Hardware
◦Artificial
Intelligence Hardware - Companies
that produce semiconductors, memory storage and other hardware that is utilized
for artificial intelligence applications. This currently includes, but is not
limited to, companies that produce graphics processing units (GPUs),
application-specific integrated circuit ("ASIC") chips, field-programmable gate
array ("FPGA") chips, and all-flash array storage.
◦Quantum
Computing - Companies
that are developing quantum computing technology. While currently in the
process of being commercialized, quantum computing is expected to have
significant potential for artificial intelligence and big data applications.
In
order to be included in the Underlying Index, a company must be classified in
the categories described above, as determined by the Index Provider. This
classification is based on a composite analysis of public filings, products and
services, official company statements and other information regarding direct
involvement in the artificial intelligence and big data categories as described
above. Eligible companies are then ranked by the Index Provider using a research
framework that assesses a company's exposure to these categories. Companies must
receive a minimum score within a given category to be selected in the Underlying
Index, as determined by the Index Provider. Accordingly, the Fund assets will be
concentrated (that is, it will hold 25% or more of its total assets) in
companies that provide exposure to Artificial Intelligence & Big Data.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted annually with a semi-annual re-weighting. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include information technology companies. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index had significant exposure to the information technology
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Artificial Intelligence & Big Data
Companies:
Artificial Intelligence & Big Data Companies typically face intense
competition and potentially rapid product obsolescence. These companies are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. There can be no assurance these companies
will be able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. Artificial Intelligence & Big Data Companies typically engage in
significant amounts of spending on research and development and mergers and
acquisitions, and there is no guarantee that the products or services produced
by these companies will be successful. Artificial Intelligence & Big Data
Companies are potential targets for cyberattacks, which can have a materially
adverse impact on the performance of these companies. In addition, artificial
intelligence technology could face increasing regulatory scrutiny in the future,
which may limit the development of this technology and impede the growth of
companies that develop and/or utilize this technology. Similarly, the collection
of data from consumers and other sources could face increased scrutiny as
regulators consider how the data is collected, stored, safeguarded and used.
Artificial Intelligence & Big Data Companies may face regulatory fines and
penalties, including potential forced break-ups, that could hinder the ability
of the companies to operate on an ongoing basis. The customers and/or suppliers
of Artificial Intelligence & Big Data Companies may be concentrated in a
particular country, region or industry. Any adverse event affecting one of these
countries,
regions
or industries could have a negative impact on Artificial Intelligence & Big
Data Companies. Country, government, and/or region-specific regulations or
restrictions could have an impact on Artificial Intelligence & Big Data
companies. Through its portfolio companies’ customers and suppliers, the Fund is
specifically exposed to Asian
Economic Risk,
European
Economic Risk
and North
American Economic Risk.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands.
The
shell company lists on a foreign exchange and enters into contractual
arrangements with the VIE. This structure allows Chinese companies in which the
Chinese government restricts foreign ownership to raise capital from foreign
investors. While the shell company has no equity ownership of the VIE, these
contractual arrangements permit the shell company to consolidate the VIE’s
financial statements with its own for accounting purposes and provide for
economic exposure to the performance of the underlying Chinese operating
company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access. As of January 31, 2023, the Fund had significant exposure to VIEs,
as defined above.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:
The Fund targets Artificial Intelligence & Big Data Companies globally and
is expected to invest in securities in emerging market countries. Investments in
emerging markets may be subject to a greater risk of loss than investments in
developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries, and there may be greater
risk associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be
re-nationalized.
Risk
of Investing in South Korea: Investments
in South Korean issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risks that are specific to South Korea. In
addition, economic and political developments of South Korea’s neighbors,
including escalated tensions involving North Korea and any outbreak of
hostilities involving North Korea, or even the threat of an outbreak of
hostilities, may have a severe adverse effect on the South Korean
economy.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of
constraints,
may cause the Fund to underperform the market or its relevant benchmark or
adversely affect the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
32.53% |
Worst
Quarter: |
6/30/2022 |
-22.73% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (05/11/2018) |
Global
X Artificial Intelligence & Technology ETF: |
|
|
·Return
before taxes |
-36.18% |
7.11% |
·Return
after taxes on distributions1 |
-36.26% |
6.98% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-21.36% |
5.57% |
Indxx
Artificial Intelligence & Big Data Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-35.93% |
7.53% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
5.18% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
the Fund's inception. Mr. Xie has been a Portfolio Manager of the Fund since
March 1, 2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10,
2019. Ms. Yang has been a Portfolio Manager of the Fund since December 2020. Mr.
Lu has been a Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global
X Metaverse ETF
Ticker:
VR
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X
Metaverse ETF ("Fund") seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Global X Metaverse Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses:1 |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
1 Other Expenses
are based on estimated amounts for the current fiscal
year.
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. From the Fund's commencement of operations on April 26, 2022 to the
end of the most recent fiscal period, the Fund's portfolio turnover rate was
30.52% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its net assets, plus the amount of any borrowings
for investment purposes, in the securities of the Global X Metaverse Index (the
"Underlying Index") and in American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs") based on the securities in the Underlying Index.
Solely for the purposes of complying with this policy, the Fund views securities
issued by Metaverse Leaders only (as defined below) as satisfying this
criterion. The Fund's 80% investment policy is non-fundamental and requires 60
days prior written notice to shareholders before it can be changed. The Fund may
lend securities representing up to one-third of the value of the Fund's total
assets (including the value of collateral received).
The
Underlying Index is owned and was developed by Global X Management Company LLC
(the “Index Provider”), an affiliate of the Fund and the Fund's investment
adviser (the “Adviser”). The Underlying Index is administered and calculated by
Indxx, LLC (the “Index Administrator”). The Underlying Index is designed to
provide exposure to companies that are positioned to benefit from the
development and commercialization of the metaverse. The metaverse is a set of
virtual, three dimensional (“3D”), real-time rendered spaces and simulations
that can be experienced simultaneously by users regardless of the users’
physical location. Specifically, the Underlying Index consists of securities
issued by “Metaverse Leaders”, as
determined
by the Index Administrator. Metaverse Leaders are those companies that derive at
least 50% of their revenues from one or more of the following business
activities in aggregate (“Metaverse Business Activities”):
i.Augmented/Virtual/Mixed
Reality and Spatial Computing –
Companies involved in the development of hardware and/or software that allow
users to experience or interact with extended digital realities, including fully
immersive simulated virtual experience (“Virtual Reality”), real-world
environments that are enhanced by computer generated information (“Augmented
Reality”), and hybridized displays that represent both physical and virtual
worlds, providing users the ability to experience and interact with both
simultaneously (“Mixed Reality���). Such technologies can simulate or relay
visual, audio, haptic (creating the sensation of touch for users by utilizing
vibrations or other forces), or movement-driven information, among
others.
ii.Creator
Platforms
- Companies involved in the development of immersive digital platforms that
enable users to create, share, and consume content and digital goods, including
social networking, online video games/video game engines and esports, live
streaming, digital live events, and other media content in three dimensional
simulations, environments or worlds.
iii.Creator
Economy
– Companies involved in the development of infrastructure and applications that
involve digital payment services for the metaverse, including cryptocurrency
payments, blockchain technologies, decentralized finance solutions, the creation
and distribution of Non-Fungible Tokens (“NFTs”) and digital asset payment
gateways.
iv.Digital
Infrastructure/Hardware –
Companies that produce semiconductors, cloud computing technology (including
edge computing and cloud computing security) and 5G infrastructure that are
utilized for digital media consumption and/or in the development and maintenance
of metaverse and related devices.
In
constructing the Underlying Index, the Index Administrator first identifies
FactSet Industries related to the metaverse. FactSet is a leading financial data
provider that maintains a comprehensive structured taxonomy designed to offer
precise classification of global companies and their individual business units.
Companies within these FactSet Industries, as of the selection date, are further
reviewed by the Index Administrator on the basis of revenue related to Metaverse
Business Activities. To be eligible for the Underlying Index, a company is
considered by the Index Administrator to be a Metaverse Leader if the company
generates at least 50% of its revenues from Metaverse Business Activities, as
determined by the Index Administrator.
In
addition, companies identified by the Index Administrator as having primary
business operations in Metaverse Business Activities but that do not currently
generate revenues (“Pre-Revenue Metaverse Leaders”), as well as companies that
derive greater than 0% but less than 50% of revenue from Metaverse Business
Activities (“Diversified Metaverse Leaders”), are eligible for inclusion.
Primary business operations are determined by the Index Administrator based on
the business description provided by the company in official reporting documents
such as Form 10-K or equivalent. Diversified Metaverse Leaders and Pre-Revenue
Metaverse Leaders are subject to an individual weight cap of 4% and an aggregate
weight cap of 15% at each semi-annual rebalance.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index
Administrator, must be met. As of January 31, 2023, companies must have a
minimum market capitalization of $200 million and a minimum average daily
turnover for the last 6 months greater than or equal to $2 million in order to
be eligible for inclusion in the Underlying Index. As of January 31, 2023,
companies listed in the following countries were eligible for inclusion in the
Underlying Index: Australia, Austria, Belgium, Brazil, Canada, Chile, China,
Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong
Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia,
Mexico, Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal,
Qatar, South Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan,
Thailand, Turkey, United Arab Emirates, the United Kingdom, and the United
States
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
During each rebalance, the maximum weight of each Metaverse Leader is
individually capped at 6%, the aggregate weight of Metaverse Leaders with a
weight greater than or equal to 4.5% is capped at 40%, all remaining Metaverse
Leaders are individually capped at a weight of 4.5%, and all constituents are
subject to a minimum weight of 0.3%. Generally speaking, this approach will
limit the amount of concentration in the largest market capitalization companies
and increase company-level diversification. The Underlying Index may include
large-, mid- or small-capitalization companies, and components primarily include
communication services and information technology companies. As of
January 31, 2023, the Underlying Index included companies with market
capitalizations ranging from $280 million to $2.3 trillion. As of
January 31, 2023, the Underlying Index had 41 constituents. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is created and sponsored by the Index Provider. Any
determinations related to the constituents of the Underlying Index are made by
the Index Administrator and are independent of the Fund's portfolio managers.
The Index Administrator determines the composition and relative weightings of
the securities in the Underlying Index and publishes information regarding the
market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the entertainment industry and had
significant exposure to the communication services sector. The
Fund is classified as “non-diversified,” which means it may invest a larger
percentage of its assets in a smaller number of issuers than a diversified
fund.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund's performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
("SAI"). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Affiliated
Index Provider Risk: The
Adviser also serves as the Fund’s Index Provider, which may present the
appearance of a conflict of interest. For example, a potential conflict could
arise if the Adviser were to exercise undue influence with respect to regular
and/or extraordinary updates to the methodology or composition of the Underlying
Index, including in a manner that might improve the apparent performance of the
Fund relative to the performance of the Underlying Index. Additionally,
potential conflicts could arise to the extent that portfolio managers of the
Adviser become aware of contemplated methodology changes or rebalance activity
prior to disclosure to the public, which could facilitate “front running” on
behalf of other funds managed by the Adviser with similar exposure. Although the
Adviser has taken steps designed to ensure that these potential conflicts are
mitigated (e.g., via the adoption of policies and procedures that are designed
to minimize potential conflicts of interest and ensure independence with respect
to the operation of the Underlying Index, as well as the implementation of
informational barriers designed to minimize the potential for the misuse of
information about the Underlying Index), there can be no assurance that such
measures will be successful.
Asset
Class Risk: Securities
and other assets in the Underlying Index or otherwise held in the Fund's
portfolio may underperform in comparison to the general securities markets, a
particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Companies Involved in the Metaverse:
Metaverse Leaders have exposure to various products and services, including but
not limited to video games and esports, live streaming, social media, blockchain
technology, artificial intelligence (“AI”), extended reality (e.g., augmented
reality (“AR”), virtual reality (“VR”) mixed reality (“MR”)), and technology
software and hardware (e.g., semiconductors, 5G, etc.). The risks related to
investing in Metaverse Leaders include intense competition and rapid product
obsolescence, changes in consumer preferences and/or spending, disruption in
service caused by hardware or software failure, security breaches involving
certain private, sensitive, proprietary, and confidential information and
privacy laws. In addition, there can be no assurance that competitors will not
develop technology that is substantially similar or superior to such companies’
technology. Metaverse Leaders typically engage in significant amounts of
spending on research and development and there is no guarantee that the products
or services produced by these companies will develop into viable economic
opportunities. Metaverse Leaders are potential targets for cyberattacks, which
can have a materially adverse impact on their performance. As a result, these
companies may be adversely impacted by government regulations, and may be
subject to additional regulatory oversight with regard to privacy concerns and
security risk. In addition, Metaverse technology could face increasing
regulatory scrutiny in the future, which may limit the development and impede
the growth of companies that utilize these technological advancements. Metaverse
Leaders may be adversely affected by increased scrutiny of privacy concerns,
which could limit the growth and adoption of Metaverse technology. The customers
and/or suppliers of Metaverse Leaders may be concentrated in a particular
country, region, or industry. Any adverse event affecting one of these
countries, regions or industries could have a negative impact on Metaverse
Leaders. Country, government, and/or region-specific regulations or restrictions
could have an impact on Metaverse Leaders.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk: To
the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Communication Services Sector: Companies
in the communication services sector may be affected by industry competition,
substantial capital requirements, government regulation, cyclicality of revenues
and earnings, obsolescence of communications products and services due to
technological advancement, a potential decrease in the discretionary income of
targeted individuals and changing consumer tastes and interests.
Risks
Related to Investing in the Entertainment Industry:
Entertainment companies may be impacted by high costs of research and
development of new content and services in an effort to stay relevant in a
highly competitive industry,
and
entertainment products may face a risk of rapid obsolescence. Entertainment
companies are subject to risks that include cyclicality of revenues and
earnings, changing tastes and topical interests, and decreases in the
discretionary income of their targeted consumers. Sales of content through
physical formats and traditional content delivery services may be displaced by
new content delivery mechanisms, such as streaming technology, and it is
possible that such new content delivery mechanisms may themselves become
obsolete over time. The entertainment industry is regulated, and changes
to rules regarding advertising and the content produced by entertainment
companies can increase overall production and distribution costs. Companies in
the entertainment industry have at times faced increased regulatory pressure
which has delayed or prohibited the release of entertainment content.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company. Therefore, an investor in the listed shell
company, such as the Fund, will have exposure to the Chinese-based operating
company only through contractual arrangements and has no ownership in the
Chinese-based operating company. Furthermore, because the shell company only has
specific rights provided for in these service agreements with the VIE, its
abilities to control the activities at the Chinese-based operating company are
limited and the operating company may engage in activities that negatively
impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will
continue
to feel satisfied with their access. As of January 31, 2023, the Fund had
significant exposure to VIEs, as defined above.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market country. There may
be significant obstacles to obtaining information necessary for investigations
into or litigation against emerging market companies and shareholders may have
limited legal rights and remedies. Emerging markets may be more likely to
experience inflation, political turmoil and rapid changes in economic conditions
than more developed markets. Emerging market economies’ exposure to specific
industries, such as tourism, and lack of efficient or sufficient health care
systems, could make these economies especially vulnerable to global crises,
including but not limited to, pandemics such as the global COVID-19 pandemic.
Certain emerging market countries may have privatized, or have begun the process
of privatizing, certain entities and industries. Privatized entities may lose
money or be re-nationalized.
Risk
of Investing in Japan:
The Japanese economy may be subject to considerable degrees of economic,
political and social instability, which could have a negative impact on Japanese
securities. Japan’s economy has suffered from low growth and low inflation for a
prolonged period of time since the collapse of its bubble economy, and that may
continue despite the efforts of the Bank of Japan and policymakers. In addition,
Japan is subject to the risk of natural disasters, such as earthquakes,
volcanoes, typhoons and tsunamis, which could negatively affect the Fund.
Japan’s relations with its neighbors have at times been strained, and strained
relations with its neighbors or trading partners may cause uncertainty in the
Japanese markets and adversely affect the overall Japanese economy.
Risk
of Investing in South Korea: Investments
in South Korean issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risks that are specific to South Korea. In
addition, economic and political developments of South Korea’s neighbors,
including escalated tensions involving North Korea and any outbreak of
hostilities involving North Korea, or even the threat of an outbreak of
hostilities, may have a severe adverse effect on the South Korean
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will
continue
and when inflation will return to target levels. This increases the risk that
monetary policy may provide less support should economic growth slow.
Additionally, China’s shift away from a zero-COVID policy creates both
opportunities and risks, causing uncertainty for global economic growth. Market
risk factors may result in increased volatility and/or decreased liquidity in
the securities markets. The Fund’s NAV could decline over short periods due to
short-term market movements and over longer periods during market downturns.
New
Fund Risk: The
Fund is a new fund, with a limited operating history, which may result in
additional risks for investors in the Fund. There can be no assurance that the
Fund will grow to or maintain an economically viable size, in which case the
Board of Trustees may determine to liquidate the Fund. While shareholder
interests will be the paramount consideration, the timing of any liquidation may
not be favorable to certain individual shareholders. New funds are also subject
to Large Shareholder Risk.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Administrator for a period of time or at all, which may have an adverse impact
on the Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The Fund does
not have a full calendar year of performance. Once the Fund
has completed a full calendar year of operations, a bar chart and table will be
included that will provide some indication of the risks of investing in the Fund
by showing the variability of the Fund's returns and comparing the Fund's
performance to the Underlying Index. The Fund's
performance is not necessarily indicative of how the Fund will perform in the
future.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To, Xie and Lu and Ms. Chan and Ms. Yang have
been Portfolio Managers of the Fund since the Fund's inception.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
"Authorized Participants" (as defined in the SAI) who have entered into
agreements with the Fund's distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called "Creation Units". The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X
Millennial Consumer ETF
Ticker:
MILN
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Millennial Consumer ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the Indxx Millennials Thematic Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 14.75% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests more than 80% of its total assets in the securities of the Indxx
Millennials Thematic Index ("Underlying Index"). The Fund's 80% investment
policy is non-fundamental and requires 60 days prior written notice to
shareholders before it can be changed. The Fund may lend securities representing
up to one-third of the value of the Fund’s total assets (including the value of
the collateral received).
The
Underlying Index is designed to measure the performance of U.S. listed companies
that provide exposure to the millennial generation consumption trends,
(collectively, "Millennial Companies"), as defined by Indxx, LLC, the provider
of the Underlying Index ("Index Provider"). The millennial generation refers to
the demographic in the U.S. with birth years ranging from 1980 to 2000.
The
eligible universe of the Underlying Index includes the most liquid and
investable companies in accordance with the standard market capitalization and
liquidity criteria associated with developed markets, as defined by the Index
Provider. As of January 31, 2023, companies must have a minimum market
capitalization of $500 million and a minimum average daily turnover for the last
6 months (or since the IPO launch date for Significant IPOs as defined by the
Index Provider or 3 months, in the case of other IPOs) greater than or equal to
$2 million in order to be eligible for inclusion in the Underlying Index. The
Underlying Index only includes companies listed in the United States. The
Underlying Index is developed using a proprietary, multi-step research process
to identify Millennial Companies. First, the Index Provider conducts fundamental
research on trends related to the millennial generation, including but not
limited to: consumer spending data, consumer behavior,
technology
and demographics. Based on this analysis, the Index Provider determines key
categories that appear to be most reflective of how individuals from the
millennial generation spend their time and money (collectively, "Spending
Categories"). As of January 31, 2023, the Index Provider has identified the
following eight key Spending Categories for millennials: (1) Social and
Entertainment, (2) Clothing and Apparel, (3) Travel and Mobility, (4)
Food/Restaurants and Consumer Staples, (5) Financial Services and Investments,
(6) Housing and Home Goods, (7) Education and Employment, and (8) Health and
Fitness. These Spending Categories may change over time, as determined by the
Index Provider.
After
establishing these Spending Categories, the Index Provider uses a variety of
sources - including, but not limited to: industry reports, investment research
and financial statements published by companies - to identify companies with
significant exposure to these Spending Categories. A company is determined to
have significant exposure to the Spending Categories if (i) it derives a
significant portion of its revenue from the Spending Categories, or (ii) it has
stated its primary business to be in products and services focused on the
Spending Categories, as determined by the Index Provider. The companies
identified at this stage are then considered for further analysis, which
ultimately determines their eligibility for inclusion in the Underlying
Index.
In
the final step of the selection process, the Index Provider conducts a composite
analysis on the remaining companies to identify Millennial Companies within each
of the Spending Categories. As part of this process, the Index Provider utilizes
the fundamental research it has conducted on trends related to the millennial
generation in order to evaluate companies based on quantitative and qualitative
criteria that have been identified as being consistent with millennial
demographics and consumer preferences. As of January 31, 2023, some
examples of the criteria used in the evaluation process include but are not
limited to: E-commerce, social and professional networks, digital media
streaming services, athletic and outdoor apparel, multi-family apartments, and
peer reviews/recommendations. The Index Provider then scores the companies based
on these criteria to determine the companies that are most reflective of
Millennial Companies within each Spending Category. These criteria will vary by
Spending Category and are subject to evaluation by the Index Provider on an
annual basis. A minimum of five and a maximum of fifteen companies from each
Spending Category are included in the Underlying Index, primarily based on their
score in the composite analysis conducted by the Index Provider.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and rebalanced annually. The Underlying Index
may include large-, mid- or small-capitalization companies, and components
primarily include consumer discretionary, consumer staples, information
technology and financial services companies as well as real estate investment
trusts ("REITs"). The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index had significant exposure to the consumer discretionary
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Real
Estate Stocks and Real Estate Investment Trusts (REITs) Investment
Risk:
The Fund may have exposure to companies that invest in real estate, such as
REITs, which exposes investors in the Fund to the risks of owning real estate
directly, as well as to risks that relate specifically to the way in which real
estate companies are organized and operated. Real estate is highly sensitive to
general and local economic conditions and developments and characterized by
intense competition and periodic overbuilding. Many real estate companies,
including REITs, utilize leverage (and some may be highly leveraged), which
increases risk and could adversely affect a real estate company's operations and
market value in periods of rising interest rates.
Associated
Risks Related to Investing in Millennial Companies:
The Fund invests in
millennial
companies, including companies involved in producing or distributing clothing
and apparel, food (including restaurants), and consumer staples, as well as
companies involved in the provision of social networks and social media, digital
media, live events and entertainment, travel and transportation services,
financial services and investments, housing and housing services and educational
services. Millennial companies may be affected by changes in consumers’
disposable income, consumer preferences, social trends and marketing campaigns.
Millennial companies generally face a high degree of competition and potentially
rapid product obsolescence. The customers and/or suppliers of millennial
companies may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on millennial companies. Millennial companies may participate
in monopolistic practices that could make them subject to higher levels of
regulatory scrutiny and/or potential break ups in the future, which could
severely impact the viability of these companies. Through its portfolio
companies’ customers and suppliers, the Fund is specifically exposed to
Asian
Economic Risk
and European
Economic Risk.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Small-Capitalization
Companies Risk: Compared
to mid- and large-capitalization companies, small-capitalization companies may
be less stable and more susceptible to adverse developments, and their
securities may be more volatile and less liquid.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Consumer Discretionary Sector: The
consumer discretionary sector may be affected by changes in domestic and
international economies, exchange and interest rates, competition, consumers’
disposable income and consumer preferences, social trends and marketing
campaigns.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an
adverse
effect on the Fund’s ability to adjust its exposure to the required levels in
order to track the Underlying Index. Errors in index data, index computations
and/or the construction of the Underlying Index in accordance with its
methodology may occur from time to time and may not be identified and corrected
by the Index Provider for a period of time or at all, which may have an adverse
impact on the Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
37.75% |
Worst
Quarter: |
6/30/2022 |
-28.35% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (05/04/2016) |
Global
X Millennial Consumer ETF: |
|
|
|
·Return
before taxes |
-38.50% |
6.65% |
9.18% |
·Return
after taxes on distributions1 |
-38.54% |
6.58% |
9.06% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-22.77% |
5.22% |
7.35% |
Indxx
Millennials Thematic Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-38.24% |
7.20% |
9.69% |
S&P
500®
Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.11% |
9.42% |
11.92% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
Education ETF
Ticker:
EDUT
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Education ETF ("Fund") seeks investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Indxx Global Education Thematic Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 26.33% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Indxx
Global Education Thematic Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed.
The
objective of the Underlying Index is to provide exposure to exchange-listed
companies globally that provide educational products and services, including
companies primarily involved in digital learning and educational
content/publishing, as well as early childhood education, secondary education,
higher education, professional education and enterprise video and chat
communication platforms, (collectively, "Education Companies"), as defined by
Indxx, LLC, the provider of the Underlying Index ("Index
Provider").
The
eligible universe of the Underlying Index includes among the most liquid and
investable companies in accordance with the market capitalization and liquidity
criteria associated with developed and emerging markets, as defined by the Index
Provider. As of January 31, 2023, companies must have a minimum market
capitalization of $200 million and a minimum average daily turnover for the last
6 months (or since the IPO launch date for Significant IPOs as defined by the
Index Provider) greater than or equal to $2 million in order to be eligible for
inclusion in the Underlying Index. As of January 31, 2023, components from
the following countries were eligible for inclusion in the Underlying Index:
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia,
Ireland,
Israel, Italy, Japan, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand,
Norway, Peru, Philippines, Poland, Portugal, Qatar, South Africa, South Korea,
Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab
Emirates, the United Kingdom, and the United States.
From
the eligible universe, the Index Provider identifies Education Companies by
applying a proprietary analysis that consists of two primary components: theme
identification and company analysis. As part of the theme identification
process, the Index Provider analyzes industry reports, investment research and
consumer data related to the education industry in order to establish the themes
that are expected to provide the most exposure to the growth of the education
industry. As of January 31, 2023, the Index Provider has identified the
following five education themes (collectively, "Education Themes"):
i. Educational
Content/Publishing: Includes companies involved in developing, providing and
publishing educational content, including but not limited to companies providing
digital content for test preparations, language learning courses, and
traditional and interactive e-textbooks for purchase or rental.
ii. Digital
Learning Platforms: Includes companies which are involved in providing digital
learning platforms, MOOCs (Massive Open Online Courses), accredited online
courses, recognized educational degrees, vocational training, educational games
and training/tutor services, content delivery tools (e.g. digital whiteboards),
augmented/virtual reality-based education/training, and artificial intelligence
tools for augmenting teaching and learning.
iii. Early
Childhood Education: Includes companies involved in providing early/pre-school
education services, managing child-care centers and related
services.
iv. Secondary,
Higher and Professional Education: Includes companies that provide campus-based
courses, classroom-based tutoring services and companies providing professional
education services and programs excluding for-profit
schools/universities.
v. Enterprise
Video and Chat Communication Platforms: Includes companies that provide
cloud-based platforms with communications capabilities such as voice, video and
messaging to its users.
In
order to be included in the Underlying Index, a company must be identified by
the Index Provider as having significant exposure to one or more of these
Education Themes, as determined by the Index Provider. In
the second step of the process, the Index Provider analyzes companies based on
revenue exposure to the Education Themes. A company is identified as having
significant exposure to the Education Themes if it derives a significant portion
of its revenue from the sale of products or services from one or more of the
Education Themes, as determined by the Index Provider. Accordingly, the Fund
assets will be concentrated (that is, it will hold 25% or more of its total
assets) in companies that provide exposure to Education Themes.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and rebalanced semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
Generally speaking, this approach will limit the amount of concentration in the
largest market capitalization companies and increase company-level
diversification. Additionally, Enterprise Video and Chat Communication Platforms
are subject to an aggregate weight cap of 15% at each semi-annual rebalance. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include consumer discretionary and communication services
companies. The Fund's investment objective and Underlying Index may be changed
without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying
Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the diversified consumer services industry
and had significant exposure to the consumer discretionary
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Education Companies: Education
Companies
may
be affected by changes in demographics and changes in consumer demands.
Furthermore, government regulations, programs and policies can have a
significant impact on the products and services provided by Education Companies,
and the prices that they charge their customers. Some Education Companies rely
heavily on tax breaks and government subsidies, which can be very
policy-dependent and may not continue indefinitely in the future. Education
Companies are also affected by macroeconomic growth and the overall strength of
the labor market, which can influence the demand for educational products and
services. Some Education Companies have faced increased regulatory scrutiny, and
in some cases litigation, due to business practices that were perceived as
unfair and misleading to consumers. Ongoing and future legal actions could have
a negative impact on Education Companies. The customers and/or suppliers of
Education Companies may be concentrated in a particular country, region or
industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on Education Companies. Such events
could include, but are not limited to, changing policies that affect birth
rates, regulations that require privatization or non-profit status, pandemics,
pandemic-related school closures, and pandemic-driven changes in school
enrollment. Under the Double Reduction policy, Chinese Education Companies
engaged in afterschool tutoring services for mandatory subjects are prohibited
from using the VIE structure to list abroad and are required to become
non-profit.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change
quickly
and unpredictably. As a result, the Fund's NAV may change quickly and without
warning, which could have a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Consumer Discretionary Sector: The
consumer discretionary sector may be affected by changes in domestic and
international economies, exchange and interest rates, competition, consumers’
disposable income and consumer preferences, social trends and marketing
campaigns.
Risks
Related to Investing in the Diversified Consumer Services Industry: The
diversified consumer services industry includes companies providing educational
services, either online or through conventional teaching methods. It also
includes specialized consumer services not classified elsewhere, such as
residential, home security, legal, personal, renovation & interior design,
consumer auctions, and wedding & funeral services. Government regulations,
programs and policies can have a significant impact on the products and services
provided by companies in the diversified consumer services industry. Some
companies in the diversified consumer services industry rely heavily on tax
breaks and government subsidies, which can be very policy-dependent and may not
continue indefinitely in the future. Companies in the diversified consumer
services industry are also affected by macroeconomic growth and the overall
strength of the labor market, which can influence the demand for products and
services. Some companies in the diversified consumer services industry have
recently faced increased regulatory scrutiny, and in some cases litigation, due
to business practices that were perceived as unfair and misleading to
consumers.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging
market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through
contractual
arrangements and has no ownership in the Chinese-based operating company.
Furthermore, because the shell company only has specific rights provided for in
these service agreements with the VIE, its abilities to control the activities
at the Chinese-based operating company are limited and the operating company may
engage in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access. As of January 31, 2023, the Fund had significant exposure to VIEs,
as defined above.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2022 |
20.95% |
Worst
Quarter: |
9/30/2021 |
-22.68% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (07/10/2020) |
Global
X Education ETF: |
|
|
·Return
before taxes |
-18.37% |
-25.34% |
·Return
after taxes on distributions1 |
-18.71% |
-25.47% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-10.76% |
-18.25% |
Indxx
Global Education Thematic Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-17.89% |
-24.95% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
6.24% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan
have
been Portfolio Managers of the Fund since the Fund's inception. Ms. Yang has
been a Portfolio Manager of the Fund since December 2020. Mr. Lu has been a
Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
Cannabis ETF
Ticker:
POTX
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Cannabis ETF ("Fund") seeks to provide investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Cannabis Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.01% |
Total
Annual Fund Operating Expenses: |
0.51% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$52 |
$164 |
$285 |
$640 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 65.14% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Cannabis
Index ("Underlying Index") and in American Depositary Receipts ("ADRs") and
Global Depositary Receipts ("GDRs") based on the securities in the Underlying
Index. The Fund will also invest, under normal circumstances, at least 80%
of its net assets, plus borrowings for investment purposes (if any), in Cannabis
Companies (as defined below), and in ADRs and GDRs based on such securities. The
Fund's 80% investment policies are non-fundamental and requires 60 days prior
written notice to shareholders before they can be changed. The Fund may lend
securities representing up to one-third of the value of the Fund’s total assets
(including the value of the collateral received).
The
Underlying Index is designed to provide exposure to exchange-listed companies
that are active in the cannabis industry (collectively, "Cannabis Companies"),
as defined by Solactive AG, the provider of the Underlying Index ("Index
Provider"). In order to be eligible for inclusion in the Underlying Index, a
company is considered by the Index Provider to be a Cannabis Company if it
derives at least 50% of its revenue, operating income, or assets from the
cannabis industry. The cannabis industry is composed of the following areas: (i)
the legal production, growth and distribution of marijuana, as well as extracts,
derivative products or synthetic versions thereof; (ii) the legal production,
growth and distribution of hemp, as well as extracts, derivative products or
synthetic versions thereof; (iii) financial services (insurance offerings,
property leasing, financing, capital markets activity and investments) provided
to companies involved in the production, growth and distribution of cannabis;
(iv) pharmaceutical applications of cannabis; (v) cannabidiol (better known as
CBD) and cannabis oil products, edibles, topicals,
drinks
and other products; (vi) products that may be used to consume cannabis; and
(vii) the provision of software and/or online marketplaces or platforms
primarily for the cannabis sector. "Hemp" refers to cannabis plants with a
delta-9 tetrahydrocannabinol ("THC") concentration of not more than 0.3 percent
on a dry weight basis, as well as derivatives thereof, whereas "marijuana"
refers to all other cannabis plants and derivatives thereof. In addition,
companies that the Index Provider expects to derive at least 50% of future
revenue, operating income or assets from the cannabis industry based on its
review of their primary business operations, capital investments and/or
operating expenses, as well as other public statements, are eligible for
inclusion in the Underlying Index ("Pre-Revenue Companies"). Pre-Revenue
Companies are subject to an aggregate weight cap of 15% at each quarterly
rebalance. Additionally, Pre-Revenue Companies do not count towards satisfaction
of the Fund's policy to invest, under normal circumstances, at least 80% of its
net assets, plus borrowings for investment purposes (if any), in Cannabis
Companies, and in ADRs and GDRs based on such securities.
To
be a part of the eligible universe of the Underlying Index, a Cannabis Company
must be listed on a regulated stock exchange that requires issuers to maintain
compliance with all laws, rules and regulations applicable to their business. As
such, the Underlying Index is designed to invest in Cannabis Companies that
represent that they operate cannabis-related business activities, or supply
products and perform services for companies that grow, produce, distribute, or
sell cannabis or products derived from cannabis, in a manner that is legal under
all laws, rules and regulations applicable to the company's business. A company
must also meet certain minimum market capitalization and liquidity criteria, as
defined by the Index Provider. As of January 31, 2023, companies must have a
minimum market capitalization of $100 million and a minimum average daily
turnover for the last three and/or six months greater than or equal to $2
million in order to be eligible for inclusion in the Underlying Index as of the
selection date. Companies in the Underlying Index must retain a minimum market
capitalization of $80 million and average daily turnover for the last three
and/or six months greater than or equal to $1.4 million as of the selection date
in order to be eligible to remain in the Underlying Index. The aforementioned
criteria may be reduced , as per the Underlying Index methodology, in the event
that fewer than 25 companies meet these criteria. The market capitalization
minimum requirement can be reduced to $50 million for new index constituents and
$35 million for companies that are already index constituents. Similarly, the
average daily turnover minimum requirement can be reduced to $500,000 for new
index constituents and $200,000 for companies that are already index
constituents. If there are still an insufficient number of companies that meet
these reduced criteria to fulfill the weighting scheme requirements, the market
capitalization and average daily turnover criteria can be reduced stepwise by
10% for companies that are index constituents until the index retains a
sufficient number of securities. As of January 31, 2023, companies listed in the
following countries were eligible for inclusion in the Underlying Index:
Australia, Canada, United Kingdom, and the United States.
The
Underlying Index is weighted according to modified effective market
capitalization, using a scheme that accounts for liquidity in determining final
weights and is reconstituted and re-weighted quarterly. Additionally, on an
intra-quarter basis, if the Index Provider determines that a constituent of the
Underlying Index does not meet the index requirements with respect to compliance
with laws, rules and regulations, the Index Provider may remove such constituent
outside of the regular rebalance schedule. Modified effective market
capitalization weighting seeks to weight constituents based on market
capitalization but accounting for liquidity in determining final weights, and
subject to caps on the weights of the individual securities. Generally speaking,
this approach will limit the amount of concentration in the largest market
capitalization companies and thereby increase exposure to other companies. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include mid-capitalization and small-capitalization
companies. As of January 31, 2023, the Underlying Index had 17 constituents. The
Fund's investment objective and Underlying Index may be changed without
shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued. Additionally, the Fund will not
invest in companies that, in the opinion of the Adviser, fail to meet any the
criteria outlined below (collectively, the "Eligibility Criteria"):
•Each
company must have securities listed on an exchange that requires compliance with
all laws, rules and regulations applicable to their business, which includes
U.S. federal laws if the company performs activities in the U.S. or is otherwise
subject to U.S. jurisdiction.
•Each
company may only supply products and/or perform services related to the cannabis
industry in a manner that is legal under applicable national and local laws,
including U.S. federal, state, and local laws.
"Legal
under applicable national and local laws" refers to being permitted under the
applicable (i) controlled substance or (ii) food, drug, and cosmetics, or
equivalent laws and regulations under whose jurisdiction the company is subject
that govern the cultivation, production or distribution, for medical or
non-medical purposes, of cannabis in a particular country. The Adviser reviews
publicly available information related to Underlying Index constituents for
violations of Eligibility Criteria in connection with each quarterly and
intra-quarter reconstitution of the Underlying Index. If, after acquiring a
company's securities, the company, in the Adviser's opinion, no longer meets the
Eligibility Criteria, or if the Index Provider removes the company from the
Underlying Index for failure to comply with laws, rules and regulations
applicable to their business, the Fund will promptly sell that position,
potentially at a time when it is disadvantageous to do so. As of the date of
this Prospectus, Cannabis Companies that grow or distribute marijuana inside the
U.S. fail to meet Eligibility Criteria.
The
Fund generally uses a representative sampling strategy with respect to the
Underlying Index. "Representative sampling" is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index in terms of key risk
factors, performance attributes and other characteristics. These include country
weightings, market capitalization and other financial characteristics of
securities. The Fund may or may not hold all of the securities in the Underlying
Index, in particular if the Adviser determines that one or more of the
securities in the Underlying Index may fail to meet the Eligibility
Criteria.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the pharmaceuticals industry and had
significant exposure to the health care
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Depositary
Receipts Risk: The
Fund may invest in depositary receipts, such as ADRs and GDRs. Depositary
receipts may be subject to certain of the risks associated with direct
investments in the securities of foreign companies. For additional details on
these risks, please see Foreign
Securities Risk.
Moreover, depositary receipts may not track the price of the underlying foreign
securities on which they are based. A holder of depositary receipts may
also be subject to fees and the credit risk of the financial institution acting
as depositary.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Cannabis Companies: The
cannabis industry is a very young, fast evolving industry with increased
exposure to the risks associated with changes in applicable laws (including
increased regulation, other rule changes, and related federal and state
enforcement activities), as well as market developments, which may cause
businesses to contract or close suddenly and negatively impact the value of
securities held by the Fund.
General
Legal Considerations:
Cannabis Companies are subject to various laws and regulations that may differ
at the state/local, federal and international level. These laws and regulations
may significantly affect a Cannabis Company’s ability to secure financing and
traditional banking services, impact the market for cannabis business sales and
services, and set limitations
on
cannabis use, production, transportation, export and storage. There is a risk
that a Cannabis Company currently operating legally may suddenly find itself
accused (or found guilty) of illegal activities, including because of changes to
applicable law. Cannabis Companies may face litigation, formal or informal
complaints, enforcement actions, and inquiries by various federal, provincial,
state, or local governmental and/or regulatory authorities, which could consume
considerable amounts of financial and other corporate resources and have a
negative impact on sales, revenue, profitability, and growth prospects.
Additionally, to the extent that the United States and other countries pass laws
that permit individuals to grow cannabis for personal, non-commercial use, the
markets may shrink for certain Cannabis Companies in which the Fund invests.
Similarly, certain Cannabis Companies may not be able to obtain or maintain the
necessary licenses, permits, authorizations, or accreditations, or may only be
able to do so at great cost. Failure to comply with or to obtain the necessary
licenses, permits, authorizations, or accreditations could result in
restrictions on a Cannabis Company’s ability to legally engage in its business
activity, which could have a negative impact on the value of the Fund’s
investments. Actions taken against certain Cannabis Companies could have an
indirect, negative effect on the value of other Cannabis Companies in the
cannabis industry, even Cannabis Companies not directly affected by such
actions.
U.S.
Federal Marijuana Regulation:
The possession, use and importation of marijuana remains illegal under U.S.
federal law. Federal law criminalizing the use of marijuana remains enforceable
notwithstanding state laws that legalize its use for medicinal and recreational
purposes. This conflict between the regulation of marijuana under federal and
state law creates volatility and risk for all Cannabis Companies, and any
stepped-up enforcement of marijuana laws by the federal government could
adversely affect the value of the Fund’s investments. Pronouncements from the
current United States Attorney General suggested during his confirmation
testimony that the Department of Justice (“DOJ”) may likely take a more passive
approach in states where marijuana use and possession is legal and not step up
the enforcement of federal marijuana laws in those states so long as operators
in those states comply with state cannabis laws and regulations. Currently, the
Rohrabacher-Blumenauer amendment to appropriations legislation prohibits the DOJ
from using federal funds to prevent states from implementing laws that authorize
medical marijuana use, possession, distribution, and cultivation. In the event
the Rohrabacher-Blumenauer amendment is not renewed by Congress, the DOJ may
begin using federal funds to prevent states from implementing such laws. Since
the cultivation, sale and use of marijuana is illegal under U.S. federal law,
institutions may be unwilling to make services available to growers and sellers
of marijuana. Any stepped-up enforcement efforts by the U.S. federal government
could produce a chilling effect on the industry’s growth and discourage more
traditional financial institutions, including banks, from expanding their
services to Cannabis Companies, where such services are currently limited, and
could potentially curtail the ability of investors to purchase or hold Cannabis
Companies. The current federal regulatory stance will limit the number of
companies that could otherwise be eligible for inclusion in the Underlying
Index, and consequently could limit the range of companies eligible for
investment by the Fund. Additionally, U.S. Federal tax law prohibits a taxpayer
from claiming ordinary deductions or credit for any amount paid or incurred
during the tax year (other than only the costs of goods sold) in carrying on any
trade or business if that trade or business (or the activities that comprise
that trade or business) consists of trafficking in controlled substances (e.g.,
marijuana (cannabis) for this purpose) where that trafficking is prohibited by
either federal law or the state law for the state in which the trade or business
is conducted. Consequently, Cannabis Companies may pay higher amounts of taxes
than non-Cannabis Companies, which could result in less income to the Fund and,
in turn, less for the Fund to distribute to shareholders.
U.S.
Regulation of Hemp:
Although legislation has recently expanded the permissible industrial use of
hemp, such activity remains heavily regulated, and it is possible that future
federal and/or state legislation and/or regulations could drastically curtail
permissible uses of hemp. Certain Underlying Index constituents may sell dietary
supplements and/or foods containing CBD within the U.S. The Agricultural
Improvement Act of 2018, also known as the “2018 Farm Bill”, altered the legal
landscape in the United States with respect to the manufacturing, distribution
and sale of hemp and hemp derivatives, including CBD. As a result of the 2018
Farm Bill, “hemp” (defined as the plant Cannabis sativa L. plant and extracts
thereof with a delta-9 tetrahydrocannabinol concentration of not more than 0.3%
on a dry weight basis), was exempted from the definition of “marijuana” under
the U.S. Controlled Substances Act. The 2018 Farm Bill delegates to the Food and
Drug Administration (“FDA”) responsibility for regulating products containing
hemp or derivatives thereof (including CBD) under the Federal Food, Drug, and
Cosmetic Act (the “FD&C”). Under the FD&C, if a substance (such as CBD)
is an active ingredient in a drug product that has been approved by the FDA,
then the substance cannot be sold in dietary supplements or foods without FDA
approval, unless the substance was marketed as a dietary supplement or as a
conventional food before the drug was approved or before the new drug
investigations were authorized. The FDA has publicly taken the position that CBD
cannot be sold in dietary supplements or foods because CBD is an active
ingredient in an FDA-approved drug, but has yet to issue any regulations in this
regard. However, companies that sell CBD in dietary supplements and foods have
taken the position that CBD was marketed as a dietary supplement and/or as a
conventional food before the drug was approved or before the new drug
investigations were authorized, and because the FDA has not brought enforcement
action against such companies, this question of fact has not yet been
adjudicated. On January 26, 2023, the FDA announced that it would not be issuing
CBD regulations but rather has asked Congress to take a legislative approach to
the regulation of hemp-derived CBD. In the absence of a conclusive legal
determination to the contrary, as of the date of this prospectus, the Advisor
has not determined that the sale of
dietary
supplements and/or foods containing CBD within the U.S. would cause an
Underlying Index Constituent to fail to meet the applicable Eligibility
Criteria.
U.S.
Regulation of Medical Cannabis:
Few drug products containing cannabis or cannabis extracts have been approved
for use by the FDA or obtained registrations for commercial production from the
Drug Enforcement Administration (“DEA”), and there is no guarantee that such
products will ever be legally produced or sold in the United States. Cannabis
Companies in the United States that engage in medical or pharmaceutical research
or the production and distribution of controlled substances, such as marijuana,
must be registered with the DEA to perform such activities and have the
security, control, recordkeeping, reporting and inventory mechanisms required by
the DEA to prevent drug loss and diversion. The current regulatory state of
medical cannabis in the United States may limit the number of pharmaceutical
companies that could otherwise be eligible for inclusion in the Underlying
Index, and consequently could limit the range of companies eligible for
investment by the Fund.
Non-U.S.
Regulation of Cannabis:
Laws and regulations related to the possession, use (medical or recreational),
sale, transport and cultivation of cannabis vary throughout the world, and
legislation in certain countries may restrict or limit the ability of certain
companies in which the Fund invests to sell their products. Additionally, even
if a company’s operations are legal under current law, such operations may
become illegal in the future if the applicable law changes to prohibit
cannabis-related activities vital to the company’s business. Any such change
would have a significant impact on the cannabis industry and Cannabis Companies
in which the Fund may invest. The Fund will only invest in non-U.S. Cannabis
Companies if such companies are operating legally in their relevant
jurisdiction. In addition, even if Cannabis Companies operate permissibly under
local law, importation of their products in other countries, such as the United
States, may be prohibited, which could result in a reduced market for their
products.
Eligibility
Criteria Risk:
The Fund intends to invest only in those Cannabis Companies that meet the
Eligibility Criteria. To the extent that any securities included in the
Underlying Index are unable to meet the Eligibility Criteria, the Fund would not
invest in such securities, which would increase the tracking error between the
Fund’s performance and the performance of the Underlying Index and may cause the
Fund to underperform the Underlying Index. Moreover, it is possible that
the Fund may invest in Cannabis Companies that ultimately fail to meet the
Eligibility Criteria, and any change in regulation and/or enforcement of U.S.
federal law could cause securities held by the Fund to cease to meet the
Eligibility Criteria. If the Fund were to hold securities of a Cannabis
Company that fails to meet the Eligibility Criteria, the value of such security
may decrease substantially; additionally, the Fund could be required to rapidly
divest itself of such securities. Such divestment would likely contribute to
substantial underperformance relative to the Underlying Index, particularly in
the event that numerous Fund securities are impacted by changes in U.S. federal
law.
Service
Provider Risk:
Because of legal and reputational concerns associated with the Fund’s
investments in Cannabis Companies, Fund service providers may be reluctant to
provide, or to continue to provide, services to the Fund. If a service provider
were to terminate its relationship with the Fund, the use of an alternate
service provider could negatively impact the Fund’s operations. Additionally,
the Fund’s service providers may raise concerns with respect to specific
securities included in the Underlying Index, and may be unwilling to continue to
act as a service provider to the Fund if the Fund invests in such security. If
the Fund does not invest in a security included in the Underlying Index as a
result of such concerns, the Fund would experience tracking error versus the
performance of the Underlying Index and may underperform the Underlying
Index.
Legal
Liability of the Fund:
The breadth of U.S. federal law affecting the cannabis industry is significant.
Given the uncertain nature of the regulation of the cannabis industry in the
United States, the Fund’s investment in certain entities could, under unique
circumstances, raise issues under one or more of those laws, and any
investigation or prosecution related to those investments could result in
expense and losses to the Fund. The Fund and the Adviser have taken steps to
mitigate this risk through the implementation of the Eligibility Criteria, which
have been discussed previously, and which are intended to ensure that the Fund
is not invested in any Cannabis Company that is operating in contravention of
applicable U.S. law. However, the application of the Eligibility Criteria cannot
guarantee that a Cannabis Company is not engaged in impermissible activities,
which could result in the Fund inadvertently holding such a company for a
limited period of time prior to divestment. In addition, the Adviser has
obtained a legal opinion on behalf of the Fund indicating that the Fund’s
investments in Cannabis Companies that meet the Eligibility Criteria should not
cause the Fund to violate federal drug and anti-money laundering laws. However,
such legal opinion does not prevent or otherwise estop any governmental agency
or the courts from taking a contrary position.
Cannabis
Price Fluctuation Risk: The
Fund invests in companies engaged in the cannabis industry, which may be
susceptible to fluctuations in the price of cannabis. Cannabis prices may be
influenced or characterized by unpredictable factors, including, where
applicable, high volatility, changes in supply and demand relationships,
weather, agriculture, trade, changes in interest rates and monetary and other
governmental policies, action and inaction. Securities of companies held by the
Fund that are dependent on a single commodity, such as cannabis, may typically
exhibit even higher volatility attributable to cannabis prices.
In
addition, the lack of a futures market in cannabis may impede the ability of
Cannabis Companies to hedge their cannabis exposure risks.
Cannabis
Price Relationship Risk: The
Underlying Index measures the performance of companies involved in the cannabis
industry and not the performance of the price of cannabis itself. The securities
of companies involved in the cannabis industry may under- or over-perform the
price of cannabis over the short-term or the long-term.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Micro-Capitalization
Companies Risk:
Stock prices of micro-cap companies are significantly more volatile, and more
vulnerable to adverse business and economic developments, than those of larger
companies, and their earnings and revenues tend to be less predictable (and some
companies may experience significant losses). Microcap stocks may also be thinly
traded, making it difficult for the Fund to buy and sell them.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Health Care Sector: The
health care sector may be affected by government regulations and government
health care programs, increases or decreases in the cost of medical products and
services, an increased emphasis on outpatient services, and product liability
claims, among other factors. Many health care companies are heavily dependent on
patent protection, and the expiration of a company's patent may adversely affect
that company's profitability. Health care companies are subject to competitive
forces that may result in price discounting and may be thinly capitalized and
susceptible to product obsolescence. Companies in the health care sector may
also be affected by unforeseen circumstances including but not limited to the
spread of infectious disease which could impact drug development priorities and
pipelines, supply and demand dynamics for health care equipment, as well as the
ability to receive care in health care service facilities.
Risks
Related to Investing in the Pharmaceuticals Industry:
Companies in the pharmaceuticals industry may be affected by industry
competition, dependency on a limited number of products, obsolescence of
products, government approvals and regulations, loss or impairment of
intellectual property rights and litigation regarding product liability. Demand
for pharmaceuticals, generally speaking and specific to sub-segments, may
fluctuate due to unexpected
events,
including but not limited to global health crises like pandemics which could
strain health care systems and alter health care needs. Such demand fluctuations
could positively or negatively impact pharmaceutical companies.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Canada:
The Canadian economy is highly dependent on the demand for and price of natural
resources. As a result, the Canadian market is relatively concentrated in
issuers involved in the production and distribution of natural resources and any
changes in these sectors could have an adverse impact on the Canadian economy.
The Canadian economy is heavily dependent on relationships with certain key
trading partners, including the United States and China. Developments in the
United States, including renegotiation of the North American Free Trade
Agreement (“NAFTA”) and ratification of the successor United
States-Mexico-Canada Agreement (“USMCA”), which went into effect on July 1,
2020, as well as the imposition of additional tariffs by the United States, may
have implications for the trade arrangements between the United States and
Canada, which could negatively affect the value of securities held by the Fund.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central
governments
and governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those
Authorized
Participants is obligated to engage in creation and/or redemption transactions.
To the extent that those Authorized Participants exit the business or are unable
to process creation and/or redemption orders, such as in times of market stress,
Shares may be more likely to trade at a premium or discount to NAV and/or at
wider intraday bid-ask spreads, and possibly face trading halts and/or delisting
from an exchange. Authorized Participants Concentration Risk may be heightened
because the Fund invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
3/31/2021 |
61.56% |
Worst
Quarter: |
3/31/2022 |
-50.97% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (09/17/2019) |
Global
X Cannabis ETF: |
|
|
·Return
before taxes |
-67.42% |
-52.56% |
·Return
after taxes on distributions1 |
-67.74% |
-53.28% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-39.85% |
-30.18% |
Cannabis
Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-68.38% |
-54.74% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
6.06% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan have been Portfolio
Managers of the Fund since the Fund's inception. Ms. Yang has been a Portfolio
Manager of the Fund since December 2020. Mr. Lu has been a Portfolio Manager of
the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
Genomics & Biotechnology ETF
Ticker:
GNOM
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Genomics & Biotechnology ETF ("Fund") seeks to
provide investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Solactive Genomics Index
("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 39.39% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Solactive
Genomics Index ("Underlying Index"). The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed. The Fund may lend securities representing up to one-third of
the value of the Fund’s total assets (including the value of the collateral
received).
The
Underlying Index is designed to provide exposure to exchange-listed companies
that are positioned to benefit from further advances in the field of genomic
science and biotechnology, as well as applications thereof (collectively,
"Genomics & Biotechnology Companies"), as defined by Solactive AG, the
provider of the Underlying Index ("Index Provider"). In order to be eligible for
inclusion in the Underlying Index, a company is considered by the Index Provider
to be a Genomics & Biotechnology Company if it derives at least 50% of its
revenue, operating income, or assets from genomics and/or biotechnology. These
companies include those involved in the following business activities: (i) gene
editing, (ii) genomic sequencing, (iii) development and testing of genetic
medicine/therapies, (iv) computational genomics and genetic diagnostics, and/or
(v) biotechnology.
In
constructing the Underlying Index, the Index Provider first establishes the
eligible universe by utilizing FactSet sector classifications: only companies
classified by FactSet as healthcare companies are eligible for the Underlying
Index. The Index Provider then applies a proprietary natural language processing
algorithm to the eligible universe, which seeks to identify and rank companies
with direct exposure to the genomics industry based on filings, disclosures and
other public information (e.g.
regulatory
filings, earnings transcripts, etc.). The highest ranking companies identified
by the natural language processing algorithm, as of the selection date, are
further reviewed by the Index Provider to confirm they derive at least 50% of
their revenues, operating income, or assets from the following business
activities:
i.Gene
Editing:
Companies that develop technology for the insertion, deletion, or replacement of
DNA at a specific site in the genome of an organism.
ii.Genomic
Sequencing:
Companies that are engaged in the process of determining the complete DNA
sequence of an organism's genome.
iii.Genetic
Medicine/Therapies:
Companies that seek to detect, cure or treat diseases by identifying and/or
modifying an organism's gene expression or functioning.
iv.Computational
Genomics and Genetic Diagnostics:
Companies that use computational and statistical analysis to decipher biological
insights from genome sequences and related data.
v.Biotechnology:
Companies that combine biologic processes and technology to develop products and
services.
The
eligible universe of the Underlying Index includes exchange-listed companies
that meet minimum market capitalization and liquidity criteria, as defined by
the Index Provider. As of January 31, 2023, companies must have a minimum
market capitalization of $200 million and a minimum average daily turnover for
the last 6 months greater than or equal to $2 million in order to be eligible
for inclusion in the Underlying Index. As of January 31, 2023, companies
listed in the following countries were eligible for inclusion in the Underlying
Index: Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia,
Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong,
Hungary, Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico,
Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar,
Saudi Arabia, South Africa, South Korea, Singapore, Spain, Sweden, Switzerland,
Taiwan, Thailand, Turkey, United Arab Emirates, the United Kingdom, and the
United States. Additionally, ADRs of any company whose primary listing is in a
country that is part of the Emerging markets are eligible.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
Generally speaking, this approach will limit the amount of concentration in the
largest market capitalization companies and increase company-level
diversification. The Underlying Index may include large-, mid- or
small-capitalization companies, and components primarily include healthcare
companies. As of January 31, 2023, the Underlying Index had 40
constituents. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the biotechnology and life sciences tools
& services industries and had significant exposure to the health care
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Genomics Companies:
Genomics companies typically face intense competition and potentially rapid
product obsolescence. These companies are also heavily dependent on intellectual
property rights and may be adversely affected by loss or impairment of those
rights. There can be no assurance these companies will be able to successfully
protect their intellectual property to prevent the misappropriation of their
technology, or that competitors will not develop technology that is
substantially similar or superior to such companies’ technology. Genomics
companies typically engage in significant amounts of spending on research and
development, and there is no guarantee that the products or services produced by
these companies will be successful. In addition, the field of genomic science
could face increasing regulatory scrutiny in the future, which may limit the
development of this technology and impede the growth of companies that develop
and/or utilize this technology. The customers and/or suppliers of genomics
companies may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on genomics companies. Through its portfolio companies’
customers and suppliers, the Fund is specifically exposed to Asian
Economic Risk
and European
Economic Risk.
Demand for Genomics products, generally speaking and specific to sub-segments,
may fluctuate due to unexpected events, including but not limited to global
health crises like pandemics which could strain health care systems and alter
health care needs. Such demand fluctuations could positively or negatively
impact Genomics Companies.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Biotechnology Industry:
Biotechnology companies face intense competition and the potential for rapid
product obsolescence. Biotechnology companies may be adversely affected by the
loss or impairment of intellectual property rights or changes in government
regulations. Demand for Biotechnology products and services, generally speaking
and specific to sub-segments, may fluctuate due to unexpected events, including
but not limited to global health crises like pandemics which could strain health
care systems and alter health care needs. Such demand fluctuations could
positively or negatively impact Biotechnology companies.
Risks
Related to Investing in the Health Care Sector: The
health care sector may be affected by government regulations and government
health care programs, increases or decreases in the cost of medical products and
services, an increased emphasis on outpatient services, and product liability
claims, among other factors. Many health care companies are heavily dependent on
patent protection, and the expiration of a company's patent may adversely affect
that company's profitability. Health care companies are subject to competitive
forces that may result in price discounting and may be thinly capitalized and
susceptible to product obsolescence. Companies in the health care sector may
also be affected by unforeseen circumstances including but not limited to the
spread of infectious disease which could impact drug development priorities and
pipelines, supply and demand dynamics for health care equipment, as well as the
ability to receive care in health care service facilities.
Risks
Related to Investing in the Life Sciences Tools & Services Industry:
Companies
in the life science tools and service industry may be affected by industry
competition, dependency on a limited number of products, product obsolescence,
and government approvals and regulations. Demand for life science tools and
services, generally speaking and specific to sub-segments, may fluctuate due to
unexpected events, including but not limited to global health crises like
pandemics which could strain health care systems and alter health care needs.
Such demand fluctuations could positively or negatively impact life science
tools and services companies.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging
market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through
contractual
arrangements and has no ownership in the Chinese-based operating company.
Furthermore, because the shell company only has specific rights provided for in
these service agreements with the VIE, its abilities to control the activities
at the Chinese-based operating company are limited and the operating company may
engage in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and
risks,
causing uncertainty for global economic growth. Market risk factors may result
in increased volatility and/or decreased liquidity in the securities markets.
The Fund’s NAV could decline over short periods due to short-term market
movements and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able
to
maintain sufficient assets to continue operations in which case the Board of
Trustees may determine to liquidate the Fund. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on a
national securities exchange and may, therefore, have a material upward or
downward effect on the market price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
38.84% |
Worst
Quarter: |
3/31/2022 |
-24.18% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (04/05/2019) |
Global
X Genomics & Biotechnology ETF: |
|
|
·Return
before taxes |
-36.09% |
-4.86% |
·Return
after taxes on distributions1 |
-36.09% |
-4.87% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-21.37% |
-3.64% |
Solactive
Genomics Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-35.86% |
-4.41% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
6.00% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie have been Portfolio Managers of the
Fund since the Fund's inception. Ms. Chan has been a Portfolio Manager of the
Fund since June 10,
2019.
Ms. Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu
has been a Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X China
Biotech Innovation ETF
Ticker:
CHB
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X China Biotech Innovation ETF ("Fund") seeks to
provide investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Solactive China Biotech Innovation
Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.65% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$66 |
$208 |
$362 |
$810 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 41.26% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the Solactive China Biotech Innovation
Index ("Underlying Index") and in American Depositary Receipts ("ADRs") and
Global Depositary Receipts ("GDRs") based on the securities in the Underlying
Index. The Fund's 80% investment policy is non-fundamental and requires 60 days
prior written notice to shareholders before it can be changed.
The
Underlying Index is designed to provide exposure to exchange-listed companies
that are directly involved in China’s biotechnology industry. The securities
eligible for inclusion in the Underlying Index include:
•H-Shares
(securities of companies incorporated in China that are denominated in Hong Kong
Dollars and listed on the Hong Kong Stock Exchange (the "HKSE"));
•Red
Chips (securities of companies with a majority of their business operations in
mainland China and that are controlled by the national government or local
governments of China, traded on the HKSE in Hong Kong dollars);
•P-Chips
(securities of companies with the majority of their business operations in
mainland China and controlled by individuals in China, but that are incorporated
outside of China);
•A-Shares
(securities of companies incorporated in mainland China that trade on Chinese
exchanges in renminbi) that are accessible through the Shanghai-Hong Kong Stock
Connect program ("Shanghai Connect") or the Shenzhen-Hong Kong Stock Connect
program ("Shenzhen Connect", and together with Shanghai Connect, "Stock Connect
Programs"); and
•Foreign
listings such as American Depository Receipts ("ADRs").
The
Stock Connect Programs are securities trading and clearing programs that aim to
achieve mutual stock market access between China and Hong Kong. Under the Stock
Connect Programs, the Fund's trading of eligible A-Shares listed on the Shanghai
Stock Exchange ("SSE") or Shenzhen Stock Exchange ("SZSE"), as applicable, would
be effectuated through its Hong Kong brokers. Trading through the Stock Connect
Programs is subject to a daily quota, which limits the maximum net purchases
under Stock Connect Programs each day, and as such, buy orders for A-Shares
would be rejected once the daily quota is exceeded (although the Fund will be
permitted to sell A-Shares regardless of the daily quota balance). The daily
quota is not specific to the Fund. From time to time, other stock exchanges in
China may participate in Stock Connect Programs, and A-Shares listed and traded
on such other stock exchanges and accessible through Stock Connect Programs may
be added to the Underlying Index, as determined by Solactive AG, the provider of
the Underlying Index (the “Index Provider”).
In
constructing the Underlying Index, the Index Provider utilizes FactSet Industry
classifications to identify companies that are directly involved in the
biotechnology industry. Only those securities classified in the biotechnology
industry according to FactSet as of each rebalance date are eligible for
inclusion in the Underlying Index.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index Provider,
must be met. As of January 31, 2023, companies must have a minimum free
float market capitalization of $200 million and a minimum average daily turnover
for the last 6 months greater than or equal to $2 million in order to be
eligible for inclusion in the Underlying Index.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
During each rebalance, the maximum weight of a company is capped at 8%, the
aggregate weight of companies with a weight greater than or equal to 5% is
capped at 40%, all remaining companies are capped at a weight of 4.5%, and all
constituents are subject to a minimum weight of 0.3%. Generally speaking, this
approach will limit the amount of concentration in the largest market
capitalization companies and increase company-level diversification. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include health care companies. As of January 31, 2023,
the Underlying Index had 26 constituents. The Fund's investment objective and
Underlying Index may be changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the Underlying Index was concentrated in
the biotechnology industry and had significant exposure to the health care
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
China
State-Owned Enterprises Risk
Investing in companies controlled by various Chinese governmental authorities
involves risks that political changes, social instability, regulatory
uncertainty, adverse diplomatic developments, asset expropriation or
nationalization, or confiscatory taxation could adversely affect the performance
of such companies. State-owned or controlled companies may be less efficiently
run and less profitable than other companies.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several
days
if the securities market is relatively illiquid and may involve considerable
brokerage fees and taxes. These factors may result in wider spreads between the
bid and the offered prices of the Fund’s Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying
Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
Because the Underlying Index focuses in investments related to a particular
industry or group of industries, the Fund will also focus its investments to
approximately the same extent. Similarly, because the Underlying Index has
significant exposure to one or more sectors, the Fund’s investments will likely
have significant exposure to such sectors. As a result, the value of the Fund’s
investments may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries or sectors.
The Fund's performance is expected to be particularly impacted by:
Risks
Related to Investing in the Biotechnology Industry:
Biotechnology companies face intense competition and the potential for rapid
product obsolescence. Biotechnology companies may be adversely affected by the
loss or impairment of intellectual property rights or changes in government
regulations. Demand for Biotechnology products and services, generally speaking
and specific to sub-segments, may fluctuate due to unexpected events, including
but not limited to global health crises like pandemics which could strain health
care systems and alter health care needs. Such demand fluctuations could
positively or negatively impact Biotechnology companies.
Risks
Related to Investing in the Health Care Sector: The
health care sector may be affected by government regulations and government
health care programs, increases or decreases in the cost of medical products and
services, an increased emphasis on outpatient services, and product liability
claims, among other factors. Many health care companies are heavily dependent on
patent protection, and the expiration of a company's patent may adversely affect
that company's profitability. Health care companies are subject to competitive
forces that may result in price discounting and may be thinly capitalized and
susceptible to product obsolescence. Companies in the health care sector may
also be affected by unforeseen circumstances including but not limited to the
spread of infectious disease which could impact drug development priorities and
pipelines, supply and demand dynamics for health care equipment, as well as the
ability to receive care in health care service facilities.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in
which
the Fund invests and, consequently, the Fund are also subject to specific risks
as a result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, China is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce
or
eliminate its holdings in that company. The reduction or elimination of the
Fund’s holdings in the company may have an adverse impact on the liquidity of
the Fund’s overall portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of
dividends
or interest, tax gains or losses, changes to the Underlying Index or the costs
to the Fund of complying with various new or existing regulatory requirements.
This risk may be heightened during times of increased market volatility or other
unusual market conditions. Tracking error also may result because the Fund
incurs fees and expenses, while the Underlying Index does not. ETFs that track
indices with significant weight in emerging markets issuers may experience
higher tracking error than other ETFs that do not track such
indices.
Reliance
on Trading Partners Risk: The
Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy and on the companies in which the Fund invests.
Because of this interdependence, the Fund may be indirectly exposed to downturns
in other markets, and may be exposed to Asian Economic Risk, European Economic
Risk, and North American Economic Risk, as discussed more fully in the
Prospectus.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2021 |
15.87% |
Worst
Quarter: |
9/30/2022 |
-23.79% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (09/22/2020) |
Global
X China Biotech Innovation ETF: |
|
|
·Return
before taxes |
-33.21% |
-18.05% |
·Return
after taxes on distributions1 |
-33.21% |
-18.05% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-19.66% |
-13.31% |
Solactive
China Biotech Innovation Index
(net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-32.74% |
-17.50% |
MSCI
Emerging Markets Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-20.09% |
-3.06% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan have been Portfolio
Managers of the Fund since the Fund's inception. Ms. Yang has been a Portfolio
Manager of the Fund since December 2020. Mr. Lu has been a Portfolio Manager of
the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X
Telemedicine & Digital Health ETF
Ticker:
EDOC
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Telemedicine & Digital Health ETF ("Fund") seeks
to provide investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Solactive Telemedicine &
Digital Health Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.68% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.68% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$69 |
$218 |
$379 |
$847 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 43.26% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the Solactive Telemedicine & Digital
Health Index ("Underlying Index") and in American Depositary Receipts ("ADRs")
and Global Depositary Receipts ("GDRs") based on the securities in the
Underlying Index. The Fund's 80% investment policy is non-fundamental and
requires 60 days prior written notice to shareholders before it can be changed.
The Fund may lend securities representing up to one-third of the value of the
Fund’s total assets (including the value of the collateral
received).
The
Underlying Index is designed to provide exposure to exchange-listed companies
that are positioned to benefit from further advances in the field of
telemedicine and digital health, as well as applications thereof (collectively,
"Telemedicine & Digital Health Companies"), as defined by Solactive AG, the
provider of the Underlying Index (the "Index Provider"). In order to be eligible
for inclusion in the Underlying Index, a company is considered by the Index
Provider to be a Telemedicine & Digital Health Company if it derives at
least 50% of its revenue, operating income, or assets from telemedicine and/or
digital health. Telemedicine & Digital Health Companies include those
involved in the following business activities: (i) telemedicine, (ii) healthcare
analytics, (iii) connected healthcare devices, and/or (iv) administrative
digitization.
In
constructing the Underlying Index, the Index Provider first applies a
proprietary natural language processing algorithm to the eligible universe,
which seeks to identify and rank companies with direct exposure to the
telemedicine and digital health industry based on filings, disclosures and other
public information (e.g. regulatory filings, earnings transcripts, etc.). The
highest ranking companies identified by the natural language processing
algorithm, as of the selection date, are further reviewed by the Index Provider
to confirm they derive at least 50% of their revenues, operating income, or
assets from the following business activities:
i.Telemedicine:
Companies that connect physicians and patients digitally, facilitating a range
of medical activities that include diagnosis, treatment, and medication
management, as well as offering online pharmaceutical services, and/or providing
internet healthcare platforms.
ii.Healthcare
Analytics: Companies that collect, produce, utilize, and/or store data for
healthcare related statistical and/or computational analyses, including
artificial intelligence analyses and cloud-based analytics platforms.
iii.Connected
Healthcare Devices: Companies that develop healthcare devices which
automatically transmit data and results to patients and/or physicians to assist
in real-time, dynamic patient treatment and preventative care.
iv.Administrative
Digitization: Companies that enhance healthcare provider management processes
including patient intake, staffing solutions, revenue/billing cycle management,
digital healthcare security, as well as doctor/hospital search, booking and/or
rating services for patient use.
The
eligible universe of the Underlying Index includes exchange-listed companies
that meet minimum market capitalization and liquidity criteria, as defined by
the Index Provider. As of January 31, 2023, companies must have a minimum
market capitalization of $200 million and a minimum average daily turnover for
the last 6 months greater than or equal to $2 million in order to be eligible
for inclusion in the Underlying Index. As of January 31, 2023, companies
listed in the following countries were eligible for inclusion in the Underlying
Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway,
Poland, Portugal, Singapore, Spain, Sweden, Switzerland, South Korea, Taiwan,
the United Kingdom, and the United States.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
Generally speaking, this approach will limit the amount of concentration in the
largest market capitalization companies and increase company-level
diversification. The Underlying Index may include large-, mid- or
small-capitalization companies, and components primarily include healthcare
companies. As of January 31, 2023, the Underlying Index had 40
constituents. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index had significant exposure to the health care
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Telemedicine & Digital Health
Companies:
Telemedicine & Digital Health Companies typically face intense competition
and potentially rapid product obsolescence. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. Telemedicine & Digital Health Companies typically engage in
significant amounts of spending on research and development, and there is no
guarantee that the products or services produced by these companies will be
successful. In addition, the field of digital health and telemedicine could face
increasing regulatory scrutiny in the future, which may limit the development of
this technology and impede the growth of companies that develop and/or utilize
this technology. Many Telemedicine & Digital Health Companies store and
transmit sensitive data that is subject to strict regulations. As a result,
these companies may be particularly vulnerable to cybersecurity breaches or
other means by which sensitive data could be exposed. Breaches of this nature
would have a materially adverse effect on a given company, and could lead to
stricter regulation in the future. The customers and/or suppliers of
Telemedicine & Digital Health Companies may be concentrated in a particular
country, region or industry. Any adverse event affecting one of these countries,
regions or industries could have a negative impact on Telemedicine & Digital
Health Companies. Demand for Telemedicine & Digital Health services may
fluctuate due to unexpected events, including but not limited to pandemics and
related strains on health care systems. Such demand fluctuations could
positively or negatively impact Telemedicine & Digital Health Companies.
Telemedicine & Digital Health services may not be eligible for reimbursement
from insurance policies or government programs, potentially limiting the
adoption of such services. Any changes in reimbursement policies may negatively
impact the operations of Telemedicine & Digital Health service providers.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change
quickly
and unpredictably. As a result, the Fund's NAV may change quickly and without
warning, which could have a significant negative impact on the Fund.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Health Care Sector: The
health care sector may be affected by government regulations and government
health care programs, increases or decreases in the cost of medical products and
services, an increased emphasis on outpatient services, and product liability
claims, among other factors. Many health care companies are heavily dependent on
patent protection, and the expiration of a company's patent may adversely affect
that company's profitability. Health care companies are subject to competitive
forces that may result in price discounting and may be thinly capitalized and
susceptible to product obsolescence. Companies in the health care sector may
also be affected by unforeseen circumstances including but not limited to the
spread of infectious disease which could impact drug development priorities and
pipelines, supply and demand dynamics for health care equipment, as well as the
ability to receive care in health care service facilities.
Risks
Related to Investing in the Health Care Technology Industry: Companies
in the health care technology industry are subject to rapid changes in
technology product cycles; rapid product obsolescence; government regulation;
and increased competition, both domestically and internationally, including
competition from foreign competitors with lower production costs. Companies in
the health care technology industry may be particularly susceptible to changes
in government regulation. In addition, companies in the health care technology
industry may have limited product lines, markets, financial resources or
personnel.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China: Investment
exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting
from
governmental influence, a lack of publicly available information and/or
political and social instability. Chinese companies are also subject to the risk
that Chinese authorities can intervene in their operations and structure.
Internal social unrest or confrontations with other neighboring countries,
including military conflicts in response to such events, may also disrupt
economic development in China and result in a greater risk of currency
fluctuations, currency convertibility, interest rate fluctuations and higher
rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment
value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access. As of January 31, 2023, the Fund had significant exposure to VIEs,
as defined above.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market
volatility
or other unusual market conditions. Tracking error also may result because the
Fund incurs fees and expenses, while the Underlying Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The bar chart and table that
follow show how the Fund performed on a calendar year basis and provide an
indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and by showing the Fund's average annual
total returns for the indicated periods compared with the Fund's benchmark index
and a broad measure of market
performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2022 |
3.18% |
Worst
Quarter: |
6/30/2022 |
-20.63% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (07/29/2020) |
Global
X Telemedicine & Digital Health ETF: |
|
|
·Return
before taxes |
-29.43% |
-10.36% |
·Return
after taxes on distributions1 |
-29.43% |
-10.36% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-17.42% |
-7.74% |
Solactive
Telemedicine & Digital Health Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-29.07% |
-9.85% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
5.27% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan have been Portfolio
Managers of the Fund since the Fund's inception. Ms. Yang has been a Portfolio
Manager of the Fund since December 2020. Mr. Lu has been a Portfolio Manager of
the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X Aging
Population ETF
Ticker:
AGNG
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Aging Population ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the Indxx Aging Population Thematic Index
("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 13.50% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests more than 80% of its total assets in the securities of the Indxx
Aging Population Thematic Index ("Underlying Index"). The Fund's 80% investment
policy is non-fundamental and requires 60 days prior written notice to
shareholders before it can be changed.
The
Underlying Index is designed to provide exposure to exchange-listed companies in
developed markets that facilitate the demographic trend of longer average life
spans and the aging of the global population, including but not limited to
companies involved in biotechnology, medical devices, pharmaceuticals, senior
living facilities and specialized health care services (collectively, "Aging
Population Companies"), as defined by Indxx, LLC, the provider of the Underlying
Index ("Index Provider").
The
eligible universe of the Underlying Index includes the most liquid and
investable companies in accordance with the standard market capitalization and
liquidity criteria associated with developed markets, as defined by the Index
Provider. As of January 31, 2023, companies must have a minimum market
capitalization of $500 million and a minimum average daily turnover for the last
6 months (or since the IPO launch date for Significant IPOs as defined by the
Index Provider) greater than or equal to $2 million in order to be eligible for
inclusion in the Underlying Index. The Underlying Index may include components
from the following countries: Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg,
Netherlands, New Zealand, Norway, Portugal, Singapore, South Korea, Spain,
Sweden, Switzerland, Taiwan, the United Kingdom and the United States.
From
the eligible universe, the Index Provider identifies Aging Population Companies
by applying a proprietary analysis that consists of two primary components:
theme identification and company analysis. As of January 31, 2023, the
Index Provider has identified the following four themes that are expected to
provide the most exposure to Aging Population Companies: (1) Health Care
Products, (2) Health Care Services, (3) Medical Devices, and (4) Senior Homes
(collectively, "Longevity Themes"). In order to be included in the Underlying
Index, a company must be identified as having significant exposure to these
Aging Population Themes, as determined by the Index Provider. Companies are
analyzed based on two primary criteria: revenue exposure and primary business
operations. A company is deemed to have significant exposure to the Aging
Population Themes if (i) it derives a significant portion of its revenue from
the Aging Population Themes, or (ii) it has stated its primary business to be in
products and services focused on the Aging Population Themes, as determined by
the Index Provider. Accordingly, the Fund assets will be concentrated (that is,
it will hold 25% or more of its total assets) in companies that provide products
and services that facilitate the aging of the global population.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and rebalanced annually. The Underlying Index
may include large-, mid- or small-capitalization companies, and components
primarily include health care, biotechnology and pharmaceuticals companies as
well as real estate investment trusts ("REITs"). The Fund's investment objective
and Underlying Index may be changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the biotechnology and pharmaceuticals
industries and had significant exposure to the health care
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Real
Estate Stocks and Real Estate Investment Trusts (REITs) Investment
Risk:
The Fund may have exposure to companies that invest in real estate, such as
REITs, which exposes investors in the Fund to the risks of owning real estate
directly, as well as to risks that relate specifically to the way in which real
estate companies are organized and operated. Real estate is highly sensitive to
general and local economic conditions and developments and characterized by
intense competition and periodic overbuilding. Many real estate companies,
including REITs, utilize leverage (and some may be highly leveraged), which
increases risk and could adversely affect a real estate company's operations and
market value in periods of rising interest rates.
Associated
Risks Related to Investing in Aging Population Companies:
The Fund invests in aging population companies, including pharmaceutical and
biotechnology companies involved in the research, development, production and/or
manufacturing of drugs; suppliers or manufacturers of medical devices; companies
operating skilled nursing homes, senior living homes and continuing care
communities; and providers of health care services, including home healthcare
providers. Aging population companies may be affected by industry competition,
dependency on a limited number of products, obsolescence of products, government
approvals and regulations, loss or impairment of intellectual property rights
and litigation regarding product liability. Aging population companies may also
be affected by unforeseen health circumstances including but not limited to the
spread of infectious disease which could impact longevity-related drug
development priorities and pipelines, supply and demand dynamics for longevity
health care equipment as well as the ability to receive care in
longevity-related health care service facilities. Aging population companies may
be affected by government regulations and government healthcare programs, as
well as increases or decreases in the cost of medical products and services and
product liability claims. Many aging population companies are heavily dependent
on patent protection, and the expiration of a company’s patent may adversely
affect that company’s profitability. The customers and/or suppliers of aging
population companies may be concentrated in a particular country, region or
industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on aging population companies. Through
its portfolio companies’ customers and suppliers, the Fund is specifically
exposed to Asian
Economic Risk
and European
Economic Risk.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies
in
a particular industry or sector. As a result, the value of the Fund’s
investments may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries or sectors.
Risks
Related to Investing in the Biotechnology Industry:
Biotechnology companies face intense competition and the potential for rapid
product obsolescence. Biotechnology companies may be adversely affected by the
loss or impairment of intellectual property rights or changes in government
regulations. Demand for Biotechnology products and services, generally speaking
and specific to sub-segments, may fluctuate due to unexpected events, including
but not limited to global health crises like pandemics which could strain health
care systems and alter health care needs. Such demand fluctuations could
positively or negatively impact Biotechnology companies.
Risks
Related to Investing in the Health Care Sector: The
health care sector may be affected by government regulations and government
health care programs, increases or decreases in the cost of medical products and
services, an increased emphasis on outpatient services, and product liability
claims, among other factors. Many health care companies are heavily dependent on
patent protection, and the expiration of a company's patent may adversely affect
that company's profitability. Health care companies are subject to competitive
forces that may result in price discounting and may be thinly capitalized and
susceptible to product obsolescence. Companies in the health care sector may
also be affected by unforeseen circumstances including but not limited to the
spread of infectious disease which could impact drug development priorities and
pipelines, supply and demand dynamics for health care equipment, as well as the
ability to receive care in health care service facilities.
Risks
Related to Investing in the Pharmaceuticals Industry:
Companies in the pharmaceuticals industry may be affected by industry
competition, dependency on a limited number of products, obsolescence of
products, government approvals and regulations, loss or impairment of
intellectual property rights and litigation regarding product liability. Demand
for pharmaceuticals, generally speaking and specific to sub-segments, may
fluctuate due to unexpected events, including but not limited to global health
crises like pandemics which could strain health care systems and alter health
care needs. Such demand fluctuations could positively or negatively impact
pharmaceutical companies.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such
events,
may also disrupt economic development in China and result in a greater risk of
currency fluctuations, currency convertibility, interest rate fluctuations and
higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be
unenforceable
under Chinese law, investors in the listed shell company, such as the Fund, may
suffer significant losses with little or no recourse available. If the Chinese
government determines that the agreements establishing the VIE structures do not
comply with Chinese law and regulations, including those related to restrictions
on foreign ownership, it could subject a Chinese-based issuer to penalties,
revocation of business and operating licenses, or forfeiture of ownership
interest. In addition, the listed shell company’s control over a VIE may also be
jeopardized if a natural person who holds the equity interest in the VIE
breaches the terms of the agreement, is subject to legal proceedings or if any
physical instruments for authenticating documentation, such as chops and seals,
are used without the Chinese-based issuer’s authorization to enter into
contractual arrangements in China. Chops and seals, which are carved stamps used
to sign documents, represent a legally binding commitment by the company.
Moreover, any future regulatory action may prohibit the ability of the shell
company to receive the economic benefits of the Chinese-based operating company,
which may cause the value of the Fund’s investment in the listed shell company
to suffer a significant loss. For example, in 2021, the Chinese government
prohibited use of the VIE structure for investment in after-school tutoring
companies. There is no guarantee that the Chinese government will not place
similar restrictions on other industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:Investments
in emerging markets may be subject to a greater risk of loss than investments in
developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries, and there may be greater
risk associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central
governments
and governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
20.88% |
Worst
Quarter: |
12/31/2018 |
-14.41% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (05/09/2016) |
Global
X Aging Population ETF: |
|
|
|
·Return
before taxes |
-8.52% |
7.01% |
9.34% |
·Return
after taxes on distributions1 |
-8.61% |
6.83% |
9.09% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-4.99% |
5.48% |
7.43% |
Indxx
Aging Population Thematic Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-8.36% |
7.22% |
9.62% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
5.23% |
8.58% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a
Portfolio
Manager of the Fund since June 10, 2019. Ms. Yang has been a Portfolio Manager
of the Fund since December 2020. Mr. Lu has been a Portfolio Manager of the Fund
since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
Health & Wellness ETF
Ticker:
BFIT
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Health & Wellness ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the Indxx Global Health & Wellness Thematic
Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 13.49% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests more than 80% of its total assets in the securities of the Indxx
Global Health & Wellness Thematic Index ("Underlying Index") and in American
Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on
the securities in the Underlying Index. The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed.
The
Underlying Index is designed to provide exposure to exchange-listed companies in
developed markets that provide products and services that facilitate physical
wellness through active and healthy lifestyles, including but not limited to
companies involved in fitness equipment, fitness technology, athletic apparel,
nutritional supplements, and organic/natural food offerings, (collectively,
"Health & Wellness Companies"), as defined by Indxx, LLC, the provider of
the Underlying Index ("Index Provider").
The
eligible universe of the Underlying Index includes the most liquid and
investable companies in accordance with the standard market capitalization and
liquidity criteria associated with developed markets, as defined by the Index
Provider. As of January 31, 2023, companies must have a minimum market
capitalization of $500 million and a minimum average daily turnover for the last
6 months (or since the IPO launch date for Significant IPOs as defined by the
Index Provider) greater than or equal to $2 million in order to be eligible for
inclusion in the Underlying Index. The Underlying Index may include components
from the following countries: Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg,
Netherlands, New Zealand, Norway, Portugal, Singapore, South Korea, Spain,
Sweden, Switzerland, Taiwan, the United Kingdom and the United States.
From
the eligible universe, the Index Provider identifies Health & Wellness
Companies by applying a proprietary analysis that consists of two primary
components: theme identification and company analysis. As of January 31,
2023, the Index Provider has identified the following four themes that are
expected to provide the most exposure to Health & Wellness Companies: (1)
Healthy Food, Nutrition and Weight Loss, (2) Fitness and Fitness Apparel, (3)
Nutritional Supplements and Preventive Health Care, (4) Anti-Aging and Wellness
(collectively, "Health & Wellness Themes"). In order to be included in the
Underlying Index, a company must be identified as having significant exposure to
these Health & Wellness Themes, as determined by the Index Provider. The
Index Provider analyzes companies based on two primary criteria: revenue
exposure and primary business operations. A company is to have significant
exposure to the Health & Wellness Themes if (i) it derives a significant
portion of its revenue from the sale of products or services from the Health
& Wellness Themes, or (ii) it has stated its primary business to be in
products and services focused on the Health & Wellness Themes, as determined
by the Index Provider. Accordingly, the Fund assets will be concentrated (that
is, it will hold 25% or more of its total assets) in companies that provide
products and services that facilitate physical health and wellness.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and rebalanced annually. The Underlying Index
may include large-, mid- or small-capitalization companies, and components
primarily include consumer discretionary, consumer staples, health care and
information technology companies. The Fund's investment objective and Underlying
Index may be changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the textiles, apparel and luxury goods
industry and had significant exposure to the consumer discretionary
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Health & Wellness Companies:
The Fund invests in
health
and wellness companies, including companies that operate gyms and
fitness/wellness facilities as well as companies that provide, manufacture or
distribute natural/organic foods, sports/fitness equipment, wearable fitness
technology, fitness/athletic apparel, nutritional supplements, anti-aging
products and dietary services.
The
risks related to investing in such companies include rapid changes in consumer
trends, social trends, marketing campaigns, and consumers’ disposable income.
Health & Wellness Companies that manufacture or distribute natural/organic
foods may enter the cannabis space which would increase the risk of facing
increased regulatory scrutiny in the future. Exposure to cannabis companies
could increase the volatility of the stocks. In addition, these companies
typically face intense competition domestically and abroad, which could
adversely impact the success of these companies. The customers and/or suppliers
of health and wellness companies may be concentrated in a particular country,
region or industry. Any adverse event affecting one of these countries, regions
or industries could have a negative impact on health and wellness companies.
Through its portfolio companies’ customers and suppliers, the Fund is
specifically exposed to Asian
Economic Risk,
European
Economic Risk
and North
American Economic Risk.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Consumer Discretionary Sector: The
consumer discretionary sector may be affected by changes in domestic and
international economies, exchange and interest rates, competition, consumers’
disposable income and consumer preferences, social trends and marketing
campaigns.
Risks
Related to Investing in the Textiles, Apparel and Luxury Goods
Industry:
Companies in the textiles, apparel and luxury goods industry face intense
competition and are dependent on their ability to maintain brand image.
Companies may be subject to changes in consumer preferences, and technologies
employed by textiles, apparel and luxury goods companies may become obsolete.
Companies in this industry are dependent on consumer spending and, as such, are
likely to be sensitive to any downturns in the broader economy. Demand for
products may be seasonal, and incorrect assessment of future demand can lead to
overproduction of underproduction, which can impact company
profitability.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual
and threatened responses to such activity, including purchasing restrictions,
sanctions, tariffs or cyberattacks on the Chinese government or Chinese
companies, may impact China’s economy and Chinese issuers of securities in which
the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:
The Fund targets Health and Wellness Companies globally and is expected to
invest in securities in emerging market countries. Investments in emerging
markets may be subject to a greater risk of loss than investments in developed
markets. Securities markets of emerging market countries are less liquid,
subject to greater price volatility, have smaller market capitalizations, have
less government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries, and there may be greater risk associated
with the custody of securities in emerging markets. It may be difficult or
impossible for the Fund to pursue claims against an emerging market issuer in
the courts of an emerging market country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Japan:
The Japanese economy may be subject to considerable degrees of economic,
political and social instability, which could have a negative impact on Japanese
securities. Japan’s economy has suffered from low growth and low inflation for a
prolonged period of time since the collapse of its bubble economy, and that may
continue despite the efforts of the Bank of Japan and policymakers. In addition,
Japan is subject to the risk of natural disasters, such as earthquakes,
volcanoes, typhoons and tsunamis, which could negatively affect the Fund.
Japan’s relations with its neighbors have at times been strained, and strained
relations with its neighbors or trading partners may cause uncertainty in the
Japanese markets and adversely affect the overall Japanese economy.
Risk
of Investing in Taiwan: Investments
in Taiwanese issuers involve risks that are specific to Taiwan, including legal,
regulatory, political and economic risks. Political and economic developments of
Taiwan’s neighbors may have an adverse effect on Taiwan’s economy. Specifically,
Taiwan’s geographic proximity and history of political contention with China
have resulted in ongoing tensions, which may materially affect the Taiwanese
economy and its securities market.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support
should
economic growth slow. Additionally, China’s shift away from a zero-COVID policy
creates both opportunities and risks, causing uncertainty for global economic
growth. Market risk factors may result in increased volatility and/or decreased
liquidity in the securities markets. The Fund’s NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
26.38% |
Worst
Quarter: |
3/31/2020 |
-27.52% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (05/09/2016) |
Global
X Health & Wellness ETF: |
|
|
|
·Return
before taxes |
-23.93% |
5.80% |
6.25% |
·Return
after taxes on distributions1 |
-24.04% |
5.65% |
5.97% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-13.99% |
4.55% |
4.89% |
Indxx
Global Health & Wellness Thematic Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-23.71% |
6.16% |
6.67% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
5.23% |
8.58% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a
Portfolio
Manager of the Fund since June 10, 2019. Ms. Yang has been a Portfolio Manager
of the Fund since December 2020. Mr. Lu has been a Portfolio Manager of the Fund
since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
CleanTech ETF
Ticker:
CTEC
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X CleanTech ETF ("Fund") seeks to provide investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Indxx Global CleanTech Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 15.72% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the Indxx Global CleanTech Index
("Underlying Index") and in American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs") based on the securities in the Underlying Index.
The Fund's 80% investment policy is non-fundamental and requires 60 days prior
written notice to shareholders before it can be changed. The Fund may lend
securities representing up to one-third of the value of the Fund’s total assets
(including the value of the collateral received).
The
Underlying Index is designed to provide exposure to exchange-listed companies
that are positioned to benefit from the increased adoption of technologies
focused on improving the efficiency of renewable energy production and/or
mitigating the adverse environmental effects of resource consumption
(“CleanTech”), including, but not limited to, companies whose principal business
is in developing technology relating to renewable energy, energy efficiency and
storage, smart grid, lithium-ion batteries and/or fuel cells, and/or pollution
prevention/amelioration (collectively, "CleanTech Companies"), as defined by
Indxx LLC, the provider of the Underlying Index ("Index Provider").
In
constructing the Underlying Index, the Index Provider first identifies FactSet
Industries related to CleanTech. Companies within these Industries, as of the
selection date, are further reviewed by the Index Provider on the basis of
revenue related to CleanTech activities. To be eligible for the Underlying
Index, a company is considered by the Index Provider to be a CleanTech Company
if the company generates at least 50% of its revenues from developing
technologies and/or equipment relating to: (i) renewable energy production, (ii)
residential and commercial energy efficiency and storage, (iii) smart grid
implementation, (iv)
lithium-ion
batteries and/or fuel cells, or (v) preventing/ameliorating the negative
environmental effects of pollution, in each case, as determined by the Index
Provider.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index Provider,
must be met. As of January 31, 2023, companies must have a minimum market
capitalization of $500 million and a minimum average daily turnover for the last
6 months (or since the IPO launch date for Significant IPOs as defined by the
Index Provider) greater than or equal to $2 million in order to be eligible for
inclusion in the Underlying Index. As of January 31, 2023, companies listed
in the following countries were eligible for inclusion in the Underlying Index:
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, Mexico,
Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar,
South Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan,
Thailand, Turkey, United Arab Emirates, the United Kingdom, and the United
States.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
During each rebalance, the maximum weight of a company is capped at 6%, the
aggregate weight of companies with a weight greater than or equal to 5% is
capped at 40%, and all remaining companies are capped at a weight of 4.5%, and
all constituents are subject to a minimum weight of 0.3%. Generally speaking,
this approach will limit the amount of concentration in the largest market
capitalization companies and increase company-level diversification. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include industrials and information technology companies.
As of January 31, 2023, the Underlying Index had 29 constituents. The
Fund's investment objective and Underlying Index may be changed without
shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the electrical equipment and semiconductors
& semiconductor equipment industries and had significant exposure to the
industrials and information technology
sectors.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus
and
in the Statement of Additional Information (“SAI”). The order of the below risk
factors does not indicate the significance of any particular risk
factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in CleanTech Companies:
CleanTech Companies typically face intense competition, short product lifecycles
and potentially rapid product obsolescence. These companies may be significantly
affected by fluctuations in energy prices and in the supply and demand of
renewable energy, tax incentives, subsidies, and other governmental regulations
and policies. Investors should take notice of the distinction between
implemented government policy based on legislation and less guaranteed
commitments which may be aspirational, subject to political risk, and difficult
to enforce. These companies are also heavily dependent on intellectual property
rights and may be adversely affected by loss or impairment of those rights.
CleanTech Companies may be adversely affected by commodity price volatility,
changes in exchange rates, imposition of import controls, availability of
certain inputs and materials required for production, depletion of resources,
technological developments and labor relations. A decline in the price of
conventional energy such as oil and natural gas could have a materially adverse
impact on CleanTech Companies. Renewable energy resources may be highly
dependent upon government policies that support renewable energy generation and
enhance the economic viability of owning renewable electric generation assets.
Additionally, adverse environmental conditions may cause fluctuations in
renewable electric generation and adversely affect the cash flows associated
with CleanTech Companies.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk: Compared
to mid- and large-capitalization companies, small-capitalization companies may
be less stable and more susceptible to adverse developments, and their
securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies
in
a particular industry or sector. As a result, the value of the Fund’s
investments may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries or
sectors.
Risks
Related to Investing in the Electrical Equipment Industry: The
Electrical Equipment Industry is fragmented but includes a number of large
incumbent companies that may compete heavily for market share in the space.
Companies in the Electrical Equipment Industry may involve operations with high
fixed costs. Because copper, aluminum, steel and other raw materials are often
critical components of the products manufactured in the Electrical Equipment
Industry, fluctuations in commodities prices for such raw materials may impact
the profitability of companies in this industry. Purchasers of such products may
be geographically dispersed, which may subject companies in this industry to any
increases in geopolitical uncertainty or global macroeconomic
trends.
Risks
Related to Investing in the Industrials Sector:
Companies in the industrials sector are subject to fluctuations in supply and
demand for their specific product or service. The products of manufacturing
companies may face product obsolescence due to rapid technological developments.
Government regulation, world events and economic conditions affect the
performance of companies in the industrials sector. Companies also may be
adversely affected by environmental damage and product liability claims.
Companies in the Industrial Sector face increased risk from trade agreements
between countries that develop these technologies and countries in which
customers of these technologies are based. Lack of resolution or potential
imposition of trade tariffs may hinder the companies’ ability to successfully
deploy their inventories.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Risks
Related to Investing in the Semiconductors and Semiconductor Equipment
Industry:
The semiconductors and semiconductor equipment industry is highly competitive,
and certain companies in this industry may be restricted from operating in
certain markets due to the sensitive nature of these technologies. Companies in
this space generally seek to increase silicon capacity, improve yields, and
reduce die size in their product designs which may result in significant
increases in worldwide supply and downward pressure on prices. Companies
involved in the semiconductors and semiconductor equipment industry face
increased risk from trade agreements between countries that develop these
technologies and countries in which customers of these technologies are based.
Lack of resolution or potential imposition of trade tariffs may hinder the
companies’ ability to successfully deploy their inventories. The success of such
companies frequently depends on the ability to develop and produce competitive
new semiconductor technologies. Companies in this industry frequently undertake
substantial research and development expenses in order to remain competitive,
and a failure to successfully demonstrate advanced functionality and performance
can have a material impact on the company’s business.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those
shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands.
The
shell company lists on a foreign exchange and enters into contractual
arrangements with the VIE. This structure allows Chinese companies in which the
Chinese government restricts foreign ownership to raise capital from foreign
investors. While the shell company has no equity ownership of the VIE, these
contractual arrangements permit the shell company to consolidate the VIE’s
financial statements with its own for accounting purposes and provide for
economic exposure to the performance of the underlying Chinese operating
company. Therefore, an investor in the listed shell company, such as the Fund,
will have exposure to the Chinese-based operating company only through
contractual arrangements and has no ownership in the Chinese-based operating
company. Furthermore, because the shell company only has specific rights
provided for in these service agreements with the VIE, its abilities to control
the activities at the Chinese-based operating company are limited and the
operating company may engage in activities that negatively impact investment
value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets: Investments
in emerging markets may be subject to a greater risk of loss than investments in
developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries, and there may be greater
risk associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country. There may be significant
obstacles to obtaining information necessary for investigations into or
litigation against emerging market companies and shareholders may have limited
legal rights and remedies. Emerging markets may be more likely to experience
inflation, political turmoil and rapid changes in economic conditions than more
developed markets. Emerging market economies’ exposure to specific industries,
such as tourism, and lack of efficient or sufficient health care systems, could
make these economies especially vulnerable to global crises, including but not
limited to, pandemics such as the global COVID-19 pandemic. Certain emerging
market countries may have privatized, or have begun the process of privatizing,
certain entities and industries. Privatized entities may lose money or be
re-nationalized.
Risk
of Investing in South Korea: Investments
in South Korean issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risks that are specific to South Korea. In
addition, economic and political
developments
of South Korea’s neighbors, including escalated tensions involving North Korea
and any outbreak of hostilities involving North Korea, or even the threat of an
outbreak of hostilities, may have a severe adverse effect on the South Korean
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index.
Errors
in index data, index computations and/or the construction of the Underlying
Index in accordance with its methodology may occur from time to time and may not
be identified and corrected by the Index Provider for a period of time or at
all, which may have an adverse impact on the Fund and its
shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2022 |
5.34% |
Worst
Quarter: |
6/30/2022 |
-18.56% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (09/22/2020) |
Global
X CleanTech ETF: |
|
|
·Return
before taxes |
-16.60% |
-0.84% |
·Return
after taxes on distributions1 |
-16.65% |
-0.91% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-9.79% |
-0.64% |
Indxx
Global CleanTech Index
(net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-16.22% |
-1.66% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
4.33% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan have been Portfolio
Managers of the Fund since the Fund's inception. Ms. Yang has been a Portfolio
Manager of the Fund since December 2020. Mr. Lu has been a Portfolio Manager of
the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X U.S.
Infrastructure Development ETF
Ticker:
PAVE
Exchange: Cboe BZX
INVESTMENT
OBJECTIVE
The Global X U.S. Infrastructure Development ETF ("Fund") seeks to
provide investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Indxx U.S. Infrastructure
Development Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.47% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.47% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$48 |
$151 |
$263 |
$591 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 9.78% of the average value of its
portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Indxx
U.S. Infrastructure Development Index ("Underlying Index"). The Fund's 80%
investment policy is non-fundamental and requires 60 days prior written notice
to shareholders before it can be changed. The Fund may lend securities
representing up to one-third of the value of the Fund’s total assets (including
the value of the collateral received).
The
Underlying Index is designed to measure the performance of U.S. listed companies
that provide exposure to domestic infrastructure development, including
companies involved in construction and engineering; production of infrastructure
raw materials, composites and products; industrial transportation; and
producers/distributors of heavy construction equipment (collectively, "U.S.
Infrastructure Development Companies"), as defined by Indxx, LLC, the provider
of the Underlying Index ("Index Provider").
The
eligible universe of the Underlying Index includes the most liquid and
investable companies in accordance with the standard market capitalization and
liquidity criteria associated with developed markets, as defined by the Index
Provider. As of January 31, 2023, companies must have a minimum market
capitalization of $300 million and a minimum average daily turnover for the last
6 months (or since the IPO launch date for Significant IPOs as defined by the
Index Provider) greater than or equal to $1 million in order to be eligible for
inclusion in the Underlying Index. The Underlying Index only includes companies
listed in the United States.
From
the eligible universe, the Index Provider identifies U.S. Infrastructure
Development Companies by applying a proprietary analysis that consists of two
primary components: theme identification and company analysis. As part of the
theme identification process, the Index Provider analyzes industry reports,
investment research and spending trends related to infrastructure development in
order to establish the themes that are expected to provide the most exposure to
increased investment in U.S. infrastructure. As of January 31, 2023, the
Index Provider has identified the following four U.S. infrastructure development
themes: (1) Construction and Engineering Services, (2) Raw Materials and
Composites, (3) Products and Equipment, and (4) Industrial Transportation
(collectively, "U.S. Infrastructure Development Themes").
In
the second step of the process, companies are analyzed based on two primary
criteria: revenue exposure and primary business operations. A company is
eligible for inclusion in the Underlying Index if (i) it derives a significant
portion of its revenue from the U.S. Infrastructure Development Themes, or (ii)
it has stated its primary business to be in products and services focused on the
U.S. Infrastructure Development Themes, as determined by the Index Provider.
Furthermore, only companies that generate greater than 50% of revenues from the
United States as of the index selection date, as determined by the Index
Provider, are eligible for inclusion in the Underlying Index. Accordingly, the
Fund assets will be concentrated (that is, it will hold 25% or more of its total
assets) in companies that provide exposure to U.S. infrastructure development.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and rebalanced annually. At the annual
rebalance, a capping methodology is applied to reduce concentration in
individual securities and increase diversification of the Underlying Index. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include industrials and materials companies. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of the Fund and Global X Management Company LLC, the
investment adviser for the Fund ("Adviser"). The Index Provider determines the
relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index had significant exposure to the industrials
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Infrastructure Development Companies:
The Fund invests in infrastructure development companies, including companies
involved in construction, engineering, production of raw materials, production
and distribution of heavy construction equipment and industrial
transportation. General risks of infrastructure development companies
include the general state of the economy, intense competition, consolidation,
domestic and international politics, and excess capacity. In addition,
infrastructure development companies may also be significantly affected by
overall capital spending levels (including both private and public sector
spending), economic cycles, technical obsolescence, delays in modernization,
labor relations and government regulations. Some infrastructure
development companies may rely heavily on local, state or national government
contracts, and are therefore subject to higher degrees of political risk and
could be negatively impacted by changes in government policies or a
deterioration in government balance sheets in the future. The customers and/or
suppliers of Infrastructure Development companies may be concentrated in a
particular country, region or industry. Any adverse event affecting one of these
countries, regions or industries could have a negative impact on infrastructure
development companies. Through its portfolio companies’ customers and suppliers,
the Fund is specifically exposed to North
American Economic Risk.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Industrials Sector:
Companies in the industrials sector are subject to fluctuations in supply and
demand for their specific product or service. The products of manufacturing
companies may face product obsolescence due to rapid technological developments.
Government regulation, world events and economic conditions affect the
performance of companies in the industrials sector. Companies also may be
adversely affected by environmental damage and product liability claims.
Companies in the Industrial Sector face increased risk from trade agreements
between countries that develop these technologies and countries in which
customers of these technologies are based. Lack of resolution or potential
imposition of trade tariffs may hinder the companies’ ability to successfully
deploy their inventories.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact
on the Fund’s investments in the affected region or in a region economically
tied to the affected region. The securities in which the Fund invests and,
consequently, the Fund are also subject to specific risks as a result of their
business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2020 |
26.41% |
Worst
Quarter: |
3/31/2020 |
-30.24% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (03/06/2017) |
Global
X U.S. Infrastructure Development ETF: |
|
|
|
·Return
before taxes |
-7.08% |
10.39% |
10.99% |
·Return
after taxes on distributions1 |
-7.27% |
10.22% |
10.82% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-4.06% |
8.22% |
8.79% |
Indxx
U.S. Infrastructure Development Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-6.55% |
10.95% |
11.55% |
S&P®
500 Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.11% |
9.42% |
10.56% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
AgTech & Food Innovation ETF
Ticker:
KROP
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X AgTech & Food Innovation ETF ("Fund") seeks to
provide investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Solactive AgTech & Food
Innovation Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 55.85% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the Solactive AgTech & Food
Innovation Index (the "Underlying Index") and in American Depositary Receipts
("ADRs") and Global Depositary Receipts ("GDRs") based on the securities in the
Underlying Index. Solely for purposes of complying with this policy, the Fund
only views securities issued by AgTech & Food Innovation Companies and
Pre-Revenue AgTech & Food Innovation Companies (both as defined below) as
satisfying this criterion.
The
Fund's 80% investment policy is non-fundamental and requires 60 days prior
written notice to shareholders before it can be changed.
The
Underlying Index is designed to provide exposure to companies that are
positioned to benefit from further advances in the fields of agricultural
technology (“AgTech”) and food innovation. Specifically, the Underlying Index
will include securities issued by “AgTech & Food Innovation Companies” as
defined by Solactive AG, the provider of the Underlying Index (the "Index
Provider"). “AgTech & Food Innovation Companies” are those companies that
derive at least 50% of their revenues, operating income, or assets from the
following business activities:
•AgTech
◦Precision
Agriculture:
Technologies used to increase crop yields and reduce levels of traditional
agricultural inputs (land, water, fertilizer, etc.) to grow crops more
profitably/efficiently. Business activities include the
development
of Geographic Information System (“GIS”) software and hardware for GIS-based
agriculture, precision weed control technologies, soil and water sensors,
weather tracking, and satellite imaging.
◦Robotics/Automation:
Technologies used to reduce labor and other farming inputs. Business activities
include the development of farming drones and autonomous farm equipment for
irrigation, soil management (agronomy), pollination, harvesting and processing
(e.g. robotic-enabled harvesters).
◦Controlled
Environment Agriculture (“CEA”):
Technologies and systems that optimize plant and/or fish farming and use
controlled environments to reduce the types and/or quantity of inputs required
for farming. Business activities include vertical farming, hydroponics,
aquaponics and aeroponics.
◦Agricultural
Biotechnology:
Biological/genetic technologies used to enhance agricultural cultivation and
yield. Business activities include the use of gene editing to develop crops with
higher yield, less water requirements, greater insect resistance,
etc.
•Food
Innovation
◦Protein
& Dairy Alternatives:
Products containing protein-rich ingredients sourced from plants, insects,
fungi, or through tissue culture that replace conventional animal-based protein
sources like meat and dairy. Business activities include the development of
plant-based and/or food-technology (e.g. molecular based) alternative proteins
and dairy.
◦Food
Waste Reduction:
Technologies and/or systems designed to reduce food-waste in the supply chain.
Business activities include the development of technology to track, monitor,
and/or preserve food (e.g. blockchain-based food sourcing and tracking systems
and software), as well as the development of products and services (e.g.
marketplaces) that reduce food waste.
In
addition, companies identified by the Index Provider as deriving greater than 0%
but less than 50% of revenue from the business activities described above
("Diversified AgTech & Food Innovation Companies"), as well as companies
identified by the Index Provider as having primary business operations in the
business activities described above but that do not currently generate revenues
(“Pre-Revenue AgTech & Food Innovation Companies”), are eligible for
inclusion in the Underlying Index if there are fewer than 30 eligible AgTech
& Food Innovation Companies. Diversified AgTech & Food Innovation
Companies and Pre-Revenue AgTech & Food Innovation Companies are
collectively subject to an aggregate weight cap of 15% at each semi-annual
rebalance.
In
constructing the Underlying Index, the Index Provider first applies a
proprietary natural language processing algorithm to the eligible universe,
which seeks to identify and rank companies involved in the fields of agriculture
technology and food innovation based on filings, disclosures and other public
information (e.g. regulatory filings, earnings transcripts, etc.). The
highest-ranking companies identified by the natural language processing
algorithm, as of the selection date, are further reviewed by the Index Provider
to confirm they derive at least 50% of their revenues from the business
activities described above, greater than 0% of their revenues from the business
activities described above in the case of Diversified AgTech & Food
Innovation Companies, or that they have primary business operations in the
business activities described above but do not currently generate revenues in
the case of Pre-Revenue AgTech & Food Innovation Companies.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index Provider,
must be met. As of January 31, 2022, companies must have a minimum market
capitalization of $200 million and a minimum average daily turnover for the last
6 months greater than or equal to $2 million in order to be eligible for
inclusion in the Underlying Index. As of January 31, 2022, companies listed in
the following countries were eligible for inclusion in the Underlying Index:
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New
Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar, Saudi Arabia, South
Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand,
Turkey, United Arab Emirates, the United Kingdom, and the United States. The
Fund may invest in China A-Shares, which are issued by companies incorporated in
mainland China and traded on Chinese exchanges.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
During each rebalance, the maximum weight of a company is capped at 12%, the
aggregate weight of companies with a weight greater than or equal to 4.5% is
capped at 45%, and all remaining companies are capped at a weight of 4.5%, and
all constituents are subject to a minimum weight of 0.3%. In addition,
Diversified AgTech & Food Innovation Companies and Pre-Revenue AgTech &
Food Innovation Companies are subject to an individual weight cap of 2% and an
aggregate weight cap of 10% at each semi-annual rebalance. Generally speaking,
modified capitalization weighting will limit the amount of concentration in the
largest market capitalization companies and increase company-level
diversification. The Underlying Index may include large-, mid- or
small-capitalization companies, and components primarily include consumer
staples and materials companies. As of January 31, 2022, the
Underlying
Index had 30 constituents. The Fund's investment objective and Underlying Index
may be changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). In addition, any
determinations related to the constituents of the Underlying Index are made
independent of the Fund's portfolio managers. The Index Provider determines the
relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the chemicals and food products industries
and had significant exposure to the consumer staples and materials
sectors. The Fund is classified as "non-diversified," which
means it may invest a larger percentage of its assets in a smaller number of
issuers than a diversified fund.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds section of this Prospectus
and in the Statement of Additional Information (“SAI”). The order of the below
risk factors does not indicate the significance of any particular risk
factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of
Creation
Units (as defined below) may also be disrupted. These risks, among others, could
adversely affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in AgTech & Food Innovation Companies:
AgTech
& Food Innovation companies may have limited product lines, markets,
financial resources or personnel. These companies typically face intense
competition and potentially rapid product obsolescence. These companies are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. AgTech & Food Innovation companies
are substantially affected by developments related to the agriculture industry,
including the impact of global climate change on agricultural production. AgTech
& Food Innovation companies, especially smaller companies, tend to be more
volatile than companies that do not rely heavily on technology. AgTech &
Food Innovation companies may be adversely affected by commodity price
volatility, changes in exchange rates, imposition of import controls,
availability of certain inputs and materials required for production, depletion
of resources, technological developments and labor relations. AgTech & Food
Innovation companies are also subject to significant environmental and safety
regulations that could adversely affect their business. The customers and/or
suppliers of AgTech & Food Innovation companies may be concentrated in a
particular country, region or industry. Any adverse event affecting one of these
countries, regions or industries could have a negative impact on AgTech &
Food Innovation companies.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Micro-Capitalization
Companies Risk: Stock
prices of micro-cap companies are significantly more volatile, and more
vulnerable to adverse business and economic developments, than those of larger
companies, and their earnings and revenues tend to be less predictable (and some
companies may experience significant losses). Microcap stocks may also be thinly
traded, making it difficult for the Fund to buy and sell them.
Cash
Transaction Risk: Unlike
most exchange-traded funds ("ETFs"), the Fund intends to effect a significant
portion of creations and redemptions for cash, rather than in-kind securities.
As a result, an investment in the Fund may be less tax-efficient than an
investment in a more conventional ETF. Moreover, cash transactions may have to
be carried out over several days if the securities market is relatively illiquid
and may involve considerable brokerage fees and taxes. These factors may result
in wider spreads between the bid and the offered prices of the Fund’s Shares
than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying
Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Chemicals Industry: The
chemicals industry can be significantly affected by intense competition, product
obsolescence, raw materials prices, and government regulation, and can be
subject to risks associated with the production, handling and disposal of
hazardous components, and litigation arising out of environmental contamination.
Risks
Related to Investing in the Consumer Staples Sector: The
consumer staples sector may be affected by, among other things, marketing
campaigns, changes in consumer demands, government regulations and changes in
commodity prices.
Risks
Related to Investing in the Food Products Industry: The
food products industry is subject to various risks, including evolving consumer
preferences, nutritional and health-related concerns, federal, state and local
food inspection and processing controls, consumer product liability claims,
risks of product tampering, and the availability and expense of liability
insurance. The meat and poultry industries are subject to scrutiny due to the
association of meat and poultry products with outbreaks of illness caused by
food borne pathogens. Product recalls are sometimes required in the food
industry to withdraw contaminated or mislabeled products from the market.
Additionally, the failure to identify and react appropriately to changes in
consumer trends, demands and preferences could lead to, among other things,
reduced demand and price reduction for a company’s products. Companies in the
food products industry may be adversely affected by changes in domestic or
foreign economic conditions, including inflation or deflation, interest rates,
availability of capital markets, consumer spending rates, and energy
availability and costs (including fuel surcharges).
Risks
Related to Investing in the Materials Sector: Companies
in the materials sector are affected by commodity price volatility, exchange
rates, import controls and worldwide competition. At times, worldwide production
of industrial materials has exceeded demand, leading to poor investment returns
or outright losses. Issuers in the materials sector are at risk of depletion of
resources, technological progress, labor relations, governmental regulations and
environmental damage and product liability claims.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those
shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in
which
the Fund invests and, consequently, the Fund are also subject to specific risks
as a result of their business operations, including, but not limited to:
Risk
of Investing in Canada:
The Canadian economy is highly dependent on the demand for and price of natural
resources. As a result, the Canadian market is relatively concentrated in
issuers involved in the production and distribution of natural resources and any
changes in these sectors could have an adverse impact on the Canadian economy.
The Canadian economy is heavily dependent on relationships with certain key
trading partners, including the United States and China. Developments in the
United States, including renegotiation of the North American Free Trade
Agreement (“NAFTA”) and ratification of the successor United
States-Mexico-Canada Agreement (“USMCA”), which went into effect on July 1,
2020, as well as the imposition of additional tariffs by the United States, may
have implications for the trade arrangements between the United States and
Canada, which could negatively affect the value of securities held by the Fund.
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company. Therefore, an investor in the listed shell
company, such as the Fund, will have exposure to the Chinese-based operating
company only through contractual arrangements and has no ownership in the
Chinese-based operating company. Furthermore, because the shell company only has
specific rights provided for in these service agreements with the VIE, its
abilities to control the activities at the Chinese-based operating company are
limited and the operating company may engage in activities that negatively
impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets: Investments
in emerging markets may be subject to a greater risk of loss than investments in
developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries, and there may be greater
risk associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an
emerging
market country. There may be significant obstacles to obtaining information
necessary for investigations into or litigation against emerging market
companies and shareholders may have limited legal rights and remedies. Emerging
markets may be more likely to experience inflation, political turmoil and rapid
changes in economic conditions than more developed markets. Emerging market
economies’ exposure to specific industries, such as tourism, and lack of
efficient or sufficient health care systems, could make these economies
especially vulnerable to global crises, including but not limited to, pandemics
such as the global COVID-19 pandemic. Certain emerging market countries may have
privatized, or have begun the process of privatizing, certain entities and
industries. Privatized entities may lose money or be
re-nationalized.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index,
even
if that security generally is underperforming. Additionally, if a constituent of
the Underlying Index were removed, even outside of a regular rebalance of the
Underlying Index, the Adviser anticipates that the Fund would sell such
security. Maintaining investments in securities regardless of market conditions
or the performance of individual securities could cause the Fund’s return to be
lower than if the Fund employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
3/31/2022 |
0.66% |
Worst
Quarter: |
6/30/2022 |
-20.39% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (07/12/2021) |
Global
X AgTech & Food Innovation ETF: |
|
|
·Return
before taxes |
-27.09% |
-31.72% |
·Return
after taxes on distributions1 |
-27.20% |
-31.90% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-15.94% |
-23.63% |
Solactive
AgTech & Food Innovation Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-26.76% |
-31.44% |
MSCI
ACWI Index (Net)
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.36% |
-10.28% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts
(IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan and Ms. Yang have been
Portfolio Managers of the Fund since the Fund's inception. Mr. Lu has been a
Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
"Authorized Participants" (as defined in the SAI) who have entered into
agreements with the Fund's distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called "Creation Units". The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X
Blockchain ETF
Ticker:
BKCH
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Blockchain ETF ("Fund") seeks to provide investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Solactive Blockchain Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 36.47% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the Solactive Blockchain Index (the
"Underlying Index") and in American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs") based on the securities in the Underlying Index.
Solely for purposes of complying with this policy, the Fund only views
securities issued by Blockchain Companies (as defined below) as satisfying this
criterion. The Fund's 80% investment policy is non-fundamental and requires 60
days prior written notice to shareholders before it can be changed. The Fund may
lend securities representing up to one-third of the value of the Fund’s total
assets (including the value of the collateral received).
The
Underlying Index is designed to provide exposure to companies that are
positioned to benefit from further advances in the field of blockchain
technology. A blockchain is a peer-to-peer shared, distributed ledger (or
decentralized database) that facilitates the recording of transactions and
tracking of assets without the need for the use of a central authority acting as
a trusted intermediary (i.e., a bank). Certain users, known as nodes, elect to
maintain a copy of the database (“ledger”) on their computer. Nodes connect on a
peer-to-peer basis with other nodes, propagating transactions and blocks across
the network to be independently verified by other nodes according to the
network’s rules. Transactions are aggregated into blocks which record the time
and sequence of transactions, like new pages of a ledger. “Blocks” are linked
together with the prior block to form a “chain”, or a “blockchain”, which grows
linearly in time with the addition of each subsequent block, or page of the
ledger. The
resulting
blockchain is a distributed, time-stamped ledger of information—because the
rules for adding information to the ledger are public, any transactions and new
pages of the ledger can be independently verified by any user maintaining a copy
of the ledger, resulting in a shared and continually reconciled database.
Blockchains may also be private or public networks. A public blockchain network
is a publicly available set of rules that anyone can download and run to
participate in the network. A private blockchain network is a centralized
blockchain that requires an invitation from the originator of the network to
participate. Specifically, the Underlying Index will include securities issued
by “Blockchain Companies” as defined by Solactive AG, the provider of the
Underlying Index (the "Index Provider"). “Blockchain Companies” are those
companies that derive at least 50% of their revenues, operating income, or
assets from the following business activities:
1.Digital
Asset Mining:
Companies involved in verifying and adding digital asset transactions to a
blockchain ledger (i.e., digital asset mining), or that produce technology used
in digital asset mining.
2.Blockchain
& Digital Asset Transactions:
Companies that operate trading platforms/exchanges, custodians, wallets, and/or
payment gateways for digital assets issued on a blockchain.
3.Blockchain
Applications:
Companies involved in the development and distribution of applications and
software services related to blockchain technology and digital assets issued on
a blockchain, including smart contracts.
4.Blockchain
& Digital Asset Hardware:
Companies that manufacture and distribute infrastructure and/or hardware used
for blockchain activities and digital assets issued on a blockchain.
5.Blockchain
& Digital Asset Integration:
Companies that provide engineering and consulting services for the adoption and
utilization of blockchain technology and digital assets issued on a blockchain.
For purposes of the definition of “Blockchain Companies”, the Index Provider
will consider only those revenues, operating income, or assets from consulting
and/or engineering services specifically related to blockchain and digital asset
technologies.
The
Fund will not invest in digital assets (including cryptocurrencies) (i) directly
or (ii) indirectly through the use of digital asset derivatives.
In
addition, companies identified by the Index Provider as deriving greater than 0%
but less than 50% of revenue from the business activities described above
("Diversified Blockchain Companies"), as well as companies identified by the
Index Provider as having primary business operations in the business activities
described above but that do not currently generate revenues (“Pre-Revenue
Blockchain Companies”, are eligible for inclusion in the Underlying Index if
there are fewer than 25 eligible Blockchain Companies. Diversified Blockchain
Companies and Pre-Revenue Blockchain Companies are collectively subject to an
aggregate weight cap of 10% at each semi-annual rebalance.
In
constructing the Underlying Index, the Index Provider first applies a
proprietary natural language processing algorithm to the eligible universe,
which seeks to identify and rank companies involved in the blockchain fields
based on filings, disclosures and other public information (e.g. regulatory
filings, earnings transcripts, etc.). The highest-ranking companies identified
by the natural language processing algorithm, as of the selection date, are
further reviewed by the Index Provider to confirm they derive at least 50% of
their revenues from the business activities described above, greater than 0% of
their revenues from the business activities described above in the case of
Diversified Blockchain Companies, or that they have primary business operations
in the business activities described above but do not currently generate
revenues in the case of Pre-Revenue Blockchain Companies.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index Provider,
must be met. As of January 31, 2023, companies must have a minimum market
capitalization of $50 million and a minimum average daily turnover for the last
3 months greater than or equal to $0.5 million in order to be eligible for
inclusion in the Underlying Index. As of January 31, 2023, companies listed
in the following countries were eligible for inclusion in the Underlying Index:
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New
Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar, Saudi Arabia, South
Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand,
Turkey, United Arab Emirates, the United Kingdom, and the United
States.
As
of January 31, 2023, the Underlying Index had significant exposure to
Chinese issuers. The Fund may invest in China A-Shares, which are issued by
companies incorporated in mainland China and traded on Chinese exchanges.
The
Underlying Index is weighted according to a modified effective market
capitalization weighting methodology and is reconstituted and re-weighted
semi-annually. Modified effective market capitalization weighting seeks to
weight constituents based on market capitalization but accounting for liquidity
in determining final weights, and subject to caps on the weights of the
individual securities. During each rebalance, the maximum weight of a company is
capped at 12%, the aggregate weight of companies with a weight greater than or
equal to 4.5% is capped at 45%, and all remaining companies are capped at a
weight of 4.5%, and all constituents are subject to a minimum weight of 0.3%. In
addition, Diversified Blockchain Companies and Pre-Revenue Blockchain Companies
are subject to an individual weight cap of 2% and an aggregate weight cap of 10%
at each
semi-annual
rebalance. Generally speaking, modified effective market capitalization
weighting will limit the amount of concentration in the largest market
capitalization companies and increase company-level diversification. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include information technology and financials companies. As
of January 31, 2023, the Underlying Index had 24 constituents. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). In addition, any
determinations related to the constituents of the Underlying Index are made
independent of the Fund's portfolio managers. The Index Provider determines the
relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the software industry and had significant
exposure to the information technology sector. The Fund is
classified as "non-diversified," which means it may invest a larger percentage
of its assets in a smaller number of issuers than a diversified
fund.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds section of this Prospectus
and in the Statement of Additional Information (“SAI”). The order of the below
risk factors does not indicate the significance of any particular risk
factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face
difficulties
or prohibitions accessing certain A-Shares that are part of a restricted list in
countries such as the U.S. A-Shares may be subject to frequent and widespread
trading halts and may become illiquid. Trading suspensions in certain stock
could lead to greater market execution risk and costs for the Fund, and the
creation and redemption of Creation Units (as defined below) may also be
disrupted. These risks, among others, could adversely affect the value of the
Fund’s investments.
Depositary
Receipts Risk: The
Fund may invest in depositary receipts, such as ADRs and GDRs. Depositary
receipts may be subject to certain of the risks associated with direct
investments in the securities of foreign companies. For additional details on
these risks, please see Foreign
Securities Risk.
Moreover, depositary receipts may not track the price of the underlying foreign
securities on which they are based. A holder of depositary receipts may
also be subject to fees and the credit risk of the financial institution acting
as depositary.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Blockchain Companies: Blockchain
companies may be adversely impacted by government regulations, limited operating
histories, or economic conditions. Blockchain technology is new and its uses are
in many cases untested or unclear. These companies may also have significant
exposure to fluctuations in the spot prices of digital assets, particularly to
the extent that demand for a company’s hardware or services may increase as the
spot price of digital assets increase. Blockchain companies typically face
intense competition and potentially rapid product obsolescence. In addition,
many Blockchain companies store sensitive consumer information and could be the
target of cybersecurity attacks and other types of theft, which could have a
negative impact on these companies. Access to a given blockchain may require a
specific cryptographic key (in effect, a string of characters granting unique
access to initiate transactions related to specific digital assets) or set of
keys, the theft, loss, or destruction of which, either by accident or as a
result of the efforts of a third party, could irrevocably impair a claim to the
digital assets stored on that blockchain.
Many
Blockchain companies currently operate under less regulatory scrutiny than
traditional financial services companies and banks, but there is significant
risk that regulatory oversight could increase in the future. For example,
companies that operate trading platforms and/or exchanges may face heightened
regulatory risks associated with their operations. The SEC has made several
public statements indicating that some cryptocurrency exchanges may be operating
unregistered securities exchanges in violation of applicable regulations. In
August 2021, the SEC settled charges with Poloniex for selling digital asset
securities between 2017 and 2019 without registering as a national securities
exchange. Higher levels of regulation could increase costs and adversely impact
the current business models of some Blockchain companies and could even result
in the outright prohibition of certain business activities. For example, on
September 24, 2021, multiple Chinese regulators issued prohibitions on all
cryptocurrency transactions and mining. Any further restrictions imposed by
governments, including China or the United States of America, on crypto-currency
related activities may adversely impact Blockchain Companies and, in turn, the
Fund. These companies could be negatively impacted by disruptions in service
caused by hardware or software failure, or by interruptions or delays in service
by third-party data center hosting facilities and maintenance providers.
Blockchain companies involved in digital assets may face slow adoption rates and
be subject to higher levels of regulatory scrutiny in the future, which could
severely impact the viability of these companies. Blockchain companies,
especially smaller companies, tend to be more volatile than companies that do
not rely heavily on technology. The customers and/or suppliers of Blockchain
companies may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on Blockchain companies. Many Blockchain companies have
limited operating histories and may lack the necessary safeguards to ensure
their long-term viability. On July 6, 2022, Voyager Digital, a U.S. crypto
brokerage, filed for Chapter 11 bankruptcy protection. Voyager Digital suffered
significant losses due to its lending practices in which it issued
under-collateralized loans to companies within the digital asset ecosystem.
Shares of Voyager Digital were subsequently delisted from the Toronto Stock
Exchange.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Micro-Capitalization
Companies Risk:
Stock prices of micro-cap companies are significantly more volatile, and more
vulnerable to adverse business and economic developments, than those of larger
companies, and their earnings and revenues tend to be less predictable (and some
companies may experience significant losses). Microcap stocks may also be thinly
traded, making it difficult for the Fund to buy and sell them.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying
Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Risks
Related to Investing in the Software Industry:
The software industry can be significantly affected by intense competition,
aggressive pricing, technological innovations, and product obsolescence.
Companies in the application software industry, in particular, may also be
negatively affected by the decline or fluctuation of subscription renewal rates
for their products and services, which may have an adverse effect on profit
margins. Companies in the systems software industry may be adversely affected
by, among other things, actual or perceived security vulnerabilities in their
products and services, which may result in individual or class action lawsuits,
state or federal enforcement actions and other remediation costs.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security
during
the Fund’s domestic trading day. This in turn could lead to differences between
the market price of the Fund’s shares and the underlying value of those
shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Canada:
The Canadian economy is highly dependent on the demand for and price of natural
resources. As a result, the Canadian market is relatively concentrated in
issuers involved in the production and distribution of natural resources and any
changes in these sectors could have an adverse impact on the Canadian economy.
The Canadian economy is heavily dependent on relationships with certain key
trading partners, including the United States and China. Developments in the
United States, including renegotiation of the North American Free Trade
Agreement (“NAFTA”) and ratification of the successor United
States-Mexico-Canada Agreement (“USMCA”), which went into effect on July 1,
2020, as well as the imposition of additional tariffs by the United States, may
have implications for the trade arrangements between the United States and
Canada, which could negatively affect the value of securities held by the Fund.
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and
as
a result, information about the Chinese securities in which the Fund invests may
be less reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company. Therefore, an investor in the listed shell
company, such as the Fund, will have exposure to the Chinese-based operating
company only through contractual arrangements and has no ownership in the
Chinese-based operating company. Furthermore, because the shell company only has
specific rights provided for in these service agreements with the VIE, its
abilities to control the activities at the Chinese-based operating company are
limited and the operating company may engage in activities that negatively
impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets: Investments
in emerging markets may be subject to a greater risk of loss than investments in
developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries, and there may be greater
risk associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country. There may be significant
obstacles to obtaining information necessary for investigations into or
litigation against emerging market companies and shareholders may have limited
legal rights and remedies. Emerging markets may be more likely to experience
inflation, political turmoil and rapid changes in economic conditions than more
developed markets. Emerging market economies’ exposure to specific industries,
such as tourism, and lack of efficient or sufficient health care systems, could
make these economies especially vulnerable to global crises, including but not
limited to, pandemics such as the global COVID-19 pandemic. Certain emerging
market countries may have privatized, or have begun the process of privatizing,
certain entities and industries. Privatized entities may lose money or be
re-nationalized.
Risk
of Investing in the United States: A
decrease in imports or exports, changes in trade regulations and/or an economic
recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to
reduce
these operational risks through controls and procedures. However, these measures
do not address every possible risk and may be inadequate for those risks that
they are intended to address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares
trading
at a significant premium or discount to NAV. If a shareholder purchases Shares
at a time when the market price is at a premium to the NAV or sells Shares at a
time when the market price is at a discount to the NAV, the shareholder may
sustain losses. The NAV of the Fund is calculated at the end of each business
day and fluctuates with changes in the market value of the Fund’s holdings. The
trading price of the Fund’s shares fluctuates, in some cases materially,
throughout trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
9/30/2022 |
15.81% |
Worst
Quarter: |
6/30/2022 |
-70.75% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (07/12/2021) |
Global
X Blockchain ETF: |
|
|
·Return
before taxes |
-85.23% |
-74.42% |
·Return
after taxes on distributions1 |
-85.27% |
-74.75% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-50.45% |
-51.57% |
Solactive
Blockchain Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-85.50% |
-74.78% |
MSCI
ACWI Index (Net)
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.36% |
-10.28% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts
(IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan
and
Ms. Yang have been Portfolio Managers of the Fund since the Fund's inception.
Mr. Lu has been a Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
"Authorized Participants" (as defined in the SAI) who have entered into
agreements with the Fund's distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called "Creation Units". The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X Clean
Water ETF
Ticker:
AQWA
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Clean Water ETF ("Fund") seeks to provide investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Solactive Global Clean Water Industry Index
("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 28.19% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the Solactive Global Clean Water
Industry Index (the "Underlying Index") and in American Depositary Receipts
("ADRs") and Global Depositary Receipts ("GDRs") based on the securities in the
Underlying Index. The Fund's 80% investment policy is non-fundamental and
requires 60 days prior written notice to shareholders before it can be changed.
The
Underlying Index is designed to provide exposure to companies that have business
operations in the provision of clean water. Specifically, the Underlying Index
will include securities issued by “Clean Water Companies” as defined by
Solactive AG, the provider of the Underlying Index (the "Index Provider"). Clean
Water Companies are those companies that derive at least 50% of their revenues,
operating income, or assets from the following business activities:
1.Industrial
water treatment, recycling (including water reclamation), purification, and
conservation.
2.Water
storage, transportation, metering, and distribution infrastructure.
3.Production
of household and commercial water purifier and heating products.
4.Provision
of consulting services identifying and implementing water efficiency strategies
at the corporate and/or municipal levels.
In
constructing the Underlying Index, the Index Provider first applies a
proprietary natural language processing algorithm to the eligible universe,
which seeks to identify and rank companies involved in the provision of clean
water based on filings, disclosures and other public information (e.g.
regulatory filings, earnings transcripts, etc.). The Index Provider also applies
an ESG (Environmental, Social and Governance) screening process to the universe
of eligible companies. The Index Provider, in partnership with ESG data provider
Minerva, on a quarterly basis reviews each constituent of the Underlying Index
for compliance with the principles of the United Nations Global Compact. Any
existing or potential constituent of the Underlying Index which does not meet
the labor, human rights, environmental, and anti-corruption standards as defined
by the United Nations Global Compact Principles as of the quarterly review will
be excluded from the Underlying Index, as determined by the Index Provider. The
highest-ranking companies identified by the natural language processing
algorithm, as of the selection date, are further reviewed by the Index Provider
to confirm they derive at least 50% of their revenues from the provision of
clean water.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index Provider,
must be met. As of January 31, 2023, companies must have a minimum market
capitalization of $200 million and a minimum average daily turnover for the last
6 months greater than or equal to $2 million in order to be eligible for
inclusion in the Underlying Index. As of January 31, 2023, companies listed
in the following countries were eligible for inclusion in the Underlying Index:
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New
Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar, Saudi Arabia, South
Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand,
Turkey, United Arab Emirates, the United Kingdom, and the United
States.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
During each rebalance, the maximum weight of a company is capped at 8%, the
aggregate weight of companies with a weight greater than or equal to 4.5% is
capped at 40%, and all remaining companies are capped at a weight of 4.5%, and
all constituents are subject to a minimum weight of 0.3%. Generally speaking,
this approach will limit the amount of concentration in the largest market
capitalization companies and increase company-level diversification. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include utilities and industrials companies. As of
January 31, 2023, the Underlying Index had 39 constituents. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). In addition, any
determinations related to the constituents of the Underlying Index are made
independent of the Fund's portfolio managers. The Index Provider determines the
relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the machinery and water utilities
industries and had significant exposure to the industrials and utilities
sectors.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds section of this Prospectus
and in the Statement of Additional Information (“SAI”). The order of the below
risk factors does not indicate the significance of any particular risk
factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Clean Water Companies: Clean
Water Companies typically face intense competition, short product lifecycles and
potentially rapid product obsolescence. These companies may also be heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. Clean Water Companies are subject to significant regulation
regarding the usage, treatment, and distribution of water. Clean Water Companies
may also be adversely affected by the impact of global climate change on the
available supply of clean water reserves. The ability of Clean Water Companies
to effectively distribute clean water is dependent on the infrastructure in
which they operate. The customers and/or suppliers of Clean Water Companies may
be concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on Clean Water Companies.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying
Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Industrials Sector:
Companies in the industrials sector are subject to fluctuations in supply and
demand for their specific product or service. The products of manufacturing
companies may face product obsolescence due to rapid technological developments.
Government regulation, world events and economic conditions affect the
performance of companies in the industrials sector. Companies also may be
adversely affected by environmental damage and product liability claims.
Companies in the Industrial Sector face increased risk from trade agreements
between countries that develop these technologies and countries in which
customers of these technologies are based. Lack of resolution or potential
imposition of trade tariffs may hinder the companies’ ability to successfully
deploy their inventories.
Risks
Related to Investing in the Machinery Industry: The
machinery industry is capital-intensive. Working capital and cash flow
management can be crucial to a company's success, as investments in research and
development and acquisitions may be important to maintain sales and earnings. A
long capital investment cycle can add challenges to management decisions
regarding the expansion of capacity, which may limit a company’s ability to grow
during periods of increasing demand and may result in overcapacity during
periods of decreasing demand. The performance of the machinery industry may
therefore be highly dependent on the business cycle and highly correlated with
the performance of the broader equity market. Machinery industry companies with
large barriers to entry based on proprietary technology may face potentially
rapid product obsolescence. Conversely, machine industry companies that produce
commodity-like offerings are likely to face thin margins and must maintain
expansive distribution and support networks in order to maintain adequate
volume.
Risks
Related to Investing in the Utilities Sector: Companies
in the utilities sector may be adversely affected by changes in exchange rates,
domestic and international competition and governmental regulations on rates
charged to customers. Privatization and deregulation in the utilities sector may
subject companies to greater competition and losses in profitability. Companies
in the utilities sector may have difficulty obtaining an adequate return on
invested capital, raising capital, or financing large construction programs
during periods of inflation or unsettled capital markets. In addition, companies
in the utilities sector may be adversely affected due to increase in fuel and
operating costs and the costs of complying with
regulations.
Risks
Related to Investing in the Water Utilities Industry: Companies
in the water utilities industry may face difficulty in obtaining water resources
for resale or may be faced with increased regulation or operating costs.
Reliance on capital construction projects may increase the risks associated with
natural disasters, terrorist attacks, government intervention or other factors
that may render a water utility company’s equipment unusable or obsolete and
negatively impact profitability.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those
shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in
which
the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company. Therefore, an investor in the listed shell
company, such as the Fund, will have exposure to the Chinese-based operating
company only through contractual arrangements and has no ownership in the
Chinese-based operating company. Furthermore, because the shell company only has
specific rights provided for in these service agreements with the VIE, its
abilities to control the activities at the Chinese-based operating company are
limited and the operating company may engage in activities that negatively
impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed
countries
tend to represent a significant portion of the global economy and have generally
experienced slower economic growth than some less developed countries. Certain
developed countries have experienced security concerns, such as terrorism and
strained international relations. Incidents involving a country’s or region’s
security may cause uncertainty in its markets and may adversely affect its
economy and the Fund’s investments. In addition, developed countries may be
impacted by changes to the economic conditions of certain key trading partners,
regulatory burdens, debt burdens and the price or availability of certain
commodities.
Risk
of Investing in Emerging Markets: Investments
in emerging markets may be subject to a greater risk of loss than investments in
developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries, and there may be greater
risk associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country. There may be significant
obstacles to obtaining information necessary for investigations into or
litigation against emerging market companies and shareholders may have limited
legal rights and remedies. Emerging markets may be more likely to experience
inflation, political turmoil and rapid changes in economic conditions than more
developed markets. Emerging market economies’ exposure to specific industries,
such as tourism, and lack of efficient or sufficient health care systems, could
make these economies especially vulnerable to global crises, including but not
limited to, pandemics such as the global COVID-19 pandemic. Certain emerging
market countries may have privatized, or have begun the process of privatizing,
certain entities and industries. Privatized entities may lose money or be
re-nationalized.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk: The
Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy and on the companies in which the Fund invests.
Because of this interdependence, the Fund may be indirectly exposed to downturns
in other markets, and may be exposed to Asian Economic Risk, European Economic
Risk, and North American Economic Risk, as discussed more fully in the
Prospectus.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a
national
securities exchange and may, therefore, have a material upward or downward
effect on the market price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2022 |
12.70% |
Worst
Quarter: |
6/30/2022 |
-13.41% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (04/08/2021) |
Global
X Clean Water ETF: |
|
|
·Return
before taxes |
-19.62% |
-3.14% |
·Return
after taxes on distributions1 |
-19.92% |
-3.51% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-11.41% |
-2.36% |
Solactive
Global Clean Water Industry Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-19.38% |
-2.83% |
MSCI
ACWI (Net)
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.36% |
-5.94% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts
(IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan
and
Ms. Yang have been Portfolio Managers of the Fund since the Fund's inception.
Mr. Lu has been a Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
"Authorized Participants" (as defined in the SAI) who have entered into
agreements with the Fund's distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called "Creation Units". The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X
Hydrogen ETF
Ticker:
HYDR
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Hydrogen ETF ("Fund") seeks to provide investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Solactive Global Hydrogen Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 36.44% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the Solactive Global Hydrogen Index (the
"Underlying Index") and in American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs") based on the securities in the Underlying Index.
Solely for purposes of complying with this policy, the Fund only views
securities issued by Hydrogen Companies and Pre-Revenue Hydrogen Companies (both
as defined below) as satisfying this criterion. The Fund's 80% investment policy
is non-fundamental and requires 60 days prior written notice to shareholders
before it can be changed.
The
Underlying Index is designed to provide exposure to companies that are
positioned to benefit from further advances in the field of hydrogen technology.
Hydrogen technology includes products and services focused on the development
and implementation of hydrogen gas as a renewable fuel source. Hydrogen
technology may play an important role in the transition toward renewable energy
from fossil fuels. Specifically, the Underlying Index will include securities
issued by “Hydrogen Companies” as defined by Solactive AG, the provider of the
Underlying Index (the "Index Provider"). “Hydrogen Companies” are those
companies that derive at least 50% of their revenues, operating income, or
assets from the following business activities:
1.Hydrogen
Production:
Companies involved in the production, transportation, storage, and distribution
of hydrogen (including renewable hydrogen) that can be used as an energy
source.
2.Hydrogen
Fuel Cells:
Companies that develop and/or manufacture fuel cells (and the components
thereof) that convert chemical energy into electricity and heat, powered by
hydrogen fuel and/or reformed hydrogen-rich gas.
3.Hydrogen
Technology:
Companies involved in the production of hydrogen electrolyzers (which produce
hydrogen gas from water), tanks and pipelines, commercial and residential
infrastructure, generators, engines, and vehicles powered by hydrogen fuel
cells, as well as hydrogen fueling stations.
4.Hydrogen
Integration:
Companies that provide engineering and consulting services for the adoption and
utilization of hydrogen-based fuel and/or energy sources at the residential,
commercial, and industrial levels.
In
addition, companies identified by the Index Provider as deriving greater than 0%
but less than 50% of revenue from the business activities described above
("Diversified Hydrogen Companies"), as well as companies identified by the Index
Provider as having primary business operations in the business activities
described above but that do not currently generate revenues (“Pre-Revenue
Hydrogen Companies”), are eligible for inclusion in the Underlying Index if
there are fewer than 25 eligible Hydrogen Companies. Diversified Hydrogen
Companies and Pre-Revenue Hydrogen Companies are collectively subject to an
aggregate weight cap of 10% at each semi-annual rebalance.
In
constructing the Underlying Index, the Index Provider first applies a
proprietary natural language processing algorithm to the eligible universe,
which seeks to identify and rank companies involved in the fields of hydrogen
and fuel cells based on filings, disclosures and other public information (e.g.
regulatory filings, earnings transcripts, etc.). The highest-ranking companies
identified by the natural language processing algorithm, as of the selection
date, are further reviewed by the Index Provider to confirm they derive at least
50% of their revenues from the business activities described above, greater than
0% of their revenues from the business activities described above in the case of
Diversified Hydrogen Companies, or that they have primary business operations in
the business activities described above but do not currently generate revenues
in the case of Pre-Revenue Hydrogen Companies.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index Provider,
must be met. As of January 31, 2023, companies must have a minimum market
capitalization of $50 million and a minimum average daily turnover for the last
3 months greater than or equal to $0.5 million in order to be eligible for
inclusion in the Underlying Index. As of January 31, 2023, companies listed
in the following countries were eligible for inclusion in the Underlying Index:
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New
Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar, Saudi Arabia, South
Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand,
Turkey, United Arab Emirates, the United Kingdom, and the United States. The
Fund may invest in China A-Shares, which are issued by companies incorporated in
mainland China and traded on Chinese exchanges. The Fund may invest in
securities of issuers located in emerging markets
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
During each rebalance, the maximum weight of a company is capped at 12%, the
aggregate weight of companies with a weight greater than or equal to 4.5% is
capped at 45%, and all remaining companies are capped at a weight of 4.5%, and
all constituents are subject to a minimum weight of 0.3%. In addition,
Diversified Hydrogen Companies and Pre-Revenue Hydrogen Companies are subject to
an individual weight cap of 2% and an aggregate weight cap of 10% at each
semi-annual rebalance. Generally speaking, modified capitalization weighting
will limit the amount of concentration in the largest market capitalization
companies and increase company-level diversification. The Underlying Index may
include large-, mid- or small-capitalization companies, and components primarily
include industrials companies. As of January 31, 2023, the Underlying Index
had 25 constituents. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). In addition, any
determinations related to the constituents of the Underlying Index are made
independent of the Fund's portfolio managers. The Index Provider determines the
relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the electrical equipment industry and had
significant exposure to the industrials sector. The Fund is
classified as "non-diversified," which means it may invest a larger percentage
of its assets in a smaller number of issuers than a diversified
fund.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds section of this Prospectus
and in the Statement of Additional Information (“SAI”). The order of the below
risk factors does not indicate the significance of any particular risk
factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Hydrogen Companies: Hydrogen
companies typically face intense competition, short product lifecycles and
potentially rapid product obsolescence due to significant R&D expenses and
the possibility that other emerging energy technologies could become more
commercially viable. These companies may be significantly affected by
fluctuations in energy prices and in the supply and demand of renewable energy,
tax incentives, subsidies and other governmental regulations and policies.
Investors should take notice of the distinction between implemented government
policy based on legislation and less guaranteed commitments which may be
aspirational, subject to political risk, and difficult to
enforce.
These companies are also heavily dependent on intellectual property rights and
may be adversely affected by loss or impairment of those rights. Hydrogen
companies may be adversely affected by commodity price volatility, changes in
exchange rates, imposition of import controls, availability of certain inputs
and materials required for production, depletion of resources, technological
developments and labor relations. A decline in the price of conventional energy
such as oil and natural gas could have a materially adverse impact on Hydrogen
Companies. Energy companies are increasingly becoming the target of malicious
cybersecurity attacks, which could adversely affect Hydrogen
companies.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Micro-Capitalization
Companies Risk:
Stock prices of micro-cap companies are significantly more volatile, and more
vulnerable to adverse business and economic developments, than those of larger
companies, and their earnings and revenues tend to be less predictable (and some
companies may experience significant losses). Microcap stocks may also be thinly
traded, making it difficult for the Fund to buy and sell them.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying
Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Electrical Equipment Industry: The
Electrical Equipment Industry is fragmented but includes a number of large
incumbent companies that may compete heavily for market share in the space.
Companies in the Electrical Equipment Industry may involve operations with high
fixed costs. Because copper, aluminum, steel and other raw materials are often
critical components of the products manufactured in the Electrical Equipment
Industry, fluctuations in commodities prices for such raw materials may impact
the profitability of companies in this industry. Purchasers of such products may
be geographically dispersed, which may subject companies in this industry to any
increases in geopolitical uncertainty or global macroeconomic
trends.
Risks
Related to Investing in the Industrials Sector: Companies
in the industrials sector are subject to fluctuations in supply and demand for
their specific product or service. The products of manufacturing companies may
face product obsolescence due to rapid technological developments. Government
regulation, world events and economic conditions affect the performance of
companies in the industrials sector. Companies also may be adversely affected by
environmental damage and product liability claims. Companies in the Industrial
Sector face increased risk from trade agreements between countries that develop
these technologies and countries in which customers of these technologies are
based. Lack of resolution or potential imposition of trade tariffs may hinder
the companies’ ability to successfully deploy their inventories.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those
shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets: Investments
in emerging markets may be subject to a greater risk of loss than investments in
developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries, and there may be greater
risk associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country. There may be significant
obstacles to obtaining information necessary for investigations into or
litigation against emerging market companies and shareholders may have limited
legal rights and remedies. Emerging markets may be more likely to experience
inflation, political turmoil and rapid changes in economic conditions than more
developed markets. Emerging market economies’ exposure to specific industries,
such as tourism, and lack of efficient or sufficient health care systems, could
make these economies especially vulnerable to global crises, including but not
limited to, pandemics such as the global COVID-19 pandemic. Certain emerging
market countries may have privatized, or have begun the process of privatizing,
certain entities and industries. Privatized entities may lose money or be
re-nationalized.
Risk
of Investing in Norway: Investments
in Norwegian issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risks specific to Norway. Norway is a major
producer of oil and gas, and Norway's economy is subject to the risk of
fluctuations in oil and gas prices. The high value of the Norwegian krone as
compared to other currencies could have a damaging effect on Norwegian exports
and investments.
Risk
of Investing in South Korea: Investments
in South Korean issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risks that are specific to South Korea. In
addition, economic and political developments of South Korea’s neighbors,
including escalated tensions involving North Korea and any outbreak of
hostilities involving North Korea, or even the threat of an outbreak of
hostilities, may have a severe adverse effect on the South Korean
economy.
Risk
of Investing in the United Kingdom: Investments
in United Kingdom issuers may subject the Fund to regulatory, political,
currency, security, and economic risks specific to the United Kingdom. The
United Kingdom has one of the largest economies in Europe, and the United States
and other European countries are substantial trading partners of the United
Kingdom. As a result, the United Kingdom’s economy may be impacted by changes to
the economic condition of the United States and other European countries. The
United Kingdom’s economy, along with certain other European Union economies,
experienced a significant economic slowdown during the recent financial crisis;
certain United Kingdom financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. In a
referendum held on June 23, 2016, the United Kingdom resolved to leave the
European Union, which departure has become known as “Brexit”. The United Kingdom
officially stopped being a member of the European Union on January 31, 2020. On
December 30, 2020, the United Kingdom and the European Union signed an agreement
on the terms governing certain aspects of the European Union’s and the United
Kingdom’s relationship following the end of the transition period, the EU-UK
Trade and Cooperation Agreement (the “TCA”). Notwithstanding the TCA, there is
likely to be considerable uncertainty as to the United Kingdom’s post-transition
framework, and in particular, as to the arrangements which will apply to the
United Kingdom’s relationships with the European Union and with other countries,
which is likely to continue to develop and could result in increased volatility
and illiquidity and potentially lower economic growth.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2022 |
-1.88% |
Worst
Quarter: |
6/30/2022 |
-37.20% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (07/12/2021) |
Global
X Hydrogen ETF: |
|
|
·Return
before taxes |
-46.74% |
-42.98% |
·Return
after taxes on distributions1 |
-46.74% |
-42.99% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-27.67% |
-31.64% |
Solactive
Global Hydrogen Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-46.64% |
-42.84% |
MSCI
ACWI Index (Net)
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.36% |
-10.28% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts
(IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan and Ms. Yang have been
Portfolio Managers of the Fund since the Fund's inception. Mr. Lu has been a
Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
"Authorized Participants" (as defined in the SAI) who have entered into
agreements with the Fund's distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called "Creation Units". The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X Solar
ETF
Ticker:
RAYS
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Solar ETF ("Fund") seeks to provide investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Solactive Solar Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.01% |
Total
Annual Fund Operating Expenses: |
0.51% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$52 |
$164 |
$285 |
$640 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 128.22% of the average value of
its portfolio. .
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the Solactive Solar Index (the
"Underlying Index") and in American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs") based on the securities in the Underlying Index.
The Fund's 80% investment policy is non-fundamental and requires 60 days prior
written notice to shareholders before it can be changed.
The
Underlying Index is designed to provide exposure to companies that are
positioned to benefit from further advances in the field of solar technology.
Specifically, the Underlying Index consists of securities issued by “Solar
Companies” as defined by Solactive AG, the provider of the Underlying Index (the
"Index Provider"). Solar Companies are those companies that derive at least 50%
of their revenues from the following business activities:
Solar
Energy Materials:
Companies involved in the production of raw materials that are primarily used in
photovoltaic solar cells or concentrating solar-thermal mirrors or lenses
(including silicon, cadmium telluride, copper indium gallium deselenide,
titanium dioxide, and/or perovskite).
Solar
Energy Systems & Components: Companies
involved in the development and/or manufacturing of solar energy systems (and
the components thereof) that harness energy from the photovoltaic effect or from
sunlight to generate electricity. For example, a company involved in the
production of solar panels may be categorized as having
business
activities related to Solar Energy Systems & Components. Solar panels
consist of an arrangement of solar photovoltaic cells mounted in a framework for
installation.
Solar
Power Production: Companies
that generate and distribute electricity from light energy.
Solar
Technology:
Companies that develop commercial and residential infrastructure, generators,
and engines powered by solar energy, as well as residential and commercial scale
batteries for electricity produced from solar power, and solar-powered charging
systems for electric vehicles or other electric devices.
Solar
Installation, Integration & Maintenance:
Companies that provide engineering and/or advisory services for the
installation, integration, maintenance, and/or utilization of solar power at the
residential, commercial, and industrial levels.
In
constructing the Underlying Index, the Index Provider first applies a
proprietary natural language processing algorithm to the eligible universe,
which seeks to identify and rank companies involved in the field of solar
technology based on filings, disclosures and other public information (e.g.
regulatory filings, earnings transcripts, etc.). The Index Provider also applies
an ESG (Environmental, Social and Governance) screening process to the universe
of eligible companies. The Index Provider, in partnership with ESG data provider
Minerva, on a quarterly basis reviews each constituent of the Underlying Index
for compliance with the principles of the United Nations Global Compact. Any
existing or potential constituent of the Underlying Index which does not meet
the labor, human rights, environmental, and anti-corruption standards as defined
by the United Nations Global Compact Principles as of the quarterly review will
be excluded from the Underlying Index, as determined by the Index Provider. The
highest-ranking companies identified by the natural language processing
algorithm, as of the selection date, are further reviewed by the Index Provider
to confirm they derive at least 50% of their revenues from the business
activities described above.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index Provider,
must be met. As of January 31, 2023, companies must have a minimum market
capitalization of $200 million and a minimum average daily turnover for the last
6 months greater than or equal to $2 million in order to be eligible for
inclusion in the Underlying Index. As of January 31, 2023, companies listed
in the following countries were eligible for inclusion in the Underlying Index:
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New
Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar, Saudi Arabia, South
Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand,
Turkey, United Arab Emirates, the United Kingdom, and the United States. As of
January 31, 2023, the Underlying Index had significant exposure to Chinese
issuers. The Fund may invest in China A-Shares, which are issued by companies
incorporated in mainland China and traded on Chinese exchanges.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
During each rebalance, the maximum weight of a company is capped at 8%, the
aggregate weight of companies with a weight greater than or equal to 4.5% is
capped at 40%, and all remaining companies are capped at a weight of 4.5%, and
all constituents are subject to a minimum weight of 0.3%. Generally speaking,
this approach will limit the amount of concentration in the largest market
capitalization companies and increase company-level diversification. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include information technology companies. As of
January 31, 2023, the Underlying Index had 50 constituents. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). In addition, any
determinations related to the constituents of the Underlying Index are made
independent of the Fund's portfolio managers. The Index Provider determines the
relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental
or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the semiconductors & semiconductor
equipment industries and had significant exposure to the information technology
sector. The Fund is classified as "non-diversified," which means
it may invest a larger percentage of its assets in a smaller number of issuers
than a diversified fund.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds section of this Prospectus
and in the Statement of Additional Information (“SAI”). The order of the below
risk factors does not indicate the significance of any particular risk
factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Solar Companies: Solar
Companies typically face intense competition, short product lifecycles and
potentially rapid product obsolescence. These companies may be significantly
affected by fluctuations in energy prices and in the supply and demand of
renewable energy, tax incentives, subsidies and other governmental regulations
and policies. Investors should take notice of the distinction between
implemented government policy based on legislation and less guaranteed
commitments which may be aspirational, subject to political risk, and difficult
to enforce. These companies are also heavily dependent on intellectual property
rights and may be adversely affected by loss or impairment of those rights.
Solar Companies may be adversely affected by commodity price volatility, changes
in exchange rates, imposition of import controls, availability of certain inputs
and materials required for production, depletion of resources, technological
developments and labor relations. A decline in the price of conventional energy
such as oil and natural gas could have a
materially
adverse impact on Solar Companies. Renewable energy resources may be highly
dependent upon government policies that support renewable energy generation and
enhance the economic viability of owning renewable electric generation assets.
Additionally, adverse environmental conditions may cause fluctuations in
renewable electric generation and adversely affect the cash flows associated
with Solar Companies.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying
Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Risks
Related to Investing in the Semiconductors and Semiconductor Equipment
Industry:
The semiconductors and semiconductor equipment industry is highly competitive,
and certain companies in this industry may be restricted from operating in
certain markets due to the sensitive nature of these technologies. Companies in
this space generally
seek
to increase silicon capacity, improve yields, and reduce die size in their
product designs which may result in significant increases in worldwide supply
and downward pressure on prices. Companies involved in the semiconductors and
semiconductor equipment industry face increased risk from trade agreements
between countries that develop these technologies and countries in which
customers of these technologies are based. Lack of resolution or potential
imposition of trade tariffs may hinder the companies’ ability to successfully
deploy their inventories. The success of such companies frequently depends on
the ability to develop and produce competitive new semiconductor technologies.
Companies in this industry frequently undertake substantial research and
development expenses in order to remain competitive, and a failure to
successfully demonstrate advanced functionality and performance can have a
material impact on the company’s business.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those
shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company. Therefore, an investor in the listed shell
company, such as the Fund, will have exposure to the Chinese-based operating
company only through contractual arrangements and has no ownership in the
Chinese-based operating company. Furthermore, because the shell company only has
specific rights provided for in these service agreements with the VIE, its
abilities to control the activities at the Chinese-based operating company are
limited and the operating company may engage in activities that negatively
impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access
for
such inspections, there is no guarantee that the agreement will hold up or that
U.S. regulatory authorities will continue to feel satisfied with their
access.
Risk
of Investing in Emerging Markets: Investments
in emerging markets may be subject to a greater risk of loss than investments in
developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries, and there may be greater
risk associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country. There may be significant
obstacles to obtaining information necessary for investigations into or
litigation against emerging market companies and shareholders may have limited
legal rights and remedies. Emerging markets may be more likely to experience
inflation, political turmoil and rapid changes in economic conditions than more
developed markets. Emerging market economies’ exposure to specific industries,
such as tourism, and lack of efficient or sufficient health care systems, could
make these economies especially vulnerable to global crises, including but not
limited to, pandemics such as the global COVID-19 pandemic. Certain emerging
market countries may have privatized, or have begun the process of privatizing,
certain entities and industries. Privatized entities may lose money or be
re-nationalized.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to
reduce
these operational risks through controls and procedures. However, these measures
do not address every possible risk and may be inadequate for those risks that
they are intended to address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares
trading
at a significant premium or discount to NAV. If a shareholder purchases Shares
at a time when the market price is at a premium to the NAV or sells Shares at a
time when the market price is at a discount to the NAV, the shareholder may
sustain losses. The NAV of the Fund is calculated at the end of each business
day and fluctuates with changes in the market value of the Fund’s holdings. The
trading price of the Fund’s shares fluctuates, in some cases materially,
throughout trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Turnover
Risk: The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At
times, the Fund may have a portfolio turnover rate substantially greater than
100%. For example, a portfolio turnover rate of 300%
is equivalent to the Fund buying and selling all of its securities three times
during the course of a year. A
high portfolio turnover rate would result in
high brokerage costs for the Fund, may result in higher taxes when shares are
held in a taxable account and lower Fund
performance.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2022 |
2.30% |
Worst
Quarter: |
3/31/2022 |
-8.45% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (09/09/2021) |
Global
X Solar ETF: |
|
|
·Return
before taxes |
-12.44% |
-12.13% |
·Return
after taxes on distributions1 |
-12.44% |
-12.14% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-7.37% |
-9.20% |
Solactive
Solar Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-11.95% |
-11.65% |
MSCI
ACWI Index (Net)
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.36% |
-13.01% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts
(IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan and Ms. Yang have been
Portfolio Managers of the Fund since the Fund's inception. Mr. Lu has been a
Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
"Authorized Participants" (as defined in the SAI) who have entered into
agreements with the Fund's distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called "Creation Units". The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X Wind
Energy ETF
Ticker:
WNDY
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Wind Energy ETF ("Fund") seeks to provide investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Solactive Wind Energy Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 34.53% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the Solactive Wind Energy Index (the
"Underlying Index") and in American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs") based on the securities in the Underlying Index.
Solely for purposes of complying with this policy, the Fund views securities
issued by Wind Energy Companies and Pre-Revenue Wind Energy Companies (both as
defined below) as satisfying this criterion. The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed.
The
Underlying Index is designed to provide exposure to companies that are
positioned to benefit from further advances in the field of wind energy
technology. Specifically, the Underlying Index will include securities issued by
“Wind Energy Companies” as defined by Solactive AG, the provider of the
Underlying Index (the "Index Provider"). Wind Energy Companies are those
companies that derive at least 50% of their revenues from the following business
activities:
Wind
Energy Systems:
Companies involved in development, manufacturing, integration, and/or
maintenance of turbine components and turbines that harness energy from the wind
and convert it into electrical power.
Wind
Power Production: Companies
that generate and distribute electricity from wind
power.
Wind
Energy Technology:
Companies that develop commercial and residential infrastructure and systems
powered by wind energy, as well as residential and commercial scale batteries
for electricity produced from wind power.
Wind
Power Integration & Maintenance:
Companies that provide engineering and/or advisory services for the
installation, maintenance, and/or utilization of wind energy at the residential,
commercial, and industrial levels.
In
addition, companies identified by the Index Provider as having primary business
operations in the business activities described above but that do not currently
generate revenues (“Pre-Revenue Wind Energy Companies”), are eligible for
inclusion in the Underlying Index if there are fewer than 25 eligible Wind
Energy Companies. Pre-Revenue Wind Energy Companies are subject to an aggregate
weight cap of 10% at each semi-annual rebalance.
In
constructing the Underlying Index, the Index Provider first applies a
proprietary natural language processing algorithm to the eligible universe,
which seeks to identify and rank companies involved in field of wind energy
technology based on filings, disclosures and other public information (e.g.
regulatory filings, earnings transcripts, etc.). The Index Provider also applies
an ESG (Environmental, Social and Governance) screening process to the universe
of eligible companies. The Index Provider, in partnership with ESG data provider
Minerva, on a quarterly basis reviews each constituent of the Underlying Index
for compliance with the principles of the United Nations Global Compact. Any
existing or potential constituent of the Underlying Index which does not meet
the labor, human rights, environmental, and anti-corruption standards as defined
by the United Nations Global Compact Principles as of the quarterly review will
be excluded from the Underlying Index, as determined by the Index Provider. The
highest-ranking companies identified by the natural language processing
algorithm, as of the selection date, are further reviewed by the Index Provider
to confirm they derive at least 50% of their revenues from the business
activities described above, or that they have primary business operations in the
business activities described above but do not currently generate revenues in
the case of Pre-Revenue Wind Energy Companies.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index Provider,
must be met. As of January 31, 2023, companies must have a minimum market
capitalization of $200 million and a minimum average daily turnover for the last
6 months greater than or equal to $2 million in order to be eligible for
inclusion in the Underlying Index. As ofJanuary 31, 2023, companies listed
in the following countries were eligible for inclusion in the Underlying Index:
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New
Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar, Saudi Arabia, South
Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand,
Turkey, United Arab Emirates, the United Kingdom, and the United States. As of
January 31, 2023, the Underlying Index had significant exposure to Chinese
issuers. The Fund may invest in China A-Shares, which are issued by companies
incorporated in mainland China and traded on Chinese exchanges.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
During each rebalance, the maximum weight of a company is capped at 12%, the
aggregate weight of companies with a weight greater than or equal to 4.5% is
capped at 45%, and all remaining companies are capped at a weight of 4.5%, and
all constituents are subject to a minimum weight of 0.3%. In addition,
Pre-Revenue Wind Energy Companies are subject to an individual weight cap of 2%
and an aggregate weight cap of 10% at each semi-annual rebalance. Generally
speaking, this approach will limit the amount of concentration in the largest
market capitalization companies and increase company-level diversification. The
Underlying Index may include large-, mid- or small-capitalization companies, and
components primarily include utilities and industrials companies. As of
January 31, 2023, the Underlying Index had 29 constituents. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). In addition, any
determinations related to the constituents of the Underlying Index are made
independent of the Fund's portfolio managers. The Index Provider determines the
relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the electrical equipment and independent
power & renewable electricity industries and had significant exposure to the
industrials and utilities
sectors.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds section of this Prospectus
and in the Statement of Additional Information (“SAI”). The order of the below
risk factors does not indicate the significance of any particular risk
factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Wind Energy Companies: Wind
Energy Companies typically face intense competition, short product lifecycles
and potentially rapid product obsolescence. These companies may be significantly
affected by fluctuations in energy prices and in the supply and demand of
renewable energy, tax incentives, subsidies and other governmental regulations
and policies. Investors should take notice of the distinction between
implemented government policy based on legislation and less guaranteed
commitments which may be aspirational, subject to political risk, and difficult
to enforce. These companies are also heavily dependent on intellectual property
rights and may be adversely affected by loss or impairment of those rights. Wind
Energy Companies may be adversely affected by commodity price volatility,
changes in
exchange
rates, imposition of import controls, availability of certain inputs and
materials required for production, depletion of resources, technological
developments and labor relations. A decline in the price of conventional energy
such as oil and natural gas could have a materially adverse impact on Wind
Energy Companies. Renewable energy resources may be highly dependent upon
government policies that support renewable energy generation and enhance the
economic viability of owning renewable electric generation assets. Additionally,
adverse environmental conditions may cause fluctuations in renewable electric
generation and adversely affect the cash flows associated with Wind Energy
Companies.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying
Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Electrical Equipment Industry: The
Electrical Equipment Industry is fragmented but includes a number of large
incumbent companies that may compete heavily for market share in the space.
Companies in the Electrical Equipment Industry may involve operations with high
fixed costs. Because copper, aluminum, steel and other raw materials are often
critical components of the products manufactured in the Electrical
Equipment
Industry, fluctuations in commodities prices for such raw materials may impact
the profitability of companies in this industry. Purchasers of such products may
be geographically dispersed, which may subject companies in this industry to any
increases in geopolitical uncertainty or global macroeconomic
trends.
Risks
Related to Investing in the Independent Power and Renewable Electricity
Producers Industry: Companies
in the independent power and renewable electricity producers industry may be
highly dependent upon government subsidies, contracts with government entities,
and the successful development of new and proprietary technologies. In addition,
seasonal weather conditions, fluctuations in the supply of and demand for energy
products, changes in energy prices, and international political events may cause
fluctuations in the performance of independent power and renewable electricity
producers companies and the prices of their securities.
Risks
Related to Investing in the Industrials Sector: Companies
in the industrials sector are subject to fluctuations in supply and demand for
their specific product or service. The products of manufacturing companies may
face product obsolescence due to rapid technological developments. Government
regulation, world events and economic conditions affect the performance of
companies in the industrials sector. Companies also may be adversely affected by
environmental damage and product liability claims. Companies in the Industrial
Sector face increased risk from trade agreements between countries that develop
these technologies and countries in which customers of these technologies are
based. Lack of resolution or potential imposition of trade tariffs may hinder
the companies’ ability to successfully deploy their inventories.
Risks
Related to Investing in the Utilities Sector: Companies
in the utilities sector may be adversely affected by changes in exchange rates,
domestic and international competition and governmental regulations on rates
charged to customers. Privatization and deregulation in the utilities sector may
subject companies to greater competition and losses in profitability. Companies
in the utilities sector may have difficulty obtaining an adequate return on
invested capital, raising capital, or financing large construction programs
during periods of inflation or unsettled capital markets. In addition, companies
in the utilities sector may be adversely affected due to increase in fuel and
operating costs and the costs of complying with regulations.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those
shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Canada:
The Canadian economy is highly dependent on the demand for and price of natural
resources. As a result, the Canadian market is relatively concentrated in
issuers involved in the production and distribution of natural resources and any
changes in these sectors could have an adverse impact on the Canadian economy.
The Canadian economy is heavily dependent on relationships with certain key
trading partners, including the United States and China. Developments in the
United States, including renegotiation of the North American Free Trade
Agreement (“NAFTA”) and ratification of the successor United
States-Mexico-Canada Agreement (“USMCA”), which went into effect on July 1,
2020, as well as the imposition of additional tariffs by the United States, may
have implications for the trade arrangements between the United States and
Canada, which could negatively affect the value of securities held by the Fund.
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the
shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company. Therefore, an investor in the listed shell
company, such as the Fund, will have exposure to the Chinese-based operating
company only through contractual arrangements and has no ownership in the
Chinese-based operating company. Furthermore, because the shell company only has
specific rights provided for in these service agreements with the VIE, its
abilities to control the activities at the Chinese-based operating company are
limited and the operating company may engage in activities that negatively
impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Denmark: Investments
in Danish issuers subject the Fund to legal, regulatory, political, currency,
security, and economic risks specific to Denmark. Denmark’s economy has also
been characterized by slow growth and is facing demographic challenges,
including an aging population, that could lead to labor supply shortages in the
near future.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets: Investments
in emerging markets may be subject to a greater risk of loss than investments in
developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries, and there may be greater
risk associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country. There may be significant
obstacles to obtaining information necessary for investigations into or
litigation against emerging market companies and shareholders may have limited
legal rights and remedies. Emerging markets may be more likely to experience
inflation, political turmoil and rapid changes in economic conditions than more
developed markets. Emerging market economies’ exposure to specific industries,
such as tourism, and lack of efficient or sufficient health care systems, could
make these economies especially vulnerable to global crises, including but not
limited to, pandemics such as the global COVID-19 pandemic. Certain emerging
market countries may have privatized, or have begun the process of privatizing,
certain entities and industries. Privatized entities may lose money or be
re-nationalized.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no
guarantee
that the Shenzen, Shanghai, and Hong Kong Stock Exchanges will continue to
support the Stock Connect Programs in the future.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2022 |
10.17% |
Worst
Quarter: |
9/30/2022 |
-16.07% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (09/09/2021) |
Global
X Wind Energy ETF: |
|
|
·Return
before taxes |
-22.26% |
-21.31% |
·Return
after taxes on distributions1 |
-22.30% |
-21.34% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-12.99% |
-16.01% |
Solactive
Wind Energy Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-21.90% |
-20.93% |
MSCI
ACWI Index (Net)
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.36% |
-13.01% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts
(IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan and Ms. Yang have been
Portfolio Managers of the Fund since the Fund's inception. Mr. Lu has been a
Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
"Authorized Participants" (as defined in the SAI) who have entered into
agreements with the Fund's distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called "Creation Units". The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X Green
Building ETF
Ticker:
GRNR
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Green Building ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the Solactive Green Building Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.45% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses:1 |
0.00% |
Total
Annual Fund Operating Expenses: |
0.45% |
1 Other Expenses
are based on estimated amounts for the current fiscal
year.
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$46 |
$144 |
$252 |
$567 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. From the Fund’s commencement of operations on April 11, 2022 to the
end of the most recent fiscal period, the Fund’s portfolio turnover rate was
30.18% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the Solactive Green Building Index (the
"Underlying Index") and in American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs") based on the securities in the Underlying Index.
The Fund's 80% investment policy is non-fundamental and requires 60 days prior
written notice to shareholders before it can be changed. The Fund may lend
securities representing up to one-third of the value of the Fund’s total assets
(including the value of the collateral received).
The
Underlying Index is designed to provide exposure to companies that are
positioned to benefit from increased demand for buildings that reduce or
eliminate negative impacts, and/or create positive impacts, on the natural
environment (“Green Building”). Specifically, the Underlying Index consists of
securities issued by “Green Building Companies” as defined by Solactive AG, the
provider of the Underlying Index (the "Index Provider"). “Green Building
Companies” are those companies that derive at least 50% of their revenues from
one or more of the following business activities, as determined by the Index
Provider:
•Green
Building Development:
Companies that design, construct, redevelop, or retrofit properties that meet
reputable green building certification standards. The Index Provider utilizes
ESG (Environmental, Social and Governance) data provider Sustainalytics for its
assessment of reputable green building certification standards. As of April 1,
2022
examples
of green building certification standards that Sustainalytics has identified as
reputable currently include LEED, BREEAM, Greenstar, DGNB, CASBEE, and
Verde.
•Green
Building Management:
Companies that manage and/or operate buildings that have obtained a green
certification.
•Green
Building Technologies & Materials:
Companies that provide products/services that increase the energy efficiency of
residential, commercial, or public buildings. This includes products/services
such as insulation and building envelopes, controls and displays for heating,
cooling, lighting and home automation, HVAC, energy management services,
windows, doors, elevators, etc. These products and services help residential,
commercial and/or public buildings to reduce or eliminate negative impacts on
the natural environment and/or to create positive impacts on the natural
environment, which improves the environmental footprint of a building and makes
it more “green” across measures such as energy efficiency, water usage, carbon
emissions, and overall environmental impact.
To
be a part of the eligible universe of the Underlying Index, certain minimum
market capitalization and liquidity criteria, as defined by the Index Provider,
must be met. As of January 31, 2023, companies must have a minimum market
capitalization of $200 million and a minimum average daily turnover for the last
6 months greater than or equal to $2 million in order to be eligible for
inclusion in the Underlying Index. As of January 31, 2023, companies listed
in the following countries were eligible for inclusion in the Underlying Index:
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New
Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar, Saudi Arabia, South
Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand,
Turkey, United Arab Emirates, the United Kingdom, and the United
States
In
constructing the Underlying Index, the Index Provider, in partnership with ESG
(Environmental, Social and Governance) data provider Sustainalytics, reviews the
companies from the eligible universe to confirm the companies that derive at
least 50% of their revenues from the business activities described above.
Revenue exposure is determined using company filings, disclosures, and other
public information. In addition, the Index Provider also applies an ESG
screening process to the universe of eligible companies. The Index Provider, in
partnership with ESG data provider Minerva, on a quarterly basis reviews each
constituent of the Underlying Index for compliance with the principles of the
United Nations Global Compact, as well as their involvement in controversial
activities. Any existing or potential constituent of the Underlying Index which
does not meet the labor, human rights, environmental, and anti-corruption
standards as defined by the United Nations Global Compact Principles as of the
quarterly review will be excluded from the Underlying Index, as determined by
the Index Provider.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
During each rebalance, the maximum weight of a company is capped at 4%, and all
constituents are subject to a minimum weight of 0.3%. Generally speaking,
modified capitalization weighting will limit the amount of concentration in the
largest market capitalization companies and increase company-level
diversification. The Underlying Index may include large-, mid- or
small-capitalization companies, and components primarily include real estate
companies. As of January 31, 2023, the Underlying Index had 84
constituents. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). In addition, any
determinations related to the constituents of the Underlying Index are made
independent of the Fund's portfolio managers. The Index Provider determines the
relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying
Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the industrials and real estate industries
and had significant exposure to the equity real estate investment
sector. The Fund is classified as “non-diversified,” which means
it may invest a larger percentage of its assets in a smaller number of issuers
than a diversified fund.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund's performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Fund
section of this Prospectus and in the Statement of Additional Information
("SAI"). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Depositary
Receipts Risk: The
Fund may invest in depositary receipts, such as ADRs and GDRs. Depositary
receipts may be subject to certain of the risks associated with direct
investments in the securities of foreign companies. For additional details on
these risks, please see Foreign
Securities Risk.
Moreover, depositary receipts may not track the price of the underlying foreign
securities on which they are based. A holder of depositary receipts may
also be subject to fees and the credit risk of the financial institution acting
as depositary.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Real
Estate Stocks and Real Estate Investment Trusts (REITs) Investment Risk:
The
Fund may have exposure to companies that invest in real estate, such as REITs,
which exposes investors in the Fund to the risks of owning real estate directly,
as well as to risks that relate specifically to the way in which real estate
companies are organized and operated. Real estate is highly sensitive to general
and local economic conditions and developments and characterized by intense
competition and periodic overbuilding. Many real estate companies, including
REITs, utilize leverage (and some may be highly leveraged), which increases risk
and could adversely affect a real estate company's operations and market value
in periods of rising interest rates.
Associated
Risks Related to Investing in Green Building Companies: Green
Building companies are exposed to the risks specific to the real estate market
as well as the risks that relate specifically to the way in which Green Building
companies are utilized and operated. Green Building companies may be affected by
unique supply and demand factors that do not apply to other real estate sectors,
such as changes in demand for energy efficient technology and materials. Green
Building companies may be significantly affected by changes in government
spending or regulation, zoning laws, interest rates, taxation, and real estate
market trends. Green Building companies typically engage in significant amounts
of spending on research and development and could face risks associated with
higher building costs, availability of construction materials, and the effort
associated with securing and maintaining third-party certifications. Green
Building companies typically face intense competition and potentially rapid
product obsolescence and are also heavily dependent on intellectual property
rights and may be adversely affected by loss or impairment of those rights.
Green Building companies may be concentrated in a particular country or region,
and any adverse event affecting one of these countries or regions could have a
negative impact on Green Building companies.
Associated
Risks Related to Socially Responsible Investments: Certain
social responsibility investment criteria limit the types of securities that can
be included in the Underlying Index. This could cause the Underlying Index to
underperform other benchmark indices, and could cause the Fund to underperform
other funds that do not have a social responsibility focus.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk: The
Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
against the U.S. dollar or if there are delays or limits on repatriation of such
currency. Currency exchange rates can be very volatile and can change quickly
and unpredictably. As a result, the Fund's NAV may change quickly and without
warning, which could have a significant negative impact on the
Fund.Additionally, the Chinese government heavily regulates the domestic
exchange of foreign currencies and yuan exchange rates in China, which may
adversely affect the operations and financial results of the Fund’s investments
in China. Shares purchased through the Stock Connect Programs will be purchased
using offshore yuan, the value of which may differ from and experience greater
volatility than the value of onshore yuan. Offshore yuan cannot be freely
remitted into or transferred out of China, and there is no assurance that there
will always be sufficient amounts of offshore yuan available for the Fund to
invest in all components of the Underlying Index.
Custody
Risk: The
Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Equity Real Estate Investment Industry: The
Fund is concentrated in the Equity Real Estate Investment Industry, which
comprises Real Estate Investment Trusts (REITs). For more information, see
Asset
Class Risk - Real Estate Stocks and Real Estate Investment Trusts (REITs)
Investment Risk in
the SUMMARY
OF PRINCIPAL RISKS
and A
FURTHER DISCUSSION OF PRINCIPAL RISKS
sections of the Prospectus.
Risks
Related to Investing in the Industrials Sector: Companies
in the industrials sector are subject to fluctuations in supply and demand for
their specific product or service. The products of manufacturing companies may
face product obsolescence due to rapid technological developments. Government
regulation, world events and economic conditions affect the performance of
companies in the industrials sector. Companies also may be adversely affected by
environmental damage and product liability claims. Companies in the Industrial
Sector face increased risk from trade agreements between countries that develop
these technologies and countries in which customers of these technologies are
based. Lack of resolution or potential imposition of trade tariffs may hinder
the companies’ ability to successfully deploy their inventories.
Risks
Related to Investing in the Real Estate Sector:
The real estate sector includes real estate companies focused on commercial and
residential real estate development, sales, operations, and services, as well as
real estate investment trusts (“REITs”). Real estate is highly sensitive to
general and local economic conditions and developments and characterized by
intense competition and periodic overbuilding. Many real estate companies
utilize leverage (and some may be highly leveraged), which increases risk and
could adversely affect a real estate company's operations and market value in
periods of rising interest rates.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those
shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company. Therefore, an investor in the listed shell
company, such as the Fund, will have exposure to the Chinese-based operating
company only through contractual arrangements and has no ownership in the
Chinese-based operating company. Furthermore, because the shell company only has
specific rights provided for in these service agreements with the VIE, its
abilities to control the activities at the Chinese-based operating company are
limited and the operating company may engage in activities that negatively
impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign
ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets: Investments
in emerging markets may be subject to a greater risk of loss than investments in
developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries, and there may be greater
risk associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country. There may be significant
obstacles to obtaining information necessary for investigations into or
litigation against emerging market companies and shareholders may have limited
legal rights and remedies. Emerging markets may be more likely to experience
inflation, political turmoil and rapid changes in economic conditions than more
developed markets. Emerging market economies’ exposure to specific industries,
such as tourism, and lack of efficient or sufficient health care systems, could
make these economies especially vulnerable to global crises, including but not
limited to, pandemics such as the global COVID-19 pandemic. Certain emerging
market countries may have privatized, or have begun the process of privatizing,
certain entities and industries. Privatized entities may lose money or be
re-nationalized.
Risk
of Investing in France: The
Fund’s investment in French issuers subjects the Fund to legal, regulatory,
political, currency, security, and economic risks specific to France. Ongoing
concerns in relation to the economic health of the European Union (the “EU”)
continue to constrain the economic resilience of certain EU member states,
including France. External demand for French exports may be negatively impacted
by the United Kingdom’s (the “U.K.”) exit from the EU. As a result, the French
economy may experience adverse trends due to concerns about a prolonged economic
downturn, potential weakness in exports, high rates of unemployment and rising
government debt levels. The French economy is dependent on agricultural exports,
and as a result, is susceptible to fluctuations in demand for agricultural
products. France has experienced several terrorist attacks over the past several
years, creating a climate of insecurity that has been detrimental to tourism and
that could adversely affect growth.
Risk
of Investing in Japan: The
Japanese economy may be subject to considerable degrees of economic, political
and social instability, which could have a negative impact on Japanese
securities. Japan’s economy has suffered from low growth and low inflation for a
prolonged period of time since the collapse of its bubble economy, and that may
continue despite the efforts of the Bank of Japan and policymakers. In addition,
Japan is subject to the risk of natural disasters, such as earthquakes,
volcanoes, typhoons and tsunamis, which could negatively affect the Fund.
Japan’s relations with its neighbors have at times been strained, and strained
relations with its neighbors or trading partners may cause uncertainty in the
Japanese markets and adversely affect the overall Japanese
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
New
Fund Risk: The
Fund is a new fund, with a limited operating history, which may result in
additional risks for investors in the Fund. There can be no assurance that the
Fund will grow to or maintain an economically viable size, in which case the
Board of Trustees may determine to liquidate the Fund. While shareholder
interests will be the paramount consideration, the timing of any liquidation may
not be favorable to certain individual shareholders. New funds are also subject
to Large Shareholder Risk.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no
guarantee
that the Shenzen, Shanghai, and Hong Kong Stock Exchanges will continue to
support the Stock Connect Programs in the future.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The Fund does
not have a full calendar year of performance. Once the Fund
has completed a full calendar year of operations, a bar chart and table will be
included that will provide some indication of the risks of investing in the Fund
by showing the variability of the Fund's returns and comparing the Fund's
performance to the Underlying Index. The Fund's
performance is not necessarily indicative of how the Fund will perform in the
future.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To, Xie and Lu and Ms. Chan and Ms. Yang have
been Portfolio Managers of the Fund since the Fund's inception.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
"Authorized Participants" (as defined in the SAI) who have entered into
agreements with the Fund's distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called "Creation Units". The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X
Thematic Growth ETF
Ticker:
GXTG
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Thematic Growth ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the Solactive Thematic Growth Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 55.00% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Solactive
Thematic Growth Index ("Underlying Index"). The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed. The Fund may lend securities representing up to one-third of
the value of the Fund’s total assets (including the value of the collateral
received).
The
Underlying Index seeks to provide broad exposure to thematic growth strategies
using a portfolio of exchange-traded funds (each, an "Underlying ETF"). The
Underlying Index allocates index weights among the Underlying ETFs based on a
quantitative methodology developed by Solactive AG, the provider of the
Underlying Index ("Index Provider"), which is designed to determine the
selection of the eligible Underlying ETFs, which are then equally weighted. The
share prices of the Underlying ETFs are expected to track the performance of
equities in developed or emerging markets that provide exposure to structurally
disruptive macro-trends.
The
Underlying Index is constructed from the eligible universe of Underlying ETFs,
each of which is issued by Global X Funds®
and is determined by Solactive AG, the provider of the Underlying Index ("Index
Provider"), to provide exposure to structurally disruptive macro-trends and the
underlying investments that stand to benefit from the materialization of those
trends ("Global X Thematic Growth ETFs"). Structurally disruptive macro-trends
typically eschew traditional sector and geographic classifications, and may stem
from advancements in disruptive technology, changing consumer habits and
demographics, or
changing
needs for infrastructure or finite resources. The Underlying Index is equal
weighted. On an annual basis, the Underlying Index is reconstituted to allocate
exposure to a subset of the eligible Underlying ETFs using a quantitative
methodology that ranks each of the eligible Underlying ETFs based on realized
sales growth. In order to calculate the realized sales growth for a given
Underlying ETF, the Index Provider calculates the realized sales growth of each
component security of each eligible Underlying ETF. The realized sales growth of
each component security of the Underlying ETF is then used to calculate the
aggregate realized sales growth for the Underlying ETF, based on the respective
weights of the component securities in the Underlying ETF. Realized sales growth
is determined by calculating the difference between a component security's
revenue over the previous 12 months from the date of the rebalance and its
revenue over the 12 months prior to the previous rebalance date. In addition to
the annual reconstitution, the Underlying Index is reweighted on a semi-annual
basis. As of January 31, 2023, the Underlying ETFs eligible for inclusion in the
Underlying Index are: Global X Aging Population ETF, Global X AgTech & Food
Innovation ETF, Global X Artificial Intelligence & Technology ETF, Global X
Autonomous & Electric Vehicles ETF, Global X Blockchain ETF, Global X
Cannabis ETF, Global X China Biotech Innovation ETF, Global X Clean Water ETF,
Global X CleanTech ETF, Global X Cloud Computing ETF, Global X Cybersecurity
ETF, Global X Data Center REITs & Digital Infrastructure ETF, Global X
E-Commerce ETF, Global X Education ETF, Global X Emerging Markets Internet &
E-commerce ETF, Global X FinTech ETF, Global X Genomics & Biotechnology ETF,
Global X Health & Wellness ETF, Global X Hydrogen ETF, Global X Internet of
Things ETF, Global X Lithium and Battery Tech ETF, Global X Millennial Consumer
ETF, Global X Renewable Energy Producers ETF, Global X Robotics & Artificial
Intelligence ETF, Global X Social Media ETF, Global X Telemedicine & Digital
Health ETF, Global X U.S. Infrastructure Development ETF, Global X Video Games
& Esports ETF, Global X Metaverse ETF, Global X Disruptive Materials ETF,
Global X Green Building ETF, Global X Solar ETF and Global X Wind Energy ETF.
The Underlying ETFs eligible for inclusion are subject to change at each annual
reconstitution. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index had significant exposure to the information technology
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
ETF
Investment Risk:
The Fund is expected to primarily hold ETFs to gain exposure to certain asset
classes. As a result, the Fund will be subject to the same risks as the
underlying ETFs. While the risks of owning shares of an Underlying ETF generally
reflect the risks of owning the underlying securities of the index the ETF is
designed to track, lack of liquidity in the Underlying ETF can result in its
value being more volatile than the underlying portfolio securities. Because the
value of an Underlying ETF's shares depends on the demand in the market, the
Adviser may not be able to liquidate the Fund’s holdings in those shares at the
most optimal time, thereby adversely affecting the Fund’s performance. An
Underlying ETF may experience tracking error in relation to the index tracked by
the Underlying ETF, which could contribute to tracking error for the Fund. In
addition, an Underlying ETF's shares may trade at a premium or discount to NAV.
If the Underlying ETF fails to achieve its investment objective, the value of
the Fund’s investment may decline, adversely affecting the Fund’s performance.
In
addition, investments in the securities of Underlying ETFs may involve
duplication of certain expenses. The Fund will pay brokerage commissions in
connection with the purchase and sale of shares of the Underlying ETFs, which
could result in greater expenses to the Fund. By investing in an Underlying ETF,
the Fund becomes a shareholder thereof. As a result, Fund shareholders
indirectly bear the Fund’s proportionate share of certain of the fees and
expenses indirectly paid by shareholders of the Underlying ETF, in addition to
the fees and expenses Fund shareholders indirectly bear in connection with the
Fund’s own operations.
Associated
Risks Related to Investing in Thematic Growth Companies: Companies
focused on business activities in emerging economic themes typically face
intense competition and potentially rapid product obsolescence. Thematic
companies may have limited product lines, markets, financial resources or
personnel. These companies typically engage in significant amounts of spending
on research and development, capital expenditures and mergers and acquisitions,
and there is no guarantee that the products or services produced by these
companies will be successful.
These
companies are also frequently dependent on intellectual property rights and may
be adversely affected by loss or impairment of those rights. There can be no
assurance these companies will be able to successfully protect their
intellectual property to prevent the misappropriation of their technology, or
that competitors will not develop technology that is substantially similar or
superior to such companies’ technology. Such companies may be potential targets
for cyberattacks, which can have a materially adverse impact on the performance
of these companies. The emergent nature of many economic themes could result in
increasing regulatory scrutiny in the future, which may impede the growth of
companies that develop and/or focus on such economic themes. Similarly, the
collection of data from consumers and other sources is frequently a critical
component in emerging economic themes and could face increased scrutiny as
regulators consider how the data is collected, stored, safeguarded and used.
Finally, these companies may be involved in young, fast evolving industries with
increased exposure to the risks associated with changes in applicable laws
(including regulation, other rule changes, and related federal and state
enforcement activities), as well as market developments, which may cause
businesses to contract or close suddenly and negatively impact the value of
these companies. Thematic companies may face adverse economic conditions during
periods of rising interest rates as borrowing costs increase, potentially
limiting capital spending and growth opportunities. Similarly, Thematic
companies tend to have higher expected future earnings that, if discounted at a
higher prevailing interest rate, could result in lower valuation
estimates.
Sales
growth and acceleration for a particular economic theme may not continue, and
the business models employed by the companies focused on a particular economic
theme may not prove to be successful. The customers and/or suppliers of thematic
companies may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on thematic companies. These companies may also be more
affected by overall capital spending levels, economic cycles and changes in
consumer and social trends than companies focused on more established business
industries. Such companies, especially smaller companies, tend to be more
volatile than companies that do not rely heavily on technology and may
experience greater downturns in the case of falling equity markets. Such
considerations may lead the value of companies involved in a given economic
theme to at times be heavily correlated with the value of companies involved in
a different economic theme, which may lead the Fund to experience greater
volatility than it would likely experience if a broader investment strategy were
employed. These companies may participate in monopolistic practices that could
make them subject to higher levels of regulatory scrutiny and/or potential break
ups in the future, which could severely impact the viability of these
companies.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Micro-Capitalization
Companies Risk: Stock
prices of micro-cap companies are significantly more volatile, and more
vulnerable to adverse business and economic developments, than those of larger
companies, and their earnings and revenues tend to be less predictable (and some
companies may experience significant losses). Microcap stocks may also be thinly
traded, making it difficult for the Fund to buy and sell them.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Canada: The
Canadian economy is highly dependent on the demand for and price of natural
resources. As a result, the Canadian market is relatively concentrated in
issuers involved in the production and distribution of natural resources and any
changes in these sectors could have an adverse impact on the Canadian economy.
The Canadian economy is heavily dependent on relationships with certain key
trading partners, including the United States and China. Developments in the
United States, including renegotiation of the North American Free Trade
Agreement (“NAFTA”) and ratification of the successor United
States-Mexico-Canada Agreement (“USMCA”), which went into effect on July 1,
2020, as well as the imposition of additional tariffs by the United States, may
have implications for the trade arrangements between the United States and
Canada, which could negatively affect the value of securities held by the
Fund.
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to
expropriation
or nationalization of assets and property or the imposition of restrictions on
foreign investments and repatriation of capital. Furthermore, government actions
against leaders or other key figures within companies, or speculation about such
actions, may lead to sudden and unpredictable falls in the value of securities
within the Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Developed Markets:
An Underlying ETF’s investment in a developed country issuer may subject the
Underlying ETF to regulatory, political, currency, security, economic and other
risks associated with developed countries. Developed countries tend to represent
a significant portion of the global economy and have generally experienced
slower economic growth than some less developed countries. Certain developed
countries have experienced security concerns, such as terrorism and strained
international relations. Incidents involving a country’s or region’s security
may cause uncertainty in its markets and may adversely affect its economy and
the Underlying ETF’s investments. In addition, developed countries may be
impacted by changes to the economic conditions of certain key trading partners,
regulatory burdens, debt burdens and the price or availability of certain
commodities.
Risk
of Investing in Emerging Markets:
Some of the Underlying ETFs in which the Fund invests may have investments in
emerging markets. Investments in emerging markets may be subject to a greater
risk of loss than
investments
in developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries, and there may be greater
risk associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in South Korea: Investments
in South Korean issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risks that are specific to South Korea. In
addition, economic and political developments of South Korea’s neighbors,
including escalated tensions involving North Korea and any outbreak of
hostilities involving North Korea, or even the threat of an outbreak of
hostilities, may have a severe adverse effect on the South Korean
economy.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Model
Portfolio Risk:
The Underlying Index utilizes a proprietary methodology to determine its
allocations to the securities in which the Fund invests. Investments selected
using a proprietary methodology (i.e.,
quantitative model) may perform differently from the market as a whole or from
their expected performance. There can be no assurance that use of a quantitative
model will enable the Fund to achieve positive returns or outperform the market.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security.
Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value
of
the loaned securities increases and the collateral is not increased accordingly.
Additionally, the Fund will bear any loss on the investment of cash collateral
it receives. These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a risk that
the Fund may not be able to recall the securities in sufficient time to vote on
material proxy matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Turnover
Risk: The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At
times, the Fund may have a portfolio turnover rate substantially greater than
100%. For example, a portfolio turnover rate of 300%
is equivalent to the Fund buying and selling all of its securities three times
during the course of a year. A
high portfolio turnover rate would result in
high brokerage costs for the Fund, may result in higher taxes when shares are
held in a taxable account and lower Fund performance.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
40.24% |
Worst
Quarter: |
6/30/2022 |
-21.64% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (10/25/2019) |
Global
X Thematic Growth ETF: |
|
|
·Return
before taxes |
-48.03% |
-1.94% |
·Return
after taxes on distributions1 |
-48.29% |
-2.36% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-28.39% |
-1.53% |
Solactive
Thematic Growth Index
(Index
returns do not reflect deduction for fees, expenses, or
taxes) |
-48.16% |
-2.20% |
MSCI
ACWI Index (net)
(Index
returns reflect invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other
taxes) |
-18.36% |
5.87% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan have been Portfolio
Managers of the Fund since the Fund's inception. Ms. Yang has been a Portfolio
Manager of the Fund since December 2020. Mr. Lu has been a Portfolio Manager of
the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUNDS
This
Prospectus contains information about investing in a Fund. Please read this
Prospectus carefully before you make any investment decisions. Shares of a Fund
are listed for trading on a national securities exchange. The market price for a
Share of a Fund may be different from the Fund's most recent NAV. ETFs are funds
that trade like other publicly-traded securities. A Fund is designed to track an
Underlying Index. Similar to shares of an index mutual fund, each Share of a
Fund represents an ownership interest in an underlying portfolio of securities.
Unlike shares of a mutual fund, which can be bought and redeemed from the
issuing fund by all shareholders at a price based on NAV, Shares of a Fund may
be purchased or redeemed directly from the Fund at NAV solely by Authorized
Participants and only in Creation Unit increments. Also unlike shares of a
mutual fund, Shares of a Fund are listed on a national securities exchange and
trade in the secondary market at market prices that change throughout the day. A
Fund is designed to be used as part of broader asset allocation strategies.
Accordingly, an investment in a Fund should not constitute a complete investment
program. An index is a financial calculation, based on a grouping of financial
instruments, and is not an investment product, while a Fund is an actual
investment portfolio. The performance of a Fund and its Underlying Index may
vary for a number of reasons, including transaction costs, non-U.S. currency
valuations, asset valuations, corporate actions (such as mergers and spin-offs),
timing variances and differences between a Fund’s portfolio and the Underlying
Index resulting from the Fund's legal restrictions (such as diversification
requirements) that apply to the Fund but not to the Underlying Index.
Each
Fund invests at least 80% of its total assets in the securities of the
Underlying Index. Each Fund’s 80% investment policy is non-fundamental and
requires 60 days prior written notice to shareholders before it can be changed.
The Adviser anticipates that, generally, each Fund will hold all of the
securities that comprise its Underlying Index in proportion to their weightings
in such Underlying Index. However, under various circumstances, it may not be
possible or practicable to purchase all of those securities in those weightings.
In these circumstances, a Fund may purchase a sample of securities in its
Underlying Index. There also may be instances in which the Adviser may choose to
underweight or overweight a security in a Fund’s Underlying Index, purchase
securities not in the Fund’s Underlying Index that the Adviser believes are
appropriate to substitute for certain securities in such Underlying Index or
utilize various combinations of other available investment techniques in seeking
to replicate as closely as possible, before fees and expenses, the price and
yield performance of a Fund’s Underlying Index. In addition, each Fund may also
invest in equity index futures for cash flow management purposes and as a
portfolio management technique. Each Fund may sell securities that are
represented in its Underlying Index in anticipation of their removal from such
Underlying Index or purchase securities not represented in its Index in
anticipation of their addition to such Underlying Index. Each Fund’s investment
objective and its Underlying Index may be changed without shareholder approval
upon at least 60 days prior written notice to shareholders.
A
FURTHER DISCUSSION OF PRINCIPAL RISKS
Each
Fund is subject to various risks, including the principal risks noted below, any
of which may adversely affect the Fund’s NAV, trading price, yield, total return
and ability to meet its investment objective. You could lose all or part of your
investment in the Fund, and the Fund could underperform other investments.
Affiliated
Index Provider Risk
Affiliated
Index Provider Risk applies to the Global X Mataverse ETF
The
Adviser also serves as the Fund’s Index Provider, which may present the
appearance of a conflict of interest. For example, a potential conflict could
arise if the Adviser were to exercise undue influence with respect to regular
and/or extraordinary updates to the methodology or composition of the Underlying
Index, including in a manner that might improve the apparent performance of the
Fund relative to the performance of the Underlying Index. Additionally,
potential conflicts could arise to the extent that portfolio managers of the
Adviser become aware of contemplated methodology changes or rebalance activity
prior to disclosure to the public, which could facilitate “front running” on
behalf of other funds managed by the Adviser with similar exposure. Although the
Adviser has taken steps designed to ensure that these potential conflicts are
mitigated (e.g., via the adoption of policies and procedures that are designed
to minimize potential conflicts of interest and ensure independence with respect
to the operation of the Underlying Index, as well as the implementation of
informational barriers designed to minimize the potential for the misuse of
information about the Underlying Index), there can be no assurance that such
measures will be successful.
Asset
Class Risk
The
returns from the types of securities and/or assets in which the Fund invests may
under-perform returns from the various general securities markets or different
asset classes. The assets in the Underlying Index may under-perform investments
that track other markets, segments, sectors or assets. Different types of assets
tend to go through cycles of out-performance and under-performance in comparison
to the general securities markets.
China
A-Shares Risk
China
A-Shares Risk applies to the Global X China Biotech Innovation ETF, Global X
AgTech & Food Innovation ETF, Global X Blockchain ETF, Global X Clean Water
ETF, Global X Hydrogen ETF, Global X Solar ETF, Global X Wind Energy ETF and
Global X Green Building ETF
A-Shares
are issued by companies incorporated in mainland China and are traded on Chinese
exchanges. Foreign investors can access A-Shares by obtaining a QFII or a RQFII
license, as well as through the Stock Connect Programs. The Fund currently
intends to gain exposure to A-Shares through the Stock Connect Programs. Trading
suspensions in certain stocks could lead to greater market execution risk,
valuation risks, liquidity risks and costs for the Fund, as well as for
Authorized Participants that create and redeem Creation Units of the Fund. The
SSE and SZSE currently apply a daily limit of the amount of fluctuation
permitted in the prices of A-shares during a single trading day. The daily limit
refers to price movements only and does not restrict trading within the relevant
limit. There can be no assurance that a liquid market on an exchange will exist
for any particular A-share or for any particular time. Additionally, during
instances where aggregate limits on foreign ownership are exceeded. the Fund may
be unable to purchase additional equity securities of a particular company. This
could increase the Fund’s tracking error and/or cause the Fund to trade in the
market at greater bid-ask spreads or greater premiums or discounts to the Fund’s
NAV. Given that the A-share market is considered volatile and unstable (with the
risk of widespread trading suspensions or government intervention), the creation
and redemption of Creation Units (as defined below) may also be disrupted. These
risks, among others, could adversely affect the value of the Fund’s
investments.
China
State-Owned Enterprises Risk
China
State-Owned Enterprises Risk applies to the Global X China Biotech Innovation
ETF
The
Fund may invest in businesses that are controlled, either directly or
indirectly, by the central, provincial or municipal governments of China.
Because such companies are controlled by various Chinese governmental
authorities, investing in such state-owned enterprises involves risks that
political changes, social instability, regulatory uncertainty, adverse
diplomatic developments, asset expropriation or nationalization, or confiscatory
taxation could adversely affect the performance of such companies. State-owned
or controlled companies may be less efficiently run and less profitable than
other companies. They are also subject to risks affecting their jurisdiction of
incorporation, including any legal or tax changes.
Depositary
Receipts Risk
Depositary
Receipts Risk applies to the Global X Cannabis ETF, Global X Blockchain ETF and
Global X Green Building ETF
The
Fund may invest in depositary receipts, such as ADRs and GDRs. ADRs are
certificates that evidence ownership of shares of a foreign issuer and are
alternatives to purchasing the underlying foreign securities directly in their
national markets and currencies. GDRs are certificates issued by an
international bank that generally are traded and denominated in the currencies
of countries other than the home country of the issuer of the underlying
shares. Depositary receipts may be subject to certain of the risks
associated with direct investments in the securities of foreign companies. For
additional details on these risks, please see Foreign Securities Risk.
Moreover, depositary receipts may not track the price of the underlying foreign
securities on which they are based. Certain countries may limit the
ability to convert depositary receipts into the underlying foreign securities
and vice versa, which may cause the securities of the foreign company to trade
at a discount or premium to the market price of the related depositary receipts.
A holder of depositary receipts may also be subject to fees and the credit
risk of the financial institution acting as depositary. Depositary receipts may
be purchased through “sponsored” or “unsponsored” facilities. A sponsored
facility is established jointly by a depositary and the issuer of the underlying
security. A depositary may establish an unsponsored facility without
participation by the issuer of the deposited security. Unsponsored depositary
receipts may involve higher expenses, fewer shareholder rights, and may be less
liquid. Holders of unsponsored ADRs generally bear all the costs of such
facilities, and the depositary of an unsponsored facility frequently is under no
obligation
to distribute shareholder communications received from the issuer of the
deposited security or to pass through voting rights to the holders of such
receipts in respect of the deposited securities.
Equity
Securities Risk
Equity
Securities Risk applies to each Fund
The
Fund may invest in equity securities, which are subject to changes in value that
may be attributable to market perception of a particular issuer, general stock
market fluctuations that affect all issuers, or as a result of such factors as a
company’s business performance, investor perceptions, stock market trends and
general economic conditions. Investments in equity securities may be more
volatile than investments in other asset classes.
ETF
Investment Risk
ETF
Investment Risk applies to the Global X Thematic Growth ETF
The
Fund may hold ETFs to gain exposure to certain asset classes. As a result, the
Fund may be subject to the same risks as the Underlying ETFs. While the risks of
owning shares of an Underlying ETF generally reflect the risks of owning the
underlying securities the ETF is designed to track, lack of liquidity in an
Underlying ETF can result in its value being more volatile than the underlying
portfolio securities. Because the value of an Underlying ETF's shares depends on
the demand in the market, the Adviser may not be able to liquidate the Fund’s
holdings in those shares at the most optimal time, thereby adversely affecting
the Fund’s performance. An Underlying ETF may experience tracking error in
relation to the index tracked by the Underlying ETF, which could contribute to
tracking error for the Fund. In addition, an Underlying ETF's shares may trade
at a premium or discount to NAV. If an Underlying ETF fails to achieve its
investment objective, the value of the Fund’s investment may decline, adversely
affecting the Fund’s performance.
In
addition, investments in the securities of Underlying ETFs may involve
duplication of certain expenses. The Fund will pay brokerage commissions in
connection with the purchase and sale of shares of Underlying ETFs, which could
result in greater expenses to the Fund. By investing in an Underlying ETF, the
Fund becomes a shareholder thereof. As a result, Fund shareholders indirectly
bear the Fund’s proportionate share of certain of the fees and expenses
indirectly paid by shareholders of the Underlying ETF, in addition to the fees
and expenses Fund shareholders indirectly bear in connection with the Fund’s own
operations. In addition, certain of the Underlying ETFs may hold common
portfolio positions, thereby reducing the diversification benefits of an asset
allocation style.
A
complete list of each Underlying ETF held by the Fund can be found daily on the
Trust’s website. Each investor should review the complete description of the
principal risks of each Underlying ETF prior to investing in the
Fund.
Real
Estate Stocks and Real Estate Investment Trusts (REITs) Investment
Risk
Real
Estate Stocks and Real Estate Investment Trusts (REITs) Investment Risk applies
to the Global X Cloud Computing ETF, Global X Data Center REITs & Digital
Infrastructure ETF, Global X Millennial Consumer ETF, Global X Aging Population
ETF and Global X Green Building ETF
The
Fund invests in companies or underlying funds that invest in real estate, such
as REITs, which exposes investors in the Fund to the risks of owning real estate
directly, as well as to risks that relate specifically to the way in which real
estate companies are organized and operated. Real estate is highly sensitive to
general and local economic conditions and developments, and characterized by
intense competition and periodic overbuilding. Many real estate companies,
including REITs, utilize leverage (and some may be highly leveraged), which
increases risk and could adversely affect a real estate company's operations and
market value in periods of rising interest rates.
Concentration
Risk
Real
estate companies may own a limited number of properties and concentrate their
investments in a particular geographic region or property type.
Equity
REITs Risk
Certain
REITs may make direct investments in real estate. These REITs are often referred
to as "Equity REITs." Equity REITs invest primarily in real properties and earn
rental income from leasing those properties. Equity REITs may also realize gains
or losses from the sale of the properties. Equity REITs will be affected by
conditions in the real estate rental market and by changes in the value of the
properties they own. A decline in rental income may occur because of extended
vacancies, limitations on rents, the failure to collect rents, increased
competition from other properties or poor management. Equity REITs also can be
affected by rising interest rates. Rising interest rates may cause investors to
demand a high annual yield from future distributions that, in turn, could
decrease the market prices for such REITs. In addition, rising interest rates
also increase the costs of obtaining financing for real estate projects. Because
many real estate projects are dependent upon receiving financing, this could
cause the value of the Equity REITs in which the Fund invests to decline.
Interest
Rate Risk
Rising
interest rate could result in higher costs of capital for real estate companies,
which could negatively affect a real estate company's ability to meet its
payment obligations.
Leverage
Risk
Real
estate companies may use leverage (and some may be highly leveraged), which
increases investment risk and the risks normally associated with debt financing,
and could adversely affect a real estate company's operations and market value
in periods of rising interest rates. Financing covenants related to a real
estate company's leveraging may affect the ability of the real estate company to
operate effectively. In addition, real property may be subject to quality of
credit extended and defaults by borrowers and tenants. Leveraging may also
increase repayment risk.
Liquidity
Risk
Investing
in real estate companies may involve risks similar to those associated with
investing in small-capitalization companies. Real estate company securities may
be volatile. There may be less trading in real estate company shares, which
means that buy and sell transactions in those shares could have a magnified
impact on share price, resulting in abrupt or erratic price fluctuations. In
addition, real estate is relatively illiquid and, therefore, a real estate
company may have a limited ability to vary or liquidate its investments in
properties in response to changes in economic or other conditions.
Operational
Risk
Real
estate companies are dependent upon management skills and may have limited
financial resources. Real estate companies are generally not diversified and may
be subject to heavy cash flow dependency, default by borrowers and
self-liquidation. In addition, transactions between real estate companies and
their affiliates may be subject to conflicts of interest, which may adversely
affect a real estate company's shareholders. A real estate company may also have
joint ventures in certain of its properties and, consequently, its ability to
control decisions relating to such properties may be limited.
Property
Risk
Real
estate companies may be subject to risks relating to functional obsolescence or
reduced desirability of properties; extended vacancies due to economic
conditions and tenant bankruptcies; catastrophic events such as earthquakes,
hurricanes, tornadoes and terrorist acts; and casualty or condemnation losses.
Real estate income and values also may be greatly affected by demographic
trends, such as population shifts, changing tastes and values, or increasing
vacancies or declining rents resulting from legal, cultural, technological,
global or local developments.
Regulatory
Risk
Real
estate income and values may be adversely affected by applicable domestic and
foreign laws (including tax laws). Government actions, such as tax increases,
zoning law changes or environmental regulations also may have a major impact on
real estate.
Repayment
Risk
The
prices of real estate company securities may drop because of the failure of
borrowers to repay their loans, poor management, or the inability to obtain
financing either on favorable terms or at all. If the properties do not generate
sufficient income to meet operating expenses, including, where applicable, debt
service, ground lease payments, tenant improvements, third-party leasing
commissions and other capital expenditures, the income and ability of the real
estate companies to make payments of interest and principal on their loans will
be adversely affected.
U.S.
Tax Risk
Certain
U.S. real estate companies are subject to special U.S. federal tax requirements.
A 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.
Associated
Risks Related to Investing in Aging Population Companies
Associated
Risks Related to Investing in Aging Population Companies applies to the Global X
Aging Population ETF
The
Fund invests in aging population companies, including pharmaceutical and
biotechnology companies involved in the research, development, production and/or
manufacturing of drugs; suppliers or manufacturers of medical devices; companies
operating skilled nursing homes, senior living homes and continuing care
communities; and providers of health care services, including home healthcare
providers. Aging population companies may be affected by industry competition,
dependency on a limited number of products, obsolescence of products, government
approvals and regulations, loss or impairment of intellectual property rights
and litigation regarding product liability. Aging population companies may also
be affected by unforeseen health circumstances including but not limited to the
spread of infectious disease which could impact longevity-related drug
development priorities and pipelines, supply and demand dynamics for longevity
health care equipment as well as the ability to receive care in
longevity-related health care service facilities. Aging population companies may
be affected by government regulations and government healthcare programs, as
well as increases or decreases in the cost of medical products and services and
product liability claims. Many aging population companies are heavily dependent
on patent protection, and the expiration of a company’s patent may adversely
affect that company’s profitability. The customers and/or suppliers of aging
population companies may be concentrated in a particular country, region or
industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on aging population companies. Through
its portfolio companies’ customers and suppliers, the Fund is specifically
exposed to Asian Economic Risk and European Economic Risk.
Associated
Risks Related to Investing in AgTech & Food Innovation
Companies
Associated
Risks Related to Investing in AgTech & Food Innovation Companies applies to
the Global X AgTech & Food Innovation ETF
AgTech
& Food Innovation companies may have limited product lines, markets,
financial resources or personnel. These companies typically face intense
competition and potentially rapid product obsolescence. These companies are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. AgTech & Food Innovation companies
are substantially affected by developments related to the agriculture industry,
including the impact of global climate change on agricultural production. AgTech
& Food Innovation companies, especially smaller companies, tend to be more
volatile than companies that do not rely heavily on technology. AgTech &
Food Innovation companies may be adversely affected by commodity price
volatility, changes in exchange rates, imposition of import controls,
availability of certain inputs and materials required for production, depletion
of resources, technological developments and labor relations. AgTech & Food
Innovation companies are also subject to significant environmental and safety
regulations that could adversely affect their business. The customers and/or
suppliers of AgTech & Food Innovation companies may be concentrated in a
particular country, region or industry. Any adverse event affecting one of these
countries, regions or industries could have a negative impact on AgTech &
Food Innovation companies.
Associated
Risks Related to Investing in Artificial Intelligence & Big Data
Companies
Associated
Risks Related to Investing in Artificial Intelligence & Big Data Companies
applies to the Global X Artificial Intelligence & Technology ETF
Artificial
Intelligence & Big Data Companies typically face intense competition and
potentially rapid product obsolescence. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment
of
those rights. There can be no assurance these companies will be able to
successfully protect their intellectual property to prevent the misappropriation
of their technology, or that competitors will not develop technology that is
substantially similar or superior to such companies’ technology. Artificial
Intelligence & Big Data Companies typically engage in significant amounts of
spending on research and development and mergers and acquisitions, and there is
no guarantee that the products or services produced by these companies will be
successful. Artificial Intelligence & Big Data Companies are potential
targets for cyberattacks, which can have a materially adverse impact on the
performance of these companies. In addition, artificial intelligence technology
could face increasing regulatory scrutiny in the future, which may limit the
development of this technology and impede the growth of companies that develop
and/or utilize this technology. Similarly, the collection of data from consumers
and other sources could face increased scrutiny as regulators consider how the
data is collected, stored, safeguarded and used. Artificial Intelligence &
Big Data Companies may face regulatory fines and penalties, including potential
forced break-ups, that could hinder the ability of the companies to operate on
an ongoing basis. The customers and/or suppliers of Artificial Intelligence
& Big Data Companies may be concentrated in a particular country, region or
industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on Artificial Intelligence & Big
Data Companies. Country, government, and/or region-specific regulations or
restrictions could have an impact on Artificial Intelligence & Big Data
companies. Through its portfolio companies’ customers and suppliers, the Fund is
specifically exposed to Asian Economic Risk, European Economic Risk and North
American Economic Risk.
Associated
Risks Related to Investing in Autonomous & Electric Vehicle
Companies
Associated
Risks Related to Investing in Autonomous & Electric Vehicle Companies
applies to the Global X Autonomous & Electric Vehicles ETF
Autonomous
& Electric Vehicle Companies typically face intense competition and
potentially rapid product obsolescence. Many of these companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. Autonomous & Electric Vehicle companies typically engage in
significant amounts of spending on research and development, capital
expenditures and mergers and acquisitions, and there is no guarantee that the
products or services produced by these companies will be successful. In
addition, autonomous vehicle technology could face increasing regulatory
scrutiny in the future, which may limit the development of this technology and
impede the growth of companies that develop and/or utilize this technology.
Autonomous vehicle technology companies could be adversely affected by
cybersecurity breaches, traffic accidents related to autonomous vehicles, and
other issues that could lead to litigation and/or additional regulation. The
customers and/or suppliers of Autonomous & Electric Vehicle companies may be
concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on Autonomous & Electric Vehicle companies. Through its portfolio
companies’ customers and suppliers, the Fund is specifically exposed to Asian
Economic Risk, European Economic Risk and North American Economic Risk.
Companies
that produce the raw materials that are used in electric vehicles may be
concentrated in certain commodities, and therefore be exposed to the price
fluctuations of those commodities. In addition, these companies may have
operations in emerging and frontier markets, and are therefore subject to higher
degrees of economic and political risk associated with these markets. Recently,
companies involved in the production and refining of cobalt have been identified
as having significant issues in their supply chains, most notably in regard to
child labor. Many of the companies identified have taken concrete steps to
address these supply chain issues, but additional oversight, regulation and
industry-wide coordination will be necessary to ensure that these problems do
not persist in the future.
Associated
Risks Related to Investing in Blockchain Companies
Associated
Risks Related to Investing in Blockchain Companies applies to the Global X
Blockchain ETF
Blockchain
companies may be adversely impacted by government regulations, limited operating
histories, or economic conditions. Blockchain technology is new and its uses are
in many cases untested or unclear. These companies may also have significant
exposure to fluctuations in the spot prices of digital assets, particularly to
the extent that demand for a company’s hardware or services may increase as the
spot price of digital assets increase. Blockchain companies typically face
intense competition and potentially rapid product obsolescence. In addition,
many Blockchain companies store sensitive consumer information and could be the
target of cybersecurity attacks and other types of theft, which could have a
negative impact on these companies. Access to a given blockchain may require a
specific cryptographic key (in effect, a string of characters granting unique
access to initiate transactions related to specific digital assets) or set of
keys, the theft, loss, or destruction of which, either by accident or as a
result of the efforts of a third party, could irrevocably impair a claim to the
digital assets stored
on
that blockchain.
Many Blockchain companies currently operate under less
regulatory scrutiny than traditional financial services companies and banks, but
there is significant risk that regulatory oversight could increase in the
future. For example, companies that operate trading platforms and/or exchanges
may face heightened regulatory risks associated with their operations. The SEC
has made several public statements indicating that some cryptocurrency exchanges
may be operating unregistered securities exchanges in violation of applicable
regulations. In August 2021, the SEC settled charges with Poloniex for selling
digital asset securities between 2017 and 2019 without registering as a national
securities exchange. In November 2022, the collapse and subsequent Chapter 11
bankruptcy of major cryptocurrency trading platforms FTX and BlockFi severely
impacted investor confidence in cryptocurrencies and prompted calls for more
regulatory action. Higher levels of regulation could increase costs and
adversely impact the current business models of some Blockchain companies and
could even result in the outright prohibition of certain business activities.
For example, on September 24, 2021, multiple Chinese regulators issued
prohibitions on all cryptocurrency transactions and mining. Any further
restrictions imposed by governments, including China or the United States of
America, on crypto-currency related activities may adversely impact Blockchain
Companies and, in turn, the Fund. These companies could be negatively impacted
by disruptions in service caused by hardware or software failure, or by
interruptions or delays in service by third-party data center hosting facilities
and maintenance providers. Blockchain companies involved in digital assets may
face slow adoption rates and be subject to higher levels of regulatory scrutiny
in the future, which could severely impact the viability of these companies.
Blockchain companies, especially smaller companies, tend to be more volatile
than companies that do not rely heavily on technology. The customers and/or
suppliers of Blockchain companies may be concentrated in a particular country,
region or industry. Any adverse event affecting one of these countries, regions
or industries could have a negative impact on Blockchain companies. Many
Blockchain companies have limited operating histories and may lack the necessary
safeguards to ensure their long-term viability. On July 6, 2022, Voyager
Digital, a U.S. crypto brokerage, filed for Chapter 11 bankruptcy protection.
Voyager Digital suffered significant losses due to its lending practices in
which it issued under-collateralized loans to companies within the digital asset
ecosystem. Shares of Voyager Digital were subsequently delisted from the Toronto
Stock Exchange.
Associated
Risks Related to Investing in Cannabis Companies
Associated
Risks Related to Investing in Cannabis Companies applies to the Global X
Cannabis ETF
The
cannabis industry is a very young, fast evolving industry with increased
exposure to the risks associated with changes in applicable laws (including
increased regulation, other rule changes, and related federal and state
enforcement activities), as well as market developments, which may cause
businesses to contract or close suddenly and negatively impact the value of
securities held by the Fund.
General
Legal Considerations:
Cannabis
Companies are subject to various laws and regulations that may differ at the
state/local, federal and international level. These laws and regulations may
significantly affect a Cannabis Company’s ability to secure financing and
traditional banking services, impact the market for cannabis business sales and
services, and set limitations on cannabis use, production, transportation,
export and storage. There is a risk that a Cannabis Company currently operating
legally may suddenly find itself accused (or found guilty) of illegal
activities, including because of changes to applicable law. Cannabis Companies
may face litigation, formal or informal complaints, enforcement actions, and
inquiries by various federal, provincial, state, or local governmental and/or
regulatory authorities, which could consume considerable amounts of financial
and other corporate resources and have a negative impact on sales, revenue,
profitability, and growth prospects. Additionally, to the extent that the United
States and other countries pass laws that permit individuals to grow cannabis
for personal, non-commercial use, the markets may shrink for certain Cannabis
Companies in which the Fund invests. Similarly, certain Cannabis Companies may
not be able to obtain or maintain the necessary licenses, permits,
authorizations, or accreditations, or may only be able to do so at great cost.
Failure to comply with or to obtain the necessary licenses, permits,
authorizations, or accreditations could result in restrictions on a Cannabis
Company’s ability to legally engage in its business activity, which could have a
negative impact on the value of the Fund’s investments. Actions taken against
certain Cannabis Companies could have an indirect, negative effect on the value
of other Cannabis Companies in the cannabis industry, even Cannabis Companies
not directly affected by such actions.
U.S.
Federal Marijuana Regulation:
The
possession, use and importation of marijuana remains illegal under U.S. federal
law. Federal law criminalizing the use of marijuana remains enforceable
notwithstanding state laws that legalize its use for medicinal and recreational
purposes. This conflict between the regulation of marijuana under federal and
state law creates volatility and risk for all Cannabis Companies, and any
stepped-up enforcement of marijuana laws by the federal government could
adversely affect the value of the Fund’s investments. Pronouncements from the
current United States Attorney General suggested during his confirmation
testimony that the Department of Justice (“DOJ”) may likely take a more passive
approach in states where marijuana use and possession is legal and not step up
the enforcement of federal marijuana laws in those states so long as
operators
in those states comply with state cannabis laws and regulations. Currently, the
Rohrabacher-Blumenauer amendment to appropriations legislation prohibits the DOJ
from using federal funds to prevent states from implementing laws that authorize
medical marijuana use, possession, distribution, and cultivation. In the event
the Rohrabacher-Blumenauer amendment is not renewed by Congress, the DOJ may
begin using federal funds to prevent states from implementing such laws. Since
the cultivation, sale and use of marijuana is illegal under U.S. federal law,
institutions may be unwilling to make services available to growers and sellers
of marijuana. Any stepped-up enforcement efforts by the U.S. federal government
could produce a chilling effect on the industry’s growth and discourage more
traditional financial institutions, including banks, from expanding their
services to Cannabis Companies, where such services are currently limited, and
could potentially curtail the ability of investors to purchase or hold Cannabis
Companies. The current federal regulatory stance will limit the number of
companies that could otherwise be eligible for inclusion in the Underlying
Index, and consequently could limit the range of companies eligible for
investment by the Fund. Additionally, U.S. Federal tax law prohibits a taxpayer
from claiming ordinary deductions or credit for any amount paid or incurred
during the tax year (other than only the costs of goods sold) in carrying on any
trade or business if that trade or business (or the activities that comprise
that trade or business) consists of trafficking in controlled substances (e.g.,
marijuana (cannabis) for this purpose) where that trafficking is prohibited by
either federal law or the state law for the state in which the trade or business
is conducted. Consequently, Cannabis Companies may pay higher amounts of taxes
than non-Cannabis Companies, which could result in less income to the Fund and,
in turn, less for the Fund to distribute to shareholders.
U.S.
Regulation of Hemp:
Although
legislation has recently expanded the permissible industrial use of hemp, such
activity remains heavily regulated, and it is possible that future federal
and/or state legislation and/or regulations could drastically curtail
permissible uses of hemp. Certain Underlying Index constituents may sell dietary
supplements and/or foods containing CBD within the U.S. The Agricultural
Improvement Act of 2018, also known as the “2018 Farm Bill”, altered the legal
landscape in the United States with respect to the manufacturing, distribution
and sale of hemp and hemp derivatives, including CBD. As a result of the 2018
Farm Bill, “hemp” (defined as the plant Cannabis sativa L. plant and extracts
thereof with a delta-9 tetrahydrocannabinol concentration of not more than 0.3%
on a dry weight basis), was exempted from the definition of “marijuana” under
the U.S. Controlled Substances Act. The 2018 Farm Bill delegates to the Food and
Drug Administration (“FDA”) responsibility for regulating products containing
hemp or derivatives thereof (including CBD) under the Federal Food, Drug, and
Cosmetic Act (the “FD&C”). Under the FD&C, if a substance (such as CBD)
is an active ingredient in a drug product that has been approved by the FDA,
then the substance cannot be sold in dietary supplements or foods without FDA
approval, unless the substance was marketed as a dietary supplement or as a
conventional food before the drug was approved or before the new drug
investigations were authorized. The FDA has publicly taken the position that CBD
cannot be sold in dietary supplements or foods because CBD is an active
ingredient in an FDA-approved drug, but has yet to issue any regulations in this
regard. However, companies that sell CBD in dietary supplements and foods have
taken the position that CBD was marketed as a dietary supplement and/or as a
conventional food before the drug was approved or before the new drug
investigations were authorized, and because the FDA has not brought enforcement
action against such companies, this question of fact has not yet been
adjudicated. On January 26, 2023, the FDA announced that it would not be issuing
CBD regulations but rather has asked Congress to take a legislative approach to
the regulation of hemp-derived CBD. In the absence of a conclusive legal
determination to the contrary, as of the date of this prospectus, the Advisor
has not determined that the sale of dietary supplements and/or foods containing
CBD within the U.S. would cause an Underlying Index Constituent to fail to meet
the applicable Eligibility Criteria.
U.S.
Regulation of Medical Cannabis:
Few
drug products containing cannabis or cannabis extracts have been approved for
use by the FDA or obtained registrations for commercial production from the Drug
Enforcement Administration (“DEA”), and there is no guarantee that such products
will ever be legally produced or sold in the United States. Cannabis Companies
in the United States that engage in medical or pharmaceutical research or the
production and distribution of controlled substances, such as marijuana, must be
registered with the DEA to perform such activities and have the security,
control, recordkeeping, reporting and inventory mechanisms required by the DEA
to prevent drug loss and diversion. The current regulatory state of medical
cannabis in the United States may limit the number of pharmaceutical companies
that could otherwise be eligible for inclusion in the Underlying Index, and
consequently could limit the range of companies eligible for investment by the
Fund.
Non-U.S.
Regulation of Cannabis:
Laws
and regulations related to the possession, use (medical or recreational), sale,
transport and cultivation of cannabis vary throughout the world, and legislation
in certain countries may restrict or limit the ability of certain companies in
which the Fund invests to sell their products. Additionally, even if a company’s
operations are legal under current law, such operations may become illegal in
the future if the applicable law changes to prohibit cannabis-related activities
vital to the company’s business. Any such change would have a significant impact
on the cannabis industry and Cannabis Companies in which the Fund may invest.
The Fund will only invest in non-U.S. Cannabis Companies if such companies are
operating legally in their relevant jurisdiction. In addition, even if Cannabis
Companies operate permissibly under local law, importation of their products in
other countries, such as the United States, may be prohibited, which could
result in a reduced market for their products.
Eligibility
Criteria Risk:
The
Fund intends to invest only in those Cannabis Companies that meet the
Eligibility Criteria. To the extent that any securities included in the
Underlying Index are unable to meet the Eligibility Criteria, the Fund would not
invest in such securities, which would increase the tracking error between the
Fund’s performance and the performance of the Underlying Index and may cause the
Fund to underperform the Underlying Index. Moreover, it is possible that
the Fund may invest in Cannabis Companies that ultimately fail to meet the
Eligibility Criteria, and any change in regulation and/or enforcement of U.S.
federal law could cause securities held by the Fund to cease to meet the
Eligibility Criteria. If the Fund were to hold securities of a Cannabis
Company that fails to meet the Eligibility Criteria, the value of such security
may decrease substantially; additionally, the Fund could be required to rapidly
divest itself of such securities. Such divestment would likely contribute to
substantial underperformance relative to the Underlying Index, particularly in
the event that numerous Fund securities are impacted by changes in U.S. federal
law.
Service
Provider Risk:
Because
of legal and reputational concerns associated with the Fund’s investments in
Cannabis Companies, Fund service providers may be reluctant to provide, or to
continue to provide, services to the Fund. If a service provider were to
terminate its relationship with the Fund, the use of an alternate service
provider could negatively impact the Fund’s operations. Additionally, the Fund’s
service providers may raise concerns with respect to specific securities
included in the Underlying Index, and may be unwilling to continue to act as a
service provider to the Fund if the Fund invests in such security. If the Fund
does not invest in a security included in the Underlying Index as a result of
such concerns, the Fund would experience tracking error versus the performance
of the Underlying Index and may underperform the Underlying Index.
Legal
Liability of the Fund:
The
breadth of U.S. federal law affecting the cannabis industry is significant.
Given the uncertain nature of the regulation of the cannabis industry in the
United States, the Fund’s investment in certain entities could, under unique
circumstances, raise issues under one or more of those laws, and any
investigation or prosecution related to those investments could result in
expense and losses to the Fund. The Fund and the Adviser have taken steps to
mitigate this risk through the implementation of the Eligibility Criteria, which
have been discussed previously, and which are intended to ensure that the Fund
is not invested in any Cannabis Company that is operating in contravention of
applicable U.S. law. However, the application of the Eligibility Criteria cannot
guarantee that a Cannabis Company is not engaged in impermissible activities,
which could result in the Fund inadvertently holding such a company for a
limited period of time prior to divestment. In addition, the Adviser has
obtained a legal opinion on behalf of the Fund indicating that the Fund’s
investments in Cannabis Companies that meet the Eligibility Criteria should not
cause the Fund to violate federal drug and anti-money laundering laws. However,
such legal opinion does not prevent or otherwise estop any governmental agency
or the courts from taking a contrary position.
Associated
Risks Related to Investing in CleanTech Companies
Associated
Risks Related to Investing in CleanTech Companies applies to the Global X
CleanTech ETF
CleanTech
Companies typically face intense competition, short product lifecycles and
potentially rapid product obsolescence. These companies may be significantly
affected by fluctuations in energy prices and in the supply and demand of
renewable energy, tax incentives, subsidies, and other governmental regulations
and policies. These companies are also heavily dependent on intellectual
property rights and may be adversely affected by loss or impairment of those
rights. CleanTech Companies may be adversely affected by commodity price
volatility, changes in exchange rates, imposition of import controls,
availability of certain inputs and materials required for production, depletion
of resources, technological developments and labor relations. A decline in the
price of conventional energy such as oil and natural gas could have a materially
adverse impact on CleanTech Companies. Renewable energy resources may be highly
dependent upon government policies that support renewable energy generation and
enhance the economic viability of owning renewable electric generation assets.
Such policies can include tax credits, accelerated cost-recovery systems of
depreciation and renewable portfolio standard programs, which mandate that a
specified percentage of electricity sales come from eligible sources of
renewable energy. Any failure to extend such policies could materially and
adversely affect the business, financial condition, results of operations and
cash flow of CleanTech Companies. Additionally, investors should take notice of
the distinction between implemented government policy based on legislation and
less guaranteed commitments which may be aspirational, subject to political
risk, and difficult to enforce. Due to the Russia-Ukraine war, Europe may turn
to fossil fuels in the short-term as a result of energy disruptions in the
region, which could negatively impact CleanTech and renewable energy value
chains.
The
electricity produced and revenues generated by variable renewable energy
generation facilities, including solar, electric or wind energy, is highly
dependent on suitable environmental conditions. Furthermore, components used in
the generation of renewable energy could be damaged by severe weather events,
such as hailstorms or tornadoes. In addition, replacement and spare parts for
key components may be difficult or costly to acquire or may be unavailable.
Unfavorable environmental conditions could impair the effectiveness of assets or
reduce their output beneath their rated capacity or require shutdown of key
equipment,
impeding operation of renewable energy assets. Actual climatic conditions at a
facility site, particularly wind conditions, may not conform to the historical
findings and, therefore, renewable energy facilities may not meet anticipated
production levels or the rated capacity of the generation assets, which could
adversely affect the business, financial condition and results of operations and
cash flows of CleanTech Companies.
Associated
Risks Related to Investing in Clean Water Companies
Associated
Risks Related to Investing in Clean Water Companies applies to the Global X
Clean Water ETF
Clean
Water Companies typically face intense competition, short product lifecycles and
potentially rapid product obsolescence. These companies may also be heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. Clean Water Companies are subject to significant regulation
regarding the usage, treatment, and distribution of water. Clean Water Companies
may also be adversely affected by the impact of global climate change on the
available supply of clean water reserves. The ability of Clean Water Companies
to effectively distribute clean water is dependent on the infrastructure in
which they operate. The customers and/or suppliers of Clean Water Companies may
be concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on Clean Water Companies.
Associated
Risks Related to Investing in Cloud Computing Companies
Associated
Risks Related to Investing in Cloud Computing Companies applies to the Global X
Cloud Computing ETF
Cloud
Computing companies may have limited product lines, markets, financial resources
or personnel. These companies typically face intense competition and potentially
rapid product obsolescence. In addition, many Cloud Computing companies store
sensitive consumer information and could be the target of cybersecurity attacks
and other types of theft, which could have a negative impact on these companies.
As a result, Cloud Computing companies may be adversely impacted by government
regulations, and may be subject to additional regulatory oversight with regard
to privacy concerns and cybersecurity risk. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. Cloud Computing companies could be negatively
impacted by disruptions in service caused by hardware or software failure, or by
interruptions or delays in service by third-party data center hosting facilities
and maintenance providers. Cloud Computing companies, especially smaller
companies, tend to be more volatile than companies that do not rely heavily on
technology. The customers and/or suppliers of Cloud Computing companies may be
concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on Cloud Computing companies. Cloud Computing companies may participate
in monopolistic practices that could make them subject to higher levels of
regulatory scrutiny and/or potential break ups in the future, which could
severely impact the viability of these companies. Through its portfolio
companies’ customers and suppliers, the Fund is specifically exposed to Asian
Economic Risk, European Economic Risk and North American Economic Risk.
Associated
Risks Related to Investing in Cybersecurity Companies
Associated
Risks Related to Investing in Cybersecurity Companies applies to the Global X
Cybersecurity ETF
Cybersecurity
companies may have limited product lines, markets, financial resources or
personnel. These companies typically face intense competition and potentially
rapid product obsolescence. Cybersecurity companies may be adversely impacted by
government regulations and actions, and may be subject to additional regulatory
oversight with regard to privacy concerns and cybersecurity risk. Cybersecurity
companies may also be negatively affected by the decline or fluctuation of
subscription renewal rates for their products and services, which may have an
adverse effect on profit margins. These companies are also heavily dependent on
intellectual property rights and may be adversely affected by loss or impairment
of those rights. Cybersecurity companies, especially smaller companies, tend to
be more volatile than companies that do not rely heavily on technology. The
customers and/or suppliers of Cybersecurity companies may be concentrated in a
particular country, region or industry. Any adverse event affecting one of these
countries, regions or industries could have a negative impact on Cybersecurity
companies. Confronting cyberthreats amid increasing remote work environments
could result in challenges for Cybersecurity companies. Through its portfolio
companies’ customers and suppliers, the Fund is specifically exposed to Asian
Economic Risk and European Economic Risk.
Associated
Risks Related to Investing in Data Center REITs and Digital Infrastructure
Companies
Associated
Risks Related to Investing in Data Center REITs and Digital Infrastructure
Companies applies to the Global X Data Center REITs & Digital Infrastructure
ETF
Data
Center REITs and Digital Infrastructure Companies are exposed to the risks
specific to the real estate market as well as the risks that relate specifically
to the way in which Data Center REITs and Digital Infrastructure Companies are
utilized and operated. Data Center REITs and Digital Infrastructure Companies
may be affected by unique supply and demand factors that do not apply to other
real estate sectors, such as changes in demand for communications
infrastructure, consolidation of tower sites, and new technologies that may
affect demand for data centers. Data Center REITs and Digital Infrastructure
Companies are particularly affected by changes in demand for wireless
infrastructure and wireless connectivity. Such demand is affected by numerous
factors including, but not limited to, consumer demand for wireless
connectivity; availability or capacity of wireless infrastructure or associated
land interests; location of wireless infrastructure; financial condition of
customers; increased use of network sharing, roaming, joint development, or
resale agreements by customers; mergers or consolidations by and among
customers; governmental regulations, including local or state restrictions on
the proliferation of wireless infrastructure; and technological changes,
including those affecting the number or type of wireless infrastructure needed
to provide wireless connectivity to a given geographic area or resulting in the
obsolescence or decommissioning of certain existing wireless networks. Data
Center REITs and Digital Infrastructure Companies may be subject to external
risks including, but not limited to, natural disasters and supplier outages.
Certain geographical areas may be at higher risk for natural disasters, which
can increase the likelihood of power surges and supplier outages. Natural
disasters and supplier outages can lead to significant downtime, data loss, and
associated expenses. Data Center REITs and Digital Infrastructure Companies may
be subject to internal risks including, but not limited to, water supply and
climate risk and data security risk. Water damage or an imprecise climate may
cause extensive damage to critical infrastructure if adequate systems aimed at
water penetration and climate control are not installed. Data centers
increasingly rely on the use of electronic data, which may make them more
vulnerable to data security risk. Data centers are potential targets for
cyberattacks, which may have a materially adverse impact on the performance of
these companies. Data centers that do not implement more advanced access control
and security monitoring in response to internal and external threats may be at
greater risk of potential breaches or damage to data integrity.
Associated
Risks Related to Investing in Education Companies
Associated
Risks Related to Investing in Education Companies applies to the Global X
Education ETF
Education
Companies may be affected by changes in demographics and changes in consumer
demands. Furthermore, government regulations, programs and policies can have a
significant impact on the products and services provided by Education Companies,
and the prices that they charge their customers. Some Education Companies rely
heavily on tax breaks and government subsidies, which can be very
policy-dependent and may not continue indefinitely in the future. Education
Companies are also affected by macroeconomic growth and the overall strength of
the labor market, which can influence the demand for educational products and
services. Some Education Companies have faced increased regulatory scrutiny, and
in some cases litigation, due to business practices that were perceived as
unfair and misleading to consumers. Ongoing and future legal actions could have
a negative impact on Education Companies. The customers and/or suppliers of
Education Companies may be concentrated in a particular country, region or
industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on Education Companies. Such events
could include, but are not limited to, changing policies that affect birth
rates, regulations that require privatization or non-profit status, pandemics,
pandemic-related school closures, and pandemic-driven changes in school
enrollment. Under the Double Reduction policy, Chinese Education Companies
engaged in afterschool tutoring services for mandatory subjects are prohibited
from using the VIE structure to list abroad and are required to become
non-profit.
Associated
Risks Related to Investing in FinTech Companies
Associated
Risks Related to Investing in FinTech Companies applies to the Global X FinTech
ETF
FinTech
companies may be adversely impacted by government regulations, economic
conditions and deterioration in credit markets. These companies may have
significant exposure to consumers and businesses (especially small businesses)
in the form of loans and other financial products or services. FinTech companies
typically face intense competition and potentially rapid product obsolescence.
In addition, many FinTech companies store sensitive consumer information and
could be the target of cybersecurity attacks and other types of theft, which
could have a negative impact on these companies. Many FinTech companies
currently operate under less regulatory scrutiny than traditional financial
services companies and banks, but there is significant risk that regulatory
oversight could increase in the future. Higher levels of regulation could
increase costs and adversely impact the current business models of some FinTech
companies. These companies could be negatively impacted by disruptions in
service caused by hardware or software failure, or by interruptions or delays in
service by third-party data center hosting facilities and maintenance providers.
FinTech companies involved in alternative currencies may face slow adoption
rates
and be subject to higher levels of regulatory scrutiny in the future, which
could severely impact the viability of these companies. In November 2022, the
collapse and subsequent Chapter 11 bankruptcy of major cryptocurrency trading
platforms FTX and BlockFi severely impacted investor confidence in
cryptocurrencies and prompted calls for more regulatory action. FinTech
companies, especially smaller companies, tend to be more volatile than companies
that do not rely heavily on technology. The customers and/or suppliers of
FinTech companies may be concentrated in a particular country, region or
industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on FinTech companies. Through its
portfolio companies’ customers and suppliers, the Fund is specifically exposed
to Asian Economic Risk, European Economic Risk and Latin American Economic Risk.
Associated
Risks Related to Investing in Genomics Companies
Associated
Risks Related to Investing in Genomics Companies applies to the Global X
Genomics & Biotechnology ETF
Genomics
companies typically face intense competition and potentially rapid product
obsolescence. These companies are also heavily dependent on intellectual
property rights and may be adversely affected by loss or impairment of those
rights. There can be no assurance these companies will be able to successfully
protect their intellectual property to prevent the misappropriation of their
technology, or that competitors will not develop technology that is
substantially similar or superior to such companies’ technology. Genomics
companies typically engage in significant amounts of spending on research and
development, and there is no guarantee that the products or services produced by
these companies will be successful. In addition, the field of genomic science
could face increasing regulatory scrutiny in the future, which may limit the
development of this technology and impede the growth of companies that develop
and/or utilize this technology. The customers and/or suppliers of genomics
companies may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on genomics companies. Through its portfolio companies’
customers and suppliers, the Fund is specifically exposed to Asian Economic Risk
and European Economic Risk. Demand for Genomics products, generally speaking and
specific to sub-segments, may fluctuate due to unexpected events, including but
not limited to global health crises like pandemics which could strain health
care systems and alter health care needs. Such demand fluctuations could
positively or negatively impact Genomics Companies.
Associated
Risks Related to Investing in Green Building Companies
Associated
Risks Related to Investing in Green Building Companies applies to the Global X
Green Building ETF
Green
Building companies are exposed to the risks specific to the real estate market
as well as the risks that relate specifically to the way in which Green Building
companies are utilized and operated. Green Building companies may be affected by
unique supply and demand factors that do not apply to other real estate sectors,
such as changes in demand for energy efficient technology and materials. Green
Building companies may be significantly affected by changes in government
spending or regulation, zoning laws, interest rates, taxation, and real estate
market trends. Green Building companies typically engage in significant amounts
of spending on research and development and could face risks associated with
higher building costs, availability of construction materials, and the effort
associated with securing and maintaining third-party certifications. Green
Building companies typically face intense competition and potentially rapid
product obsolescence and are also heavily dependent on intellectual property
rights and may be adversely affected by loss or impairment of those rights.
Green Building companies may be concentrated in a particular country or region,
and any adverse event affecting one of these countries or regions could have a
negative impact on Green Building companies.
Associated
Risks Related to Investing in Health & Wellness Companies
Associated
Risks Related to Investing in Health & Wellness Companies applies to the
Global X Health & Wellness ETF
The
Fund invests in health and wellness companies, including companies that operate
gyms and fitness/wellness facilities as well as companies that provide,
manufacture or distribute natural/organic foods, sports/fitness equipment,
wearable fitness technology, fitness/athletic apparel, nutritional supplements,
anti-aging products and dietary services. The risks related to investing in such
companies include rapid changes in consumer trends, social trends, marketing
campaigns, and consumers’ disposable income. Health & Wellness Companies
that manufacture or distribute natural/organic foods may enter the cannabis
space which would increase the risk of facing increased regulatory scrutiny in
the future. Exposure to cannabis companies could increase the volatility of the
stocks. In addition, these companies typically face intense competition
domestically and abroad, which could adversely impact the success of these
companies. The customers and/or suppliers of health and wellness companies may
be concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on health and wellness companies. Through its portfolio companies’
customers
and suppliers, the Fund is specifically exposed to Asian Economic Risk, European
Economic Risk and North American Economic Risk.
Associated
Risks Related to Investing in Hydrogen Companies
Associated
Risks Related to Investing in Hydrogen Companies applies to the Global X
Hydrogen ETF
Hydrogen
companies typically face intense competition, short product lifecycles and
potentially rapid product obsolescence due to significant R&D expenses and
the possibility that other emerging energy technologies could become more
commercially viable. These companies may be significantly affected by
fluctuations in energy prices and in the supply and demand of renewable energy,
tax incentives, subsidies and other governmental regulations and policies.
Investors should take notice of the distinction between implemented government
policy based on legislation and less guaranteed commitments which may be
aspirational, subject to political risk, and difficult to enforce. These
companies are also heavily dependent on intellectual property rights and may be
adversely affected by loss or impairment of those rights. Hydrogen companies may
be adversely affected by commodity price volatility, changes in exchange rates,
imposition of import controls, availability of certain inputs and materials
required for production, depletion of resources, technological developments and
labor relations. A decline in the price of conventional energy such as oil and
natural gas could have a materially adverse impact on Hydrogen Companies. Energy
companies are increasingly becoming the target of malicious cybersecurity
attacks, which could adversely affect Hydrogen companies.
Associated
Risks Related to Investing in Infrastructure Development Companies
Associated
Risks Related to Investing in Infrastructure Development Companies applies to
the Global X U.S. Infrastructure Development ETF
The
Fund invests in infrastructure development companies, including companies
involved in construction, engineering, production of raw materials, production
and distribution of heavy construction equipment and industrial transportation.
General risks of infrastructure development companies include the general state
of the economy, intense competition, consolidation, domestic and international
politics, and excess capacity. In addition, infrastructure development companies
may also be significantly affected by overall capital spending levels (including
both private and public sector spending), economic cycles, technical
obsolescence, delays in modernization, labor relations and government
regulations. Some infrastructure development companies may rely heavily on
local, state or national government contracts, and are therefore subject to
higher degrees of political risk and could be negatively impacted by changes in
government policies or a deterioration in government balance sheets in the
future. The customers and/or suppliers of infrastructure development companies
may be concentrated in a particular country, region or industry. Any adverse
event affecting one of these countries, regions or industries could have a
negative impact on infrastructure development companies. Through its portfolio
companies’ customers and suppliers, the Fund is specifically exposed to North
American Economic Risk.
Associated
Risks Related to Investing in Internet of Things Companies
Associated
Risks Related to Investing in Internet of Things Companies applies to the Global
X Internet of Things ETF
Internet
of Things companies may have limited product lines, markets, financial resources
or personnel. These companies typically face intense competition and potentially
rapid product obsolescence. In addition, many Internet of Things companies store
sensitive consumer information and could be the target of cybersecurity attacks
and other types of theft, which could have a negative impact on these companies.
As a result, Internet of Things companies may be adversely impacted by
government regulations, and may be subject to additional regulatory oversight
with regard to privacy concerns and cybersecurity risk. These companies are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. Internet of Things companies could be
negatively impacted by disruptions in service caused by hardware or software
failure, or by interruptions or delays in service by third-party data center
hosting facilities and maintenance providers. Internet of Things companies,
especially smaller companies, tend to be more volatile than companies that do
not rely heavily on technology. The customers and/or suppliers of Internet of
Things companies may be concentrated in a particular country, region or
industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on Internet of Things companies. Through
its portfolio companies’ customers and suppliers, the Fund is specifically
exposed to Asian Economic Risk and European Economic Risk.
Associated
Risks Related to Investing in Companies Involved in the Metaverse
Associated
Risks Related to Investing in Companies Involved in the Metaverse applies to the
Global X Mataverse ETF
Metaverse
Leaders have exposure to various products and services, including but not
limited to video games and esports, live streaming, social media, blockchain
technology, artificial intelligence (“AI”), extended reality (e.g., augmented
reality (“AR”), virtual reality (“VR”) mixed reality (“MR”)), and technology
software and hardware (e.g., semiconductors, 5G, etc.). The risks related to
investing in Metaverse Leaders include intense competition and rapid product
obsolescence, changes in consumer preferences and/or spending, disruption in
service caused by hardware or software failure, security breaches involving
certain private, sensitive, proprietary, and confidential information and
privacy laws. In addition, there can be no assurance that competitors will not
develop technology that is substantially similar or superior to such companies’
technology. Metaverse Leaders typically engage in significant amounts of
spending on research and development and there is no guarantee that the products
or services produced by these companies will develop into viable economic
opportunities. Metaverse Leaders are potential targets for cyberattacks, which
can have a materially adverse impact on their performance. As a result, these
companies may be adversely impacted by government regulations, and may be
subject to additional regulatory oversight with regard to privacy concerns and
security risk. In addition, Metaverse technology could face increasing
regulatory scrutiny in the future, which may limit the development and impede
the growth of companies that utilize these technological advancements. Metaverse
Leaders may be adversely affected by increased scrutiny of privacy concerns,
which could limit the growth and adoption of Metaverse technology. The customers
and/or suppliers of Metaverse Leaders may be concentrated in a particular
country, region, or industry. Any adverse event affecting one of these
countries, regions or industries could have a negative impact on Metaverse
Leaders. Country, government, and/or region-specific regulations or restrictions
could have an impact on Metaverse Leaders.
Associated
Risks Related to Investing in Millennial Companies
Associated
Risks Related to Investing in Millennial Companies applies to the Global X
Millennial Consumer ETF
The
Fund invests in millennial companies, including companies involved in producing
or distributing clothing and apparel, food (including restaurants), and consumer
staples, as well as companies involved in the provision of social networks and
social media, digital media, live events and entertainment, travel and
transportation services, financial services and investments, housing and housing
services and educational services. Millennial companies may be affected by
changes in consumers’ disposable income, consumer preferences, social trends and
marketing campaigns. Millennial companies generally face a high degree of
competition and potentially rapid product obsolescence. The customers and/or
suppliers of millennial companies may be concentrated in a particular country,
region or industry. Any adverse event affecting one of these countries, regions
or industries could have a negative impact on millennial companies. Millennial
companies may participate in monopolistic practices that could make them subject
to higher levels of regulatory scrutiny and/or potential break ups in the
future, which could severely impact the viability of these companies. Through
its portfolio companies’ customers and suppliers, the Fund is specifically
exposed to Asian Economic Risk and European Economic Risk.
Associated
Risks Related to Investing in Robotics & Artificial Intelligence
Companies
Associated
Risks Related to Investing in Robotics & Artificial Intelligence Companies
applies to the Global X Robotics & Artificial Intelligence ETF
Robotics
& Artificial Intelligence companies may have limited product lines, markets,
financial resources or personnel. These companies typically face intense
competition and potentially rapid product obsolescence. These companies are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. There can be no assurance these companies
will be able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. Robotics & Artificial Intelligence companies typically engage in
significant amounts of spending on research and development, and there is no
guarantee that the products or services produced by these companies will be
successful. Robotics & Artificial Intelligence companies are potential
targets for cyberattacks, which can have a materially adverse impact on the
performance of these companies. Robotics & Artificial Intelligence
companies, especially smaller companies, tend to be more volatile than companies
that do not rely heavily on technology. In addition, robotics and artificial
intelligence technology could face increasing regulatory scrutiny in the future,
which may limit the development of this technology and impede the growth of
companies that develop and/or utilize this technology. Similarly, the collection
of data from consumers and other sources could face increased scrutiny as
regulators consider how the data is collected, stored, safeguarded and used.
Robotics & Artificial Intelligence companies face increased risk from trade
agreements between countries that develop these technologies and countries in
which customers of these technologies are based. Lack of resolution or potential
imposition of trade tariffs may hinder the companies’ ability to successfully
deploy their inventories. The customers and/or suppliers of Robotics &
Artificial Intelligence companies may be concentrated in a particular country,
region or industry. Any adverse event affecting one of these countries, regions
or industries could have a negative impact on Robotics & Artificial
Intelligence companies. Through
its
portfolio companies’ customers and suppliers, the Fund is specifically exposed
to Asian Economic Risk and European Economic Risk.
Associated
Risks Related to Investing in Solar Companies
Associated
Risks Related to Investing in Solar Companies applies to the Global X Solar
ETF
Solar
Companies typically face intense competition, short product lifecycles and
potentially rapid product obsolescence. These companies may be significantly
affected by fluctuations in energy prices and in the supply and demand of
renewable energy, tax incentives, subsidies and other governmental regulations
and policies. Investors should take notice of the distinction between
implemented government policy based on legislation and less guaranteed
commitments which may be aspirational, subject to political risk, and difficult
to enforce. These companies are also heavily dependent on intellectual property
rights and may be adversely affected by loss or impairment of those rights.
Solar Companies may be adversely affected by commodity price volatility, changes
in exchange rates, imposition of import controls, availability of certain inputs
and materials required for production, depletion of resources, technological
developments and labor relations. A decline in the price of conventional energy
such as oil and natural gas could have a materially adverse impact on Solar
Companies. Renewable energy resources may be highly dependent upon government
policies that support renewable energy generation and enhance the economic
viability of owning renewable electric generation assets. Additionally, adverse
environmental conditions may cause fluctuations in renewable electric generation
and adversely affect the cash flows associated with Solar
Companies.
Associated
Risks Related to Investing in Telemedicine & Digital Health
Companies
Associated
Risks Related to Investing in Telemedicine & Digital Health Companies
applies to the Global X Telemedicine & Digital Health ETF
Telemedicine
& Digital Health Companies typically face intense competition and
potentially rapid product obsolescence. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. Telemedicine & Digital Health Companies typically engage in
significant amounts of spending on research and development, and there is no
guarantee that the products or services produced by these companies will be
successful. In addition, the field of digital health and telemedicine could face
increasing regulatory scrutiny in the future, which may limit the development of
this technology and impede the growth of companies that develop and/or utilize
this technology. Many Telemedicine & Digital Health Companies store and
transmit sensitive data that is subject to strict regulations. As a result,
these companies may be particularly vulnerable to cybersecurity breaches or
other means by which sensitive data could be exposed. Breaches of this nature
would have a materially adverse effect on a given company, and could lead to
stricter regulation in the future. The customers and/or suppliers of
Telemedicine & Digital Health Companies may be concentrated in a particular
country, region or industry. Any adverse event affecting one of these countries,
regions or industries could have a negative impact on Telemedicine & Digital
Health Companies. Demand for Telemedicine & Digital Health services may
fluctuate due to unexpected events, including but not limited to pandemics and
related strains on health care systems. Such demand fluctuations could
positively or negatively impact Telemedicine & Digital Health Companies.
Telemedicine & Digital Health services may not be eligible for reimbursement
from insurance policies or government programs, potentially limiting the
adoption of such services. Any changes in reimbursement policies may negatively
impact the operations of Telemedicine & Digital Health service
providers.
Associated
Risks Related to Investing in Thematic Growth Companies
Associated
Risks Related to Investing in Thematic Growth Companies applies to the Global X
Thematic Growth ETF
Companies
focused on business activities in emerging economic themes typically face
intense competition and potentially rapid product obsolescence. Thematic
companies may have limited product lines, markets, financial resources or
personnel. These companies typically engage in significant amounts of spending
on research and development, capital expenditures and mergers and acquisitions,
and there is no guarantee that the products or services produced by these
companies will be successful.
These
companies are also frequently dependent on intellectual property rights and may
be adversely affected by loss or impairment of those rights. There can be no
assurance these companies will be able to successfully protect their
intellectual property to prevent the misappropriation of their technology, or
that competitors will not develop technology that is substantially similar or
superior to such companies’ technology. Such companies may be potential targets
for cyberattacks, which can have a materially adverse impact on the performance
of these companies. The emergent nature of many economic
themes
could result in increasing regulatory scrutiny in the future, which may impede
the growth of companies that develop and/or focus on such economic themes.
Similarly, the collection of data from consumers and other sources is frequently
a critical component in emerging economic themes and could face increased
scrutiny as regulators consider how the data is collected, stored, safeguarded
and used. Finally, these companies may be involved in young, fast evolving
industries with increased exposure to the risks associated with changes in
applicable laws (including regulation, other rule changes, and related federal
and state enforcement activities), as well as market developments, which may
cause businesses to contract or close suddenly and negatively impact the value
of these companies. Thematic companies may face adverse economic conditions
during periods of rising interest rates as borrowing costs increase, potentially
limiting capital spending and growth opportunities. Similarly, Thematic
companies tend to have higher expected future earnings that, if discounted at a
higher prevailing interest rate, could result in lower valuation estimates.
Sales
growth and acceleration for a particular economic theme may not continue, and
the business models employed by the companies focused on a particular economic
theme may not prove to be successful. The customers and/or suppliers of thematic
companies may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on thematic companies. These companies may also be more
affected by overall capital spending levels, economic cycles and changes in
consumer and social trends than companies focused on more established business
industries. Such companies, especially smaller companies, tend to be more
volatile than companies that do not rely heavily on technology and may
experience greater downturns in the case of falling equity markets. Such
considerations may lead the value of companies involved in a given economic
theme to at times be heavily correlated with the value of companies involved in
a different economic theme, which may lead the Fund to experience greater
volatility than it would likely experience if a broader investment strategy were
employed. These companies may participate in monopolistic practices that could
make them subject to higher levels of regulatory scrutiny and/or potential break
ups in the future, which could severely impact the viability of these companies.
In
addition to all of the risks described above, companies focused on particular
economic themes may face more specific risks related to such themes, including,
but not limited to the risks described below.
Infrastructure
Development
Infrastructure
development companies face risks related to the general state of the economy,
intense competition, consolidation, domestic and international politics, and
excess capacity. Some infrastructure development companies may rely heavily on
local, state or national government contracts, and are therefore subject to
higher degrees of political risk and could be negatively impacted by changes in
government policies or a deterioration in government balance sheets in the
future.
Lithium
Production and Battery Technology
Companies
involved in the manufacturing of lithium-ion batteries are subject to the
effects of price fluctuations of traditional and alternative sources of energy,
developments in battery and alternative energy technology, the possibility that
government subsidies for alternative energy will be eliminated and the
possibility that lithium-ion technology is not suitable for widespread adoption.
The price of lithium may be affected by changes in inflation rates, interest
rates, monetary policy, economic conditions and political stability. The price
of lithium may fluctuate substantially over short periods of time, therefore
lithium production companies may be more volatile than other types of
investments. In addition, lithium production companies may also be significantly
affected by import controls, worldwide competition, liability for environmental
damage, depletion of resources, and mandated expenditures for safety and
pollution control devices.
Health
and Wellness
Companies
focused on health and wellness products face risks associated with rapid changes
in consumer trends, social trends, marketing campaigns, and consumers’
disposable income. In addition, these companies typically face intense
competition domestically and abroad.
Aging
Population
Aging
Population companies may be affected by government regulations and government
healthcare programs, as well as increases or decreases in the cost of medical
products and services and product liability claims.
Millennial
Spending
Companies
that benefit from millennial purchasing power may be affected by changes in
consumers’ disposable income, consumer preferences, social trends and marketing
campaigns.
Internet
of Things
Companies
focused on the “internet of things” could be negatively impacted by disruptions
in service caused by hardware or software failure, or by interruptions or delays
in service by third-party data center hosting facilities and maintenance
providers.
Social
Media
Social
media companies may face disruption in service caused by hardware or software
failure, interruptions or delays in service by third-party data center hosting
facilities and maintenance providers, security breaches involving certain
private, sensitive, proprietary and confidential information managed and
transmitted by social media companies, and privacy concerns and laws, evolving
internet regulation and other foreign or domestic regulations that may limit or
otherwise affect the operations of such companies.
Financial
Technology (“FinTech”)
FinTech
companies may be adversely impacted by deterioration in credit markets, as these
companies may have significant exposure to consumers and businesses
(particularly small businesses) in the form of loans and other financial
products and services. Many FinTech companies currently operate under less
regulatory scrutiny than traditional financial services companies and banks, but
there is significant risk that regulatory oversight could increase in the
future. Higher levels of regulation could increase costs and adversely impact
the current business models of some FinTech companies. FinTech companies
involved in alternative currencies may face slow adoption rates and be subject
to higher levels of regulatory scrutiny in the future, which could severely
impact the viability of these companies.
Autonomous
and Electric Vehicles
Companies
that produce the raw materials that are used in electric vehicles may be
concentrated in certain commodities, and therefore be exposed to the price
fluctuations of those commodities.
E-commerce
E-commerce
companies typically compete aggressively on price, potentially affecting their
long run profitability. Due to the online nature of e-commerce companies and
their involvement in processing, storing and transmitting large amounts of data,
these companies are particularly vulnerable to cyber security risk.
Cloud
Computing
Cloud
computing companies store sensitive consumer information and could be the target
of cybersecurity attacks and other types of theft, which could have a negative
impact on these companies. As a result, cloud computing companies may be
adversely impacted by government regulations, and may be subject to additional
regulatory oversight with regard to privacy concerns and cybersecurity
risk.
Cannabis
The
cannabis industry is a very young, fast evolving industry with increased
exposure to the risks associated with changes in applicable laws (including
increased regulation, other rule changes, and related federal and state
enforcement activities), as well as market developments, which may cause
businesses to contract or close suddenly and negatively impact the value of
securities of cannabis companies.
Laws
and regulations related to the possession, use, sale, transport and cultivation
of cannabis vary throughout the world, and legislation in certain countries may
restrict or limit the ability of certain cannabis companies to sell their
products. Additionally, even if a company’s operations are legal under current
law, such operations may become illegal in the future if the applicable law
changes. Within the United States, federal law criminalizing the use of
marijuana remains enforceable notwithstanding state laws that legalize its use
for medicinal and recreational purposes. This conflict between the regulation of
marijuana under U.S. federal and state law creates volatility and risk for
cannabis companies,, and any stepped-up enforcement of marijuana laws by the
federal government could adversely affect the value of companies in the cannabis
industry. Given the uncertain nature of the regulation of the cannabis industry
in the United States, investments in cannabis companies could, under
unique
circumstances, raise issues under one or more of those laws, and any
investigation or prosecution related to those investments could result in
expense and losses to the investing entity.
Video
Games and Esports
Video
game and esports companies may be dependent on one or a small number of product
or product franchises for a significant portion of their revenue and profits.
They may also be subject to shifting consumer preferences, including preferences
with respect to gaming console platforms, and changes in consumer discretionary
spending. Recently, video game and esports companies have faced enhanced
regulatory scrutiny, and certain regulators have at times suspended the issuance
of licenses for new video games.
Genomics
& Biotechnology
Genomics
companies typically face intense competition and potentially rapid product
obsolescence. These companies are also heavily dependent on intellectual
property rights and may be adversely affected by loss or impairment of those
rights. There can be no assurance these companies will be able to successfully
protect their intellectual property to prevent the misappropriation of their
technology, or that competitors will not develop technology that is
substantially similar or superior to such companies’ technology. Genomics
companies typically engage in significant amounts of spending on research and
development, and there is no guarantee that the products or services produced by
these companies will be successful. In addition, the field of genomic science
could face increasing regulatory scrutiny in the future, which may limit the
development of this technology and impede the growth of companies that develop
and/or utilize this technology.
Robotics
& Artificial Intelligence
Robotics
& Artificial Intelligence companies may have limited product lines, markets,
financial resources or personnel. These companies typically face intense
competition and potentially rapid product obsolescence. These companies are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. There can be no assurance these companies
will be able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. Robotics & Artificial Intelligence companies typically engage in
significant amounts of spending on research and development, and there is no
guarantee that the products or services produced by these companies will be
successful. Robotics & Artificial Intelligence companies are potential
targets for cyberattacks, which can have a materially adverse impact on the
performance of these companies. Robotics & Artificial Intelligence
companies, especially smaller companies, tend to be more volatile than companies
that do not rely heavily on technology.
Artificial
Intelligence & Technology
Artificial
Intelligence & Big Data Companies typically face intense competition and
potentially rapid product obsolescence. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. Artificial Intelligence & Big Data Companies typically engage in
significant amounts of spending on research and development and mergers and
acquisitions, and there is no guarantee that the products or services produced
by these companies will be successful. Artificial Intelligence & Big Data
Companies are potential targets for cyberattacks, which can have a materially
adverse impact on the performance of these companies. In addition, artificial
intelligence technology could face increasing regulatory scrutiny in the future,
which may limit the development of this technology and impede the growth of
companies that develop and/or utilize this technology. Similarly, the collection
of data from consumers and other sources could face increased scrutiny as
regulators consider how the data is collected, stored, safeguarded and used.
Cybersecurity
Cybersecurity
companies may have limited product lines, markets, financial resources or
personnel. These companies typically face intense competition and potentially
rapid product obsolescence. Cybersecurity companies may be adversely impacted by
government regulations and actions, and may be subject to additional regulatory
oversight with regard to privacy concerns and cybersecurity risk. Cybersecurity
companies may also be negatively affected by the decline or fluctuation of
subscription renewal rates for their products and services, which may have an
adverse effect on profit margins. These companies are also heavily dependent on
intellectual property rights and may be adversely affected by loss or impairment
of those rights.
Cybersecurity
companies, especially smaller companies, tend to be more volatile than companies
that do not rely heavily on technology.
Education
Education
Companies may be affected by changes in demographics and changes in consumer
demands. Furthermore, government regulations, programs and policies can have a
significant impact on the products and services provided by education companies.
Some Education Companies rely heavily on tax breaks and government subsidies,
which can be very policy-dependent and may not continue indefinitely in the
future. Education Companies are also affected by macroeconomic growth and the
overall strength of the labor market, which can influence the demand for
educational products and services. Some Education Companies have faced increased
regulatory scrutiny, and in some cases litigation, due to business practices
that were perceived as unfair and misleading to consumers. Ongoing and future
legal actions could have a negative impact on Education Companies. The customers
and/or suppliers of Education Companies may be concentrated in a particular
country, region or industry. Any adverse event affecting one of these countries,
regions or industries could have a negative impact on Education Companies. Such
events could include pandemics, pandemic-related school closures, and
pandemic-driven changes in school enrollment.
Telemedicine
& Digital Health
Telemedicine
& Digital Health Companies typically face intense competition and
potentially rapid product obsolescence. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. Telemedicine & Digital Health Companies typically engage in
significant amounts of spending on research and development, and there is no
guarantee that the products or services produced by these companies will be
successful. In addition, the field of digital health and telemedicine could face
increasing regulatory scrutiny in the future, which may limit the development of
this technology and impede the growth of companies that develop and/or utilize
this technology.
Associated
Risks Related to Investing in Video Game & Esports Companies
Associated
Risks Related to Investing in Video Game & Esports Companies applies to the
Global X Video Games & Esports ETF
Video
Game & Esports companies may have limited product lines, markets, financial
resources or personnel. These companies typically face intense competition and
potentially rapid product obsolescence. Video Game & Esports companies may
be dependent on one or a small number of product or product franchises for a
significant portion of their revenue and profits. They may also be subject to
shifting consumer preferences, including preferences with respect to gaming
console platforms, and changes in consumer discretionary spending. Video Game
& Esports companies may be adversely impacted by government regulations, and
may be subject to additional regulatory oversight with regard to privacy
concerns and cybersecurity risk. Recently, Video Game & Esports companies
have faced enhanced regulatory scrutiny, and certain regulators have at times
suspended the issuance of licenses for new video games or limited the hours that
video games can be played by individuals. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. Video Game & Esports companies could be
negatively impacted by disruptions in service caused by hardware or software
failure. Video Game & Esports companies, especially smaller companies, tend
to be more volatile than companies that do not rely heavily on technology. The
customers and/or suppliers of Video Game & Esports companies may be
concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on Video Game & Esports companies. Through its portfolio companies’
customers and suppliers, the Fund is specifically exposed to Asian Economic Risk
and European Economic Risk.
Associated
Risks Related to Investing in Wind Energy Companies
Associated
Risks Related to Investing in Wind Energy Companies applies to the Global X Wind
Energy ETF
Wind
Energy Companies typically face intense competition, short product lifecycles
and potentially rapid product obsolescence. These companies may be significantly
affected by fluctuations in energy prices and in the supply and demand of
renewable energy, tax incentives, subsidies and other governmental regulations
and policies. Investors should take notice of the distinction between
implemented government policy based on legislation and less guaranteed
commitments which may be aspirational, subject to political risk, and difficult
to enforce. These companies are also heavily dependent on intellectual property
rights and may be adversely affected by loss or impairment of those rights. Wind
Energy Companies may be
adversely
affected by commodity price volatility, changes in exchange rates, imposition of
import controls, availability of certain inputs and materials required for
production, depletion of resources, technological developments and labor
relations. A decline in the price of conventional energy such as oil and natural
gas could have a materially adverse impact on Wind Energy Companies. Renewable
energy resources may be highly dependent upon government policies that support
renewable energy generation and enhance the economic viability of owning
renewable electric generation assets. Additionally, adverse environmental
conditions may cause fluctuations in renewable electric generation and adversely
affect the cash flows associated with Wind Energy Companies.
Associated
Risks Related to Socially Responsible Investments
Associated
Risks Related to Socially Responsible Investments applies to the Global X Green
Building ETF
Certain
social responsibility investment criteria limit the types of securities that can
be included in the Underlying Index. In order to comply with its social
responsibility investment criteria, the Underlying Index may be required to
exclude advantageous investment opportunities or reduce exposure at
inappropriate times. This could cause the Underlying Index to underperform other
benchmark indices. The Fund’s social responsibility investment criteria could
therefore cause it to underperform funds that do not maintain social
responsibility investment criteria by limiting the Fund’s exposure to certain
types of profitable activity.
Cannabis
Price Fluctuation Risk
Cannabis
Price Fluctuation Risk applies to the Global X Cannabis ETF
The
Fund invests in companies engaged in the cannabis industry, which may be
susceptible to fluctuations in the price of cannabis. Cannabis prices may be
influenced or characterized by unpredictable factors, including, where
applicable, high volatility, changes in supply and demand relationships,
weather, agriculture, trade, changes in interest rates and monetary and other
governmental policies, action and inaction. Securities of companies held by the
Fund that are dependent on a single commodity, such as cannabis, may typically
exhibit even higher volatility attributable to cannabis prices. In addition, the
lack of a futures market in cannabis may impede the ability of Cannabis
Companies to hedge their cannabis exposure risks.
Cannabis
Price Relationship Risk
Cannabis
Price Relationship Risk applies to the Global X Cannabis ETF
The
Underlying Index measures the performance of companies involved in the cannabis
industry and not the performance of the price of cannabis itself. The securities
of companies involved in the cannabis industry may under- or over-perform the
price of cannabis over the short-term or the long-term.
Capitalization
Risk
Investing
in issuers within the same market capitalization category carries the risk that
the category may be out of favor due to current market conditions or investor
sentiment.
Large-Capitalization
Companies Risk
Large-Capitalization
Companies Risk applies to the Global X Robotics & Artificial Intelligence
ETF, Global X Internet of Things ETF, Global X FinTech ETF, Global X Video Games
& Esports ETF, Global X Autonomous & Electric Vehicles ETF, Global X
Cloud Computing ETF, Global X Data Center REITs & Digital Infrastructure
ETF, Global X Cybersecurity ETF, Global X Artificial Intelligence &
Technology ETF, Global X Mataverse ETF, Global X Millennial Consumer ETF, Global
X Genomics & Biotechnology ETF, Global X China Biotech Innovation ETF,
Global X Telemedicine & Digital Health ETF, Global X Aging Population ETF,
Global X Health & Wellness ETF, Global X CleanTech ETF, Global X U.S.
Infrastructure Development ETF, Global X AgTech & Food Innovation ETF,
Global X Clean Water ETF, Global X Solar ETF, Global X Wind Energy ETF, Global X
Green Building ETF and Global X Thematic Growth ETF
Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization 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.
Mid-Capitalization
Companies Risk
Mid-Capitalization
Companies Risk applies to the Global X Robotics & Artificial Intelligence
ETF, Global X Internet of Things ETF, Global X FinTech ETF, Global X Video Games
& Esports ETF, Global X Autonomous & Electric Vehicles ETF, Global X
Cloud Computing ETF, Global X Data Center REITs & Digital Infrastructure
ETF, Global X Cybersecurity ETF, Global X Mataverse ETF, Global X Education ETF,
Global X Cannabis ETF, Global X Genomics & Biotechnology ETF, Global X China
Biotech Innovation ETF, Global X Telemedicine & Digital Health ETF, Global X
Aging Population ETF, Global X Health & Wellness ETF, Global X CleanTech
ETF, Global X U.S. Infrastructure Development ETF, Global X AgTech & Food
Innovation ETF, Global X Blockchain ETF, Global X Clean Water ETF, Global X
Hydrogen ETF, Global X Solar ETF, Global X Wind Energy ETF, Global X Green
Building ETF and Global X Thematic Growth ETF
Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk
Small-Capitalization
Companies Risk applies to the Global X Robotics & Artificial Intelligence
ETF, Global X FinTech ETF, Global X Video Games & Esports ETF, Global X
Autonomous & Electric Vehicles ETF, Global X Cloud Computing ETF, Global X
Data Center REITs & Digital Infrastructure ETF, Global X Cybersecurity ETF,
Global X Millennial Consumer ETF, Global X Education ETF, Global X Cannabis ETF,
Global X Genomics & Biotechnology ETF, Global X China Biotech Innovation
ETF, Global X Telemedicine & Digital Health ETF, Global X Aging Population
ETF, Global X Health & Wellness ETF, Global X CleanTech ETF, Global X U.S.
Infrastructure Development ETF, Global X AgTech & Food Innovation ETF,
Global X Blockchain ETF, Global X Clean Water ETF, Global X Hydrogen ETF, Global
X Wind Energy ETF, Global X Green Building ETF and Global X Thematic Growth
ETF
The
Fund may invest a significant percentage of its assets in small-capitalization
companies. If it does so, it may be subject to certain risks associated with
small-capitalization companies. These companies often have greater price
volatility, lower trading volume and less liquidity than larger, more
established companies. In addition, these companies are often subject to less
analyst coverage and may be in early and less predictable periods of their
corporate existences. These companies tend to have smaller revenues, narrower
product lines, less management depth and experience, smaller shares of their
product or service markets, fewer financial resources and less competitive
strength than larger companies.
Micro-Capitalization
Companies Risk
Micro-Capitalization
Companies Risk applies to the Global X Cannabis ETF, Global X AgTech & Food
Innovation ETF, Global X Blockchain ETF, Global X Hydrogen ETF and Global X
Thematic Growth ETF
The
Fund may invest in micro-capitalization companies. These companies are subject
to substantially greater risks of loss and price fluctuations because their
earnings and revenues tend to be less predictable (and some companies may
experience significant losses), and their share prices tend to be more volatile
and their markets less liquid than companies with larger market capitalizations.
Micro-capitalization companies may be newly formed or in the early stages of
development, with limited product lines, markets or financial resources and may
lack management depth. In addition, there may be less public information
available about these companies. The shares of micro-capitalization companies
tend to trade less frequently than those of larger, more established companies,
which can adversely affect the pricing of these securities and the future
ability to sell these securities. Also, it may take a long time before the Fund
realizes a gain, if any, on an investment in a micro-capitalization company.
Cash
Transaction Risk
Cash
Transaction Risk applies to the Global X China Biotech Innovation ETF, Global X
AgTech & Food Innovation ETF, Global X Solar ETF and Global X Wind Energy
ETF
Unlike
most ETFs, the Fund intends to effect a significant portion of creations and
redemptions for cash, rather than in-kind securities. As a result, an investment
in the Fund may be less tax-efficient than an investment in a more conventional
ETF.
ETFs
generally are able to make in-kind redemptions and avoid being taxed on gain on
the distributed portfolio securities at the Fund level. Because the Fund
currently intends to effect redemptions for cash, rather than in-kind
distributions, it may be required to sell portfolio securities in order to
obtain the cash needed to distribute redemption proceeds. If the Fund recognizes
gain on these sales, this generally will cause the Fund to recognize gain it
might not otherwise have recognized, or to recognize such gain sooner than would
otherwise be required if it were to distribute portfolio securities in-kind. The
Fund generally intends to distribute these gains to shareholders to avoid being
taxed on this gain at the Fund level and otherwise comply with the special tax
rules that apply to it. This strategy may cause shareholders to be subject to
tax on gains they would not otherwise be subject to, or at an earlier date than,
if they had made an investment in a different ETF. Moreover, cash transactions
may have to be carried out over several days if the securities market is
relatively illiquid and may involve considerable brokerage fees and taxes. These
factors may result in wider spreads between the bid and the offered prices of
the Fund’s Shares than for more conventional ETFs. To the extent that the
maximum additional variable charge for cash creation or cash redemption
transactions is insufficient to cover the transaction costs of purchasing or
selling portfolio securities, the Fund’s performance could be negatively
impacted.
Focus
Risk
Focus
Risk applies to each Fund
In
following its methodology, the Underlying Index may be focused to a significant
degree in securities of issuers in a particular industry or group of industries
and/or may have significant exposure to one or more sectors. To the extent that
the Underlying Index focuses in the securities of issuers in such an area, the
Fund will also focus its investments to approximately the same extent. In such
event, the Fund’s performance will be particularly susceptible to adverse events
impacting such industry or sector, and the Fund will face greater risk than if
it were diversified broadly over numerous such areas. Such heightened risks, any
of which may adversely affect the companies in which the Fund invests, may
include, but are not limited to, the following: general economic conditions or
cyclical market patterns that could negatively affect supply and demand;
competition for resources; adverse labor relations; political or world events;
obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular industry or sector. In addition, at times, such industry, group of
industries or sector may be out of favor and underperform other such categories
or the market as a whole.
Risks
Related to Investing in the Automobiles Industry
Risks
Related to Investing in the Automobiles Industry applies to the Global X
Autonomous & Electric Vehicles ETF
The
automobiles industry can be highly cyclical, and companies in the industry may
suffer periodic operating losses. The industry can be significantly affected by
labor relations and fluctuating component prices. While most of the major
manufacturers are large, financially strong companies, many others are small and
can be non-diversified in both product line and customer base. Additionally,
developments in automotive technologies (e.g., autonomous vehicle technologies)
may require significant capital expenditures that may not generate profits for
several years, if any. Companies in the automobiles industry may be
significantly subject to government policies and regulations regarding imports
and exports of automotive products. Governmental policies affecting the
automotive industry, such as taxes, tariffs, duties, subsidies, and import and
export restrictions on automotive products can influence industry profitability.
In addition, such companies must comply with environmental laws and regulations.
Additional or more stringent environmental laws and regulations may be enacted
in the future and such changes could have a material adverse effect on the value
of such companies.
Risks
Related to Investing in the Biotechnology Industry
Risks
Related to Investing in the Biotechnology Industry applies to the Global X
Genomics & Biotechnology ETF, Global X China Biotech Innovation ETF and
Global X Aging Population ETF
Biotechnology
companies depend on the successful development of new and proprietary
technologies. There can be no assurance that the development of new technologies
will be successful or that intellectual property rights will be obtained with
respect to new technologies. The loss or impairment of intellectual property
rights may adversely affect the profitability of biotechnology companies. In
addition, companies in the biotechnology industry spend heavily on research and
development and their products or services may not prove commercially successful
or may become obsolete quickly. The risks of high development costs may be
exacerbated by the inability to raise prices as a result of managed care
pressure, government regulation or price controls. Biotechnology companies can
suffer persistent losses during the transition of new products from development
to production or when products are or may be subject to
regulatory
approval processes or regulatory scrutiny and, as a consequence, the earnings of
biotechnology companies may be erratic. Companies in the biotechnology industry
are also exposed to the risk that they will be subject to products liability
claims. Companies involved in the biotechnology industry may be subject to
extensive government regulations by the U.S. Food and Drug Administration, the
U.S. Environmental Protection Agency and the U.S. Department of Agriculture,
among other foreign and domestic regulators. Such regulation may significantly
affect and limit biotechnology research, product development and approval of
products.
Risks
Related to Investing in the Chemicals Industry
Risks
Related to Investing in the Chemicals Industry applies to the Global X AgTech
& Food Innovation ETF
The chemicals industry
can be significantly affected by competition, product obsolescence, raw
materials prices, and government regulation. As regulations are developed and
enforced, chemical companies could be required to alter or cease production of a
product, to pay fines, to pay for cleaning up a disposal site, or to agree to
restrictions on their operations. Some of the materials and processes used by
these companies involve hazardous components and there can be risks associated
with their production, handling, and disposal.
Risks
Related to Investing in the Communication Services Sector
Risks
Related to Investing in the Communication Services Sector applies to the Global
X Video Games & Esports ETF and Global X Mataverse ETF
The
communication services sector consists of both companies in the
telecommunication services industry as well as those in the media and
entertainment industry. Examples of companies in the telecommunication services
industry group include providers of fiber-optic, fixed-line, cellular and
wireless telecommunications networks. Companies in the media and entertainment
industry group encompass a variety of services and products including television
broadcasting, gaming products, social media, networking platforms, online
classifieds, online review websites, and Internet search engines. Companies in
the communication services sector may be affected by industry competition,
substantial capital requirements, government regulation, and obsolescence of
communications products and services due to technological advancement.
Fluctuating domestic and international demand, shifting demographics and often
unpredictable changes in consumer tastes can drastically affect a communication
services company's profitability. In addition, while all companies may be
susceptible to network security breaches, certain companies in the communication
services sector may be particular targets of hacking and potential theft of
proprietary or consumer information or disruptions in service, which could have
a material adverse effect on their businesses.
The
communication services sector of a country’s economy is often subject to
extensive government regulation. The costs of complying with governmental
regulations, delays or failure to receive required regulatory approvals, or the
enactment of new regulatory requirements may negatively affect the business of
communications companies. Government actions around the world, specifically in
the area of pre-marketing clearance of products and prices, can be arbitrary and
unpredictable. Companies in the communication services sector may encounter
distressed cash flows due to the need to commit substantial capital to meet
increasing competition, particularly in developing new products and services
using new technology. Technological innovations may make the products and
services of certain communications companies obsolete.
In
the U.S., the communication services sector is characterized by increasing
competition and regulation by the U.S. Federal Communications Commission and
various state regulatory authorities. Companies in the communication services
sector are generally required to obtain franchises or licenses in order to
provide services in a given location. Licensing and franchise rights in the
communication services sector are limited, which may provide an advantage to
certain participants. Limited availability of such rights, high barriers to
market entry and regulatory oversight, among other factors, have led to
consolidation of companies within the sector, which could lead to further
regulation or other negative effects in the future. Furthermore, operations of
foreign communication services sector companies may be perceived by domestic
regulators as national security risks, resulting in restrictions or even bans on
such operations.
Risks
Related to Investing in the Consumer Discretionary Sector
Risks
Related to Investing in the Consumer Discretionary Sector applies to the Global
X Autonomous & Electric Vehicles ETF, Global X Millennial Consumer ETF,
Global X Education ETF and Global X Health & Wellness ETF
The
success of consumer product manufacturers and retailers is tied closely to the
performance of the overall domestic and international economy, interest rates,
competition and consumer confidence. Success depends heavily on disposable
household income and consumer spending and may be strongly affected by social
trends and marketing campaigns. Moreover, the consumer discretionary sector can
be significantly affected by several factors, including, without limitation, the
performance of domestic and international economies, exchange rates, changing
consumer preferences, demographics, marketing campaigns, cyclical revenue
generation, consumer confidence, commodity price volatility, labor relations,
interest rates, import and export controls, intense competition, technological
developments and government regulation. Consumer recessionary fears could impact
discretionary spending due to rising interest rates and a high inflationary
environment.
Risks
Related to Investing in the Consumer Staples Sector
Risks
Related to Investing in the Consumer Staples Sector applies to the Global X
AgTech & Food Innovation ETF
Companies
in the consumer staples sector may be affected by the regulation of various
product components and production methods, marketing campaigns and changes in
the global economy, consumer spending and consumer demand. Tobacco companies, in
particular, may be adversely affected by new laws, regulations and litigation.
Household and personal products are particularly sensitive to increased
competition, decreased demand due to changes in consumer preferences and brand
diminution. Food products are subject to the risk that raw materials are
accidentally or maliciously contaminated or that products are contaminated
through the supply chain due to human error or equipment failure. Such incidents
may result in loss of market share and loss of revenue for companies in the
consumer staples sector. Companies in the consumer staples sector may also be
adversely affected by changes or trends in commodity prices, which may be
influenced by unpredictable factors. These companies may be subject to severe
competition, which may have an adverse impact on their
profitability.
Risks
Related to Investing in the Diversified Consumer Services Industry
Risks
Related to Investing in the Diversified Consumer Services Industry applies to
the Global X Education ETF
The
diversified consumer services industry includes companies providing educational
services, either online or through conventional teaching methods. It also
includes specialized consumer services not classified elsewhere, such as
residential, home security, legal, personal, renovation & interior design,
consumer auctions, and wedding & funeral services. Government regulations,
programs and policies can have a significant impact on the products and services
provided by companies in the diversified consumer services industry. Some
companies in the diversified consumer services industry rely heavily on tax
breaks and government subsidies, which can be very policy-dependent and may not
continue indefinitely in the future. Companies in the diversified consumer
services industry are also affected by macroeconomic growth and the overall
strength of the labor market, which can influence the demand for products and
services. Some companies in the diversified consumer services industry have
recently faced increased regulatory scrutiny, and in some cases litigation, due
to business practices that were perceived as unfair and misleading to
consumers.
Risks
Related to Investing in the Electrical Equipment Industry
Risks
Related to Investing in the Electrical Equipment Industry applies to the Global
X CleanTech ETF, Global X Hydrogen ETF and Global X Wind Energy ETF
The
Electrical Equipment Industry includes companies that produce electric cables
and wires, electrical components or equipment; and manufacturers of
power-generating equipment and other heavy electrical equipment (including power
turbines, heavy electrical machinery intended for fixed-use and large electrical
systems). The Electrical Equipment Industry is fragmented but includes a number
of large incumbent companies that may compete heavily for market share in the
space. Companies in the Electrical Equipment Industry may involve operations
with high fixed costs. Because copper, aluminum, steel and other raw materials
are often critical components of the products manufactured in the Electrical
Equipment Industry, fluctuations in commodities prices for such raw materials
may impact the profitability of companies in this industry. Purchasers of such
products may be geographically dispersed, which may subject companies in this
industry to any increases in geopolitical uncertainty or global macroeconomic
trends.
Risks
Related to Investing in the Entertainment Industry
Risks
Related to Investing in the Entertainment Industry applies to the Global X Video
Games & Esports ETF and Global X Mataverse ETF
Entertainment
companies may be impacted by high costs of research and development of new
content and services in an effort to stay relevant in a highly competitive
industry, and entertainment products may face a risk of rapid obsolescence.
Entertainment companies are subject to risks that include cyclicality of
revenues and earnings, changing tastes and topical interests, and decreases in
the discretionary income of their targeted consumers. Sales of content through
physical formats and traditional content delivery services may be displaced by
new content delivery mechanisms, such as streaming technology, and it is
possible that such new content delivery mechanisms may themselves become
obsolete over time. The entertainment industry is regulated, and changes
to rules regarding advertising and the content produced by entertainment
companies can increase overall production and distribution costs. Companies in
the entertainment industry have at times faced increased regulatory pressure
which has delayed or prohibited the release of entertainment
content.
Risks
Related to Investing in the Equity Real Estate Investment Industry
Risks
Related to Investing in the Equity Real Estate Investment Industry applies to
the Global X Data Center REITs & Digital Infrastructure ETF and Global X
Green Building ETF
The
Fund is concentrated in the Equity Real Estate Investment Industry, which
comprises Real Estate Investment Trusts (REITs). For more information, see
Asset
Class Risk - Real Estate Stocks and Real Estate Investment Trusts (REITs)
Investment Risk in
the SUMMARY
OF PRINCIPAL RISKS
and A
FURTHER DISCUSSION OF PRINCIPAL RISKS
sections of the Prospectus.
Risks
Related to Investing in the Food Products Industry
Risks
Related to Investing in the Food Products Industry applies to the Global X
AgTech & Food Innovation ETF
The
food products industry is subject to various risks, including evolving consumer
preferences, nutritional and health-related concerns, federal, state and local
food inspection and processing controls, consumer product liability claims,
risks of product tampering, and the availability and expense of liability
insurance. The meat and poultry industries are subject to scrutiny due to the
association of meat and poultry products with outbreaks of illness caused by
food borne pathogens. Product recalls are sometimes required in the food
industry to withdraw contaminated or mislabeled products from the market.
Additionally, the failure to identify and react appropriately to changes in
consumer trends, demands and preferences could lead to, among other things,
reduced demand and price reduction for a company’s products. Companies in the
food products industry may be adversely affected by changes in domestic or
foreign economic conditions, including inflation or deflation, interest rates,
availability of capital markets, consumer spending rates, and energy
availability and costs (including fuel surcharges).
Risks
Related to Investing in the Health Care Sector
Risks
Related to Investing in the Health Care Sector applies to the Global X Cannabis
ETF, Global X Genomics & Biotechnology ETF, Global X China Biotech
Innovation ETF, Global X Telemedicine & Digital Health ETF and Global X
Aging Population ETF
The
profitability of companies in the health care sector may be adversely affected
by the following factors, among others: extensive government regulations,
restrictions on government reimbursement for medical expenses, rising costs of
medical products and services, pricing pressure, an increased emphasis on
outpatient services, changes in the demand for medical products and services, a
limited number of products, industry innovation, changes in technologies and
other market developments. A number of issuers in the health care sector have
recently merged or otherwise experienced consolidation. The effects of this
trend toward consolidation are unknown and may be far-reaching. Many health care
companies are heavily dependent on patent protection. The expiration of a
company’s patents may adversely affect that company’s profitability. Many health
care companies are subject to extensive litigation based on product liability
and similar claims. Health care companies are subject to competitive forces that
may make it difficult to raise prices and, in fact, may result in price
discounting. Many new products in the health care sector may be subject to
regulatory approvals. The process of obtaining such approvals may be long and
costly, and such efforts ultimately may be unsuccessful. Companies in the health
care sector may be thinly capitalized and may be susceptible to product
obsolescence. In addition, a number of legislative proposals concerning health
care have been considered by the U.S. Congress in recent years. It is unclear
what proposals will ultimately be enacted, if any, and what effect they may have
on
U.S. and non-U.S. companies in the health care sector. Companies in the health
care sector may also be affected by unforeseen circumstances including but not
limited to the spread of infectious disease which could impact drug development
priorities and pipelines, supply and demand dynamics for health care equipment,
as well as the ability to receive care in health care service facilities.
Risks
Related to Investing in the Health Care Technology Industry
Risks
Related to Investing in the Health Care Technology Industry applies to the
Global X Telemedicine & Digital Health ETF
The
health care technology industry includes companies providing information
technology services primarily to health care providers. Includes companies
providing application, systems and/or data processing software, internet-based
tools, and IT consulting services to doctors, hospitals or businesses operating
primarily in the Health Care Sector. Market or economic factors impacting
companies that rely heavily on technology advances could have a major effect on
the value of the Fund’s investments. The value of companies in the health care
technology industry and companies that rely heavily on technology is
particularly vulnerable to rapid changes in technology product cycles, rapid
product obsolescence, government regulation and increased competition, both
domestically and internationally, including competition from foreign competitors
with lower production costs. Companies in the health care technology industry
may be particularly susceptible to changes in government regulation, and
companies that rely on subscription services may also be negatively affected by
the decline or fluctuation of subscription renewal rates for their products and
services, which may have an adverse effect on profit margins. Companies may also
be adversely affected by, among other things, actual or perceived security
vulnerabilities in their products and services, which may result in individual
or class action lawsuits, state or federal enforcement actions and other
remediation costs. In addition, companies in the health care technology industry
may have limited product lines, markets, financial resources or
personnel.
Risks
Related to Investing in the Independent Power and Renewable Electricity
Producers Industry
Risks
Related to Investing in the Independent Power and Renewable Electricity
Producers Industry applies to the Global X Wind Energy ETF
Companies
in the independent power and renewable electricity producers industry may be
highly dependent upon government subsidies, contracts with government entities,
and the successful development of new and proprietary technologies. In addition,
seasonal weather conditions, fluctuations in the supply of and demand for energy
products, changes in energy prices, and international political events may cause
fluctuations in the performance of independent power and renewable electricity
producers companies and the prices of their securities.
Risks
Related to Investing in the Industrials Sector
Risks
Related to Investing in the Industrials Sector applies to the Global X Robotics
& Artificial Intelligence ETF, Global X CleanTech ETF, Global X U.S.
Infrastructure Development ETF, Global X Clean Water ETF, Global X Hydrogen ETF,
Global X Wind Energy ETF and Global X Green Building ETF
The
stock prices of companies in the industrials sector are affected by supply and
demand both for their specific product or service and for industrials sector
products in general. The products of manufacturing companies may face product
obsolescence due to rapid technological developments and frequent new product
introduction. Government regulation, trade disputes, world events and economic
conditions affect the performance of companies in the industrials sector.
Companies in the industrials sector may be adversely affected by damages from
environmental claims and product liability claims. The industrials sector may
also be adversely affected by changes or trends in commodity prices, which may
be influenced by unpredictable factors. Companies in the industrials sector,
particularly aerospace and defense companies, may also by adversely affected by
government spending policies because companies in this sector tend to rely to a
significant extent on government demand for their products and services.
Risks
Related to Investing in the Information Technology Sector
Risks
Related to Investing in the Information Technology Sector applies to the Global
X Robotics & Artificial Intelligence ETF, Global X Internet of Things ETF,
Global X FinTech ETF, Global X Autonomous & Electric Vehicles ETF, Global X
Cloud Computing ETF, Global X Data Center REITs & Digital Infrastructure
ETF, Global X Cybersecurity ETF, Global X Artificial Intelligence &
Technology ETF, Global X CleanTech ETF, Global X Blockchain ETF, Global X Solar
ETF and Global X Thematic Growth ETF
Market
or economic factors impacting information technology companies and companies
that rely heavily on technology advances could have a major effect on the value
of the Fund’s investments. The value of stocks of information technology
companies and companies that rely heavily on technology is particularly
vulnerable to rapid changes in technology product cycles, rapid product
obsolescence, government regulation and increased competition, both domestically
and internationally, including competition from foreign competitors with lower
production costs. Information technology companies and companies that rely
heavily on technology, especially those of smaller, less-seasoned companies,
tend to be more volatile than the overall market. These companies also are
heavily dependent on patent and intellectual property rights, the loss or
impairment of which may adversely affect profitability. Additionally, companies
in the information technology sector may face dramatic and often unpredictable
changes in growth rates and competition for the services of qualified personnel.
Companies in the information technology sector are facing increased government
and regulatory scrutiny and may be subject to adverse government or regulatory
action. Companies in the application software industry, in particular, may also
be negatively affected by the decline or fluctuation of subscription renewal
rates for their products and services, which may have an adverse effect on
profit margins. Companies in the systems software industry may be adversely
affected by, among other things, actual or perceived security vulnerabilities in
their products and services, which may result in individual or class action
lawsuits, state or federal enforcement actions and other remediation costs.
Risks
Related to Investing in the IT Services Industry
Risks
Related to Investing in the IT Services Industry applies to the Global X FinTech
ETF
The
IT services industry can be significantly affected by competitive pressures,
such as technological developments, fixed-rate pricing, and the ability to
attract and retain skilled employees, and the success of companies in the
industry is subject to continued demand for IT services.
Risks
Related to Investing in the Life Sciences Tools & Services
Industry
Risks
Related to Investing in the Life Sciences Tools & Services Industry applies
to the Global X Genomics & Biotechnology ETF
Life
science tools and services companies depend on the successful development of new
and proprietary technologies. There can be no assurance that the development of
new technologies will be successful or that intellectual property rights will be
obtained with respect to new technologies. In addition, companies in the life
science tools and services industry spend heavily on research and development
and their products or services may not prove commercially successful or may
become obsolete quickly. Life science services companies, in particular, may be
subject to third-party payers, such as commercial insurance companies and
government insurance programs, not reimbursing diagnostic tests at all or
reimbursing them at levels that would not allow for industry companies to cover
expenses.
Risks
Related to Investing in the Lithium-Ion Battery Industry
Risks
Related to Investing in the Lithium-Ion Battery Industry applies to the Global X
Autonomous & Electric Vehicles ETF
Securities
in the Fund’s portfolio involved in the manufacturing of lithium-ion batteries
are subject to the effects of price fluctuations of traditional and alternative
sources of energy, supply and demand of alternative energy sources, energy
conservation, the success of exploration projects and tax and other government
regulations and policies. The lithium-ion battery industry can be significantly
affected by obsolescence of existing technology, short product lifecycles,
falling prices and profits, competition from new market entrants and general
economic conditions. Companies in this industry could be adversely affected by
commodity price volatility, imposition of import controls, increased
competition, depletion of resources, technological developments and labor
relations. If government subsidies and economic incentives for alternative
energy are reduced or eliminated, the demand for lithium-ion batteries may
decline and cause corresponding declines in the revenues and profits of
lithium-ion battery companies. If lithium-ion technology is not suitable for
widespread adoption, or sufficient demand for lithium-ion products does not
develop or takes long periods of time to develop, the revenues of lithium-ion
battery companies may decline.
Risks
Related to Investing in the Machinery Industry
Risks
Related to Investing in the Machinery Industry applies to the Global X Robotics
& Artificial Intelligence ETF and Global X Clean Water ETF
The
machinery industry is capital-intensive. Working capital and cash flow
management can be crucial to a company's success, as investments in research and
development and acquisitions may be important to maintain sales and earnings. A
long capital investment cycle can add challenges to management decisions
regarding the expansion of capacity, which may limit a company’s ability to grow
during periods of increasing demand and may result in overcapacity during
periods of decreasing demand. The performance of the machine industry may
therefore be highly dependent on the business cycle and highly correlated with
the performance of the broader equity market. Machine industry companies with
large barriers to entry based on proprietary technology may face potentially
rapid product obsolescence. Conversely, machine industry companies that produce
commodity-like offerings are likely to face thin margins and must maintain
expansive distribution and support networks in order to maintain adequate
volume.
Risks
Related to Investing in the Materials Sector
Risks
Related to Investing in the Materials Sector applies to the Global X AgTech
& Food Innovation ETF
Issuers
in the materials sector could be adversely affected by commodity price
volatility, exchange rates, import controls, increased competition, depletion of
resources, technical advances, labor relations, over-production, litigation and
government regulations, among other factors. At times, worldwide production of
industrial materials has exceeded demand as a result of over-building or
economic downturns, leading to poor investment returns or losses. Issuers in the
materials sector are at risk for environmental damage and product liability
claims and may be adversely affected by depletion of resources, technical
progress, labor relations and governmental regulations.
Risks
Related to Investing in the Pharmaceuticals Industry
Risks
Related to Investing in the Pharmaceuticals Industry applies to the Global X
Cannabis ETF and Global X Aging Population ETF
Companies
in the pharmaceuticals industry are subject to competitive forces that may make
it difficult to raise prices and, in fact, may result in price discounting. The
profitability of some companies in the pharmaceuticals industry may be dependent
on a relatively limited number of products. In addition, their products can
become obsolete due to industry innovation, changes in technologies or other
market developments. Many new products in the pharmaceuticals industry are
subject to government approvals, regulation and reimbursement rates. The process
of obtaining government approvals may be long and costly. Many companies in the
pharmaceuticals industry are heavily dependent on patents and intellectual
property rights. The loss or impairment of these rights may adversely affect the
profitability of these companies. Companies in the pharmaceuticals industry may
be subject to extensive litigation based on product liability and similar
claims. Demand for pharmaceuticals, generally speaking and specific to
sub-segments, may fluctuate due to unexpected events, including but not limited
to global health crises like pandemics which could strain health care systems
and alter health care needs. Such demand fluctuations could positively or
negatively impact pharmaceutical companies.
Risks
Related to Investing in the Real Estate Sector
Risks
Related to Investing in the Real Estate Sector applies to the Global X Data
Center REITs & Digital Infrastructure ETF and Global X Green Building
ETF
The
real estate sector includes real estate companies focused on commercial and
residential real estate development, sales, operations, and services, as well as
real estate investment trusts (“REITs”). Real estate is highly sensitive to
general and local economic conditions and developments and characterized by
intense competition and periodic overbuilding. Many real estate companies
utilize leverage (and some may be highly leveraged), which increases risk and
could adversely affect a real estate company's operations and market value in
periods of rising interest rates.
Risks
Related to Investing in the Semiconductors and Semiconductor Equipment
Industry
Risks
Related to Investing in the Semiconductors and Semiconductor Equipment Industry
applies to the Global X Internet of Things ETF, Global X CleanTech ETF and
Global X Solar ETF
The
semiconductors and semiconductor equipment industry is highly competitive, and
certain companies in this industry may be restricted from operating in certain
markets due to the sensitive nature of these technologies. Companies in this
space generally seek to increase silicon capacity, improve yields, and reduce
die size in their product designs which may result in significant increases in
worldwide supply and downward pressure on prices. The success of such companies
frequently depends on the ability to develop and produce competitive new
semiconductor technologies. Companies in this industry frequently undertake
substantial research and development expenses in order to remain competitive,
and a failure to successfully demonstrate advanced functionality and performance
can have a material impact on the company’s business.
Risks
Related to Investing in the Software Industry
Risks
Related to Investing in the Software Industry applies to the Global X FinTech
ETF, Global X Cloud Computing ETF, Global X Cybersecurity ETF and Global X
Blockchain ETF
The
software industry can be significantly affected by intense competition,
aggressive pricing, technological innovations, and product obsolescence.
Companies in the application software industry, in particular, may also be
negatively affected by the decline or fluctuation of subscription renewal rates
for their products and services, which may have an adverse effect on profit
margins. Companies in the systems software industry may be adversely affected
by, among other things, actual or perceived security vulnerabilities in their
products and services, which may result in individual or class action lawsuits,
state or federal enforcement actions and other remediation costs.
Risks
Related to Investing in the Textiles, Apparel and Luxury Goods
Industry
Risks
Related to Investing in the Textiles, Apparel and Luxury Goods Industry applies
to the Global X Health & Wellness ETF
Companies
in the textiles, apparel and luxury goods industry face intense competition and
are dependent on their ability to maintain brand image. Companies may be subject
to changes in consumer preferences, and technologies employed by textiles,
apparel and luxury goods companies may become obsolete. Companies in this
industry are dependent on consumer spending and, as such, are likely to be
sensitive to any downturns in the broader economy. Demand for products may be
seasonal, and incorrect assessment of future demand can lead to overproduction
of underproduction, which can impact company profitability.
Risks
Related to Investing in the Utilities Sector
Risks
Related to Investing in the Utilities Sector applies to the Global X Clean Water
ETF and Global X Wind Energy ETF
Stock
prices for companies in the utilities sector are affected by supply and demand,
operating costs, government regulation, environmental factors, liabilities for
environmental damage and general civil liabilities, and rate caps or rate
exchanges. Although rate changes of a utility usually fluctuate in approximate
correlation with financing costs due to political and regulatory factors, rate
changes ordinarily occur only following a delay after the changes in financing
costs. This factor will tend to favorably affect a regulated utility company's
earnings and dividends in times of decreasing costs, but conversely, will tend
to adversely affect earnings and dividends are rising in times of rising costs.
The value of regulated utility equity securities may tend to have an inverse
relationship to the movement of interest rates. Certain utility companies have
experienced full or partial deregulation in recent years. These utility
companies are frequently more similar to industrial companies in that they are
subject to greater competition and have been permitted by regulators to
diversify outside of their original geographic regions and their traditional
lines of business. These opportunities may permit certain utility companies to
earn more than their traditional regulated rate of return. Some companies,
however, may be forced to defend their core business and may be less profitable.
In addition, natural disasters, terrorist attacks, government intervention or
other factors may render a utility company's equipment unusable or obsolete and
negatively impact profitability.
Risks
Related to Investing in the Water Utilities Industry
Risks
Related to Investing in the Water Utilities Industry applies to the Global X
Clean Water ETF
Companies
in the water utilities industry may face difficulty in obtaining water resources
for resale or may be faced with increased regulation or operating costs.
Reliance on capital construction projects may increase the risks associated
with
natural disasters, terrorist attacks, government intervention or other factors
that may render a water utility company’s equipment unusable or obsolete and
negatively impact profitability.
Currency
Risk
Currency
Risk applies to the Global X Robotics & Artificial Intelligence ETF, Global
X Internet of Things ETF, Global X FinTech ETF, Global X Video Games &
Esports ETF, Global X Autonomous & Electric Vehicles ETF, Global X Cloud
Computing ETF, Global X Data Center REITs & Digital Infrastructure ETF,
Global X Cybersecurity ETF, Global X Artificial Intelligence & Technology
ETF, Global X Mataverse ETF, Global X Education ETF, Global X Cannabis ETF,
Global X Genomics & Biotechnology ETF, Global X China Biotech Innovation
ETF, Global X Telemedicine & Digital Health ETF, Global X Aging Population
ETF, Global X Health & Wellness ETF, Global X CleanTech ETF, Global X AgTech
& Food Innovation ETF, Global X Blockchain ETF, Global X Clean Water ETF,
Global X Hydrogen ETF, Global X Solar ETF, Global X Wind Energy ETF, Global X
Green Building ETF and Global X Thematic Growth ETF
Foreign
currencies are subject to risks, which include changes in the debt level and
trade deficit of the country issuing the foreign currency; inflation rates of
the United States and the country issuing the foreign currency; investors’
expectations concerning inflation rates; interest rates of the United States and
the country issuing the foreign currency; investors’ expectations concerning
interest rates; investment and trading activities of mutual funds, hedge funds
and currency funds; and global or regional political, economic or financial
events and situations.
In
addition, a foreign currency in which the Fund invests may not maintain its
long-term value in terms of purchasing power in the future. When the price of a
foreign currency in which the Fund invests declines, it may have an adverse
impact on the Fund.
Foreign
exchange rates are influenced by the factors identified above and may also be
influenced by: changing supply and demand for a particular currency; monetary
policies of governments (including exchange control programs, restrictions on
local exchanges or markets and limitations on foreign investment in a country or
on investment by residents of a country in other countries); changes in balances
of payments and trade; trade restrictions; and currency devaluations and
revaluations. Also, governments from time to time intervene in the currency
markets, directly and by regulation, in order to influence prices directly.
These events and actions are unpredictable. The resulting volatility in the
USD/foreign currency exchange rate could materially and adversely affect the
performance of the Fund.
Custody
Risk
Custody
Risk applies to the Global X Internet of Things ETF, Global X Video Games &
Esports ETF, Global X Autonomous & Electric Vehicles ETF, Global X Cloud
Computing ETF, Global X Cybersecurity ETF, Global X Artificial Intelligence
& Technology ETF, Global X Mataverse ETF, Global X Education ETF, Global X
Cannabis ETF, Global X Genomics & Biotechnology ETF, Global X China Biotech
Innovation ETF, Global X Health & Wellness ETF, Global X CleanTech ETF,
Global X AgTech & Food Innovation ETF, Global X Blockchain ETF, Global X
Clean Water ETF, Global X Hydrogen ETF, Global X Solar ETF, Global X Wind Energy
ETF and Global X Green Building ETF
Custody
risk refers to risks in the process of clearing and settling trades and in the
holding of securities by local banks, agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle. Local agents are held only to the standard of care of the
local markets. Governments or trade groups may compel local agents to hold
securities in designated depositories that are subject to independent
evaluation. Generally, the less developed a country’s securities market, the
greater the likelihood of custody problems occurring.
Foreign
Securities Risk
Foreign
Securities Risk applies to the Global X Robotics & Artificial Intelligence
ETF, Global X Internet of Things ETF, Global X FinTech ETF, Global X Video Games
& Esports ETF, Global X Autonomous & Electric Vehicles ETF, Global X
Cloud Computing ETF, Global X Data Center REITs & Digital Infrastructure
ETF, Global X Cybersecurity ETF, Global X Artificial Intelligence &
Technology ETF, Global X Mataverse ETF, Global X Education ETF, Global X
Cannabis ETF, Global X Genomics & Biotechnology ETF, Global X China Biotech
Innovation ETF, Global X Telemedicine & Digital Health ETF, Global X Aging
Population ETF, Global X Health & Wellness ETF, Global X CleanTech ETF,
Global X AgTech & Food Innovation ETF, Global X Blockchain ETF, Global X
Clean Water ETF, Global X Hydrogen ETF, Global X Solar ETF, Global X Wind Energy
ETF, Global X Green Building ETF and Global X Thematic Growth ETF
The
Fund’s assets may be invested within the equity markets of countries outside of
the United States. These markets are subject to special risks associated with
foreign investment, including, but not limited to: lower levels of liquidity and
market
efficiency;
greater securities price volatility; exchange rate fluctuations and exchange
controls; less availability of public information about issuers; limitations on
foreign ownership of securities; imposition of withholding or other taxes;
imposition of restrictions on the expatriation of the assets of the Fund;
restrictions placed on U.S. investors by U.S. regulations governing foreign
investments; higher transaction and custody costs and delays in settlement
procedures; difficulties in enforcing contractual obligations; lower levels of
regulation of the securities market; weaker accounting, disclosure and reporting
requirements; and legal principles relating to corporate governance and
directors’ fiduciary duties and liabilities. Shareholder rights under the laws
of some foreign countries may not be as favorable as U.S. laws. Thus, a
shareholder may have more difficulty in asserting its rights or enforcing a
judgment against a foreign company than a shareholder of a comparable U.S.
company. Investment of more than 25% of the Fund’s total assets in securities
located in one country or region will subject the Fund to increased country or
region risk with respect to that country or region. Where all or a portion of
the Fund's underlying securities trade in a market that is closed when the
market in which the Fund's shares are listed and trading is open, there may be
differences between the last quote from the security’s closed foreign market and
the value of the security during the Fund’s domestic trading day. This in turn
could lead to differences between the market price of the Fund’s shares and the
underlying value of those shares.
Geographic
Risk
Geographic
Risk applies to each Fund
Geographic
risk is the risk that the Fund’s assets may be focused in countries located in
the same geographic region. This investment focus will subject the Fund to risks
associated with that particular region, or a region economically tied to that
particular region, such as a natural, biological or other disaster. Outbreaks of
contagious viruses and diseases may reduce business activity or disrupt market
activity, and have the potential to exacerbate market risks in the countries and
regions in which they occur. The securities in which the Fund invests and,
consequently, the Fund are also subject to specific risks as a result of their
business operations, including, but not limited to:
Risk
of Investing in the Southeast Asian Nations (ASEAN) Region
Risk
of Investing in the Southeast Asian Nations (ASEAN) Region applies to the Global
X Data Center REITs & Digital Infrastructure ETF
Investments
in the ASEAN region involve risks not typically associated with investments in
securities of issuers in more developed countries that may negatively affect the
value of your investment in the Fund. Singapore, Malaysia, Thailand, Indonesia
and the Philippines present different economic and political conditions from
those in Western markets, and less social, political and economic stability. In
the past, some of these economies have experienced high interest rates, economic
volatility, inflation, currency devaluations and high unemployment rates.
Political instability could have an adverse effect on economic or social
conditions in these economies and may result in outbreaks of civil unrest,
terrorist attacks or threats or acts of war in the affected areas, any of which
could materially and adversely affect the companies in which the Fund may
invest.
Risk
of Investing in Canada
Risk
of Investing in Canada applies to the Global X Cannabis ETF, Global X AgTech
& Food Innovation ETF, Global X Blockchain ETF, Global X Wind Energy ETF and
Global X Thematic Growth ETF
The
United States is Canada’s largest trading and investment partner, and the
Canadian economy is significantly affected by developments in the U.S. economy
and by changes in U.S. trade policy. Since the implementation of NAFTA in 1994
among Canada, the United States and Mexico, total two-way merchandise trade
between the United States and Canada has more than doubled. To further this
relationship, the three NAFTA countries entered into the Security and Prosperity
Partnership of North America in March 2005, which has further affected Canada’s
dependency on the U.S. economy. Any downturn in U.S. or Mexican economic
activity is likely to have an adverse impact on the Canadian economy. The
Canadian economy is also dependent upon external trade with other key trading
partners, including China and the European Union. Any trade policy changes by
the United States, China or the European Union which reduced Canada's ability to
trade with such regions could therefore have significant impact on the Canadian
economy. Developments in the United States, including renegotiation of NAFTA,
ratification of the successor USMCA, which received legislative approval and
went into effect in 2020, and imposition of tariffs by the United States, may
have implications for the trade arrangements among the United States and Canada,
which could negatively affect the value of securities held by the Funds. In
addition, Canada is a large supplier of natural resources
(e.g.,
oil, natural gas and agricultural products). As a result, the Canadian economy
is sensitive to fluctuations in certain commodity prices.
Risk
of Investing in China
Risk
of Investing in China applies to the Global X Video Games & Esports ETF,
Global X Autonomous & Electric Vehicles ETF, Global X Data Center REITs
& Digital Infrastructure ETF, Global X Artificial Intelligence &
Technology ETF, Global X Mataverse ETF, Global X Education ETF, Global X
Genomics & Biotechnology ETF, Global X China Biotech Innovation ETF, Global
X Telemedicine & Digital Health ETF, Global X Aging Population ETF, Global X
Health & Wellness ETF, Global X CleanTech ETF, Global X AgTech & Food
Innovation ETF, Global X Blockchain ETF, Global X Clean Water ETF, Global X
Solar ETF, Global X Wind Energy ETF, Global X Green Building ETF and Global X
Thematic Growth ETF
The
Chinese economy is subject to a considerable degree of economic, political and
social instability.
Political
and Social Risk
The
Chinese government is authoritarian and has periodically used force to suppress
civil dissent. Disparities of wealth and the pace of economic liberalization may
lead to social turmoil, violence and labor unrest. In addition, China continues
to experience disagreements related to integration with Hong Kong and religious
and nationalist disputes in Tibet and Xinjiang. There is also a greater risk in
China than in many other countries of currency fluctuations, currency
nonconvertibility, interest rate fluctuations and higher rates of inflation as a
result of internal social unrest or conflicts with other countries.
Unanticipated political or social developments may result in sudden and
significant investment losses. China’s growing income inequality, rapidly aging
population and significant environmental issues also are factors that may affect
the Chinese economy. Concerns about the rising government and household debt
levels could impact the stability of the Chinese economy.
Heavy
Government Control and Regulation
The
Chinese government has implemented significant economic reforms in order to
liberalize trade policy, promote foreign investment in the economy, reduce
government control of the economy and develop market mechanisms. There can be no
assurance these reforms will continue or that they will be effective. Despite
recent reform and privatizations, government control over certain sectors or
enterprises and significant regulation of investment and industry is still
pervasive, including restrictions on investment in companies or industries
deemed to be sensitive to particular national interests, and the Chinese
government may restrict foreign ownership of Chinese corporations and/or the
repatriation of assets by foreign investors. Chinese companies that maintain
large amounts of sensitive data or produce some form of adverse social cost are
particularly at risk as the government moves forward with the Common Prosperity
agenda. Limitations or restrictions on foreign ownership of securities may have
adverse effects on the liquidity and performance of the Fund and could lead to
higher tracking error. Chinese government intervention in the market may have a
negative impact on market sentiment, which may in turn affect the performance of
the Chinese economy and the Fund’s investments. Chinese markets generally
continue to experience inefficiency, volatility and pricing anomalies that may
be connected to governmental influence, lack of publicly-available information,
and political and social instability.
Economic
Risk
The
Chinese economy has grown rapidly in the recent past and there is no assurance
that this growth rate will be maintained. In fact, the Chinese economy may
experience a significant slowdown as a result of, among other things, a
deterioration in global demand for Chinese exports, a systemic failure in the
property sector, as well as contraction in spending on domestic goods by Chinese
consumers. In addition, China may experience substantial rates of inflation or
economic recessions, which would have a negative effect on its economy and
securities market. Delays in enterprise restructuring, slow development of
well-functioning financial markets and widespread corruption have also hindered
performance of the Chinese economy. China continues to receive substantial
pressure from trading partners to liberalize official currency exchange rates.
Elevated
geopolitical tensions between China and its trading partners, including the
imposition of U.S. tariffs on certain Chinese goods, the imposition of trade and
non-trade related barriers for certain Chinese companies, and increased
international pressure related to Chinese trade policy, forced technology
transfers and intellectual property protections, may have a substantial impact
on the Chinese economy. The continuation or worsening of the current political
climate between China and the U.S. could result in additional regulatory
restrictions being contemplated or
imposed
on the U.S. or in China that could impact the Fund’s ability to invest in
certain companies. Reduction in spending on Chinese products and services,
institution of additional tariffs or other trade barriers (including as a result
of heightened trade tensions between China and the U.S. or in response to actual
or alleged Chinese cyber activity), or a downturn in any of the economies of
China’s key trading partners may have an adverse impact on the Chinese economy
and the Chinese issuers of securities in which the Fund invests. For example,
the U.S. has added certain foreign technology companies to the U.S. Department
of Commerce’s Bureau of Industry and Security’s “Entity List,” which is a list
of companies believed to pose a national security risk to the U.S. U.S.
investors may also be barred by U.S. authorities from investing in certain
companies, including those with ties to the military, intelligence, and security
services in China. Actions like these may have unanticipated and disruptive
effects on the Chinese economy. Any such response that targets Chinese financial
markets or securities exchanges could interfere with orderly trading, delay
settlement or cause market disruptions. Public health crises or major
health-related developments may have a substantial impact on the Chinese economy
or holdings in the Fund. Outbreaks of contagious viruses and diseases, including
the novel viruses commonly known as SARS, MERS, and Covid-19 (Coronavirus), may
reduce business activity or disrupt market activity, and have the potential to
exacerbate market risks such as volatility in exchange rates or the trading of
Chinese securities listed domestically or abroad. Likewise, factories, ports,
and critical infrastructure in China may close to limit contagion risk. In
response to the Covid-19 crisis, China is implementing strict lockdowns to keep
cases extremely low and there is no assurance that China will relax this
approach or not revert back to it after an attempt at relaxation. Foreign
investors’ access to domestic markets may also be limited during such health
crises, especially if domestic exchanges are closed for an extended period.
Market closures could interfere with the orderly trading or settlement
mechanisms of Chinese securities listed domestically or abroad. The Chinese
economy or holdings in the Fund may also be adversely impacted should health
crises create political uncertainty or social unrest. The implications of such
health crises are difficult to ascertain but may put strain on China’s supply
chains, trading relationships, and international relations.
Expropriation
Risk
The
Chinese government maintains a major role in economic policy making and
investing in China involves risk of loss due to expropriation, nationalization,
confiscation of assets and property or the imposition of restrictions on foreign
investments and on repatriation of capital invested.
Security
Risk
China
has strained international relations with Taiwan, India, Russia and other
neighbors due to territorial disputes, historical animosities, defense concerns
and other security concerns. Relations between China’s Han ethnic majority and
other ethnic groups in China, including Tibetans and Uighurs, are also strained
and have been marked by protests and violence. Additionally, China is alleged to
have participated in state-sponsored cyberattacks against foreign companies and
foreign governments. Actual and threatened responses to such activity, including
purchasing restrictions, sanctions, tariffs or cyberattacks on the Chinese
government or Chinese companies, may impact China’s economy and Chinese issuers
of securities in which the Fund invests. These situations may cause uncertainty
in the Chinese market and may adversely affect the Chinese economy. In addition,
conflict on the Korean Peninsula could adversely affect the Chinese economy.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund.
Hong
Kong Political Risk
Hong
Kong reverted to Chinese sovereignty on July 1, 1997 as a Special Administrative
Region (SAR) of the People’s Republic of China under the principle of “one
country, two systems.” Although China is obligated to maintain the current
capitalist economic and social system of Hong Kong through June 30, 2047, the
continuation of economic and social freedoms enjoyed in Hong Kong is dependent
on the government of China. Since 1997, there have been tensions between the
Chinese government and many people in Hong Kong who perceive China as tightening
of control over Hong Kong’s semi-autonomous liberal political, economic, legal,
and social framework. Recent protests and unrest have increased tensions even
further. Due to the interconnected nature of the Hong Kong and Chinese
economies, this instability in Hong Kong may cause uncertainty in the Hong Kong
and Chinese markets. In addition, the Hong Kong
dollar
trades at a fixed exchange rate in relation to (or, is “pegged” to) the U.S.
dollar, which has contributed to the growth and stability of the Hong Kong
economy. However, it is uncertain how long the currency peg will continue or
what effect the establishment of an alternative exchange rate system would have
on the Hong Kong economy. Because the Fund’s NAV is denominated in U.S. dollars,
the establishment of an alternative exchange rate system could result in a
decline in the Fund’s NAV.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the government restricts foreign ownership to
raise capital from foreign investors. While the shell company has no equity
ownership of the VIE, these contractual arrangements permit the shell company to
consolidate the VIE’s financial statements with its own for accounting purposes
and provide for economic exposure to the performance of the underlying Chinese
operating company. Therefore, an investor in the listed shell company, such as
the Fund, will have exposure to the Chinese-based operating company only through
contractual arrangements and has no ownership in the Chinese-based operating
company. Furthermore, because the shell company only has specific rights
provided for in these service agreements with the VIE, its abilities to control
the activities at the Chinese-based operating company are limited and the
operating company may engage in activities that negatively impact investment
value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
government will not place similar restrictions on other
industries.
Chinese equities that utilize the VIE structure to list in
the U.S. as ADRs face the risk of regulatory action from U.S. authorities,
including the risk of delisting. This will depend in part on whether U.S.
regulatory authorities are satisfied with their access to Mainland China and
Hong Kong for the purpose of conducting inspections on the quality of audits for
these companies. Although the U.S. and China reached an agreement in September
2022 to grant the U.S. access for such inspections, there is no guarantee that
the agreement will hold up or that U.S. regulatory authorities will continue to
feel satisfied with their access.
Risk
of Investing in Denmark
Risk
of Investing in Denmark applies to the Global X Wind Energy ETF
Investments
in Danish issuers subject the Fund to legal, regulatory, political, currency,
security, and economic risks specific to Denmark. Denmark’s industrialized
market economy depends on imported raw materials and foreign trade. As a result,
Denmark is dependent on trading relationships with certain key trading partners,
including other EU countries and the United States. Denmark’s economy has also
been characterized by slow growth and is facing demographic challenges,
including an aging population, that could lead to labor supply shortages in the
near future.
Risk
of Investing in Developed Markets
Risk
of Investing in Developed Markets applies to the Global X Robotics &
Artificial Intelligence ETF, Global X Internet of Things ETF, Global X FinTech
ETF, Global X Video Games & Esports ETF, Global X Autonomous & Electric
Vehicles ETF, Global X Cloud Computing ETF, Global X Data Center REITs &
Digital Infrastructure ETF, Global X Cybersecurity ETF, Global X Artificial
Intelligence & Technology ETF, Global X Mataverse ETF, Global X Millennial
Consumer ETF, Global X Education ETF, Global X Cannabis ETF, Global X Genomics
& Biotechnology ETF, Global X Telemedicine & Digital Health ETF, Global
X Aging Population ETF, Global X Health & Wellness ETF, Global X CleanTech
ETF, Global X U.S. Infrastructure Development ETF, Global X AgTech & Food
Innovation ETF, Global X Blockchain ETF, Global X Clean Water ETF, Global X
Hydrogen ETF, Global X Wind Energy ETF, Global X Green Building ETF and Global X
Thematic Growth ETF
Investment
in developed country issuers may subject the Fund to regulatory, political,
currency, security, and economic risk specific to developed countries. Developed
countries generally tend to rely on services sectors (e.g., the financial
services sector) as the primary means of economic growth. A prolonged slowdown
in, among others, services sectors is likely to have a negative impact on
economies of certain developed countries, although economies of individual
developed countries can be impacted by slowdowns in other sectors. In the past,
certain developed countries have been targets of terrorism, and some geographic
areas in which the Fund invests have experienced strained international
relations due to territorial disputes, historical animosities, defense concerns
and other security concerns. These situations may cause uncertainty in the
financial markets in these countries or geographic areas and may adversely
affect the performance of the issuers to which the Fund has exposure. Heavy
regulation of certain markets, including labor and product markets, may have an
adverse effect on certain issuers. Such regulations may negatively affect
economic growth or cause prolonged periods of recession. Many developed
countries are heavily indebted and face rising healthcare and retirement
expenses and may be underprepared for global health crises. For example, the
rapid and global spread of a highly contagious novel coronavirus respiratory
disease, designated COVID-19, resulted in extreme volatility in the financial
markets and severe losses; reduced liquidity of many instruments; restrictions
on international and, in some cases, local travel; significant disruptions to
business operations (including business closures); strained healthcare systems;
disruptions to supply chains, consumer demand and employee availability; and
widespread uncertainty regarding the duration and long-term effects of this
pandemic. In addition, price fluctuations of certain commodities and regulations
impacting the import of commodities may negatively affect developed country
economies.
Risk
of Investing in Emerging Markets
Risk
of Investing in Emerging Markets applies to the Global X Internet of Things ETF,
Global X FinTech ETF, Global X Video Games & Esports ETF, Global X
Autonomous & Electric Vehicles ETF, Global X Data Center REITs & Digital
Infrastructure ETF, Global X Artificial Intelligence & Technology ETF,
Global X Mataverse ETF, Global X Education ETF, Global X China Biotech
Innovation ETF, Global X Telemedicine & Digital Health ETF, Global X Aging
Population ETF, Global X Health & Wellness ETF, Global X CleanTech ETF,
Global X AgTech & Food Innovation ETF, Global X Blockchain ETF, Global X
Clean Water ETF, Global X Hydrogen ETF, Global X Solar ETF, Global X Wind Energy
ETF, Global X Green Building ETF and Global X Thematic Growth ETF
The
securities markets of emerging market countries may be less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation and not be subject to as extensive and frequent
accounting, financial and other reporting requirements as the securities markets
of more developed countries, as has historically been the case. Issuers and
securities markets in emerging markets are generally not subject to as extensive
and frequent accounting, financial and other reporting requirements or as
comprehensive government regulations as are issuers and securities markets in
the developed markets. In particular, the assets and profits appearing on the
financial statements of emerging market issuers may not reflect their financial
position or results of operations in the same manner as financial statements for
developed market issuers. Substantially less information may be publicly
available about emerging market issuers than is available about issuers in
developed markets. It may be difficult or impossible for the Fund to pursue
claims against an emerging market issuer in the courts of an emerging market
country. There may be significant obstacles to obtaining information necessary
for investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies.
Emerging
markets are generally located in the Asia and Pacific regions, the Middle East,
Eastern Europe, Latin America, and Africa. Emerging markets typically are
classified as such by lacking one or more of the following characteristics:
sustainability of economic development, large and liquid securities markets,
openness to foreign ownership, ease of capital inflows and outflows, efficiency
of the market’s operational framework, and/or stability of the institutional
framework. The Fund’s purchase and sale of portfolio securities in certain
emerging market countries may be constrained by limitations relating to daily
changes in the prices of listed securities, periodic trading or settlement
volume and/or limitations on aggregate holdings of foreign investors. Such
limitations may be computed
based
on the aggregate trading volume by or holdings of the Fund, the Adviser, its
affiliates and their respective clients and other service providers. The Fund
may not be able to sell securities in circumstances where price, trading or
settlement volume limitations have been reached.
Foreign
investment in the securities markets of certain emerging market countries is
restricted or controlled to varying degrees, which may limit investment in such
countries or increase the administrative costs of such investments. For example,
certain Asian countries require government approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of the issuer available for purchase by nationals. In addition,
certain countries may restrict or prohibit investment opportunities in issuers
or industries deemed important to national interests. Such restrictions may
affect the market price, liquidity and rights of securities that may be
purchased by the Fund. The repatriation of both investment income and capital
from certain emerging market countries is subject to restrictions, such as the
need for governmental consents. In situations where a country restricts direct
investment in securities (which may occur in certain Asian, Latin American and
other countries), the Fund may invest in such countries through other investment
funds in such countries. Certain emerging market countries may have privatized,
or have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Many
emerging market countries have experienced currency devaluations, substantial
(and, in some cases, extremely high) rates of inflation, and economic
recessions. These circumstances have had a negative effect on the economies and
securities markets of those emerging market countries. Economies in emerging
market countries generally are dependent upon commodity prices and international
trade and, accordingly, have been, and may continue to be, affected adversely by
the economies of their trading partners, trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist measures
imposed or negotiated by the countries with which they trade. As a result,
emerging market countries are particularly vulnerable to downturns of the world
economy. The 2008-2009 global financial crisis tightened international credit
supplies and weakened the global demand for their exports. As a result, certain
of these economies faced significant economic difficulties, which caused some
emerging market economies to fall into recession. Recovery from such conditions
may be gradual and/or halting as weak economic conditions in developed markets
may continue to suppress demand for exports from emerging market countries.
Many
emerging market countries are subject to a substantial degree of economic,
political and social instability. Governments of some emerging market countries
are authoritarian in nature or have been installed or removed as a result of
military coups, while governments in other emerging market countries have
periodically used force to suppress civil dissent. Disparities of wealth, the
pace and success of democratization, and ethnic, religious and racial
disaffection, among other factors, have also led to social unrest, violence
and/or labor unrest in some emerging market countries. Many emerging market
countries have experienced strained international relations due to border
disputes, historical animosities or other defense concerns. These situations may
cause uncertainty in the markets and may adversely affect the performance of
these economies. Unanticipated political, social, and public health developments
may result in sudden and significant investment losses. Many emerging markets
may be underprepared for global health crises. For example, the rapid and global
spread of a highly contagious novel coronavirus respiratory disease, designated
COVID-19, has resulted in extreme volatility in the financial markets and severe
losses; reduced liquidity of many instruments; restrictions on international
and, in some cases, local travel; significant disruptions to business operations
(including business closures); strained healthcare systems; disruptions to
supply chains, consumer demand and employee availability; and widespread
uncertainty regarding the duration and long-term effects of this pandemic.
Investing in emerging market countries involves greater risk of loss due to
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and on repatriation of capital
invested. As an example, in the past some Eastern European governments have
expropriated substantial amounts of private property, and many claims of the
property owners have never been fully settled. There is no assurance that
similar expropriations will not occur in other emerging market countries,
including China.
As
a result of heightened geopolitical tensions, various countries have imposed
economic sanctions, imposed non-trade barriers and renewed existing economic
sanctions on specific emerging markets and on issuers within those markets.
These non-trade barriers consist of prohibiting certain securities trades,
prohibiting certain private transactions in certain sectors and with respect to
certain companies, asset freezes, and prohibition of all business, against
certain individuals and companies. The United States and other nations or
international organizations may impose additional, broader economic sanctions or
take other actions that may adversely affect certain emerging markets in the
future. These actions, any future sanctions or other actions, or even the threat
of further sanctions or other actions, may negatively affect the value and
liquidity of the Fund’s investments. For example, the Fund may be prohibited
from
investing
in securities issued by companies subject to such sanctions. In addition,
sanctions may require the Fund to freeze its existing investments, prohibiting
the Fund from buying, selling or otherwise transacting in these investments.
Also, if an affected security is included in the Fund's Underlying Index, the
Fund may, where practicable, seek to eliminate its holdings of the affected
security by employing or augmenting its representative sampling strategy to seek
to track the investment results of the Underlying Index. The use of (or
increased use of) a representative sampling strategy may increase the Fund’s
tracking error risk. Actions barring some or all transactions with a specific
company will likely have a substantial, negative impact on the value of such
company’s securities. These sanctions may also lead to changes in the Fund’s
Underlying Index. The Fund’s index provider may remove securities from the
Underlying Index or implement caps on the securities of certain issuers that
have been subject to recent economic sanctions. In such an event, it is expected
that the Fund will rebalance its portfolio to bring it in line with its
Underlying Index as a result of any such changes, which may result in
transaction costs and increased tracking error. The Fund’s investment in
emerging market countries may also be subject to withholding or other taxes,
which may be significant and may reduce the return to the Fund from an
investment in such countries.
Settlement
and clearance procedures in emerging market countries are frequently less
developed and reliable than those in the United States and may involve the
Fund’s delivery of securities before receipt of payment for their sale. In
addition, significant delays may occur in certain markets in registering the
transfer of securities. Settlement, clearance or registration problems may make
it more difficult for the Fund to value its portfolio securities and could cause
the Fund to miss attractive investment opportunities, to have a portion of its
assets uninvested or to incur losses due to the failure of a counterparty to pay
for securities the Fund has delivered or the Fund’s inability to complete its
contractual obligations because of theft or other reasons. In addition, local
agents and depositories are subject to local standards of care that may not be
as rigorous as developed countries. Governments and other groups may also
require local agents to hold securities in depositories that are not subject to
independent verification. The less developed a country’s securities market, the
greater the risk to the Fund.
The
creditworthiness of the local securities firms used by the Fund in emerging
market countries may not be as sound as the creditworthiness of firms used in
more developed countries. As a result, the Fund may be subject to a greater risk
of loss if a securities firm defaults in the performance of its
responsibilities.
The
Fund’s use of foreign currency management techniques in emerging market
countries may be limited. Due to the limited market for these instruments in
emerging market countries, all or a significant portion of the Fund's currency
exposure in emerging market countries may not be covered by such instruments.
Rising
interest rates, combined with widening credit spreads, could negatively impact
the value of emerging market debt and increase funding costs for foreign
issuers. In such a scenario, foreign issuers might not be able to service their
debt obligations, the market for emerging market debt could suffer from reduced
liquidity, and the Fund could lose money.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer's securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level, for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Risk
of Investing in France
Risk
of Investing in France applies to the Global X Green Building ETF
Investment
in French issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risk specific to France. As a result of the
COVID-19 pandemic in 2020, the French economy, along with certain other EU
economies, experienced a significant economic slowdown. The 2022 invasion of
Ukraine by Russia created economic headwinds and potential threats to energy
security for France and other EU nations. Ongoing concerns in relation to the
economic health of the European Union (the “EU”) continue to constrain the
economic resilience of certain EU
member
states, including France. Interest rates on France’s debt may rise to levels
that make it difficult for it to service high debt levels without significant
financial help from, among others, the European Central Bank and could
potentially result in default. In addition, the French economy is dependent to a
significant extent on the economies of certain key trading partners, including
Germany and other Western European countries. Reduction in spending on French
products and services, or changes in any of the economies may cause an adverse
impact on the French economy. In addition, France has been subject to acts of
terrorism, which has created a climate of insecurity that has been detrimental
to tourism and may lead to further adverse economic consequences. The French
economy is dependent on exports from the agricultural sector. Leading
agricultural exports include dairy products, meat, wine, fruit and vegetables,
and fish. As a result, the French economy is susceptible to fluctuations in
demand for agricultural products.
Risk
of Investing in Indonesia
Risk
of Investing in Indonesia applies to the Global X Data Center REITs &
Digital Infrastructure ETF
Investment
in Indonesian issuers involves risks that are specific to Indonesia, including
legal, regulatory, political, security and economic risks. The securities
markets of Indonesia are underdeveloped and are often considered to be less
correlated to global economic cycles than those markets located in more
developed countries. As a result, securities markets in Indonesia are subject to
greater risks associated with market volatility, lower market capitalization,
lower trading volume, illiquidity, inflation, greater price fluctuations,
uncertainty regarding the existence of trading markets, governmental control and
heavy regulation of labor and industry. Moreover, trading on securities markets
may be suspended altogether. The government in Indonesia may restrict or control
to varying degrees the ability of foreign investors to invest in securities of
issuers located or operating in Indonesia. These restrictions and/or controls
may at times limit or prevent foreign investment in securities of issuers
located or operating in Indonesia. These factors, among others, make investing
in issuers located or operating in Indonesia significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the value of the Fund’s Shares. The value
of the Indonesian Rupiah may be subject to a high degree of fluctuation. The
Fund’s exposure to the Indonesian Rupiah and changes in value of the Indonesian
Rupiah versus the U.S. dollar may result in reduced returns for the Fund. The
Indonesian economy, among other things, is dependent upon external trade with
other economies, specifically China, Japan, Singapore and the United States. In
the past, Indonesia has experienced acts of terrorism, predominantly targeted at
foreigners. Such acts of terrorism have had a negative impact on tourism, an
important sector of the Indonesian economy.
Risk
of Investing in Japan
Risk
of Investing in Japan applies to the Global X Robotics & Artificial
Intelligence ETF, Global X Video Games & Esports ETF, Global X Mataverse
ETF, Global X Health & Wellness ETF and Global X Green Building ETF
Japan
may be subject to political, economic, nuclear, and labor risks, among others.
Any of these risks, individually or in the aggregate, can impact an investment
made in Japan.
Economic
Risk
The
growth of Japan’s economy has recently lagged that of its Asian neighbors and
other major developed economies. Population decline and an aging society could
contribute further to lower growth. Furthermore, Japan has struggled with
persistently low inflation, which has prompted unorthodox monetary policy in
response. The Bank of Japan’s stance may continue to differ significantly from
other major central banks. The Japanese economy is heavily dependent on
international trade and has been adversely affected by trade tariffs, other
protectionist measures, competition from emerging economies and the economic
conditions of its trading partners. Japan is also heavily dependent on oil and
other commodity imports, and higher commodity prices could therefore have a
negative impact on the Japanese economy.
Political
Risk
Historically,
Japan has had unpredictable national politics and may experience frequent
political turnover. Future political developments may lead to changes in policy
that might adversely affect the Fund’s investments. In addition, China has
become an important trading partner with Japan. Japan’s political relationship
with China, however, has become strained. Should political tension increase, it
could adversely affect the Japanese economy and destabilize the region as a
whole.
Large
Government and Corporate Debt Risk
The
Japanese economy faces several concerns, including a financial system with large
levels of nonperforming loans, over-leveraged corporate balance sheets,
extensive cross-ownership by major corporations, a changing corporate governance
structure, and large government deficits. These issues may cause a slowdown of
the Japanese economy.
Currency
Risk
The
Japanese yen has fluctuated widely at times and any increase in its value may
cause a decline in exports that could weaken the Japanese economy. Japan has, in
the past, intervened in the currency markets to attempt to maintain or reduce
the value of the yen. Japanese intervention in the currency markets could cause
the value of the yen to fluctuate sharply and unpredictably and could cause
losses to investors.
Labor
Risk
Japan
has an aging workforce and has experienced a significant population decline in
recent years. Japan’s labor market appears to be undergoing fundamental
structural changes, as a labor market traditionally accustomed to lifetime
employment adjusts to meet the need for increased labor mobility, which may
adversely affect Japan’s economic competitiveness.
Security
Risk
Japan's
relations with its neighbors, particularly China, North Korea, South Korea and
Russia, have at times been strained due to territorial disputes, historical
animosities and defense concerns. Most recently, the Japanese government has
shown concern over the increased nuclear and military activity by North Korea
and China. There is a risk of maritime conflict between Japan and China over the
Senkaku or Diaoyu Islands, and between Japan and South Korea over the Liancourt
Rocks. Strained relations may cause uncertainty in the Japanese markets and
adversely affect the overall Japanese economy, particularly in times of crisis.
An invasion of Taiwan by China could be a catalyst for regional destabilization.
In 2022, Japan began increasing its defense spending significantly in
preparation for a potential crisis in Taiwan.
Risk
of Investing in Norway
Risk
of Investing in Norway applies to the Global X Hydrogen ETF
Investments
in Norwegian issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risks specific to Norway. Norway is a major
producer of oil and gas, and Norway's economy is subject to the risk of
fluctuations on oil and gas prices. Norwegian oil and gas infrastructure,
particularly that which is linked to continental Europe, is at risk of being
sabotaged as a result of the Russia-Ukraine war. The high value of the Norwegian
krone as compared to other currencies could have a damaging effect on Norwegian
exports and investments.
Risk
of Investing in South Korea
Risk
of Investing in South Korea applies to the Global X Video Games & Esports
ETF, Global X Cybersecurity ETF, Global X Artificial Intelligence &
Technology ETF, Global X Mataverse ETF, Global X CleanTech ETF, Global X
Hydrogen ETF and Global X Thematic Growth ETF
Investments
in South Korean issuers involve risks that are specific to South Korea,
including legal, regulatory, political, currency, security and economic risks.
Substantial political tensions exist between North Korea and South Korea.
Escalated tensions involving the two nations and the outbreak of hostilities
between the two nations, or even the threat of an outbreak of hostilities, could
have a severe adverse effect on the South Korean economy. In addition, South
Korea’s economic growth potential has recently been on a decline because of a
rapidly aging population and structural problems, among other factors. The South
Korean economy is heavily reliant on trading exports and disruptions or
decreases in trade activity could lead to further declines.
Risk
of Investing in Switzerland
Risk
of Investing in Switzerland applies to the Global X Robotics & Artificial
Intelligence ETF
Investment
in Swiss issuers may subject the Fund to legal, regulatory, political, currency,
security, and economic risks specific to Switzerland. Among other things,
Switzerland’s economy is heavily dependent on trading relationships with certain
key trading partners, including the U.S., U.K., China, France and Germany.
Future changes in the price or the demand for Swiss products or services by the
U.S., U.K., China, France and Germany or changes in these countries’ economies,
trade regulations or currency exchange rates could adversely impact the Swiss
economy and the issuers to which the Fund has exposure. Switzerland’s economy
relies heavily on the banking sector, and in recent years, Switzerland has
responded to increasing pressure from neighboring countries and trading partners
to reform its banking secrecy laws. Due to the lack of natural resources,
Switzerland is dependent upon imports for raw materials. As a result, any
drastic price fluctuations in the price of certain raw materials will likely
have a significant impact on the Swiss economy.
Risk
of Investing in Taiwan
Risk
of Investing in Taiwan applies to the Global X Internet of Things ETF and Global
X Health & Wellness ETF
Investments
in Taiwanese issuers may subject the Fund to legal, regulatory, political,
currency and economic risks that are specific to Taiwan. Specifically, Taiwan’s
geographic proximity and history of political contention with China have
resulted in ongoing tensions between the two countries. These tensions may
materially affect the Taiwanese economy and its securities market. These
tensions may evolve into a military conflict between China and Taiwan, with
potential participation by other regional powers such as the US and Japan.
Taiwan’s lack of formal recognition by most countries around the world leaves
its legal status ambiguous and often prevents Taiwan from membership in
international organizations. The establishment of diplomatic ties between Taiwan
and another country could result in both Taiwan and that country facing economic
or diplomatic retaliation from China. Taiwan’s economy is export-oriented, so it
depends on an open world trade regime and remains vulnerable to fluctuations in
the world economy. Rising labor costs and increasing environmental consciousness
have led some labor-intensive industries to relocate to countries with cheaper
work forces, and continued labor outsourcing may adversely affect the Taiwanese
economy.
Risk
of Investing in the United Kingdom
Risk
of Investing in the United Kingdom applies to the Global X Clean Water ETF and
Global X Hydrogen ETF
Investments
in United Kingdom issuers may subject the Fund to regulatory, political,
currency, security, and economic risks specific to the United Kingdom. The
United Kingdom has one of the largest economies in Europe, and the United States
and other European countries are substantial trading partners of the United
Kingdom. As a result, the United Kingdom’s economy may be impacted by changes to
the economic condition of the United States and other European countries. The
United Kingdom’s economy, along with certain other European Union economies,
experienced a significant economic slowdown during the recent financial crisis;
certain United Kingdom financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. In a
referendum held on June 23, 2016, the United Kingdom resolved to leave the
European Union, which departure has become known as “Brexit”. The United Kingdom
officially stopped being a member of the European Union on January 31, 2020. On
December 30, 2020, the United Kingdom and the European Union signed an agreement
on the terms governing certain aspects of the European Union’s and the United
Kingdom’s relationship following the end of the transition period, the EU-UK
Trade and Cooperation Agreement (the “TCA”). Notwithstanding the TCA, there is
likely to be considerable uncertainty as to the United Kingdom’s post-transition
framework, and in particular, as to the arrangements which will apply to the
United Kingdom’s relationships with the European Union and with other countries,
which is likely to continue to develop and could result in increased volatility
and illiquidity and potentially lower economic growth. In October 2022, the
United Kingdom suffered a pension fund crisis that prompted intervention by the
Bank of England and damaged investor confidence in its financial
stability.
Risk
of Investing in the United States
Risk
of Investing in the United States applies to the Global X Internet of Things
ETF, Global X FinTech ETF, Global X Autonomous & Electric Vehicles ETF,
Global X Cloud Computing ETF, Global X Data Center REITs & Digital
Infrastructure ETF, Global X Cybersecurity ETF, Global X Artificial Intelligence
& Technology ETF, Global X Millennial Consumer ETF, Global X Genomics &
Biotechnology ETF, Global X Telemedicine & Digital Health ETF, Global X
Aging Population ETF, Global X U.S. Infrastructure Development ETF, Global X
AgTech & Food Innovation ETF, Global X Blockchain ETF and Global X Clean
Water ETF
A
decrease in imports or exports, changes in trade regulations and/or an economic
recession in the U.S. may have a material adverse effect on the U.S. economy and
the securities listed on U.S. exchanges. Proposed and adopted policy and
legislative changes in the U.S. are changing many aspects of financial and other
regulation and may have a significant effect on the U.S. markets generally, as
well as on the value of certain securities. In addition, a continued rise in the
U.S. public debt level or the imposition of U.S. austerity measures may
adversely affect U.S. economic growth and the securities to which the Fund has
exposure. The U.S. has developed increasingly strained relations with a number
of foreign countries. If these relations continue to worsen, it could adversely
affect U.S. issuers as well as non-U.S. issuers that rely on the U.S. for trade.
The U.S. has also experienced increased internal unrest and discord. If this
trend were to continue, it may have an adverse impact on the U.S. economy and
the issuers in which the Fund invests.
Geographic
Economic Exposure Risk
Geographic
Economic Exposure Risk applies to each Fund
The
constituents held by the Fund may have partners, suppliers and/or customers
located in various geographic regions, and the geographic regions in which Fund
constituents are located may have trading partners in other geographic regions.
As a result, an economic downturn in one or more of these regions may impact the
performance of the constituents in which the Fund invests, even if the Fund does
not invest directly in companies located in such region. The risks related to
such regions may include:
African
Economic Risk
The
economies of African countries are subject to risks not typically associated
with more developed economies, countries or geographic regions. Such heightened
risks include, among others, expropriation and/or nationalization of assets,
restrictions on and government intervention in international trade, confiscatory
taxation, political instability, including authoritarian and/or military
involvement in governmental decision making, armed conflict, civil war, and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
The
securities markets in Africa are underdeveloped and are often considered to be
less correlated to global economic cycles than markets located in more developed
countries or geographic regions. Securities markets in Africa are subject to
greater risks associated with market volatility, lower market capitalization,
lower trading volume, illiquidity, inflation, greater price fluctuations,
uncertainty regarding the existence of trading markets, governmental control and
heavy regulation of labor and industry. Moreover, trading on securities markets
may be suspended altogether.
Certain
governments in Africa may restrict or control to varying degrees the ability of
foreign investors to invest in securities of issuers located or operating in
those countries. These restrictions and/or controls may at times limit or
prevent foreign investment in securities of issuers located or operating in
countries in Africa. Moreover, certain countries in Africa may require
governmental approval or special licenses prior to investment by foreign
investors; may limit the amount of investment by foreign investors in a
particular industry and/or issuer; may limit such foreign investment to a
certain class of securities of an issuer that may have less advantageous rights
than the classes available for purchase by domestic investors of those
countries; and/or may impose additional taxes on foreign investors. These
factors, among others, make investing in issuers located or operating in
countries in Africa significantly riskier than investing in issuers located or
operating in more developed countries.
Asian
Economic Risk
Many
Asian economies have experienced rapid growth and industrialization in recent
years, but there is no assurance that this growth rate will be maintained. Other
Asian economies, however, have experienced high inflation, high unemployment,
currency devaluations and restrictions, and over-extension of credit.
Geopolitical hostility, political instability, as well as economic or
environmental events in any one Asian country may have a significant economic
effect on the entire Asian region, as well as on major trading partners outside
Asia. Any adverse event in the Asian markets may have a significant adverse
effect on some or all of the economies of the countries in which the Fund
invests. Many Asian countries are subject to political risk, including political
instability, corruption and regional conflict with neighboring countries. Hong
Kong is currently administered as a Special Administrative Region under the
sovereignty of the People’s Republic of China, but pro-independence sentiment
and political dissatisfaction towards China have resulted and may continue to
result in widespread protests. In 2020, China passed the National Security Law
in Hong Kong, which tightened political freedoms and heightens risk for any
businesses or individuals
that
express pro-independence views. North Korea and South Korea each have
substantial military capabilities, and historical tensions between the two
countries present the risk of war. Escalated tensions involving the two
countries and any outbreak of hostilities between the two countries, or even the
threat of an outbreak of hostilities, could have a severe adverse effect on the
entire Asian region. Maritime disputes in the South China Sea are complex and
involve conflicting claims by China, Brunei, Indonesia, Malaysia, the
Philippines, Taiwan and Vietnam, and there is a risk that these disputes could
escalate into armed conflict between any of the aforementioned countries.
Furthermore, there are numerous disputes over islands in East Asia that pose
security risks, including but not necessarily limited to the Liancourt Rocks
dispute between Japan and Korea, the Senkaku/Diaoyu Islands dispute between
China and Japan, and the Kuril Islands dispute between Japan and Russia.
Although Taiwan currently has a government that is separate from that of the
People’s Republic of China, the PRC lays claim to Taiwan and has enacted
legislation mandating military invasion should Taiwan’s government formally
declare independence. China may also choose to launch an invasion of Taiwan even
without the Taiwanese government formally declaring independence and there is a
high risk that such a conflict would draw in other actors such as the United
States and Japan. In response to the elevated risk of conflict in Taiwan, in
2022 the government of Japan moved to dramatically raise its defense budget and
lift longstanding restrictions on obtaining missiles with strike capabilities.
Certain Asian countries have also developed increasingly strained relationships
with the U.S., and if these relations were to worsen, they could adversely
affect Asian issuers that rely on the U.S. for trade. In addition, many Asian
countries are subject to social and labor risks associated with demands for
improved political, economic and social conditions.
Australasian
Economic Risk
The
economies of Australasia, which include Australia and New Zealand, are dependent
on exports from the agricultural and mining sectors. This makes Australasian
economies susceptible to fluctuations in the commodity markets. Australasian
economies are also increasingly dependent on their growing service industries.
Because the economies of Australasia are dependent on the economies of Asia,
Europe and the United States as key trading partners and investors, reduction in
spending by any of these trading partners on Australasian products and services,
or negative changes in any of these economies, may cause an adverse impact on
some or all of the Australasian economies.
European
Economic Risk
The
economies of Europe are highly dependent on each other, both as key trading
partners and, in many cases, as fellow members maintaining the euro. Decreasing
European imports, new trade regulations, changes in exchange rates, a recession
in Europe, or a slowing of economic growth in this region could have an adverse
impact on the securities in which the Fund invests. Reduction in trading
activity among European countries may cause an adverse impact on each nation’s
individual economies. The Economic and Monetary Union of the European Union (the
“EU”) requires compliance with restrictions on inflation rates, deficits,
interest rates, debt levels and fiscal and monetary controls, each of which may
significantly affect every country in Europe, including those countries that are
not members of the EU. Decreasing imports or exports, changes in governmental or
EU regulations on trade, changes in the exchange rate of the euro, the default
or threat of default by an EU member country on its sovereign debt, and
recessions in an EU member country may have a significant adverse effect on the
economies of EU member countries and their trading partners. The European
financial markets have historically experienced volatility and adverse trends
due to concerns about economic downturns or rising government debt levels in
several European countries, including, but not limited to, Austria, Belgium,
Cyprus, France, Greece, Ireland, Italy, Portugal, Spain and Ukraine. These
events have adversely affected the exchange rate of the euro and may continue to
significantly affect European countries.
Latin
American Economic Risk
High
interest rates, inflation, government defaults and unemployment rates are
characteristics of the economies in some Latin American countries. Currency
devaluations in any Latin American country can have a significant effect on the
entire region. Because commodities such as oil and gas, minerals and metals can
represent a significant percentage of the region’s exports, the economies of
Latin American countries may be particularly sensitive to fluctuations in
commodity prices. As a result, the economies in many Latin American countries
could experience significant volatility. Political stability is also a concern
in Latin America, with the risk of contested election results, military coups,
and mass social disorder presenting complex risks.
Middle
East Economic Risk
Middle
Eastern governments have exercised and continue to exercise substantial
influence over many aspects of the private sector. Many economies in the Middle
East are highly reliant on income from the sale of oil or trade with countries
involved in the sale of oil, and their economies are therefore vulnerable to
changes in the market for oil and foreign currency values. As global demand for
oil fluctuates, many Middle Eastern economies may be significantly impacted. A
sustained decrease in commodity prices could have a significant negative impact
on all aspects of the economy in the region. Middle Eastern economies may be
subject to acts of terrorism, political strife, religious, ethnic or
socioeconomic unrest and sudden outbreaks of hostilities with neighboring
countries. Certain Middle Eastern countries have strained relations with other
Middle Eastern countries due to territorial disputes, historical animosities,
international alliances, religious tensions or defense concerns, which may
adversely affect the economies of these countries. Certain Middle Eastern
countries experience significant unemployment, as well as widespread
underemployment. Many Middle Eastern countries have little or no democratic
tradition. Many Middle Eastern countries periodically have experienced
political, economic and social unrest as protestors have called for widespread
reform. Some of these protests have resulted in a governmental regime change,
internal conflict or civil war. If further regime changes were to occur,
internal conflict were to intensify, or a civil war were to continue in any of
these countries, such instability could adversely affect the economies of Middle
Eastern countries.
North
American Economic Risk
A
decrease in imports or exports, changes in trade regulations or an economic
recession in any North American country can have a significant economic effect
on the entire North American region and on some or all of the North American
countries to which the Fund has economic exposure. The U.S. is Canada's and
Mexico's largest trading and investment partner. The Canadian and Mexican
economies are significantly affected by developments in the U.S. economy. Since
the implementation of the North American Free Trade Agreement (“NAFTA”) in 1994
among Canada, the U.S. and Mexico, total merchandise trade among the three
countries has increased. However, political developments in the U.S., including
the renegotiation of NAFTA and imposition of tariffs by the U.S., may have
implications for the trade arrangements among the U.S., Mexico and Canada, which
could negatively affect the value of securities held by the Fund. Policy and
legislative changes in any of the three countries may have a significant effect
on North American economies generally, as well as on the value of certain
securities held by the Fund.
International
Closed Market Trading Risk
International
Closed Market Trading Risk applies to the Global X Robotics & Artificial
Intelligence ETF, Global X Internet of Things ETF, Global X FinTech ETF, Global
X Video Games & Esports ETF, Global X Autonomous & Electric Vehicles
ETF, Global X Cloud Computing ETF, Global X Data Center REITs & Digital
Infrastructure ETF, Global X Cybersecurity ETF, Global X Artificial Intelligence
& Technology ETF, Global X Mataverse ETF, Global X Education ETF, Global X
Cannabis ETF, Global X Genomics & Biotechnology ETF, Global X China Biotech
Innovation ETF, Global X Telemedicine & Digital Health ETF, Global X Aging
Population ETF, Global X Health & Wellness ETF, Global X CleanTech ETF,
Global X AgTech & Food Innovation ETF, Global X Blockchain ETF, Global X
Clean Water ETF, Global X Hydrogen ETF, Global X Solar ETF, Global X Wind Energy
ETF and Global X Green Building ETF
To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other ETFs.
Investable
Universe of Companies Risk
Investable
Universe of Companies Risk applies to the Global X Robotics & Artificial
Intelligence ETF, Global X Data Center REITs & Digital Infrastructure ETF,
Global X Cybersecurity ETF, Global X Education ETF, Global X Cannabis ETF,
Global X China Biotech Innovation ETF, Global X CleanTech ETF, Global X AgTech
& Food Innovation ETF, Global X Blockchain ETF, Global X Clean Water ETF,
Global X Hydrogen ETF, Global X Solar ETF and Global X Wind Energy ETF
The
investable universe of companies in which the Fund may invest may be limited. If
a company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s overall portfolio holdings
and on Fund performance.
Issuer
Risk
Issuer
Risk applies to each Fund
Issuer
risk is the risk that any of the individual companies that the Fund invests in
may perform badly, causing the value of its securities to decline. Poor
performance may be caused by poor management decisions, competitive pressures,
changes in technology, disruptions in supply, labor problems or shortages,
corporate restructurings, fraudulent disclosures or other factors. Issuers may,
in times of distress or on their own discretion, decide to reduce or eliminate
dividends, which would also cause their stock prices to decline.
Market
Risk
Market
Risk applies to each Fund
Market
risk is the risk that the value of the securities in which the Fund invests may
go up or down in response to the prospects of individual issuers and/or general
economic conditions. Turbulence in the financial markets and reduced liquidity
may negatively affect issuers, which could have an adverse effect on the Fund.
If the securities held by the Fund experience poor liquidity, the Fund may be
unable to transact at advantageous times or prices, which may decrease the
Fund’s returns. In addition, there is a risk that policy changes by central
governments and governmental agencies, including the Federal Reserve or the
European Central Bank, which could include increasing interest rates, could
cause increased volatility in financial markets and lead to higher levels of
Fund redemptions from Authorized Participants, which could have a negative
impact on the Fund. Furthermore, local, regional or global events such as war,
acts of terrorism, the spread of infectious illness or other public health
issues, recessions, or other events could have a significant impact on the Fund
and its investments and trading of its Shares. For example, at the start of
2023, central banks had already increased interest rates at the fastest rate on
record, the unknown is the length of time they remain restrictive and when
inflation returns to target levels. This increases the risk that monetary policy
may provide less support should economic growth slow. Additionally, China’s
shift away from their zero-COVID policy creates both opportunities and risks,
establishing China as the wildcard for global economic growth. Market risk
factors may result in increased volatility and/or decreased liquidity in the
securities markets. The Fund’s NAV could decline over short periods due to
short-term market movements and over longer periods during market downturns.
Model
Portfolio Risk
Model
Portfolio Risk applies to the Global X Thematic Growth ETF
The
Underlying Index utilizes a proprietary methodology to determine its allocations
to the securities in which the Fund invests. Investments selected using a
proprietary methodology, including quantitative models, may perform differently
from the market as a whole or from their expected performance. There can be no
assurance that use of a quantitative model will enable the Fund to achieve
positive returns or outperform the market.
New
Fund Risk
New
Fund Risk applies to the Global X Mataverse ETF and Global X Green Building
ETF
The
Fund is a new fund, with a limited operating history, which may result in
additional risks for investors in the Fund. There can be no assurance that the
Fund will grow to or maintain an economically viable size, in which case the
Board of Trustees may determine to liquidate the Fund. While shareholder
interests will be the paramount consideration, the timing of any liquidation may
not be favorable to certain individual shareholders. From time to time an
Authorized Participant, a third-party investor, the Adviser or another affiliate
of the Adviser or the Fund may invest in the Fund and hold its investment for a
specific period of time in order to facilitate commencement of the Fund’s
operations or for the Fund to achieve size or scale. There can be no assurance
that any such entity would not redeem its investment or that the size of the
Fund would be maintained at such levels which could negatively impact the Fund.
Non-Diversification
Risk
Non-Diversification
Risk applies to the Global X Robotics & Artificial Intelligence ETF, Global
X Internet of Things ETF, Global X FinTech ETF, Global X Video Games &
Esports ETF, Global X Cloud Computing ETF, Global X Data Center REITs &
Digital Infrastructure ETF, Global X Cybersecurity ETF, Global X Mataverse ETF,
Global X Education ETF, Global X Cannabis ETF, Global X Genomics &
Biotechnology ETF, Global X China Biotech Innovation ETF, Global X Telemedicine
& Digital Health ETF, Global X CleanTech ETF, Global X AgTech & Food
Innovation ETF, Global X Blockchain ETF, Global X
Clean
Water ETF, Global X Hydrogen ETF, Global X Solar ETF, Global X Wind Energy ETF
and Global X Green Building ETF
The
Fund is classified as a “non-diversified” investment company under the 1940 Act.
This means that the Fund may invest most of its assets in securities issued by
or representing a small number of companies. As a result, the Fund may be more
susceptible to the risks associated with these particular companies, or to a
single economic, political or regulatory occurrence affecting these companies.
Operational
Risk
Operational
Risk applies to each Fund
The
Fund is exposed to operational risk arising from a number of factors, including
but not limited to human error, processing and communication errors, errors of
the Fund's service providers, counterparties or other third-parties, failed or
inadequate processes and technology or systems failures.
With
the increased use of technologies such as the internet to conduct business, the
Fund, Authorized Participants, service providers and the relevant listing
exchange are susceptible to operational, information security and related
“cyber” risks both directly and through their service providers. Similar types
of cyber security risks are also present for issuers of securities in which the
Fund invests, which could result in material adverse consequences for such
issuers and may cause the Fund’s investment in such portfolio companies to lose
value. Unlike many other types of risks faced by the Fund, these risks typically
are not covered by insurance. In general, cyber incidents can result from
deliberate attacks or unintentional events. Cyber incidents include, but are not
limited to, gaining unauthorized access to digital systems (e.g., through
“hacking” or malicious software coding) for purposes of misappropriating assets
or sensitive information, corrupting data, or causing operational disruption.
Cyber-attacks may also be carried out in a manner that does not require gaining
unauthorized access, such as causing denial-of-service attacks on websites
(i.e., efforts to make network services unavailable to intended users).
Recently, geopolitical tensions may have increased the scale and sophistication
of deliberate attacks, particularly those from nation-states or from entities
with nation-state backing. Cyber security failures by or breaches of the systems
of the Adviser and the Fund’s distributor and other service providers
(including, but not limited to, the Index Provider, fund accountants,
custodians, transfer agents and administrators), market makers, Authorized
Participants, or the issuers of securities in which the Fund invests, have the
ability to cause disruptions and impact business operations, potentially
resulting in: financial losses, interference with the Fund’s ability to
calculate its NAV, disclosure of confidential trading information, impediments
to trading, submission of erroneous trades or erroneous creation or redemption
orders, the inability of the Fund or its service providers to transact business,
violations of applicable privacy and other laws, regulatory fines, penalties,
reputational damage, reimbursement or other compensation costs, or additional
compliance costs. In addition, cyber-attacks may render records of Fund assets
and transactions, shareholder ownership of Fund Shares, and other data integral
to the functioning of the Fund inaccessible or inaccurate or incomplete.
Substantial costs may be incurred by the Fund in order to resolve or prevent
cyber incidents in the future. While the Fund has established business
continuity plans in the event of, and risk management systems to prevent, such
cyber-attacks, there are inherent limitations in such plans and systems,
including the possibility that certain risks have not been identified and that
prevention and remediation efforts will not be successful. Furthermore, the Fund
cannot control the cyber security plans and systems put in place by service
providers to the Fund, issuers in which the Fund invests, the Index
Provider, market makers or Authorized Participants. The Fund and its
shareholders could be negatively impacted as a result.
The
Fund and the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate for those risks that they are intended to address.
Passive
Investment Risk
Passive
Investment Risk applies to each Fund
The
Fund is not actively managed and may be affected by a general decline in market
segments relating to the Underlying Index. The Fund invests in securities
included in, or representative of, the Underlying Index regardless of their
investment merits, and the Adviser does not otherwise attempt to take defensive
positions in declining markets. Unlike many investment companies, the Fund does
not seek to outperform its Underlying Index. Therefore, the Fund would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk
There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk
The
Fund may not fully replicate its Underlying Index and may hold securities not
included in its Underlying Index. Therefore, the Fund is subject to management
risk. That is, the Adviser’s investment strategy, the implementation of which is
subject to a number of constraints, may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. While the Fund is passively managed,
implementation of the Fund’s principal investment strategy may result in
tracking error risk, which is described below. The ability of the Adviser to
successfully implement the Fund’s investment strategies will influence the
Fund’s performance significantly.
Tracking
Error Risk
Tracking
error is the divergence of the Fund's performance from that of the Underlying
Index. Tracking error may occur because of differences between the securities
and other instruments held in the Fund's portfolio and those included in the
Underlying Index, pricing differences (including differences between a
security's price at the local market close and the Fund's valuation of a
security at the time of calculation of the Fund's NAV), transaction costs
incurred by the Fund, the Fund's holding of uninvested cash, differences in
timing of the accrual of or the valuation of dividends or interest, tax gains or
losses, changes to the Underlying Index or the costs to the Fund of complying
with various new or existing regulatory requirements. This risk may be
heightened during times of increased market volatility or other unusual market
conditions. Tracking error also may result because the Fund incurs fees and
expenses, while the Underlying Index does not. ETFs that track indices with
significant weight in emerging markets issuers may experience higher tracking
error than other ETFs that do not track such indices.
Reliance
on Trading Partners Risk
Reliance
on Trading Partners Risk applies to the Global X Data Center REITs & Digital
Infrastructure ETF, Global X China Biotech Innovation ETF and Global X Clean
Water ETF
The
Fund may invest in economies that are heavily dependent upon trading with key
partners. Any reduction in this trading, institution of tariffs or other trade
barriers or a slowdown in the economies of any of its key trading partners may
cause an adverse impact on the economies of the markets in which the Fund
invests.
Risks
Associated with Exchange-Traded Funds
Risks
Associated with Exchange-Traded Funds applies to each Fund
As
an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk
The
Fund has a limited number of financial institutions that may act as Authorized
Participants. Only Authorized Participants who have entered into agreements with
the Fund's distributor may engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, and no other
Authorized Participant is able to step forward to create and redeem in either of
those cases, Shares may trade like closed-end fund shares at a discount to NAV
and/or at wider intraday bid-ask spreads, and may possibly face trading halts
and/or delisting from the Exchange.
Large
Shareholder Risk
Certain
shareholders, including an Authorized Participant, the Adviser or an affiliate
of the Adviser, may own a substantial amount of the Fund’s Shares. Additionally,
from time to time an Authorized Participant, a third-party investor, the
Adviser, or an affiliate of the Adviser may invest in the Fund and hold its
investment for a specific period of time in order to facilitate commencement of
the Fund’s operations or to allow the Fund to achieve size or scale.
Redemptions by large shareholders could have a significant negative impact on
the Fund. If a large shareholder were to redeem all, or a large portion, of its
Shares, there is no guarantee that the Fund will be able to maintain sufficient
assets to continue operations in which case the Board of Trustees may determine
to liquidate the Fund. In addition, transactions by large shareholders may
account for a large percentage of the trading volume on the Exchange and may,
therefore, have a material upward or downward effect on the market price of the
Shares.
Listing
Standards Risk
The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks
Absence
of Active Market
Although
Shares of the Fund are or will be listed for trading on a U.S. exchange and may
be listed on certain foreign exchanges, there can be no assurance that an active
trading market for the Shares will develop or be maintained.
Risks
of Secondary Listings
The
Fund's Shares may be listed or traded on U.S. and non-U.S. exchanges other than
the U.S. exchange where the Fund’s primary listing is maintained. There can be
no assurance that the Fund’s Shares will continue to trade on any such exchange
or in any market or that the Fund's Shares will continue to meet the
requirements for listing or trading on any exchange or in any market. The Fund's
Shares may be less actively traded in certain markets than others, and investors
are subject to the execution and settlement risks and market standards of the
market where they or their brokers direct their trades for execution. Certain
information available to investors who trade Shares on a U.S. exchange during
regular U.S. market hours may not be available to investors who trade in other
markets, which may result in secondary market prices in such markets being less
efficient.
Secondary
Market Trading Risk
Only
Authorized Participants who have entered into agreements with the Fund’s
distributor may engage in creation or redemption transactions directly with the
Fund. Shares of the Fund may trade in the secondary market on days when the Fund
does not accept orders to purchase or redeem Shares from Authorized
Participants. On such days, Shares may trade in the secondary market with more
significant premiums or discounts than might be experienced on days when the
Fund accepts purchase and redemption orders.
Secondary
market trading in Fund Shares may be halted by a stock exchange because of
market conditions or other reasons. In addition, trading in Fund Shares on a
stock exchange or in any market may be subject to trading halts caused by
extraordinary market volatility pursuant to "circuit breaker" rules on the stock
exchange or market. There can be no assurance that the requirements necessary to
maintain the listing or trading of Fund Shares will continue to be met or will
remain unchanged.
Shares
of the Fund May Trade at Prices Other Than NAV
Shares
of the Fund may trade at, above or below NAV. The per share NAV of the Fund will
fluctuate with changes in the market value of the Fund’s holdings. The trading
prices of Shares will fluctuate in accordance with changes in the Fund's NAV as
well as market supply and demand. The trading prices of the Fund's Shares may
deviate significantly from NAV during periods of market volatility or when the
Fund has relatively few assets or experiences a lower trading volume. In
stressed market conditions, the market for the Shares may become less liquid in
response to the deteriorating liquidity of the Fund’s portfolio. Any of these
factors may lead to the Fund's Shares trading at a premium or discount to NAV.
While the creation/redemption feature is designed to make it likely that Shares
normally will trade
close
to the Fund’s NAV, market prices are not expected to correlate exactly with the
Fund's NAV due to timing reasons as well as market supply and demand factors. In
addition, disruptions to creations and redemptions or the existence of extreme
market volatility may result in trading prices that differ significantly from
NAV. If a shareholder purchases at a time when the market price is at a premium
to the NAV or sells at a time when the market price is at a discount to the NAV,
the shareholder may sustain losses.
Since
foreign exchanges may be open on days when the Fund does not price Shares, the
value of the securities in the Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell Shares.
Costs
of Buying or Selling Fund Shares
Buying
or selling Fund Shares involves two types of costs that apply to all securities
transactions. When buying or selling Shares of the Fund through a broker, you
will likely incur a brokerage commission or other charges imposed by brokers as
determined by that broker. In addition, you may incur the cost of the "spread" -
that is, the difference between what professional investors are willing to pay
for Fund Shares (the "bid" price) and the market price at which they are willing
to sell Fund Shares (the "ask" price). Because of the costs inherent in buying
or selling Fund Shares, frequent trading may detract significantly from
investment results and an investment in Fund Shares may not be advisable for
investors who anticipate regularly making small investments.
Risks
Related to Stock Connect Programs
Risks
Related to Stock Connect Programs applies to the Global X China Biotech
Innovation ETF, Global X AgTech & Food Innovation ETF, Global X Blockchain
ETF, Global X Clean Water ETF, Global X Hydrogen ETF, Global X Solar ETF, Global
X Wind Energy ETF and Global X Green Building ETF
Investing
in securities through Stock Connect Programs is subject to trading, clearance,
settlement and other procedures, which could pose risks to the Fund. The Stock
Connect Programs are subject to daily and aggregate quota limitations, which
limit the maximum daily net purchases on any particular day by Hong Kong
investors (and foreign investors trading through Hong Kong) trading mainland
Chinese listed securities and mainland Chinese investors trading Hong Kong
listed securities trading through the relevant Stock Connect Program. The daily
quota is not specific to the Fund and is utilized on a first-come-first-serve
basis. As such, buy orders via the Stock Connect Programs could be rejected once
the daily quota is exceeded. The daily quota may thereby restrict the Fund’s
ability to invest through Stock Connect Programs on a timely basis, which could
affect the Fund’s ability to effectively pursue its investment strategy. The
daily quota is also subject to change. It is possible for securities eligible to
be purchased via the Stock Connect Programs to lose such designation, which
could impact the Fund's ability to pursue its investment strategy.
In
order to comply with applicable local market rules and to facilitate orderly
operations of the Fund, including the timely settlement of Stock Connect Program
trades placed by or on behalf of the Fund, the Fund utilizes an operating model
that may reduce the risks of trade failures; however, it will also allow Stock
Connect Program trades to be settled without the prior verification by the Fund.
Accordingly, this operating model may subject the Fund to additional risks,
including an increased risk of inadvertently exceeding certain trade or other
restrictions or limits placed on the Fund and/or its affiliates, and a
heightened risk of erroneous trades, which may negatively impact the Fund.
Additionally, the Shenzen and Shanghai markets may operate when the Stock
Connect Programs are not active, and consequently the prices of shares held via
Stock Connect Programs may fluctuate at times when the Fund is unable to add to
or exit its positions.
The
Stock Connect Programs are new, and the effect of the introduction of large
numbers of foreign investors on the market for trading Chinese-listed securities
is not well understood. Regulations, such as limitations on redemptions or
suspension of trading, may adversely impact the value of the Fund’s investments.
The Fund's investments in A-Shares though the Stock Connect Program are held by
its custodian in accounts in Central Clearing and Settlement System ("CCASS")
maintained by the Hong Kong Securities Clearing Company Limited ("HKSCC"), which
in turn holds the A-Shares, as the nominee holder, through an omnibus securities
account in its name registered with the CSDCC. The precise nature and rights of
the Fund as the beneficial owner of the SSE Securities or SZSE Securities
through HKSCC as nominee is not well defined under Chinese law. There is no
guarantee that the Shenzen, Shanghai, and Hong Kong Stock Exchanges will
continue to support the Stock Connect Programs in the future. The securities
regimes and legal systems of China and Hong Kong differ significantly, and
issues may arise based on these differences. Different fees, costs and taxes are
imposed on foreign investors acquiring securities through Stock Connect
Programs, and these fees, costs and taxes may be higher than comparable fees,
costs and taxes imposed on owners of other Chinese securities providing similar
investment exposure.
Securities
Lending Risk
Securities
Lending Risk applies to the Global X Robotics & Artificial Intelligence ETF,
Global X Internet of Things ETF, Global X FinTech ETF, Global X Video Games
& Esports ETF, Global X Autonomous & Electric Vehicles ETF, Global X
Cloud Computing ETF, Global X Cybersecurity ETF, Global X Artificial
Intelligence & Technology ETF, Global X Millennial Consumer ETF, Global X
Cannabis ETF, Global X Genomics & Biotechnology ETF, Global X Telemedicine
& Digital Health ETF, Global X CleanTech ETF, Global X U.S. Infrastructure
Development ETF, Global X Blockchain ETF, Global X Thematic Growth ETF, Global X
Metaverse ETF, Global X AgTech & Food Innovation ETF and Global X Green
Building ETF
The
Fund may engage in lending its portfolio securities. The Fund may lend its
portfolio securities to the extent noted under Fund Summaries-Principal
Investment Strategies. In connection with such loans, the Fund receives liquid
collateral equal to at least 102% of the value of domestic equity securities and
ADRs and 105% of the value of the foreign equity securities (other than ADRs)
being lent. This collateral is marked-to-market on a daily basis. Although the
Fund will receive collateral in connection with all loans of its securities
holdings, the Fund would be exposed to a risk of loss should a borrower default
on its obligation to return the borrowed securities (e.g., the loaned securities
may have appreciated beyond the value of the collateral held by the Fund). In
addition, the Fund will bear the risk of loss of any cash collateral that it
invests. Also, as securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
Trading
Halt Risk
Trading
Halt Risk applies to each Fund
An
exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Turnover
Risk
Turnover
Risk applies to the Global X Thematic Growth ETF and Global X Solar
ETF
The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At times, the Fund may have a portfolio
turnover rate substantially greater than 100%. For example, a portfolio turnover
rate of 300% is equivalent to the Fund buying and selling all of its securities
three times during the course of a year. A high portfolio turnover rate would
result in high brokerage costs for the Fund, may result in higher taxes when
shares are held in a taxable account and lower Fund performance.
Valuation
Risk
Valuation
Risk applies to each Fund
The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). Because non-U.S. exchanges may be open on days when the Fund does not
price its Shares, the value of the securities in the Fund's portfolio may change
on days when shareholders will not be able to purchase or sell the Fund's
Shares.
A
FURTHER DISCUSSION OF OTHER RISKS
Each
Fund may also be subject to certain other risks associated with its investments
and investment strategies.
Exclusion
from the Definition of a Commodity Pool Operator Risk
With
respect to the Fund, the Adviser has claimed an exclusion from the definition of
“commodity pool operator” (“CPO”) under the Commodity Exchange Act, as amended
(“CEA”), and the rules of the Commodity Futures Trading Commission (“CFTC”) and,
therefore, is not subject to CFTC registration or regulation as a CPO. In
addition, the Adviser is relying upon a related exclusion from the definition of
“commodity trading advisor” (“CTA”) under the CEA and the rules of the CFTC. The
terms of the CPO exclusion require the Fund, among other things, to adhere to
certain limits on its investments in “commodity
interests.”
Commodity interests include commodity futures, commodity options and swaps.
Because the Adviser and the Fund intend to comply with the terms of the CPO
exclusion, the Fund may, in the future, need to adjust its investment
strategies, consistent with its investment objective, to limit its investments
in these types of instruments. The Fund is not intended as a vehicle for trading
in the commodity futures, commodity options or swaps markets. The CFTC has
neither reviewed nor approved the Adviser’s reliance on these exclusions, or the
Fund, its investment strategies or this Prospectus.
Leverage
Risk
Under
the 1940 Act, the Fund is permitted to borrow from a bank up to 33 1/3% of its
net assets for short term or emergency purposes. The Fund may borrow money at
fiscal quarter end to maintain the required level of diversification to qualify
as a regulated investment company ("RIC") for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"). As a result, the Fund may be exposed to
the risks of leverage, which may be considered a speculative investment
technique. Leverage magnifies the potential for gain and loss on amounts
invested and therefore increases the risks associated with investing in the
Fund. If the value of the Fund's assets increases, then leveraging would cause
the Fund's NAV to increase more sharply than it would have had the Fund not
leveraged. Conversely, if the value of the Fund's assets decreases, leveraging
would cause the Fund's NAV to decline more sharply than it otherwise would have
had the Fund not leveraged. The Fund may incur additional expenses in connection
with borrowings.
Qualification
as a Regulated Investment Company Risk
The
Fund must meet a number of diversification requirements to qualify as a RIC
under Section 851 of the Code and, if qualified, to continue to qualify. If the
Fund experiences difficulty in meeting those requirements for any fiscal
quarter, it might enter into borrowings in order to increase the portion of the
Fund’s total assets represented by cash, cash items, and U.S. government
securities shortly thereafter and, as of the close of the following fiscal
quarter, to attempt to meet the requirements. However, the Fund may incur
additional expenses in connection with any such borrowings, and increased
investments by the Fund in cash, cash items, and U.S. government securities
(whether the Fund makes such investments from borrowings) are likely to reduce
the Fund’s return to investors.
Tax
Treaty Reclaims Uncertainty
When
the Fund receives dividend and interest income (if any) from issuers in certain
countries, such distributions may be subject to partial withholding by local tax
authorities in order to satisfy potential local tax obligations. The Fund may
file claims to recover such withholding tax in jurisdictions where withholding
tax reclaim is possible, which may be the case as a result of bilateral treaties
between the United States and local governments. Whether or when the Fund will
receive a withholding tax refund in the future is within the control of the tax
authorities in such countries. Where the Fund expects to recover withholding tax
based on a continuous assessment of probability of recovery, the NAV of the Fund
generally includes accruals for such tax refunds. The Fund continues to evaluate
tax developments for potential impact to the probability of recovery. If the
likelihood of receiving refunds materially decreases, for example due to a
change in tax regulation or approach, accruals in the Fund’s NAV for such
refunds may need to be written down partially or in full, which will adversely
affect that Fund’s NAV. Investors in the Fund at the time an accrual is written
down will bear the impact of any resulting reduction in NAV regardless of
whether they were investors during the accrual period. Conversely, if the Fund
receives a tax refund that has not been previously accrued, investors in the
Fund at the time the claim is successful will benefit from any resulting
increase in the Fund’s NAV. Investors who sold their shares prior to such time
will not benefit from such NAV increase.
PORTFOLIO
HOLDINGS INFORMATION
A
description of the policies and procedures of Global X Funds®
(the "Trust") with respect to the disclosure of the Funds’ portfolio securities
is available in the Funds’ combined Statement of Additional Information (“SAI”).
The top holdings of each Fund and Fund Fact Sheets providing information
regarding each Fund’s top holdings can be found at
www.globalxetfs.com/explore/(click on the name of your Fund) and may be
requested by calling 1-888-493-8631.
FUND
MANAGEMENT
Investment
Adviser
Global
X Management Company LLC (the "Adviser") serves as the investment adviser and
the administrator for the Funds. Subject to the supervision of the Trust's Board
of Trustees, the Adviser is responsible for managing the investment activities
of the Funds and the Funds' business affairs and other administrative matters.
The Adviser has been a registered investment adviser since 2008. The Adviser is
a Delaware limited liability company with its principal offices located at 605
3rd Avenue,
43rd
Floor, New York, New York 10158. As of March 1, 2023, the Adviser provided
investment advisory services for assets of approximately $38.8
billion.
Pursuant
to a Supervision and Administration Agreement and subject to the general
supervision of the Board of Trustees, the Adviser provides, or causes to be
furnished, all supervisory, administrative and other services reasonably
necessary for the operation of the Funds and also bears the costs of various
third-party services required by the Funds, including audit, certain custody,
portfolio accounting, legal, transfer agency and printing costs. The Supervision
and Administration Agreement also requires the Adviser to provide investment
advisory services to the Funds pursuant to an Investment Advisory Agreement. The
Supervision and Administration Agreement for the Global X Thematic Growth ETF
provides that the Adviser also bears the costs for acquired fund fees and
expenses generated by investments by the Fund in affiliated investment
companies.
Each
Fund pays the Adviser a fee ("Management Fee") in return for providing
investment advisory, supervisory and administrative services under an all-in fee
structure. For the fiscal year ended November 30, 2022, the Funds paid a
monthly Management Fee to the Adviser at the following annual rates (stated as a
percentage of the average daily net assets of each Fund taken separately):
|
|
|
|
|
|
Fund |
Management
Fee |
Global
X Millennial Consumer ETF |
0.50% |
Global
X Health & Wellness ETF |
0.50% |
Global
X Aging Population ETF |
0.50% |
Global
X FinTech ETF |
0.68% |
Global
X Internet of Things ETF |
0.68% |
Global
X Robotics & Artificial Intelligence ETF |
0.68% |
Global
X U.S. Infrastructure Development ETF |
0.47% |
Global
X Autonomous & Electric Vehicles ETF |
0.68% |
Global
X Artificial Intelligence & Technology ETF |
0.68% |
Global
X Genomics & Biotechnology ETF |
0.50% |
Global
X Cloud Computing ETF |
0.68% |
Global
X Cannabis ETF |
0.50% |
Global
X Cybersecurity ETF |
0.50% |
Global
X Thematic Growth ETF |
0.50% |
Global
X Video Games & Esports ETF |
0.50% |
Global
X Education ETF |
0.50% |
Global
X Telemedicine & Digital Health ETF |
0.68% |
Global
X China Biotech Innovation ETF |
0.65% |
Global
X CleanTech ETF |
0.50% |
Global
X Data Center REITs & Digital Infrastructure ETF |
0.50% |
Global
X AgTech & Food Innovation ETF |
0.50% |
Global
X Blockchain ETF |
0.50% |
Global
X Clean Water ETF |
0.50% |
Global
X Hydrogen ETF |
0.50% |
Global
X Solar ETF |
0.50% |
Global
X Wind Energy ETF |
0.50% |
Global
X Metaverse ETF |
0.50% |
Global
X Green Building ETF |
0.45% |
In
addition, each Fund bears other fees and expenses that are not covered by the
Supervision and Administration Agreement, which may vary and will affect the
total expense ratio of each Fund, such as taxes, brokerage fees, commissions and
other transaction expenses, interest and extraordinary expenses (such as
litigation and indemnification expenses). The Adviser may earn a profit on the
Management Fee paid by each Fund. Also, the Adviser, and not shareholders of the
Funds, would benefit from any price decreases in third-party services, including
decreases resulting from an increase in net assets.
The
Adviser or its affiliates may pay compensation, out of profits derived from the
Adviser’s Management Fee or other resources and not as an additional charge to
the Funds, to certain financial institutions (which may include banks,
securities dealers and other industry professionals) for the sale and/or
distribution of Fund Shares or the retention and/or servicing of Fund investors
and Fund Shares (“revenue sharing”). These payments are in addition to any other
fees described in the fee table or elsewhere in the Prospectus or SAI. Examples
of “revenue sharing” payments include, but are not limited to, payments to
financial institutions for “shelf space” or access to a third party platform or
fund offering list or other marketing programs, including, but not limited to,
inclusion of the Funds on preferred or recommended sales lists, mutual fund
“supermarket” platforms and other formal sales programs; granting the Adviser
access to the financial institution’s sales force; granting the Adviser access
to the financial institution’s conferences and meetings; assistance in training
and educating the financial institution’s personnel; and obtaining other forms
of marketing support. The level of revenue sharing payments made to financial
institutions may be a fixed fee or based upon one or more of the following
factors: gross sales, current assets and/or number of accounts of a Fund
attributable to the financial institution, or other factors as agreed to by the
Adviser and the financial institution or any combination thereof. The amount of
these revenue sharing payments is determined at the discretion of the Adviser
from time to time, may be substantial, and may be different for different
financial institutions depending upon the services provided by the financial
institution. Such payments may provide an incentive for the financial
institution to make Shares of the Funds available to its customers and may allow
the Funds greater access to the financial institution’s customers.
Approval
of Advisory Agreement
Discussions
regarding the basis for the Board of Trustees' approval of the Supervision and
Administration Agreement and the related Investment Advisory Agreement for each
Fund is available in the Funds' Semi-Annual Report to Shareholders for the
fiscal half-year ended May 31 and/or Annual Report to Shareholders for the
fiscal year ended November 30.
Portfolio
Management
The
Portfolio Managers who are currently responsible for the day-to-day management
of each Fund's portfolio are Nam To, Wayne Xie, Kimberly Chan, Vanessa Yang and
Sandy Lu.
Nam
To:
Nam To, CFA, Portfolio Manager, joined the Adviser in July 2017. Prior to that,
Mr. To was a Global Economics Research Analyst at Bunge Limited from 2014 to
2017. Mr. To received his Bachelor of Arts in Philosophy and Economics from
Cornell University in 2014.
Wayne
Xie:
Wayne Xie, Director of Portfolio Management, joined the Adviser in July 2018 as
a Portfolio Management Associate. Previously, Mr. Xie was an Analyst at VanEck
Associates on the Equity ETF Investment Management team from 2010 to 2018 and a
Portfolio Administrator at VanEck Associates from 2007 to 2010. Mr. Xie received
his Bachelor of Science from the State University of New York at Buffalo in
2002.
Kimberly
Chan:
Kimberly Chan, Portfolio Manager, joined the Adviser in June 2018. Previously,
Ms. Chan was a U.S. Associate Trader at Credit Agricole from 2016 to 2018, and
an Investment Analyst at MetLife Investments from 2015 to 2016. Ms. Chan
received her Bachelor of Science from New York University in 2015.
Vanessa
Yang:
Vanessa Yang, Portfolio Manager, joined the Adviser in 2016 as a Portfolio
Administrator. She was appointed to the portfolio management team in June 2019.
Previously, Ms. Yang was a Portfolio Administrator at VanEck Associates from
2011 to 2014. Ms. Yang received her MS in Financial Engineering from Drucker
School of Management in 2010 and her BS in Economics from Guangdong University
of Foreign Studies in 2008.
Sandy
Lu:
Sandy Lu, CFA, Portfolio Manager, joined the Adviser in September 2021.
Previously, Mr. Lu was a Portfolio Analyst and Junior Portfolio Manager at PGIM
Fixed Income from 2014 to 2021, and a Fixed Income Portfolio Analyst at Lincoln
Financial Group from 2010 to 2014. Mr. Lu received his Bachelor of Science in
Economics from the Wharton School of the University of Pennsylvania. He earned
his CFA designation in September 2015, and holds the Series 3
license.
The
SAI provides additional information about the Portfolio Managers’ compensation
structure, other accounts managed by the Portfolio Managers, and the Portfolio
Managers' ownership of Shares of the Funds.
DISTRIBUTOR
SEI
Investments Distribution Co. ("Distributor") distributes Creation Units for the
Funds on an agency basis. The Distributor does not maintain a secondary market
in Shares. The Distributor has no role in determining the policies of the Funds
or the
securities
that are purchased or sold by each Fund. The Distributor’s principal address is
One Freedom Valley Drive, Oaks, PA 19456. The Distributor is not affiliated with
the Adviser.
BUYING
AND SELLING FUND SHARES
Shares
of the Funds trade on a national securities exchange and in the secondary market
during the trading day. Shares can be bought and sold throughout the trading day
like other shares of publicly-traded securities. There is no minimum investment
for purchases made on a national securities exchange. When buying or selling
Shares through a broker, you will incur customary brokerage commissions and
charges. In addition, you will also incur the cost of the “spread,” which is the
difference between what professional investors are willing to pay for Shares
(the “bid” price) and the price at which they are willing to sell Shares (the
“ask” price). The commission is frequently a fixed amount and may be a
significant proportional cost for investors seeking to buy or sell small amounts
of Shares. The spread with respect to Shares varies over time based on a Fund’s
trading volume and market liquidity and is generally lower if a Fund has
significant trading volume and market liquidity and higher if a Fund has little
trading volume and market liquidity. Because of the costs of buying and selling
Shares, frequent trading may reduce investment returns.
Shares
of a Fund may be acquired or redeemed directly from the Fund only by Authorized
Participants (as defined in the SAI) and only in Creation Units or multiples
thereof, as discussed in the "Creations and Redemptions" section in the SAI. The
Funds anticipate regularly meeting redemption requests primarily through in-kind
redemptions. However, the Funds reserve the right to pay redemption proceeds to
an Authorized Participant in cash, consistent with the Trust’s exemptive relief.
Cash used for redemptions will be raised from the sale of portfolio assets or
may come from existing holdings of cash or cash equivalents.
Shares
generally trade in the secondary market in amounts less than a Creation Unit.
Shares of the Funds trade under the trading symbol listed for each Fund in the
Fund Summaries section of the Prospectus.
The
Funds are listed on a national securities exchange, which is open for trading
Monday through Friday and is closed on weekends and the following holidays, as
observed: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good
Friday, Memorial Day, Juneteenth National Independence Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Book
Entry
Shares
of the Funds are held in book-entry form, which means that no stock certificates
are issued. The Depository Trust Company (“DTC”) or its nominee is the record
owner of all outstanding Shares and is recognized as the owner of all Shares for
all purposes.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares.
Participants include DTC, securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any rights as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any securities that you hold in
book entry or “street name” form.
FREQUENT
TRADING
Unlike
frequent trading of shares of a traditional open-end mutual fund (i.e., not
exchange-traded shares), frequent trading of Shares on the secondary market does
not disrupt portfolio management, increase a Fund's trading costs, lead to
realization of capital gains, or otherwise harm Fund shareholders because these
trades do not involve a Fund directly. A few institutional investors are
authorized to purchase and redeem the Funds' Shares directly with the Funds.
When these trades are effected in-kind (i.e.,
for securities, and not for cash), they do not cause any of the harmful effects
(noted above) that may result from frequent cash trades. Moreover, each Fund
imposes transaction fees on in-kind purchases and redemptions of the Fund
intended to cover the custodial and other costs incurred by the Fund in
effecting in-kind trades. These fees increase if an investor substitutes cash in
part or in whole for securities, reflecting the fact that a Fund’s trading costs
increase in those circumstances, although transaction fees are subject to
certain limits and therefore may not cover all related costs incurred by a Fund.
For these reasons, the Board of Trustees has determined that it is not necessary
to adopt policies and procedures to detect and deter frequent trading and
market-timing in Shares of the Funds.
DISTRIBUTION
AND SERVICES PLAN
The
Board of Trustees of the Trust has adopted a Distribution and Services Plan
(“Plan”) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, each Fund is
authorized to pay distribution fees in connection with the sale and distribution
of its Shares and pay service fees in connection with the provision of ongoing
services to shareholders of each class and the maintenance of shareholder
accounts in an amount up to 0.25% of its average daily net assets each year.
No
Rule 12b-1 fees are currently paid by a Fund, and there are no current plans to
impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because these fees are paid out of each Fund’s assets on an ongoing
basis, these fees will increase the cost of your investment in a Fund. By
purchasing Shares subject to distribution fees and service fees, you may pay
more over time than you would by purchasing Shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the rules of
FINRA. The net income attributable to Shares will be reduced by the amount of
distribution fees and service fees and other expenses of a Fund.
DIVIDENDS
AND DISTRIBUTIONS
Dividends
from net investment income, including any net foreign currency gains, generally
are declared and paid at least annually and any net realized capital gains are
distributed at least annually. In order to improve tracking error or comply with
the distribution requirements of the Code, dividends may be declared and paid
more frequently than annually for a Fund.
Dividends
and other distributions on Shares are distributed on a pro rata basis to
beneficial owners of such Shares. Dividend payments are made through DTC
participants to beneficial owners then of record with proceeds received from a
Fund. Dividends and security gain distributions are distributed in U.S. dollars
and cannot be automatically reinvested in additional Shares.
No
dividend reinvestment service is provided by the Trust. Broker-dealers may make
available the DTC book-entry Dividend Reinvestment Service for use by beneficial
owners of a Fund for reinvestment of their dividend distributions. Beneficial
owners should contact their broker to determine the availability and costs of
the service and the details of participation therein. Brokers may require
beneficial owners to adhere to specific procedures and timetables. If this
service is available and used, dividend distributions of both income and
realized gains will be automatically reinvested in additional whole Shares
purchased in the secondary market.
INVESTMENTS
BY INVESTMENT COMPANIES
Section
12(d)(1) of the 1940 Act restricts investments by investment companies in the
securities of other investment companies, including shares of the Funds.
Registered investment companies and unit investment trusts that enter into a
fund-of-funds investment agreement with the Trust ("Investing Funds") are
permitted to invest in certain Global X Funds beyond the limits set forth in
Section 12(d)(1) of the 1940 Act, subject to certain conditions set forth in
Rule 12d1-4 under the 1940 Act. With respect to the Global X Thematic Growth
ETF, which invests in underlying ETFs, Investing Funds must adhere to the limits
set forth in Section 12(d)(1) when investing in the Fund.
TAXES
The
following is a summary of certain tax considerations that may be relevant to an
investor in a Fund. Except where otherwise indicated, the discussion relates to
investors who are individual United States citizens or residents and is based on
current tax law. You should consult your tax advisor for further information
regarding federal, state, local and/or foreign tax consequences relevant to your
specific situation.
Distributions.
Each Fund receives income and gains on its investments. The income, less
expenses incurred in the operation of a Fund, constitutes the Fund's net
investment income from which dividends may be paid to you. Each Fund has elected
and intends to qualify as a RIC under the Code for federal tax purposes and to
distribute to shareholders substantially all of its net investment income and
net capital gain each year. Except as otherwise noted below, you will generally
be subject to federal income tax on a Fund’s distributions you receive. For
federal income tax purposes, Fund distributions attributable to short-term
capital gains and net investment income are taxable to you as ordinary income.
Distributions attributable to net capital gains (the excess of net long- term
capital gains over net short-term capital losses) of a Fund generally are
taxable to you as long-term capital gains. This is true no matter how long you
own your Shares or whether you take distributions in cash or additional Shares.
The maximum long-term capital gain rate applicable to individuals is 20%.
Distributions
of “qualifying dividends” will also generally be taxable to you at long-term
capital gain rates as long as certain requirements are met. In general, if 95%
or more of the gross income of a Fund (other than net capital gain) consists of
dividends received from domestic corporations or “qualified” foreign
corporations (“qualifying dividends”), then all distributions received by
individual shareholders of a Fund will be treated as qualifying dividends. But
if less than 95% of the gross income of a Fund (other than net capital gain)
consists of qualifying dividends, then distributions received by individual
shareholders of a Fund will be qualifying dividends only to the extent they are
derived from qualifying dividends earned by such Fund. For the lower rates to
apply, you must have owned your Shares for at least 61 days during the 121-day
period beginning on the date that is 60 days before such Fund’s ex-dividend date
(and such Fund will need to have met a similar holding period requirement with
respect to the Shares of the corporation paying the qualifying dividend). The
amount of a Fund’s distributions that qualify for this favorable treatment may
be reduced as a result of such Fund’s securities lending activities (if any), a
high portfolio turnover rate or investments in debt securities or
“non-qualified” foreign corporations. In addition, whether distributions
received from foreign corporations are qualifying dividends will depend on
several factors including the country of residence of the corporation making the
distribution. Accordingly, distributions from many of the Funds’ holdings may
not be qualifying dividends.
A
portion of distributions paid to shareholders that are corporations may also
qualify for the dividends-received deduction for corporations, subject to
certain holding period requirements and debt financing limitations. The amount
of the dividends qualifying for this deduction may, however, be reduced as a
result of such Fund’s securities lending activities, by a high portfolio
turnover rate or by investments in debt securities or foreign corporations.
Distributions
from a Fund will generally be taxable to you in the year in which they are paid,
with one exception. Dividends and distributions declared by a Fund in October,
November or December and paid in January of the following year are taxed as
though they were paid on December 31.
You
should note that if you buy Shares of a Fund shortly before it makes a
distribution, the distribution will be fully taxable to you even though, as an
economic matter, it simply represents a return of a portion of your investment.
This adverse tax result is known as “buying into a dividend.”
You
will be informed of the amount of your ordinary income dividends, qualifying
dividend income, and capital gain distributions at the time they are paid, and
you will be advised of the tax status for federal income tax purposes shortly
after the close of each calendar year. If you have not held Shares for a full
year, a Fund may designate and distribute to you, as ordinary income or capital
gain, a percentage of income that is not equal to the actual amount of such
income earned during the period of your investment in such Fund.
A
Fund’s investments in partnerships, including in partnerships defined as
Qualified Publicly Traded Partnerships for tax purposes, may result in such Fund
being subject to state, local or foreign income, franchise or withholding tax
liabilities.
Qualified
REIT Dividends.
Under the 2017 Tax Cuts and Jobs Act, “qualified REIT dividends” (i.e., ordinary
REIT dividends other than capital gain dividends and portions of REIT dividends
designated as qualified dividend income) are treated as eligible for a 20%
deduction by noncorporate 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). A Fund may choose to report the special character of “qualified
REIT dividends”. A noncorporate shareholder receiving such dividends would treat
them as eligible for the 20% deduction, provided Fund shares were held by the
shareholder for more than 45 days during the 91-day period beginning on the date
that is 45 days before the date on which the shares become ex-dividend with
respect to such dividend). The amount of a RIC’s dividends eligible for the 20%
deduction for a taxable year is limited to the excess of the RIC’s qualified
REIT dividends for the taxable year over allocable expenses.
Excise
Tax Distribution Requirements.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
RIC’s “required distribution” for the calendar year ending within the RIC’s
taxable year over the “distributed amount” for such calendar year. The term
“required distribution” means the sum of (a) 98% of ordinary income (generally
net investment income) for the calendar year, (b) 98.2% of capital gain (both
long-term and short-term) for the one-year period ending on October 31 (or
December 31, if a Fund so elects), and (c) the sum of any untaxed, undistributed
net investment income and net capital gains of the RIC for prior periods. The
term “distributed amount” generally means the sum of (a) amounts actually
distributed by a Fund from its current year’s ordinary income and capital gain
net income and (b) any amount on which a Fund pays income tax for the taxable
year ending in the calendar year. Although each Fund intends to distribute its
net investment income and net capital gains so as to avoid excise tax liability,
a Fund may determine that it is in the interest of shareholders to distribute a
lesser amount. The Funds intend to declare and pay these amounts in December (or
in January, which must be treated by you as received in December) to avoid these
excise taxes but can give no assurances that their distributions will be
sufficient to eliminate all such taxes.
Foreign
Currencies.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time a Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency, and the
time such Fund actually collects such receivables or pays such liabilities, are
treated as ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies, from the disposition of debt securities
denominated in a foreign currency, or from the disposition of a forward foreign
currency contract which are attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the asset and the date of
disposition also are treated as ordinary income or loss. These gains or losses,
referred to under the Code as “section 988” gains or losses, increase or
decrease the amount of a Fund’s investment company taxable income available to
be distributed to its shareholders as ordinary income, rather than increasing or
decreasing the amount of such Fund’s net capital gain.
Foreign
Taxes.
Each Fund will be subject to foreign withholding taxes with respect to certain
payments received from sources in foreign countries. If at the close of the
taxable year more than 50% in value of a Fund’s assets consists of stock in
foreign corporations, such Fund will be eligible to make an election to treat a
proportionate amount of those taxes as constituting a distribution to each
shareholder, which would allow you either (subject to certain limitations) (1)
to credit that proportionate amount of taxes against your U.S. Federal income
tax liability as a foreign tax credit or (2) to take that amount as an itemized
deduction. If a Fund is not eligible or chooses not to make this election, it
will be entitled to deduct such taxes in computing the amounts it is required to
distribute.
Sales
and Exchanges.
The sale of Shares is a taxable event on which a gain or loss is recognized. The
amount of gain or loss is based on the difference between your tax basis in
Shares and the amount you receive for them upon disposition. Generally, you will
recognize long-term capital gain or loss if you have held your Shares for over
one year at the time you sell or exchange them. Gains and losses on Shares held
for one year or less will generally constitute short-term capital gains, except
that a loss on Shares held six months or less will be re-characterized as a
long-term capital loss to the extent of any long-term capital gain distributions
that you have received on the Shares. A loss realized on a sale or exchange of
Shares may be disallowed under the so-called “wash sale” rules to the extent the
Shares disposed of are replaced with other Shares of that same Fund within a
period of 61 days beginning 30 days before and ending 30 days after the Shares
are disposed of, such as pursuant to a dividend reinvestment in Shares of a
Fund. If disallowed, the loss will be reflected in an adjustment to the basis of
the Shares acquired.
Taxes
on Purchase and Redemption of Creation Units. An
Authorized Participant who exchanges equity securities for Creation Units
generally will recognize a gain or a loss. The gain or loss will be equal to the
difference between the market value of the Creation Units at the time of
purchase (plus any cash received by the Authorized Participant as part of the
issue) and the Authorized Participant’s aggregate basis in the securities
surrendered (plus any cash paid by the Authorized Participant as part of the
issue). An Authorized Participant who exchanges Creation Units for equity
securities generally will recognize a gain or loss equal to the difference
between the Authorized Participant’s basis in the Creation Units (plus any cash
paid by the Authorized Participant as part of the redemption) and the aggregate
market value of the securities received (plus any cash received by the
Authorized Participant as part of the redemption). The Internal Revenue Service
(the “IRS”), however, may assert that a loss realized upon an exchange of
securities for Creation Units cannot be deducted currently under the rules
governing “wash sales,” or on the basis that there has been no significant
change in economic position. Persons exchanging securities should consult their
own tax advisor with respect to whether the wash sale rules apply and when a
loss might be deductible. Under current federal tax laws, any capital gain or
loss realized upon redemption of Creation Units is generally treated as
long-term capital gain or loss if the Shares have been held for more than one
year and as a short-term capital gain or loss if the Shares have been held for
one year or less, assuming such Creation Units are held as a capital
asset.
IRAs
and Other Tax-Qualified Plans.
The one major exception to the preceding tax principles is that distributions
on, and sales, exchanges and redemptions of, Shares held in an IRA or other
tax-qualified plan are not currently taxable but may be taxable when funds are
withdrawn from the tax qualified plan, unless the Shares were purchased with
borrowed funds.
Medicare
Tax. An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from a
Fund and net gains from redemptions or other taxable dispositions of Fund
Shares) of U.S. individuals, estates and trusts to the extent that such person’s
“modified adjusted gross income” (in the case of an individual) or “adjusted
gross income” (in the case of an estate or trust) exceeds a threshold amount.
This Medicare tax, if applicable, is reported by you on, and paid with, your
federal income tax return.
Backup
Withholding.
Each Fund will be required in certain cases to withhold and remit to the U.S.
Treasury backup withholding at the applicable rate on dividends and gross sales
proceeds paid to any shareholder (i) who has either provided an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the IRS, or (iii) who has failed to certify to a Fund, when
required to do so, that he or she is not subject to backup withholding or is an
“exempt recipient.”
Cost
Basis Reporting.
Federal law requires that shareholders' cost basis, gain/loss, and holding
period be reported to the IRS and to shareholders on the Consolidated Form 1099s
when “covered” securities are sold. Covered securities are any RIC and/or
dividend reinvestment plan shares acquired on or after January 1, 2012.
For
those securities defined as "covered" under current IRS cost basis tax reporting
regulations, accurate cost basis and tax lot information must be maintained for
tax reporting purposes. This information is not required for Shares that are not
"covered." The Funds and their service providers do not provide tax advice. You
should consult independent sources, which may include a tax professional, with
respect to any decisions you may make with respect to choosing a tax lot
identification method. Shareholders should contact their financial
intermediaries with respect to reporting of cost basis and available elections
for their accounts.
State
and Local Taxes.
You may also be subject to state and local taxes on income and gain attributable
to your ownership of Shares. You should consult your tax advisor regarding the
tax status of distributions in your state and locality.
U.S.
Tax Treatment of Foreign Shareholders.
A non-U.S. shareholder generally will not be subject to U.S. withholding tax on
gain from the redemption of Shares or on capital gain dividends (i.e., dividends
attributable to long-term capital gains of a Fund) unless, in the case of a
shareholder who is a non-resident alien individual, the shareholder is present
in the United States for 183 days or more during the taxable year and certain
other conditions are met. Non-U.S. shareholders generally will be subject to
U.S. withholding tax at a rate of 30% (or a lower treaty rate, if applicable) on
distributions by a Fund of net investment income, other ordinary income, and the
excess, if any, of net short-term capital gain over net long-term capital loss
for the year, unless the distributions are effectively connected with a U.S.
trade or business of the shareholder. Exemptions from U.S. withholding tax are
provided for certain capital gain dividends paid by a Fund from net long-term
capital gains, if any, interest-related dividends paid by the Fund from its
qualified net interest income from U.S. sources and short-term capital gain
dividends, if such amounts are reported by the Fund. Non-U.S. shareholders are
subject to special U.S. tax certification requirements to avoid backup
withholding and claim any treaty benefits. Non-U.S. shareholders should consult
their tax advisors regarding the U.S. and foreign tax consequences of investing
in a Fund.
Other
Reporting and Withholding Requirements. Under
the Foreign Account Tax Compliance Act (“FATCA”), a 30% withholding tax is
imposed on income dividends paid by a Fund to certain foreign entities, referred
to as foreign financial institutions or nonfinancial foreign entities, that fail
to comply (or be deemed compliant) with extensive reporting and withholding
requirements designed to inform the U.S. Department of the Treasury of
U.S.-owned foreign investment accounts. After December 31, 2018, FATCA
withholding also would have applied to certain capital gain distributions,
return of capital distributions and the proceeds arising from the sale of Fund
Shares; however, based on proposed regulations issued by the IRS, which may be
relied upon currently, such withholding is no longer required unless final
regulations provide otherwise (which is not expected). Information about a
shareholder in a Fund may be disclosed to the IRS, non-U.S. taxing authorities
or other parties as necessary to comply with FATCA. Withholding also may be
required if a foreign entity that is a shareholder of a Fund fails to provide
the appropriate certifications or other documentation concerning its status
under FATCA.
Consult
Your Tax Professional.
Your investment in a Fund could have additional tax consequences. You should
consult your tax professional for information regarding all tax consequences
applicable to your investments in a Fund. More tax information relating to the
Funds is also provided in the SAI. This short summary is not intended as a
substitute for careful tax planning.
DETERMINATION
OF NET ASSET VALUE
Each
Fund calculates its NAV as of the regularly scheduled close of business of the
New York Stock Exchange (“NYSE”) (normally 4:00 p.m. Eastern time) on each day
that the NYSE is open for business, based on prices at the time of closing,
provided that any assets or liabilities denominated in currencies other than the
U.S. dollar shall be translated into U.S. dollars at the prevailing market rates
on the date of valuation as quoted by one or more major banks or dealers that
make a two-way market in such currencies (or a data service provider based on
quotations received from such banks or dealers). The NAV of each Fund is
calculated by dividing the value of the net assets of such Fund (i.e., the value
of its total assets less total liabilities) by the total number of outstanding
Shares, generally rounded to the nearest cent. The price of Fund Shares is based
on market price, and because ETF shares trade at market prices rather than NAV,
Shares may trade at a price greater than NAV (a premium) or less than NAV (a
discount).
In
calculating a Fund’s NAV, the Fund’s investments are generally valued using
market valuations. A market valuation generally means a valuation (i) obtained
from an exchange or a major market maker (or dealer), (ii) based on a price
quotation or other equivalent indication of value supplied by an exchange, a
pricing service, or a major market maker (or dealer), or (iii) based on
amortized cost, provided the amortized cost is approximately the value on
current sale of the security. In the case of
shares
of funds that are not traded on an exchange, a market valuation means such
fund’s published NAV per share. A Fund may use various pricing services or
discontinue the use of any pricing service.
In
the event that current market valuations are not readily available or such
valuations do not reflect current market values, the affected investments will
be valued using fair value pricing pursuant to the pricing policy and procedures
approved by the Board of Trustees. A price obtained from a pricing service based
on such pricing service's valuation matrix may be used to fair value a security.
The frequency with which a Fund’s investments are valued using fair value
pricing is primarily a function of the types of securities and other assets in
which the Fund invests pursuant to its investment objective, strategies and
limitations.
Investments
that may be valued using fair value pricing include, but are not limited to: (i)
an unlisted security related to corporate actions; (ii) a restricted security
(i.e., one that may not be publicly sold without registration under the
Securities Act of 1933, as amended (the “Securities Act”)); (iii) a security
whose trading has been suspended or which has been de-listed from its primary
trading exchange; (iv) a security that is thinly traded; (v) a security in
default or bankruptcy proceedings for which there is no current market
quotation; (vi) a security affected by currency controls or restrictions; and
(vii) a security affected by a significant event (i.e., an event that occurs
after the close of the markets on which the security is traded but before the
time as of which the Fund’s NAV is computed and that may materially affect the
value of the Fund’s investments). Examples of events that may be “significant
events” are government actions, natural disasters, armed conflict, acts of
terrorism, and significant market fluctuations.
Valuing
a Fund’s investments using fair value pricing will result in using prices for
those investments that may differ from current market valuations. Use of fair
value prices and certain current market valuations could result in a difference
between the prices used to calculate a Fund’s NAV and the prices used by the
Fund’s Underlying Index, which, in turn, could result in a difference between
the Fund’s performance and the performance of the Fund’s Underlying Index.
Because
foreign markets may be open on different days than the days during which a
shareholder may purchase Shares, the value of a Fund’s investments may change on
days when shareholders are not able to purchase Shares. Additionally, due to
varying holiday schedules, redemption requests made on certain dates may result
in a settlement period exceeding seven calendar days.
The
value of assets denominated in foreign currencies is converted into U.S. dollars
using exchange rates deemed appropriate by the Adviser. Any use of a different
rate from the rates used by each Index Provider may adversely affect a Fund’s
ability to track its Underlying Index.
The
right of redemption may be suspended or the date of payment postponed with
respect to a Fund (1) for any period during which the NYSE or listing exchange
is closed (other than customary weekend and holiday closings), (2) for any
period during which trading on the NYSE or listing exchange is suspended or
restricted, (3) for any period during which an emergency exists as a result of
which disposal of the Fund’s portfolio securities or determination of its NAV is
not reasonably practicable, or (4) in such other circumstances as the SEC
permits.
Subject
to oversight by the Board of Trustees, the Adviser, as “valuation designee,”
pursuant to Rule 2a-5 under the 1940 Act, performs fair value determinations of
Fund investments. In addition, the Adviser, as the valuation designee, is
responsible for periodically assessing any material risks associated with the
determination of the fair value of a Fund's investments; establishing and
applying fair value methodologies; testing the appropriateness of fair value
methodologies; and overseeing and evaluating third-party pricing services. The
Adviser has established a fair value committee to assist with its designated
responsibilities as valuation designee.
PREMIUM/DISCOUNT
AND SHARE INFORMATION
Once
available, information regarding how often the Shares of each Fund traded on the
national securities exchanges at a price above (i.e., at a premium to) or below
(i.e., at a discount to) the NAV of the Fund, the Fund's per share NAV, and the
median bid-ask spread of the Shares can be found at www.globalxetfs.com.
TOTAL
RETURN INFORMATION
Each
Fund had commenced operations as of the most recent fiscal year
end.
The
tables that follow present information about the total returns of each Fund's
Underlying Index and the total returns of each Fund. The information presented
for each Fund is as of its fiscal year ended November 30,
2022.
“Annualized
Total Returns” or "Cumulative Total Returns" represent the total change in value
of an investment over the periods indicated.
Each
Fund’s per share NAV is the value of one share of the Fund as calculated in
accordance with the standard formula for valuing mutual fund Shares. The NAV
return is based on the NAV of each Fund and the market return is based on the
market prices of the Fund. The price used to calculate market prices is
determined by using the midpoint between the bid and the ask on the primary
stock exchange on which Shares of the Fund are listed for trading, as of the
time that the Fund’s NAV is calculated. Market and NAV returns assume that
dividends and capital gain distributions have been reinvested in the Fund at
market prices and NAV, respectively.
An
index is a statistical composite that tracks a specified financial market or
sector. Unlike a Fund, an Underlying Index does not actually hold a portfolio of
securities and therefore does not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of a Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The returns shown in the tables below do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund Shares. The investment return and principal value of Shares of a
Fund will vary with changes in market conditions. Shares of a Fund may be worth
more or less than their original cost when they are redeemed or sold in the
market. A Fund’s past performance is no guarantee of future results.
Annualized
Total Returns
Inception
to 11/30/22
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV |
MARKET |
UNDERLYING
INDEX |
Global
X Millennial Consumer ETF1 |
10.68% |
10.59% |
11.19% |
Global
X Health & Wellness ETF2 |
6.37% |
6.49% |
6.80% |
Global
X Aging Population ETF3 |
9.59% |
10.02% |
9.86% |
Global
X FinTech ETF4 |
5.99% |
6.09% |
6.58% |
Global
X Internet of Things ETF5 |
12.92% |
13.02% |
13.28% |
Global
X Robotics & Artificial Intelligence ETF6 |
6.33% |
6.60% |
6.73% |
Global
X U.S. Infrastructure Development ETF7 |
12.09% |
12.09% |
12.66% |
Global
X Autonomous & Electric Vehicles ETF8 |
10.81% |
10.99% |
11.03% |
Global
X Artificial Intelligence & Technology ETF9 |
8.75% |
8.97% |
9.17% |
Global
X Genomics & Biotechnology ETF10 |
-3.38% |
-2.80% |
-2.91% |
Global
X Cloud Computing ETF11 |
3.50% |
3.63% |
4.14% |
Global
X Cannabis ETF12 |
-49.06% |
-49.37% |
-51.39% |
Global
X Cybersecurity ETF13 |
14.44% |
15.26% |
14.93% |
Global
X Thematic Growth ETF14 |
1.95% |
2.39% |
1.67% |
Global
X Video Games & Esports ETF15 |
8.52% |
8.99% |
9.03% |
Global
X Education ETF16 |
-26.12% |
-26.04% |
-25.72% |
Global
X Telemedicine & Digital Health ETF17 |
-8.94% |
-9.03% |
-8.42% |
Global
X China Biotech Innovation ETF18 |
-18.29% |
-18.02% |
-17.75% |
Global
X CleanTech ETF19 |
3.75% |
4.09% |
2.86% |
Global
X Data Center REITs & Digital Infrastructure ETF20 |
-3.80% |
-4.07% |
-3.77% |
Global
X Clean Water ETF21 |
-1.94% |
-1.77% |
-1.63% |
Global
X AgTech & Food Innovation ETF22 |
-28.89% |
-28.73% |
-28.61% |
Global
X Blockchain ETF23 |
-71.92% |
-71.78% |
-72.31% |
Global
X Hydrogen ETF24 |
-40.20% |
-40.76% |
-40.09% |
Global
X Solar ETF25 |
-7.22% |
-6.67% |
-6.71% |
Global
X Wind Energy ETF26 |
-24.31% |
-23.23% |
-23.92% |
Global
X Metaverse ETF27 |
N/A |
N/A |
N/A |
Global
X Green Building ETF28 |
N/A |
N/A |
N/A |
1 For
the period since inception on 05/04/16 to 11/30/22
2 For
the period since inception on 05/09/16 to 11/30/22
3 For
the period since inception on 05/09/16 to 11/30/22
4 For
the period since inception on 09/12/16 to 11/30/22
5 For
the period since inception on 09/12/16 to 11/30/22
6 For
the period since inception on 09/12/16 to 11/30/22
7 For
the period since inception on 03/06/17 to 11/30/22
8 For
the period since inception on 04/13/18 to 11/30/22
9 For
the period since inception on 05/11/18 to 11/30/22
10 For
the period since inception on 04/05/19 to 11/30/22
11 For
the period since inception on 04/12/19 to 11/30/22
12 For
the period since inception on 09/17/19 to 11/30/22
13 For
the period since inception on 10/25/19 to 11/30/22
14 For
the period since inception on 10/25/19 to 11/30/22
15 For
the period since inception on 10/25/19 to 11/30/22
16 For
the period since inception on 07/10/20 to 11/30/22
17 For
the period since inception on 07/29/20 to 11/30/22
18 For
the period since inception on 09/22/20 to 11/30/22
19 For
the period since inception on 10/27/20 to 11/30/22
20 For
the period since inception on 10/27/20 to 11/30/22
21
For
the period since inception on 04/08/21 to 11/30/22
22
For
the period since inception on 07/12/21to 11/30/22
23
For
the period since inception on 07/12/21 to 11/30/22
24
For
the period since inception on07/12/21to 11/30/22
25
For
the period since inception on 09/08/21 to 11/30/22
26
For
the period since inception on 09/08/21 to 11/30/22
27
The
Fund commenced operations on 04/26/22
28
The
Fund commenced operations on 04/11/22
Cumulative
Total Returns
Inception
to 11/30/22
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV |
MARKET |
UNDERLYING
INDEX |
Global
X Millennial Consumer ETF1 |
94.88% |
93.89% |
100.93% |
Global
X Health & Wellness ETF2 |
50.01% |
51.07% |
53.99% |
Global
X Aging Population ETF3 |
82.44% |
87.19% |
85.42% |
Global
X FinTech ETF4 |
43.56% |
44.40% |
48.59% |
Global
X Internet of Things ETF5 |
112.92% |
114.11% |
117.15% |
Global
X Robotics & Artificial Intelligence ETF6 |
46.48% |
48.85% |
49.90% |
Global
X U.S. Infrastructure Development ETF7 |
92.51% |
92.51% |
98.20% |
Global
X Autonomous & Electric Vehicles ETF8 |
60.94% |
62.14% |
62.40% |
Global
X Artificial Intelligence & Technology ETF9 |
46.60% |
47.96% |
49.19% |
Global
X Genomics & Biotechnology ETF10 |
-11.83% |
-9.85% |
-10.24% |
Global
X Cloud Computing ETF11 |
13.35% |
13.87% |
15.92% |
Global
X Cannabis ETF12 |
-88.50% |
-88.72% |
-90.10% |
Global
X Cybersecurity ETF13 |
51.94% |
55.35% |
53.96% |
Global
X Thematic Growth ETF14 |
6.16% |
7.59% |
5.29% |
Global
X Video Games & Esports ETF15 |
28.87% |
30.62% |
30.74% |
Global
X Education ETF16 |
-51.52% |
-51.39% |
-50.89% |
Global
X Telemedicine & Digital Health ETF17 |
-19.67% |
-19.87% |
-18.61% |
Global
X China Biotech Innovation ETF18 |
-35.74% |
-35.27% |
-34.80% |
Global
X CleanTech ETF19 |
8.01% |
8.74% |
6.07% |
Global
X Data Center REITs & Digital Infrastructure ETF20 |
-7.78% |
-8.34% |
-7.74% |
Global
X Clean Water ETF21 |
-3.17% |
-2.90% |
-2.68% |
Global
X AgTech & Food Innovation ETF22 |
-37.67% |
-37.47% |
-37.32% |
Global
X Blockchain ETF23 |
-82.81% |
-82.69% |
-83.14% |
Global
X Hydrogen ETF24 |
-50.97% |
-51.61% |
-50.84% |
Global
X Solar ETF25 |
-8.79% |
-8.12% |
-8.17% |
Global
X Wind Energy ETF26 |
-28.96% |
-27.70% |
-28.51% |
Global
X Metaverse ETF27 |
-18.87% |
-18.20% |
-18.70% |
Global
X Green Building ETF28 |
-16.82% |
-16.58% |
-16.95% |
1 For
the period since inception on 05/04/16 to 11/30/22
2 For
the period since inception on 05/09/16 to 11/30/22
3 For
the period since inception on 05/09/16 to 11/30/22
4 For
the period since inception on 09/12/16 to 11/30/22
5 For
the period since inception on 09/12/16 to 11/30/22
6 For
the period since inception on 09/12/16 to 11/30/22
7 For
the period since inception on 03/06/17 to 11/30/22
8 For
the period since inception on 04/13/18 to 11/30/22
9 For
the period since inception on 05/11/18 to 11/30/22
10 For
the period since inception on 04/05/19 to 11/30/22
11 For
the period since inception on 04/12/19 to 11/30/22
12 For
the period since inception on 09/17/19 to 11/30/22
13 For
the period since inception on 10/25/19 to 11/30/22
14 For
the period since inception on 10/25/19 to 11/30/22
15 For
the period since inception on 10/25/19 to 11/30/22
16 For
the period since inception on 07/10/20 to 11/30/22
17 For
the period since inception on 07/29/20 to 11/30/22
18 For
the period since inception on 09/22/20 to 11/30/22
19 For
the period since inception on 10/27/20 to 11/30/22
20 For
the period since inception on 10/27/20 to 11/30/22
21
For
the period since inception on 04/08/21 to 11/30/22
22
For
the period since inception on 07/12/21 to 11/30/22
23
For
the period since inception on 07/12/21 to 11/30/22
24
For
the period since inception on 07/12/21 to 11/30/22
25
For
the period since inception on 09/08/21 to 11/30/22
26
For
the period since inception on 09/08/21 to 11/30/22
27
For
the period since inception on 04/26/22 to 11/30/22
28
For
the period since inception on 04/11/22 to 11/30/22
INFORMATION
REGARDING THE INDICES AND THE INDEX PROVIDERS
Indxx
Millennials Thematic Index
The
objective of the Indxx Millennials Thematic Index is to track the performance of
U.S. listed companies that provide exposure to the millennial generation
consumption trends, (collectively, "Millennial Companies"), as defined by Indxx,
LLC, the provider of the Indxx Millennials Thematic Index. The millennial
generation refers to the demographic in the U.S. with birth years ranging from
1980 to 2000.
The
eligible universe of the Indxx Millennials Thematic Index includes the most
liquid and investable companies in accordance with the standard market
capitalization and liquidity criteria associated with developed markets, as
defined by Indxx, LLC. As of January 31, 2023, companies must have a
minimum market capitalization of $500 million and a minimum average daily
turnover for the last 6 months (since the IPO launch date for Significant IPOs
as defined by Indxx, LLC or three months, in the case of other IPOs) greater
than or equal to $2 million in order to be eligible for inclusion in the Indxx
Millennials Thematic Index. The Indxx Millennials Thematic Index only includes
companies listed in the United States. The Indxx Millennials Thematic Index is
developed using a proprietary, multi-step research process to identify
Millennial Companies. First, Indxx, LLC conducts fundamental research on trends
related to the millennial generation, including but not limited to: consumer
spending data, consumer behavior, technology and demographics. Based on this
analysis, Indxx, LLC determines key categories that appear to be most reflective
of how individuals from the millennial generation spend their time and money
(collectively, "Spending Categories"). As of January 31, 2023, Indxx, LLC
has identified the following eight key Spending Categories for millennials: (1)
Social and Entertainment, (2) Clothing and Apparel, (3) Travel and Mobility, (4)
Food/Restaurants and Consumer Staples, (5) Financial Services and Investments,
(6) Housing and Home Goods, (7) Education and Employment, and (8) Health and
Fitness. These Spending Categories may change over time, as determined by Indxx,
LLC.
After
establishing these Spending Categories, Indxx, LLC uses a variety of sources -
including, but not limited to: industry reports, investment research and
financial statements published by companies - to identify companies with
significant exposure to these Spending Categories. A company is determined to
have significant exposure to the Spending Categories if (i) it derives a
significant portion of its revenue from the Spending Categories, or (ii) it has
stated its primary business to be in products and services focused on the
Spending Categories, as determined by Indxx, LLC The companies identified at
this stage are then considered for further analysis, which ultimately determines
their eligibility for inclusion in the Indxx Millennials Thematic
Index.
In
the final step of the selection process, Indxx, LLC conducts a composite
analysis on the remaining companies to identify Millennial Companies within each
of the Spending Categories. As part of this process, Indxx, LLC utilizes the
fundamental
research
it has conducted on trends related to the millennial generation in order to
evaluate companies based on quantitative and qualitative criteria that have been
identified as being consistent with millennial demographics and consumer
preferences. As of January 31, 2023, some examples of the criteria used in
the evaluation process include but are not limited to: E-commerce, social and
professional networks, digital media streaming services, athletic and outdoor
apparel, multi-family apartments, and peer reviews/recommendations. A company
identified as having significant exposure to a criteria will receive additional
points as part of the composite scoring process. A company is determined to have
significant exposure to a criteria based on its revenue exposure to that
particular criteria (relative to the other companies in its Spending Category)
or based on its primary stated area of business (relative to other companies in
its Spending Category). Indxx, LLC then scores the companies based on these
criteria to determine the companies that are most reflective of Millennial
Companies within each Spending Category. These criteria will vary by Spending
Category and are subject to evaluation by Indxx, LLC on an annual basis. A
minimum of five and a maximum of fifteen companies from each Spending Category
are included in the Indxx Millennials Thematic Index, primarily based on their
score in the composite analysis conducted by Indxx, LLC.
The
Indxx Millennials Thematic Index is weighted according to a modified
capitalization weighting methodology and is reconstituted and rebalanced
annually. The Indxx Millennials Thematic Index may include large-, mid- or
small-capitalization companies, and components primarily include consumer
discretionary, consumer staples, information technology and financial services
companies as well as real estate investment trusts ("REITs").
Indxx
Global Health & Wellness Thematic Index
The
objective of the Indxx Global Health & Wellness Thematic Index is to provide
exposure to exchange-listed companies in developed markets that provide products
and services that facilitate physical wellness through active and healthy
lifestyles, including but not limited to companies involved in fitness
equipment, fitness technology, athletic apparel, nutritional supplements, and
organic/natural food offerings, (collectively, "Health & Wellness
Companies"), as defined by Indxx, LLC, the provider of the Indxx Global Health
& Wellness Thematic Index.
The
eligible universe of the Indxx Global Health & Wellness Thematic Index
includes the most liquid and investable companies in accordance with the
standard market capitalization and liquidity criteria associated with developed
markets, as defined by Indxx, LLC. As of January 31, 2023, companies must
have a minimum market capitalization of $500 million and a minimum average daily
turnover for the last 6 months (or since the IPO launch date for Significant
IPOs as defined by Indxx, LLC) greater than or equal to $2 million in order to
be eligible for inclusion in the Indxx Global Health & Wellness Thematic
Index. The Indxx Global Health & Wellness Thematic Index may include
components from the following countries: Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan,
Luxembourg, Netherlands, New Zealand, Norway, Portugal, Singapore, South Korea,
Spain, Sweden, Switzerland, Taiwan, the United Kingdom and the United States.
From
the eligible universe, Indxx, LLC identifies Health & Wellness Companies by
applying a proprietary analysis that consists of two primary components: theme
identification and company analysis. As of January 31, 2023, Indxx, LLC has
identified the following four themes that are expected to provide the most
exposure to Health & Wellness Companies: (1) Healthy Food, Nutrition and
Weight Loss, (2) Fitness and Fitness Apparel, (3) Nutritional Supplements and
Preventive Health Care, (4) Anti-Aging and Wellness (collectively, "Health &
Wellness Themes"). In order to be included in the Indxx Global Health &
Wellness Thematic Index, a company must be identified as having significant
exposure to these Health & Wellness Themes, as determined by Indxx, LLC.
Indxx, LLC analyzes companies based on two primary criteria: revenue exposure
and primary business operations. A company is to have significant exposure to
the Health & Wellness Themes if (i) it derives a significant portion of its
revenue from the sale of products or services from the Health & Wellness
Themes, or (ii) it has stated its primary business to be in products and
services focused on the Health & Wellness Themes, as determined by Indxx,
LLC.
The
Indxx Global Health & Wellness Thematic Index is weighted according to a
modified capitalization weighting methodology and is reconstituted and
rebalanced annually. The Indxx Global Health & Wellness Thematic Index may
include large-, mid- or small-capitalization companies, and components primarily
include consumer discretionary, consumer staples, health care and information
technology companies.
Indxx
Aging Population Thematic Index
The
Indxx Aging Population Thematic Index is designed to provide exposure to
exchange-listed companies in developed markets that facilitate the demographic
trend of longer average life spans and the aging of the global population,
including but not limited to companies involved in biotechnology, medical
devices, pharmaceuticals, senior living facilities and specialized health care
services (collectively, "Aging Population Companies"), as defined by Indxx, LLC,
the provider of the Indxx Aging Population Thematic Index.
The
eligible universe of the Indxx Aging Population Thematic Index includes the most
liquid and investable companies in accordance with the standard market
capitalization and liquidity criteria associated with developed markets, as
defined by Indxx, LLC. As of January 31, 2023, companies must have a
minimum market capitalization of $500 million and a minimum average daily
turnover for the last 6 months (or since the IPO launch date for Significant
IPOs as defined by Indxx, LLC) greater than or equal to $2 million in order to
be eligible for inclusion in the Indxx Aging Population Thematic Index. The
Indxx Aging Population Thematic Index may include components from the following
countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, New
Zealand, Norway, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland,
Taiwan, the United Kingdom and the United States.
From
the eligible universe, Indxx, LLC identifies Aging Population Companies by
applying a proprietary analysis that consists of two primary components: theme
identification and company analysis. As of January 31, 2023, Indxx, LLC has
identified the following four themes that are expected to provide the most
exposure to Aging Population Companies: (1) Health Care Products, (2) Health
Care Services, (3) Medical Devices, and (4) Senior Homes (collectively, "Aging
Population Themes"). In order to be included in the Indxx Aging Population
Thematic Index, a company must be identified as having significant exposure to
these Aging Population Themes, as determined by Indxx, LLC. Companies are
analyzed based on two primary criteria: revenue exposure and primary business
operations. A company is deemed to have significant exposure to the Aging
Population Themes if (i) it derives a significant portion of its revenue from
the Aging Population Themes, or (ii) it has stated its primary business to be in
products and services focused on the Aging Population Themes, as determined by
Indxx, LLC.
The
Indxx Aging Population Thematic Index is weighted according to a modified
capitalization weighting methodology and is reconstituted and rebalanced
annually. The Indxx Aging Population Thematic Index may include large-, mid- or
small-capitalization companies, and components primarily include health care,
biotechnology and pharmaceuticals companies as well as real estate investment
trusts ("REITs").
Indxx
Global Fintech Thematic Index
The
Indxx Global Fintech Thematic Index is designed to provide exposure to
exchange-listed companies in developed markets that provide financial technology
products and services, including companies involved in mobile payments,
peer-to-peer (P2P) and marketplace lending, financial analytics software and
alternative currencies (collectively, "FinTech Companies"), as defined by Indxx,
LLC, the provider of the Indxx Global Fintech Thematic Index.
The
eligible universe of the Indxx Global Fintech Thematic Index includes among the
most liquid and investable companies in accordance with the standard market
capitalization and liquidity criteria associated with developed markets, as
defined by the Indxx, LLC. As of January 31, 2023, companies must have a
minimum market capitalization of $300 million and a minimum average daily
turnover for the last 6 months (or since the IPO launch date for Significant
IPOs as defined by Indxx, LLC or 3 months, in the case of other IPOs) greater
than or equal to $2 million in order to be eligible for inclusion in the Indxx
Global Fintech Thematic Index. As of January 31, 2023, components from the
following countries were eligible for inclusion in the Indxx Global Fintech
Thematic Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, New
Zealand, Norway, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland,
Taiwan, the United Kingdom and the United States.
From
the eligible universe, Indxx, LLC identifies FinTech Companies by applying a
proprietary analysis that consists of two primary components: theme
identification and company analysis. As part of the theme identification
process, Indxx, LLC analyzes industry reports, investment research and consumer
data related to the fintech industry in order to establish the themes that are
expected to provide the most exposure to the growth of the fintech industry. As
of January 31, 2023, Indxx, LLC has identified the following six fintech
themes: (1) Mobile Payments, (2) P2P and Marketplace Lending, (3) Enterprise
Solutions, (4) Blockchain and Alternative Currencies, (5) Crowdfunding, and (6)
Personal Finance Software and Automated Wealth Management/Trading (collectively,
"FinTech Themes"). In order to be included in the Indxx Global Fintech Thematic
Index, a company must be identified as having significant exposure to these
FinTech Themes, as determined by Indxx, LLC. In the second step of the process,
companies are analyzed based on two primary criteria: revenue exposure and
primary business operations. A company is deemed to have significant exposure to
the FinTech Themes if (i), it derives a significant portion of its revenue from
the FinTech Themes and (ii), it has stated its primary business to be in
products and services focused on the FinTech Themes, in each case as determined
by Indxx, LLC.
The
Indxx Global Fintech Thematic Index is weighted according to a modified
capitalization weighting methodology and is reconstituted and rebalanced
annually. At the annual rebalance, a capping methodology is applied to reduce
concentration in individual securities and increase diversification of the Indxx
Global Fintech Thematic Index. The Indxx Global Fintech
Thematic
Index may include large-, mid- or small-capitalization companies, and components
primarily include financial and information technology companies.
Indxx
Global Internet of Things Thematic Index
The
Indxx Global Internet of Things Thematic Index is designed to provide exposure
to exchange-listed companies in developed markets that facilitate the Internet
of Things industry, including companies involved in wearable technology, home
automation, connected automotive technology, sensors, networking
infrastructure/software, smart metering and energy control devices
(collectively, "Internet of Things Companies"), as defined by Indxx, LLC, the
provider of the Indxx Global Internet of Things Thematic Index. The Internet of
Things refers to the network of physical objects (such as electronic devices,
wearables, connected vehicles, infrastructure, equipment, smart home appliances,
buildings) that are connected to the internet. Such objects often utilize
embedded semiconductors, sensors, and software to collect, analyze, receive, and
transfer data via networks enabled by technologies such as WiFi, 4G and 5G
telecommunications infrastructure, and fiber optics.
The
eligible universe of the Indxx Global Internet of Things Thematic Index includes
among the most liquid and investable companies in accordance with the standard
market capitalization and liquidity criteria associated with developed markets,
as defined by Indxx, LLC. As of January 31, 2023, companies must have a
minimum market capitalization of $300 million and a minimum average daily
turnover for the last 6 months (or since the IPO launch date for Significant
IPOs as defined by Indxx, LLC or 3 months, in the case of other IPOs) greater
than or equal to $2 million in order to be eligible for inclusion in the Indxx
Global Internet of Things Thematic Index. As of January 31, 2023,
components from the following countries were eligible for inclusion in the Indxx
Global Internet of Things Thematic Index: Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan,
Luxembourg, Netherlands, New Zealand, Norway, Portugal, Singapore, South Korea,
Spain, Sweden, Switzerland, Taiwan, the United Kingdom and the United
States.
From
the eligible universe, Indxx, LLC identifies Internet of Things Companies by
applying a proprietary analysis that consists of two primary components: theme
identification and company analysis. As part of the theme identification
process, Indxx, LLC analyzes industry reports, investment research and consumer
data related to the Internet of Things industry in order to establish the themes
that are expected to provide the most exposure to the growth of the Internet of
Things industry. As of January 31, 2023, Indxx, LLC has identified the
following four Internet of Things themes: (1) Consumer Internet of Things
Technology, (2) Equipment, Vehicle, and Infrastructure/Building Technology, (3)
Semiconductors and Sensors and (4) Networking Infrastructure/Software
(collectively, "Internet of Things Themes"). In order to be included in the
Indxx Global Internet of Things Thematic Index, a company must be identified as
having significant exposure to these Internet of Things Themes, as determined by
Indxx, LLC. In the second step of the process, companies are analyzed based on
two primary criteria: revenue exposure and primary business operations. A
company is deemed to have significant exposure to the Internet of Things Themes
if (i), it derives a significant portion of its revenue from the Internet of
Things Themes, (ii), it has stated its primary business to be in products and
services focused on the Internet of Things Themes, as determined by Indxx, LLC.
In addition, companies with more diversified revenue streams may also be
included in the Indxx Global Internet of Things Thematic Index if they meet the
following criteria: (1) identified as being critical to the IoT ecosystem due to
scale in certain IoT technologies and services, (2) have a distinct business
unit(s) focused on IoT products and services and (3) have a core competency that
is expected to benefit from increased adoption of IoT, as determined by Indxx,
LLC. Companies that meet these criteria are eligible for inclusion in the Indxx
Global Internet of Things Thematic Index with a weighting cap of 2%.
The
Indxx Global Internet of Things Thematic Index is weighted according to a
modified capitalization weighting methodology and is reconstituted and
rebalanced annually. At the annual rebalance, a capping methodology is applied
to reduce concentration in individual securities and increase diversification of
the Indxx Global Internet of Things Thematic Index. The Indxx Global Internet of
Things Thematic Index may include large-, mid- or small-capitalization
companies, and components primarily include industrials and information
technology companies.
Indxx
Global Robotics & Artificial Intelligence Thematic Index
The
Indxx Global Robotics & Artificial Intelligence Thematic Index is designed
to provide exposure to exchange-listed companies in developed markets that are
involved in the development of robotics and/or artificial intelligence,
including companies involved in developing industrial robots and production
systems, automated inventory management, unmanned vehicles, voice/image/text
recognition, and medical robots or robotic instruments (collectively, "Robotics
& Artificial Intelligence Companies"), as defined by Indxx, LLC, the
provider of the Indxx Global Robotics & Artificial Intelligence Thematic
Index.
The
eligible universe of the Indxx Global Robotics & Artificial Intelligence
Thematic Index includes among the most liquid and investable companies in
accordance with the standard market capitalization and liquidity criteria
associated with developed
markets,
as defined by Indxx, LLC. As of January 31, 2023, companies must have a
minimum market capitalization of $300 million and a minimum average daily
turnover for the last 6 months (or since the IPO launch date for Significant
IPOs as defined by Indxx, LLC or 3 months, in the case of other IPOs) greater
than or equal to $2 million in order to be eligible for inclusion in the Indxx
Global Robotics & Artificial Intelligence Thematic Index. As of
January 31, 2023, components from the following countries were eligible for
inclusion in the Indxx Global Robotics & Artificial Intelligence Thematic
Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, New Zealand,
Norway, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan,
the United Kingdom and the United States.
From
the eligible universe, Indxx, LLC identifies Robotics & Artificial
Intelligence Companies by applying a proprietary analysis that consists of two
primary components: theme identification and company analysis. As part of the
theme identification process, Indxx, LLC analyzes industry reports, investment
research and consumer data related to the robotics and artificial intelligence
industry in order to establish the themes that are expected to provide the most
exposure to the growth of the robotics and artificial intelligence industry. As
of January 31, 2023, Indxx, LLC has identified the following four robotics
and artificial intelligence themes: (1) Industrial Robotics and Automation, (2)
Unmanned Vehicles and Drones, (3) Artificial Intelligence and (4) Non-Industrial
Robotics (collectively, "Robotics & Artificial Intelligence Themes"). In
order to be included in the Indxx Global Robotics & Artificial Intelligence
Thematic Index, a company must be identified as having significant exposure to
these Robotics & Artificial Intelligence Themes, as determined by Indxx,
LLC. In the second step of the process, companies are analyzed based on two
primary criteria: revenue exposure and primary business operations. A company is
deemed to have significant exposure to the Robotics & Artificial
Intelligence Themes if (i), it derives a significant portion of its revenue from
the Robotics & Artificial Intelligence Themes, (ii), it has stated its
primary business to be in products and services focused on the Robotics &
Artificial Intelligence Themes, as determined by Indxx, LLC.
The
Indxx Global Robotics & Artificial Intelligence Thematic Index is weighted
according to a modified capitalization weighting methodology and is
reconstituted and rebalanced annually. At the annual rebalance, a capping
methodology is applied to reduce concentration in individual securities and
increase diversification of the Indxx Global Robotics & Artificial
Intelligence Thematic Index. The Indxx Global Robotics & Artificial
Intelligence Thematic Index may include large-, mid- or small-capitalization
companies, and components primarily include industrials and information
technology companies.
Indxx
U.S. Infrastructure Development Index
The
Indxx U.S. Infrastructure Development Index is designed to measure the
performance of U.S. listed companies that provide exposure to domestic
infrastructure development, including companies involved in construction and
engineering, production of infrastructure raw materials, composites and
products; industrial transportation; and producers/distributors of heavy
construction equipment (collectively, "U.S. Infrastructure Development
Companies"), as defined by Indxx, LLC, the provider of the Indxx U.S.
Infrastructure Development Index.
The
eligible universe of the Indxx U.S. Infrastructure Development Index includes
the most liquid and investable companies in accordance with the standard market
capitalization and liquidity criteria associated with developed markets, as
defined by Indxx, LLC. As of January 31, 2023, companies must have a
minimum market capitalization of $300 million and a minimum average daily
turnover for the last 6 months (or since the IPO launch date for Significant
IPOs as defined by Indxx, LLC) greater than or equal to $1 million in order to
be eligible for inclusion in the Index. The Indxx U.S. Infrastructure
Development Index only includes companies listed in the United States.
From
the eligible universe, Indxx, LLC identifies U.S. Infrastructure Development
Companies by applying a proprietary analysis that consists of two primary
components: theme identification and company analysis. As part of the theme
identification process, Indxx, LLC analyzes industry reports, investment
research and spending trends related to infrastructure development in order to
establish the themes that are expected to provide the most exposure to increased
investment in U.S. infrastructure. As of January 31, 2023, Indxx, LLC has
identified the following four U.S. infrastructure development themes: (1)
Construction and Engineering Services, (2) Raw Materials and Composites, (3)
Products and Equipment, and (4) Industrial Transportation (collectively, "U.S.
Infrastructure Development Themes").
In
the second step of the process, companies are analyzed based on two primary
criteria: revenue exposure and primary business operations. A company is
eligible for inclusion in the Indxx U.S. Infrastructure Development Index if (i)
it derives a significant portion of its revenue from the U.S. Infrastructure
Development Themes, or (ii) it has stated its primary business to be in products
and services focused on the U.S. Infrastructure Development Themes, as
determined by Indxx, LLC. Furthermore, only companies that generate greater than
50% of revenues from the U.S. as of the index selection date, as determined by
Indxx, LLC, are eligible for inclusion in the Indxx U.S. Infrastructure
Development Index.
The
Indxx U.S. Infrastructure Development Index is weighted according to a modified
capitalization weighting methodology and is reconstituted and rebalanced
annually. At the annual rebalance, a capping methodology is applied to reduce
concentration in individual securities and increase diversification of the Indxx
U.S. Infrastructure Development Index. The Indxx U.S. Infrastructure Development
Index may include large-, mid- or small-capitalization companies, and components
primarily include industrials and materials companies.
Solactive
Autonomous & Electric Vehicles Index
The
Solactive Autonomous & Electric Vehicles Index is designed to provide
exposure to exchange-listed companies that are involved in the development of
electric vehicles and/or autonomous vehicles, including companies that produce
electric/hybrid vehicles, electric/hybrid vehicle components and materials,
autonomous driving technology, and network connected services for
transportation, (collectively, "Autonomous and Electric Vehicle Companies"), as
defined by Solactive AG, the provider of the Solactive Autonomous & Electric
Vehicles Index.
The
eligible universe of the Solactive Autonomous & Electric Vehicles Index
includes among the most liquid and investable companies in accordance with the
market capitalization and liquidity criteria associated with the eligible
markets, as defined by Solactive AG. As of January 31, 2023, companies must
have a minimum market capitalization of $500 million and a minimum average daily
turnover for the last 6 months greater than or equal to $2 million in order to
be eligible for inclusion in the Solactive Autonomous & Electric Vehicles
Index. As of January 31, 2023, companies from the following countries were
eligible for inclusion in the Solactive Autonomous & Electric Vehicles
Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway,
Poland, Portugal, Singapore, Spain, Sweden, Switzerland, South Korea, Taiwan,
the United Kingdom, and the United States.
From
the eligible universe, Solactive AG identifies Autonomous and Electric Vehicle
Companies by applying a proprietary natural language processing algorithm
process that seeks to identify companies with exposure to the following
categories:
•Electric
Vehicles ("EV")
- companies that produce electric/hybrid vehicles, including cars, trucks,
motorcycles/scooters, buses, and electric rail.
•Electric
Vehicle Components ("EVC")
- companies that produce electric/hybrid vehicle components, including electric
drivetrains, lithium-ion and other types of electric batteries, and fuel cells.
In addition, companies that produce the chemicals and raw materials (including
but not limited to lithium and cobalt) that comprise these electric/hybrid
vehicle components are eligible for inclusion.
•Autonomous
Vehicle Technology ("AVT")
- companies that build autonomous vehicles and/or develop hardware and software
that facilitates the development of autonomous vehicles, including sensors,
mapping technology, artificial intelligence, advanced driver assistance systems,
ride-share platforms, and network-connected services for
transportation.
In
order to be included in the Solactive Autonomous & Electric Vehicles Index,
a company must be identified as having exposure to these categories based on the
ranking it receives from the natural language processing algorithm ("Segment
Score"), as determined by Solactive AG. Within each category listed above,
companies are ranked by Solactive AG according to their respective Segment
Score. Solactive AG then reviews the companies to ensure relevance to one or
more of the categories above based on the business operations of the company.
The Solactive Autonomous & Electric Vehicles Index is comprised of the
highest ranking 15 companies in the EV segment, the highest ranking 30 companies
in the EVC segment, and the highest ranking 30 companies in the AVT segment, as
determined by Solactive AG and subject to certain buffer rules intended to
reduce turnover.
The
Solactive Autonomous & Electric Vehicles Index is weighted according to a
modified capitalization weighting methodology and is reconstituted
semi-annually. At the semi-annual reconstitution, a capping methodology is
applied to reduce concentration in individual securities and increase
diversification of the Solactive Autonomous & Electric Vehicles Index. The
Solactive Autonomous & Electric Vehicles Index may include large-, mid- or
small-capitalization companies, and components primarily include industrials,
information technology, materials, and consumer discretionary
companies.
Indxx
Artificial Intelligence & Big Data Index
The
Indxx Artificial Intelligence & Big Data Index is designed to provide
exposure to exchange-listed companies that are positioned to benefit from the
further development and utilization of artificial intelligence technology in
their products and services, as well as to companies that provide hardware which
facilitates the use of artificial intelligence for the analysis of big
data
(collectively, "Artificial Intelligence & Big Data Companies"), as defined
by Indxx, LLC, the provider of the Indxx Artificial Intelligence & Big Data
Index.
The
eligible universe of the Indxx Artificial Intelligence & Big Data Index
includes exchange-listed companies that meet minimum market capitalization and
liquidity criteria, as defined by Indxx, LLC. As of January 31, 2023,
companies must have a minimum market capitalization of $500 million and a
minimum average daily turnover for the last 6 months (or since the IPO launch
date for Significant IPOs as defined by Indxx, LLC or 3 months, in the case of
other IPOs) greater than or equal to $2 million in order to be eligible for
inclusion in the Indxx Artificial Intelligence & Big Data Index. As of
January 31, 2023, companies listed or incorporated in the following
countries were eligible for inclusion in the Indxx Artificial Intelligence &
Big Data Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand,
Norway, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan,
the United Kingdom, and the United States. In addition, ADRs and GDRs of
companies incorporated or with primary listing in China are eligible for
inclusion.
From
the eligible universe, Indxx, LLC identifies Artificial Intelligence & Big
Data Companies by applying a proprietary analysis that seeks to identify
companies that can be classified in the following categories:
•Artificial
Intelligence Developers
▪Artificial
Intelligence Applied to Products and Services - Companies
that have developed internal artificial intelligence capabilities (organically
or through acquisition) and are applying artificial intelligence technology
directly in their products and services. Artificial intelligence applications
include but are not limited to language/ image processing and recognition,
automated communications, threat detection, recommendation generation, and other
predictive analytics.
▪Artificial
Intelligence-as-a-Service ("AIaaS") for Big Data Applications - Companies
that provide artificial intelligence capabilities to their customers as a
service. Companies in this segment typically offer cloud-based platforms that
allow their customers to apply artificial intelligence techniques to big data
without the need for a direct investment in their own artificial
intelligence-related infrastructure or capabilities.
•Artificial
Intelligence and Big Data Analytics Hardware
◦Artificial
Intelligence Hardware - Companies
that produce semiconductors, memory storage and other hardware that is utilized
for artificial intelligence applications. This currently includes, but is not
limited to, companies that produce graphics processing units (GPUs),
application-specific integrated circuit ("ASIC") chips, field-programmable gate
array ("FPGA") chips, and all-flash array storage.
◦Quantum
Computing - Companies
that are developing quantum computing technology. While currently in the
process of being commercialized, quantum computing is expected to have
significant potential for artificial intelligence and big data applications.
In
order to be included in the Indxx Artificial Intelligence & Big Data Index,
a company must be classified in the categories described above, as determined by
Indxx, LLC. This classification is based on a composite analysis of public
filings, products and services, official company statements and other
information regarding direct involvement in the artificial intelligence and big
data categories as described above. Eligible companies are then ranked by Indxx,
LLC using a research framework that assesses a company's exposure to these
categories. Companies must receive a minimum score within a given category to be
selected in the Indxx Artificial Intelligence & Big Data Index, as
determined by Indxx, LLC.
The
Indxx Artificial Intelligence & Big Data Index is weighted according to a
modified capitalization weighting methodology and is reconstituted annually with
a semi-annual re-weighting. The Indxx Artificial Intelligence & Big Data
Index may include large-, mid- or small-capitalization companies, and components
primarily include information technology companies.
Solactive
Genomics Index
The
Solactive Genomics Index is designed to provide exposure to exchange-listed
companies that are positioned to benefit from further advances in the field of
genomic science and biotechnology, as well as applications thereof
(collectively, "Genomics & Biotechnology Companies"), as defined by
Solactive AG, the provider of the Solactive Genomics Index. In order to be
eligible for inclusion in the Solactive Genomics Index, a company is considered
by Solactive AG to be a Genomics & Biotechnology Company if it derives at
least 50% of its revenue, operating income, or assets from genomics and/or
biotechnology, as
determined
by Solactive AG. These companies include those involved in the following
business activities, as determined by Solactive AG: (i) gene editing, (ii)
genomic sequencing, (iii) development and testing of genetic medicine/therapies,
(iv) computational genomics and genetic diagnostics, and/or (v)
biotechnology.
In
constructing the Solactive Genomics Index, Solactive AG first establishes the
eligible universe by utilizing FactSet sector classifications: only companies
classified by FactSet as healthcare companies are eligible for the Solactive
Genomics Index. Solactive AG then applies a proprietary natural language
processing algorithm to the eligible universe, which seeks to identify and rank
companies with direct exposure to the genomics industry based on filings,
disclosures and other public information (e.g. regulatory filings, earnings
transcripts, etc.). The highest ranking companies identified by the natural
language processing algorithm, as of the selection date, are further reviewed by
Solactive AG to confirm they derive at least 50% of their revenues, operating
income, or assets from the following business activities:
i.Gene
Editing:
Companies that develop technology for the insertion, deletion, or replacement of
DNA at a specific site in the genome of an organism.
ii.Genomic
Sequencing:
Companies that are engaged in the process of determining the complete DNA
sequence of an organism's genome.
iii.Genetic
Medicine/Therapies:
Companies that seek to detect, cure or treat diseases by identifying and/or
modifying an organism's gene expression or functioning.
iv.Computational
Genomics and Genetic Diagnostics:
Companies that use computational and statistical analysis to decipher biological
insights from genome sequences and related data.
v.Biotechnology:
Companies that combine biologic processes and technology to develop products and
services.
The
eligible universe of the Solactive Genomics Index includes exchange-listed
companies that meet minimum market capitalization and liquidity criteria, as
defined by Solactive AG. As of January 31, 2023, companies must have a
minimum market capitalization of $200 million and a minimum average daily
turnover for the last 6 months greater than or equal to $2 million in order to
be eligible for inclusion in the Solactive Genomics Index. As of
January 31, 2023, companies listed in the following countries were eligible
for inclusion in the Solactive Genomics Index: Australia, Austria, Belgium,
Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Egypt, Finland,
France, Germany, Greece, Hong Kong, Hungary, Indonesia, Ireland, Israel, Italy,
Japan, Malaysia, Mexico, Netherlands, New Zealand, Norway, Peru, Philippines,
Poland, Portugal, Qatar, Saudi Arabia, South Africa, South Korea, Singapore,
Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab Emirates, the
United Kingdom, and the United States.
The
Solactive Genomics Index is weighted according to a modified capitalization
weighting methodology and is reconstituted and re-weighted semi-annually. The
Solactive Genomics Index may include large-, mid- or small-capitalization
companies, and components primarily include healthcare companies. As of
January 31, 2023, the Solactive Genomics Index had 40
constituents.
Indxx
Global Cloud Computing Index
The
Indxx Global Cloud Computing Index is designed to provide exposure to
exchange-listed companies that are positioned to benefit from the increased
adoption of cloud computing technology, including but not limited to companies
whose principal business is in offering computing Software-as-a-Service
("SaaS"), Platform-as-a-Service ("PaaS"), Infrastructure-as-a-Service ("IaaS"),
managed server storage space and data center real estate investment trusts
("REITs"), and/or cloud and edge computing infrastructure and hardware
(collectively, "Cloud Computing Companies"), as defined by Indxx LLC, the
provider of the Indxx Global Cloud Computing Index.
In
constructing the Indxx Global Cloud Computing Index, Indxx LLC first identifies
FactSet Industries related to cloud computing. Companies within these
Industries, as of the selection date, are further reviewed by Indxx LLC on the
basis of revenue related to cloud computing activities. To be eligible for the
Indxx Global Cloud Computing Index, a company is considered by Indxx LLC to be a
Cloud Computing Company if the company generates at least 50% of its revenues
from cloud computing activities, as determined by Indxx LLC. Indxx LLC
classifies Cloud Computing Companies as those companies that (i) license and
deliver software over the internet on a subscription basis (SaaS), (ii) provide
a platform for creating software applications which are delivered over the
internet (PaaS), (iii) provide virtualized computing infrastructure over the
internet (IaaS), (iv) own and manage facilities customers use to store data and
servers, including data center REITs, and/or (v) manufacture or distribute
infrastructure and/or hardware components used in cloud and edge computing
activities, as determined by Indxx LLC. In addition, companies that generate at
least $500 million of revenue from providing public cloud infrastructure (but
less than 50% of their overall revenues), are eligible for inclusion in the
Indxx Global Cloud Computing Index. These companies are subject to an individual
weight cap of 2% and an aggregate weight cap of 10% at each semi-annual
rebalance.
To
be a part of the eligible universe of the Indxx Global Cloud Computing Index,
certain minimum market capitalization and liquidity criteria, as defined by
Indxx LLC, must be met. As of January 31, 2023, companies must have a
minimum market capitalization of $200 million and a minimum average daily
turnover for the last 6 months (or since the IPO launch date for Significant
IPOs as defined by Indxx LLC) greater than or equal to $2 million in order to be
eligible for inclusion in the Indxx Global Cloud Computing Index. As of
January 31, 2023, companies listed in the following countries were eligible
for inclusion in the Indxx Global Cloud Computing Index: Australia, Austria,
Belgium, Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Egypt,
Finland, France, Germany, Greece, Hong Kong, Hungary, Indonesia, Ireland,
Israel, Italy, Japan, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand,
Norway, Peru, Philippines, Poland, Portugal, Qatar, South Africa, South Korea,
Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab
Emirates, the United Kingdom, and the United States.
The
Indxx Global Cloud Computing Index is weighted according to a modified
capitalization weighting methodology and is reconstituted and re-weighted
semi-annually. Modified capitalization weighting seeks to weight constituents
primarily based on market capitalization, but subject to caps on the weights of
the individual securities. Generally speaking, this approach will limit the
amount of concentration in the largest market capitalization companies and
increase company-level diversification. The Indxx Global Cloud Computing Index
may include large-, mid- or small-capitalization companies, and components
primarily include information technology companies. As of January 31, 2023,
the Indxx Global Cloud Computing Index had 36 constituents.
Cannabis
Index
The
Cannabis Index is designed to provide exposure to exchange-listed companies that
are active in the cannabis industry (collectively, "Cannabis Companies"), as
defined by Solactive AG, the provider of the Cannabis Index. In order to be
eligible for inclusion in the Cannabis Index, a company is considered by
Solactive AG to be a Cannabis Company if it derives at least 50% of its revenue,
operating income, or assets from the cannabis industry. The cannabis industry is
composed of the following areas: (i) the legal production, growth and
distribution of marijuana, as well as extracts, derivative products or synthetic
versions thereof; (ii) the legal production, growth and distribution of hemp, as
well as extracts, derivative products or synthetic versions thereof; (iii)
financial services (insurance offerings, property leasing, financing, capital
markets activity and investments) provided to companies involved in the
production, growth and distribution of cannabis; (iv) pharmaceutical
applications of cannabis; (v) cannabidiol (better known as CBD) and cannabis oil
products, edibles, topicals, drinks and other products; (vi) products that may
be used to consume cannabis; and (vii) the provision of software and/or online
marketplaces or platforms primarily for the cannabis sector. In addition,
companies that Solactive AG expects to derive at least 50% of future revenue,
operating income or assets from the cannabis industry based on its review of
their primary business operations, capital investments and/or operating
expenses, as well as other public statements, are eligible for inclusion in the
Cannabis Index ("Pre-Revenue Companies"). Pre-Revenue Companies are subject to
an aggregate weight cap of 15% at each quarterly rebalance. Additionally,
Pre-Revenue Companies do not count towards satisfaction of the Fund's policy to
invest, under normal circumstances, at least 80% of its net assets, plus
borrowings for investment purposes (if any), in Cannabis Companies, and in ADRs
and GDRs based on such securities.
To
be a part of the eligible universe of the Cannabis Index, a Cannabis Company
must be listed on a regulated stock exchange that requires issuers to maintain
compliance with all laws, rules and regulations applicable to their business. As
such, the Cannabis Index is designed to invest in Cannabis Companies that
represent that they operate cannabis-related business activities, or supply
products and perform services for companies that grow, produce, distribute, or
sell cannabis or products derived from cannabis, in a manner that is legal under
all laws, rules and regulations applicable to the company's business. A company
must also meet certain minimum market capitalization and liquidity criteria, as
defined by the Index Provider. As of January 31, 2023, companies must have a
minimum market capitalization of $100 million and a minimum average daily
turnover for the last three and/or six months greater than or equal to $2
million in order to be eligible for inclusion in the Cannabis Index as of the
selection date. Companies in the Cannabis Index must retain a minimum market
capitalization of $80 million and average daily turnover for the last three
and/or six months greater than or equal to $1.4 million as of the selection date
in order to be eligible to remain in the Cannabis Index. The aforementioned
criteria may be reduced , as per the Cannabis Index methodology, in the event
that fewer than 25 companies meet these criteria. The market capitalization
minimum requirement can be reduced to $50 million for new index constituents and
$35 million for companies that are already index constituents. Similarly, the
average daily turnover minimum requirement can be reduced to $500,000 for new
index constituents and $200,000 for companies that are already index
constituents. If there are still an insufficient number of companies that meet
these reduced criteria to fulfill the weighting scheme requirements, the market
capitalization and average daily turnover criteria can be reduced stepwise by
10% for companies that are index constituents until the index retains a
sufficient number of securities. As of January 31, 2023, companies listed in the
following countries were eligible for inclusion in the Cannabis Index:
Australia, Canada, United Kingdom, and the United States.
The
Cannabis Index is weighted according to modified effective market
capitalization, using a scheme that accounts for liquidity in determining final
weights and is reconstituted and re-weighted quarterly. Additionally, on an
intra-quarter basis, if the Index Provider determines that a constituent of the
Cannabis Index does not meet the index requirements with respect to compliance
with laws, rules and regulations, the Index Provider may remove such constituent
outside of the regular rebalance schedule. Modified effective market
capitalization weighting seeks to weight constituents based on market
capitalization but accounting for liquidity in determining final weights, and
subject to caps on the weights of the individual securities. Generally speaking,
this approach will limit the amount of concentration in the largest market
capitalization companies and thereby increase exposure to other companies. The
Cannabis Index may include large-, mid- or small-capitalization companies, and
components primarily include mid-capitalization and small-capitalization
companies. As of January 31, 2023, the Cannabis Index had 17 constituents. The
Fund's investment objective and Cannabis Index may be changed without
shareholder approval.
Global
X Cybersecurity ETF
The
Global X Cybersecurity ETF is designed to provide exposure to exchange-listed
companies that are positioned to benefit from increased adoption of
cybersecurity technology, including but not limited to companies whose principal
business is in the development and management of security protocols preventing
intrusion and attacks to systems, networks, applications, computers, and mobile
devices (collectively, "Cybersecurity Companies"), as determined by Indxx LLC,
the provider of the Global X Cybersecurity ETF.
In
constructing the Global X Cybersecurity ETF, Indxx LLC first identifies FactSet
Industries related to cybersecurity. Companies within these FactSet Industries,
as of the selection date, are further reviewed by Indxx LLC on the basis of
revenue related to cybersecurity activities. To be eligible for the Global X
Cybersecurity ETF as a Cybersecurity Company, a company must generate at least
50% of its revenues from cybersecurity activities, which Indxx LLC classifies as
the development and management of security protocols preventing intrusion and
attacks to systems, networks, applications, computers, and mobile devices.
To
be a part of the eligible universe of the Global X Cybersecurity ETF, certain
minimum market capitalization and liquidity criteria, as defined by Indxx LLC,
must be met. As of January 31, 2023, companies must have a minimum market
capitalization of $200 million and a minimum average daily turnover for the last
six months (or since the IPO launch date for Significant IPOs as defined by
Indxx LLC) greater than or equal to $2 million in order to be eligible for
inclusion in the Global X Cybersecurity ETF. As of January 31, 2023,
companies listed in the following countries were eligible for inclusion in the
Global X Cybersecurity ETF: Australia, Austria, Belgium, Brazil, Canada, Chile,
China, Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany,
Greece, Hong Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan,
Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, Peru,
Philippines, Poland, Portugal, Qatar, South Africa, South Korea, Singapore,
Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab Emirates, the
United Kingdom, and the United States.
The
Global X Cybersecurity ETF is weighted according to a modified capitalization
weighting methodology and is reconstituted and re-weighted semi-annually.
Modified capitalization weighting seeks to weight constituents primarily based
on market capitalization, but subject to caps on the weights of the individual
securities. Generally speaking, this approach will limit the amount of
concentration in the largest market capitalization companies and thereby
increase exposure to other companies. The Global X Cybersecurity ETF may include
large-, mid- or small-capitalization companies, and components primarily include
mid-capitalization companies. As of January 31, 2023, the Global X
Cybersecurity ETF had 23 constituents.
Solactive
Thematic Growth Index
The
Solactive Thematic Growth Index seeks to provide broad exposure to thematic
growth strategies using a portfolio of exchange-traded funds (each, an
"Underlying ETF"). The Solactive Thematic Growth Index allocates index weights
among the Underlying ETFs based on a quantitative methodology developed by
Solactive AG, the provider of the Solactive Thematic Growth Index, which is
designed to determine the selection and weighting of the eligible Underlying
ETFs. The share prices of the Underlying ETFs are expected to track the
performance of equities in developed or emerging markets that provide exposure
to structurally disruptive macro-trends.
The
Solactive Thematic Growth Index is constructed from the eligible universe of
Underlying ETFs, each of which is issued by Global X Funds®
and is determined by Solactive AG to provide exposure to structurally disruptive
macro-trends and the underlying investments that stand to benefit from the
materialization of those trends ("Global X Thematic Growth ETFs"). Structurally
disruptive macro-trends typically eschew traditional sector and geographic
classifications, and may stem from advancements in disruptive technology,
changing consumer habits and demographics, or changing needs for infrastructure
or finite resources. The Underlying Index is equal weighted. On an annual basis,
the Underlying Index is reconstituted to allocate
exposure
to a subset of the eligible Underlying ETFs using a quantitative methodology
that ranks each of the eligible Underlying ETFs based on realized sales growth.
In order to calculate the realized sales growth for a given Underlying ETF,
Solactive AG calculates the realized sales growth of each component security of
each eligible Underlying ETF. The realized sales growth of each component
security of the Underlying ETF is then used to calculate the aggregate realized
sales growth for the Underlying ETF, based on the respective weights of the
component securities in the Underlying ETF. Realized sales growth is determined
by calculating the difference between a component security's revenue over the
previous 12 months from the date of the rebalance and its revenue over the 12
months prior to the previous rebalance date. In addition to the annual
reconstitution, the Solactive Thematic Growth Index is reweighted on a
semi-annual basis. As of January 31, 2023, the Underlying ETFs eligible for
inclusion in the Solactive Thematic Growth Index are: Global X Aging Population
ETF, Global X AgTech & Food Innovation ETF, Global X Artificial Intelligence
& Technology ETF, Global X Autonomous & Electric Vehicles ETF, Global X
Blockchain ETF, Global X Cannabis ETF, Global X China Biotech Innovation ETF,
Global X Clean Water ETF, Global X CleanTech ETF, Global X Cloud Computing ETF,
Global X Cybersecurity ETF, Global X Data Center REITs & Digital
Infrastructure ETF, Global X E-Commerce ETF, Global X Education ETF, Global X
Emerging Markets Internet & E-commerce ETF, Global X FinTech ETF, Global X
Genomics & Biotechnology ETF, Global X Health & Wellness ETF, Global X
Hydrogen ETF, Global X Internet of Things ETF, Global X Lithium and Battery Tech
ETF, Global X Millennial Consumer ETF, Global X Renewable Energy Producers ETF,
Global X Robotics & Artificial Intelligence ETF, Global X Social Media ETF,
Global X Telemedicine & Digital Health ETF, Global X U.S. Infrastructure
Development ETF, Global X Video Games & Esports ETF, Global X Metaverse ETF,
Global X Disruptive Materials ETF, Global X Green Building ETF, Global X Solar
ETF and Global X Wind Energy ETF.
Solactive
Video Games & Esports Index
The
Solactive Video Games & Esports Index is designed to provide exposure to
exchange-listed companies that are positioned to benefit from increased
consumption related to video games and esports, including companies whose
principal business is in video game development/publishing, video game and
esports content distribution and streaming, operating/owning esports
leagues/teams, and producing video game/esports hardware (collectively, "Video
Games & Esports Companies"), as defined by Solactive AG, the provider of the
Solactive Video Games & Esports Index.
In
constructing the Solactive Video Games & Esports Index, Solactive AG first
applies a proprietary natural language processing algorithm to the eligible
universe, which screens filings, disclosures and other public information (e.g.,
regulatory filings, earnings transcripts, etc.) for keywords that describe the
index theme, to identify and rank companies with direct exposure to the video
games and esports industry. Companies identified by the natural language
processing algorithm, as of the selection date, are further reviewed by
Solactive AG on the basis of revenue related to video games and esports
activities. To be eligible for the Solactive Video Games & Esports Index, a
company is considered by Solactive AG to be a Video Games & Esports Company
if the company generates at least 50% of its revenues from video games and
esports activities, as determined by Solactive AG. Video Games & Esports
Companies are those companies that (i) develop and/or publish video games, (ii)
facilitate the streaming or distribution of video gaming and/or esports content,
(iii) operate and/or own competitive esports leagues and/or competitive esports
teams, and/or (iv) produce hardware used in video games and/or esports,
including augmented and virtual reality.
To
be a part of the eligible universe of the Solactive Video Games & Esports
Index, certain minimum market capitalization and liquidity criteria, as defined
by Solactive AG, must be met. As of January 31, 2023, companies must have a
minimum market capitalization of $200 million and a minimum average daily
turnover for the last 6 months greater than or equal to $2 million in order to
be eligible for inclusion in the Solactive Video Games & Esports Index. As
of January 31, 2023, companies listed in the following countries were
eligible for inclusion in the Solactive Video Games & Esports Index:
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Poland,
Portugal, Singapore, Spain, Sweden, Switzerland, South Korea, Taiwan, the United
Kingdom, and the United States.
The
Solactive Video Games & Esports Index is weighted according to a modified
capitalization weighting methodology and is reconstituted and re-weighted
semi-annually. Modified capitalization weighting seeks to weight constituents
primarily based on market capitalization, but subject to caps on the weights of
the individual securities. Generally speaking, this approach will limit the
amount of concentration in the largest market capitalization companies and
increase company-level diversification. The Solactive Video Games & Esports
Index may include large-, mid- or small-capitalization companies. As of
January 31, 2023, the Solactive Video Games & Esports Index had 50
constituents.
Indxx
Global Education Thematic Index
The
objective of the Indxx Global Education Thematic Index is to provide exposure to
exchange-listed companies globally that provide educational products and
services, including companies primarily involved in digital learning and
educational content/
publishing,
as well as early childhood education, secondary education, higher education,
professional education and enterprise video and chat communication platforms,
(collectively, "Education Companies"), as defined by Indxx, LLC, the provider of
the Indxx Global Education Thematic Index.
The
eligible universe of the Indxx Global Education Thematic Index includes among
the most liquid and investable companies in accordance with the market
capitalization and liquidity criteria associated with developed and emerging
markets, as defined by Indxx, LLC. As of January 31, 2023, companies must
have a minimum market capitalization of $200 million and a minimum average daily
turnover for the last 6 months (or since the IPO launch date for Significant
IPOs as defined by Indxx, LLC) greater than or equal to $2 million in order to
be eligible for inclusion in the Indxx Global Education Thematic Index. As of
January 31, 2023, components from the following countries were eligible for
inclusion in the Indxx Global Education Thematic Index: Australia, Austria,
Belgium, Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Egypt,
Finland, France, Germany, Greece, Hong Kong, Hungary, Indonesia, Ireland,
Israel, Italy, Japan, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand,
Norway, Peru, Philippines, Poland, Portugal, Qatar, South Africa, South Korea,
Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab
Emirates, the United Kingdom, and the United States.
From
the eligible universe, Indxx, LLC identifies Education Companies by applying a
proprietary analysis that consists of two primary components: theme
identification and company analysis. As part of the theme identification
process, Indxx, LLC analyzes industry reports, investment research and consumer
data related to the education industry in order to establish the themes that are
expected to provide the most exposure to the growth of the education industry.
As of January 31, 2023, Indxx, LLC has identified the following five
education themes (collectively, "Education Themes"):
i.Educational
Content/Publishing: Includes companies involved in developing, providing and
publishing educational content, including but not limited to companies providing
digital content for test preparations, language learning courses, and
traditional and interactive e-textbooks for purchase or rental.
ii.Digital
Learning Platforms: Includes companies which are involved in providing digital
learning platforms, MOOCs (Massive Open Online Courses), accredited online
courses, recognized educational degrees, vocational training, educational games
and training/tutor services, content delivery tools (e.g. digital whiteboards),
augmented/virtual reality-based education/training, and artificial intelligence
tools for augmenting teaching and learning.
iii.Early
Childhood Education: Includes companies involved in providing early/pre-school
education services, managing child-care centers and related
services.
iv.Secondary,
Higher and Professional Education: Includes companies that provide campus-based
courses, classroom-based tutoring services and companies providing professional
education services and programs excluding for-profit
schools/universities.
v.Enterprise
Video and Chat Communication Platforms: Includes
companies that provide cloud-based platforms with communications capabilities
such as voice, video and messaging to its users.
In
order to be included in the Indxx Global Education Thematic Index, a company
must be identified by Indxx, LLC as having significant exposure to one or more
of these Education Themes, as determined by Indxx, LLC. In the second step of
the process, Indxx, LLC analyzes companies based on revenue exposure to the
Education Themes. A company is identified as having significant exposure to the
Education Themes if it derives a significant portion of its revenue from the
sale of products or services from one or more of the Education Themes, as
determined by Indxx, LLC.
The
Indxx Global Education Thematic Index is weighted according to a modified
capitalization weighting methodology and is reconstituted and rebalanced
semi-annually. Modified capitalization weighting seeks to weight constituents
primarily based on market capitalization, but subject to caps on the weights of
the individual securities. Generally speaking, this approach will limit the
amount of concentration in the largest market capitalization companies and
increase company- level diversification. Additionally, Enterprise Video and Chat
Communication Platforms are subject to an aggregate weight cap of 15% at each
semi-annual rebalance. The Indxx Global Education Thematic Index may include
large-, mid- or small-capitalization companies, and components primarily include
consumer discretionary and communication services companies.
Solactive
Telemedicine & Digital Health Index
The
Solactive Telemedicine & Digital Health Index is designed to provide
exposure to exchange-listed companies that are positioned to benefit from
further advances in the field of telemedicine and digital health, as well as
applications thereof (collectively, "Telemedicine & Digital Health
Companies"), as defined by Solactive AG, the provider of the Solactive
Telemedicine & Digital Health Index. In order to be eligible for inclusion
in the Solactive Telemedicine & Digital Health Index, a company is
considered by Solactive AG to be a Telemedicine & Digital Health Company if
it derives at least 50% of its
revenue,
operating income, or assets from telemedicine and/or digital health. These
companies include those involved in the following business activities: (i)
telemedicine, (ii) healthcare analytics, (iii) connected healthcare devices,
and/or (iv) administrative digitization.
In
constructing the Solactive Telemedicine & Digital Health Index, Solactive AG
first applies a proprietary natural language processing algorithm to the
eligible universe, which seeks to identify and rank companies with direct
exposure to the telemedicine and digital health industry based on filings,
disclosures and other public information (e.g. regulatory filings, earnings
transcripts, etc.). The highest ranking companies identified by the natural
language processing algorithm, as of the selection date, are further reviewed by
Solactive AG to confirm they derive at least 50% of their revenues, operating
income, or assets from the following business activities:
i.Telemedicine:
Companies that connect physicians and patients digitally, facilitating a range
of medical activities that include diagnosis, treatment, and medication
management, as well as offering online pharmaceutical services, and/or providing
internet healthcare platforms.
ii.Healthcare
Analytics: Companies that collect, produce, utilize, and/or store data for
healthcare related statistical and/or computational analyses, including
artificial intelligence analyses and cloud-based analytics platforms.
iii.Connected
Healthcare Devices: Companies that develop healthcare devices which
automatically transmit data and results to patients and/or physicians to assist
in real-time, dynamic patient treatment and preventative care.
iv.Administrative
Digitization: Companies that enhance healthcare provider management processes
including patient intake, staffing solutions, revenue/billing cycle management,
digital healthcare security, as well as doctor/hospital search, booking and/or
rating services for patient use.
The
eligible universe of the Solactive Telemedicine & Digital Health Index
includes exchange-listed companies that meet minimum market capitalization and
liquidity criteria, as defined by Solactive AG. As of January 31, 2023,
companies must have a minimum market capitalization of $200 million and a
minimum average daily turnover for the last 6 months greater than or equal to $2
million in order to be eligible for inclusion in the Solactive Telemedicine
& Digital Health Index. As of January 31, 2023, companies listed in the
following countries were eligible for inclusion in the Solactive Telemedicine
& Digital Health Index: Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands,
New Zealand, Norway, Poland, Portugal, Singapore, Spain, Sweden, Switzerland,
South Korea, Taiwan, the United Kingdom, and the United States.
The
Solactive Telemedicine & Digital Health Index is weighted according to a
modified capitalization weighting methodology and is reconstituted and
re-weighted semi-annually. Modified capitalization weighting seeks to weight
constituents primarily based on market capitalization, but subject to caps on
the weights of the individual securities. Generally speaking, this approach will
limit the amount of concentration in the largest market capitalization companies
and increase company-level diversification. The Solactive Telemedicine &
Digital Health Index may include large-, mid- or small-capitalization companies,
and components primarily include healthcare companies. As of January 31,
2023, the Solactive Telemedicine & Digital Health Index had 40
constituents.
Solactive
China Biotech Innovation Index
The
Solactive China Biotech Innovation Index is designed to provide exposure to
exchange-listed companies that are directly involved in China’s biotechnology
industry. The securities eligible for inclusion in the Solactive China Biotech
Innovation Index include:
•H-Shares
(securities of companies incorporated in China that are denominated in Hong Kong
Dollars and listed on the Hong Kong Stock Exchange (the "HKSE"));
•Red
Chips (securities of companies with a majority of their business operations in
mainland China and that are controlled by the national government or local
governments of China, traded on the HKSE in Hong Kong dollars);
•P-Chips
(securities of companies with the majority of their business operations in
mainland China and controlled by individuals in China, but that are incorporated
outside of China);
•A-Shares
(securities of companies incorporated in mainland China that trade on Chinese
exchanges in renminbi) that are accessible through the Shanghai-Hong Kong Stock
Connect program ("Shanghai Connect") or the Shenzhen-Hong Kong Stock Connect
program ("Shenzhen Connect", and together with Shanghai Connect, "Stock Connect
Programs"); and
•Foreign
listings such as American Depository Receipts ("ADRs").
The
Stock Connect Programs are securities trading and clearing programs that aim to
achieve mutual stock market access between China and Hong Kong. Under the Stock
Connect Programs, the Fund's trading of eligible A-Shares listed on the
Shanghai
Stock Exchange ("SSE") or Shenzhen Stock Exchange ("SZSE"), as applicable, would
be effectuated through its Hong Kong brokers. Trading through the Stock Connect
Programs is subject to a daily quota, which limits the maximum net purchases
under Stock Connect Programs each day, and as such, buy orders for A-Shares
would be rejected once the daily quota is exceeded (although the Fund will be
permitted to sell A-Shares regardless of the daily quota balance). The daily
quota is not specific to the Fund. From time to time, other stock exchanges in
China may participate in Stock Connect Programs, and A-Shares listed and traded
on such other stock exchanges and accessible through Stock Connect Programs may
be added to the Underlying Index, as determined by Solactive AG, the provider of
the Solactive China Biotech Innovation Index.
In
constructing the Solactive China Biotech Innovation Index, Solactive AG utilizes
FactSet Industry classifications to identify companies that are directly
involved in the biotechnology industry. Only those securities classified in the
biotechnology industry according to FactSet as of each rebalance date are
eligible for inclusion in the Solactive China Biotech Innovation Index.
To
be a part of the eligible universe of the Solactive China Biotech Innovation
Index, certain minimum market capitalization and liquidity criteria, as defined
by Solactive AG, must be met. As of January 31, 2023, companies must have a
minimum free float market capitalization of $200 million and a minimum average
daily turnover for the last 6 months greater than or equal to $2 million in
order to be eligible for inclusion in the Solactive China Biotech Innovation
Index.
The
Solactive China Biotech Innovation Index is weighted according to a modified
capitalization weighting methodology and is reconstituted and re-weighted
semi-annually. Modified capitalization weighting seeks to weight constituents
primarily based on market capitalization, but subject to caps on the weights of
the individual securities. During each rebalance, the maximum weight of a
company is capped at 8%, the aggregate weight of companies with a weight greater
than or equal to 5% is capped at 40%, all remaining companies are capped at a
weight of 4.5%, and all constituents are subject to a minimum weight of 0.3%.
Generally speaking, this approach will limit the amount of concentration in the
largest market capitalization companies and increase company-level
diversification. The Solactive China Biotech Innovation Index may include
large-, mid- or small-capitalization companies, and components primarily include
health care companies. As of January 31, 2023, the Solactive China Biotech
Innovation Index had 26 constituents.
Indxx
Global CleanTech Index
The
Indxx Global CleanTech Index is designed to provide exposure to exchange-listed
companies that are positioned to benefit from the increased adoption of
technologies focused on improving the efficiency of renewable energy production
and/or mitigating the adverse environmental effects of resource consumption
(“CleanTech”), including, but not limited to, companies whose principal business
is in developing technology relating to renewable energy, energy efficiency and
storage, smart grid, lithium-ion batteries and/or fuel cells, and/or pollution
prevention/amelioration (collectively, "CleanTech Companies"), as defined by
Indxx LLC, the provider of the Indxx Global CleanTech Index.
In
constructing the Indxx Global CleanTech Index, Indxx LLC first identifies
FactSet Industries related to CleanTech. Companies within these Industries, as
of the selection date, are further reviewed by Indxx LLC on the basis of revenue
related to CleanTech activities. To be eligible for the Indxx Global CleanTech
Index, a company is considered by Indxx LLC to be a CleanTech Company if the
company generates at least 50% of its revenues from developing technologies
and/or equipment relating to: (i) renewable energy production, (ii) residential
and commercial energy efficiency and storage, (iii) smart grid implementation,
(iv) lithium-ion batteries and/or fuel cells, or (v) preventing/ameliorating the
negative environmental effects of pollution, in each case, as determined by
Indxx LLC.
To
be a part of the eligible universe of the Indxx Global CleanTech Index, certain
minimum market capitalization and liquidity criteria, as defined by Indxx LLC,
must be met. As of January 31, 2023, companies must have a minimum market
capitalization of $500 million and a minimum average daily turnover for the last
6 months (or since the IPO launch date for Significant IPOs as defined by Indxx
LLC) greater than or equal to $2 million in order to be eligible for inclusion
in the Indxx Global CleanTech Index. As of January 31, 2023, companies
listed in the following countries were eligible for inclusion in the Indxx
Global CleanTech Index: Australia, Austria, Belgium, Brazil, Canada, Chile,
China, Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany,
Greece, Hong Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan,
Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, Peru,
Philippines, Poland, Portugal, Qatar, South Africa, South Korea, Singapore,
Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab Emirates, the
United Kingdom, and the United States
The
Indxx Global CleanTech Index is weighted according to a modified capitalization
weighting methodology and is reconstituted and re-weighted semi-annually.
Modified capitalization weighting seeks to weight constituents primarily based
on market capitalization, but subject to caps on the weights of the individual
securities. During each rebalance, the maximum weight of a company is capped at
6%, the aggregate weight of companies with a weight greater than or equal to 5%
is capped at
40%,
and all remaining companies are capped at a weight of 4.5%, and all constituents
are subject to a minimum weight of 0.3%. Generally speaking, this approach will
limit the amount of concentration in the largest market capitalization companies
and increase company-level diversification. The Indxx Global CleanTech Index may
include large-, mid- or small-capitalization companies, and components primarily
include industrials and information technology companies. As of January 31,
2023, the Indxx Global CleanTech Index had 29 constituents.
Solactive
Data Center REITs & Digital Infrastructure Index
The
Solactive Data Center REITs & Digital Infrastructure Index is designed to
provide exposure to companies that have business operations in the fields of
data centers, cellular towers, and/or digital infrastructure hardware.
Specifically, the Solactive Data Center REITs & Digital Infrastructure Index
will include securities issued by “Data Center REITs & Digital
Infrastructure Companies” as defined by Solactive AG, the provider of the
Solactive Data Center REITs & Digital Infrastructure Index (the "Index
Provider"). Data Center REITs & Digital Infrastructure Companies are those
companies that derive at least 50% of their revenues, operating income, or
assets from the following business activities:
i.Data
Center Companies: Companies that own, operate, and/or develop data centers
(including data center REITs (as defined below)), which are publicly-listed
companies that own and manage facilities that customers use to safely and
efficiently store computer servers and data. Data Center Companies offer a range
of products and services to help secure, maintain, and facilitate the use of
servers and data within data centers, including providing uninterruptable power
supplies, temperature regulation, and physical security.
ii.Cellular
Tower Companies: Companies that own, operate and/or develop cellular towers
(including cellular tower REITs), which are publicly-listed companies that lease
antennae and equipment space on cellular towers to wireless carriers. Wireless
carriers utilize the cellular tower space provided by Cellular Tower Companies
to operate antennae and equipment that transmit and receive the signal reception
of cellular phones, televisions, radios, and other wireless communication
devices.
iii.Digital
Infrastructure Hardware Companies: Companies that manufacture, design, and/or
assemble the servers and/or other hardware often used in data centers and
cellular towers, including data center servers, processors and data center
switches.
Data
Center Companies and Cellular Tower Companies can be (but are not required to
be) structured as real estate investment trusts (“REITs”), which are publicly
listed companies that own or finance income-producing real estate assets. In
order to qualify as a REIT under the Internal Revenue Code of 1986, as amended,
a company needs to satisfy several regulatory requirements including but not
limited to:
i.Investing
at least 75% of its assets in real estate.
ii.Deriving
at least 75% of its gross income from rents from real property, interest on
mortgages financing real property, or from sales of real estate.
iii.Distributing
at least 90% of its taxable income in the form of shareholder dividends each
year.
In
constructing the Solactive Data Center REITs & Digital Infrastructure Index,
Solactive AG first applies a proprietary natural language processing algorithm
to the eligible universe, which seeks to identify and rank companies that
operate data centers and/or companies with direct exposure to digital
infrastructure based on filings, disclosures and other public information (e.g.
regulatory filings, earnings transcripts, etc.). The highest ranking companies
identified by the natural language processing algorithm, as of the selection
date, are further reviewed by Solactive AG to confirm they derive at least 50%
of their revenues, operating income, or assets from Data Center REITs and/or
Digital Infrastructure.
The
eligible universe of the Solactive Data Center REITs & Digital
Infrastructure Index includes exchange-listed companies that meet minimum market
capitalization and liquidity criteria, as defined by Solactive AG. As of
January 31, 2023, companies must have a minimum market capitalization of
$200 million and a minimum average daily turnover for the last 6 months greater
than or equal to $2 million in order to be eligible for inclusion in the
Solactive Data Center REITs & Digital Infrastructure Index. As of
January 31, 2023, companies listed in the following countries were eligible
for inclusion in the Solactive Data Center REITs & Digital Infrastructure
Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Indonesia, Ireland, Israel, Italy, Japan, Netherlands, New Zealand,
Norway, Poland, Portugal, Singapore, Spain, Sweden, Switzerland, South Korea,
Taiwan, the United Kingdom, and the United States.
The
Solactive Data Center REITs & Digital Infrastructure Index is weighted
according to a modified capitalization weighting methodology and is
reconstituted and re-weighted semi-annually. Modified capitalization weighting
seeks to weight constituents primarily based on market capitalization, but
subject to caps on the weights of the individual securities. During each
rebalance, the maximum weight of a Data Center Company or Cellular Tower Company
(defined by the Index Provider as companies that own, operate, and/or develop
data centers (including data center REITs) and cellular towers (including
Cellular Tower REITs)), respectively, is capped at 12% and the maximum weight of
a Digital Infrastructure Hardware Company (defined by the Index Provider as
companies that manufacture the servers and/or other hardware often used in data
centers and cellular towers, including semiconductors, integrated circuits, and
processors) is capped at 2%, the aggregate weight of companies with a weight
greater than or equal to 4.5% is capped at 45%, all remaining companies are
capped at a weight of 4.5%, and all constituents are subject to a minimum weight
of 0.3%. Generally speaking, this approach will limit the amount of
concentration in the largest market capitalization companies but may increase
the number of constituents included within the Solactive Data Center REITs &
Digital Infrastructure Index. The Solactive Data Center REITs & Digital
Infrastructure Index may include large-, mid- or small-capitalization companies,
and components primarily include and components primarily include real estate
and information technology companies. As of January 31, 2023, the Solactive
Data Center REITs & Digital Infrastructure Index had 24 constituents.
Solactive
AgTech & Food Innovation Index
The
Solactive AgTech & Food Innovation Index is designed to provide exposure to
companies that are positioned to benefit from further advances in the fields of
agricultural technology (“AgTech”) and food innovation. Specifically, the
Solactive AgTech & Food Innovation Index will include securities issued by
“AgTech & Food Innovation Companies” as defined by Solactive AG, the
provider of the Solactive AgTech & Food Innovation Index. “AgTech & Food
Innovation Companies” are those companies that derive at least 50% of their
revenues, operating income, or assets from the following business
activities:
•AgTech
◦Precision
Agriculture:
Technologies used to increase crop yields and reduce levels of traditional
agricultural inputs (land, water, fertilizer, etc.) to grow crops more
profitably/efficiently. Business activities include the development of
Geographic Information System (“GIS”) software and hardware for GIS-based
agriculture, precision weed control technologies, soil and water sensors,
weather tracking, and satellite imaging.
◦Robotics/Automation:
Technologies used to reduce labor and other farming inputs. Business activities
include the development of farming drones and autonomous farm equipment for
irrigation, soil management (agronomy), pollination, harvesting and processing
(e.g. robotic-enabled harvesters).
◦Controlled
Environment Agriculture (“CEA”):
Technologies and systems that optimize plant and/or fish farming and use
controlled environments to reduce the types and/or quantity of inputs required
for farming. Business activities include vertical farming, hydroponics,
aquaponics and aeroponics.
◦Agricultural
Biotechnology:
Biological/genetic technologies used to enhance agricultural cultivation and
yield. Business activities include the use of gene editing to develop crops with
higher yield, less water requirements, greater insect resistance,
etc.
•Food
Innovation
◦Protein
& Dairy Alternatives:
Products containing protein-rich ingredients sourced from plants, insects,
fungi, or through tissue culture that replace conventional animal-based protein
sources like meat and dairy. Business activities include the development of
plant-based and/or food-technology (e.g. molecular based) alternative proteins
and dairy.
◦Food
Waste Reduction:
Technologies and/or systems designed to reduce food-waste in the supply chain.
Business activities include the development of technology to track, monitor,
and/or preserve food (e.g. blockchain-based food sourcing and tracking systems
and software), as well as the development of products and services (e.g.
marketplaces) that reduce food waste.
In
addition, companies identified by Solactive AG as deriving greater than 0% but
less than 50% of revenue from the business activities described above
("Diversified AgTech & Food Innovation Companies"), as well as companies
identified by Solactive AG as having primary business operations in the business
activities described above but that do not currently generate revenues
(“Pre-Revenue AgTech & Food Innovation Companies”), are eligible for
inclusion in the Solactive AgTech & Food Innovation Index if there are fewer
than 30 eligible AgTech & Food Innovation Companies. Diversified AgTech
& Food Innovation Companies and Pre-Revenue AgTech & Food Innovation
Companies are collectively subject to an aggregate weight cap of 15% at each
semi-annual rebalance.
In
constructing the Solactive AgTech & Food Innovation Index, Solactive AG
first applies a proprietary natural language processing algorithm to the
eligible universe, which seeks to identify and rank companies involved in the
fields of agriculture
technology
and food innovation based on filings, disclosures and other public information
(e.g. regulatory filings, earnings transcripts, etc.). The highest-ranking
companies identified by the natural language processing algorithm, as of the
selection date, are further reviewed by Solactive AG to confirm they derive at
least 50% of their revenues from the business activities described above,
greater than 0% of their revenues from the business activities described above
in the case of Diversified AgTech & Food Innovation Companies, or that they
have primary business operations in the business activities described above but
do not currently generate revenues in the case of Pre-Revenue AgTech & Food
Innovation Companies.
To
be a part of the eligible universe of the Solactive AgTech & Food Innovation
Index, certain minimum market capitalization and liquidity criteria, as defined
by the Index Provider, must be met. As of January 31, 2023, companies must
have a minimum market capitalization of $200 million and a minimum average daily
turnover for the last 6 months greater than or equal to $2 million in order to
be eligible for inclusion in the Solactive AgTech & Food Innovation Index.
As of January 31, 2023, companies listed in the following countries were
eligible for inclusion in the Solactive AgTech & Food Innovation Index:
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New
Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar, Saudi Arabia, South
Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand,
Turkey, United Arab Emirates, the United Kingdom, and the United States. The
Fund may invest in China A-Shares, which are issued by companies incorporated in
mainland China and traded on Chinese exchanges.
The
Solactive AgTech & Food Innovation Index is weighted according to a modified
capitalization weighting methodology and is reconstituted and re-weighted
semi-annually. Modified capitalization weighting seeks to weight constituents
primarily based on market capitalization, but subject to caps on the weights of
the individual securities. During each rebalance, the maximum weight of a
company is capped at 12%, the aggregate weight of companies with a weight
greater than or equal to 4.5% is capped at 48%, and all remaining companies are
capped at a weight of 4.5%, and all constituents are subject to a minimum weight
of 0.3%. In addition, Diversified AgTech & Food Innovation Companies and
Pre-Revenue AgTech & Food Innovation Companies are subject to an individual
weight cap of 4% and an aggregate weight cap of 15% at each semi-annual
rebalance. Generally speaking, modified capitalization weighting will limit the
amount of concentration in the largest market capitalization companies and
increase company-level diversification. The Solactive AgTech & Food
Innovation Index may include large-, mid- or small-capitalization companies, and
components primarily include consumer staples and materials companies. As of
January 31, 2023, the Solactive AgTech & Food Innovation Index had 30
constituents.
Solactive
Blockchain Index
The
Solactive Blockchain Index is designed to provide exposure to companies that are
positioned to benefit from further advances in the field of blockchain
technology. A blockchain is a peer-to-peer shared, distributed ledger (or
decentralized database) that facilitates the recording of transactions and
tracking of assets without the need for the use of a central authority acting as
a trusted intermediary (i.e., a bank). Certain users, known as nodes, elect to
maintain a copy of the database (“ledger”) on their computer. Nodes connect on a
peer-to-peer basis with other nodes, propagating transactions and blocks across
the network to be independently verified by other nodes according to the
network’s rules. Transactions are aggregated into blocks which record the time
and sequence of transactions, like new pages of a ledger. “Blocks” are linked
together with the prior block to form a “chain”, or a “blockchain”, which grows
linearly in time with the addition of each subsequent block, or page of the
ledger. The resulting blockchain is a distributed, time-stamped ledger of
information—because the rules for adding information to the ledger are public,
any transactions and new pages of the ledger can be independently verified by
any user maintaining a copy of the ledger, resulting in a shared and continually
reconciled database. Blockchains may also be private or public networks. A
public blockchain network is a publicly available set of rules that anyone can
download and run to participate in the network. A private blockchain network is
a centralized blockchain that requires an invitation from the originator of the
network to participate. Specifically, the Solactive Blockchain Index will
include securities issued by “Blockchain Companies” as defined by Solactive AG,
the provider of the Solactive Blockchain Index. “Blockchain Companies” are those
companies that derive at least 50% of their revenues, operating income, or
assets from the following business activities:
1.Digital
Asset Mining:
Companies involved in verifying and adding digital asset transactions to a
blockchain ledger (i.e. digital asset mining), or that produce technology used
in digital asset mining.
2.Blockchain
& Digital Asset Transactions:
Companies that operate trading platforms/exchanges, custodians, wallets, and/or
payment gateways for digital assets issued on a blockchain.
3.Blockchain
Applications:
Companies involved in the development and distribution of applications and
software services related to blockchain technology and digital assets issued on
a blockchain, including smart contracts.
4.Blockchain
& Digital Asset Hardware:
Companies that manufacture and distribute infrastructure and/or hardware used
for blockchain activities and digital assets issued on a blockchain.
5.Blockchain
& Digital Asset Integration:
Companies that provide engineering and consulting services for the adoption and
utilization of blockchain technology and digital assets issued on a blockchain.
For purposes of the definition of “Blockchain Companies”, the Index Provider
will consider only those revenues, operating income, or assets from consulting
and/or engineering services specifically related to blockchain and digital asset
technologies.
The
Fund will not invest in digital assets (including cryptocurrencies) (i) directly
or (ii) indirectly through the use of digital asset derivatives.
In
addition, companies identified by Solactive AG as deriving greater than 0% but
less than 50% of revenue from the business activities described above
("Diversified Blockchain Companies"), as well as companies identified by
Solactive AG as having primary business operations in the business activities
described above but that do not currently generate revenues (“Pre-Revenue
Blockchain Companies”, are eligible for inclusion in the Underlying Index if
there are fewer than 25 eligible Blockchain Companies. Diversified Blockchain
Companies and Pre-Revenue Blockchain Companies are collectively subject to an
aggregate weight cap of 10% at each semi-annual rebalance.
In
constructing the Solactive Blockchain Index, Solactive AG first applies a
proprietary natural language processing algorithm to the eligible universe,
which seeks to identify and rank companies involved in the blockchain fields
based on filings, disclosures and other public information (e.g. regulatory
filings, earnings transcripts, etc.). The highest-ranking companies identified
by the natural language processing algorithm, as of the selection date, are
further reviewed by Solactive AG to confirm they derive at least 50% of their
revenues from the business activities described above, greater than 0% of their
revenues from the business activities described above in the case of Diversified
Blockchain Companies, or that they have primary business operations in the
business activities described above but do not currently generate revenues in
the case of Pre-Revenue Blockchain Companies.
To
be a part of the eligible universe of the Solactive Blockchain Index, certain
minimum market capitalization and liquidity criteria, as defined by Solactive
AG, must be met. As of January 31, 2023, companies must have a minimum
market capitalization of $50 million and a minimum average daily turnover for
the last 6 months greater than or equal to $0.5 million in order to be eligible
for inclusion in the Solactive Blockchain Index. As of January 31, 2023,
companies listed in the following countries were eligible for inclusion in the
Underlying Index: Australia, Austria, Belgium, Brazil, Canada, Chile, China,
Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong
Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico,
Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar,
Saudi Arabia, South Africa, South Korea, Singapore, Spain, Sweden, Switzerland,
Taiwan, Thailand, Turkey, United Arab Emirates, the United Kingdom, and the
United States. The Fund may invest in China A-Shares, which are issued by
companies incorporated in mainland China and traded on Chinese
exchanges.
The
Solactive Blockchain Index is weighted according to a modified effective market
capitalization weighting methodology and is reconstituted and re-weighted
semi-annually. Modified effective market capitalization weighting seeks to
weight constituents based on market capitalization but accounting for liquidity
in determining final weights, and subject to caps on the weights of the
individual securities. During each rebalance, the maximum weight of a company is
capped at 12%, the aggregate weight of companies with a weight greater than or
equal to 4.5% is capped at 45%, and all remaining companies are capped at a
weight of 4.5%, and all constituents are subject to a minimum weight of 0.3%. In
addition, Diversified Blockchain Companies and Pre-Revenue Blockchain Companies
are subject to an individual weight cap of 2% and an aggregate weight cap of 10%
at each semi-annual rebalance. Generally speaking, modified effective market
capitalization weighting will limit the amount of concentration in the largest
market capitalization companies and increase company-level diversification. The
Solactive Blockchain Index may include large-, mid- or small-capitalization
companies, and components primarily include information technology and
financials companies. As of January 31, 2023, the Solactive Blockchain Index had
24 constituents.
Solactive
Global Clean Water Industry Index
The
Solactive Global Clean Water Industry Index is designed to provide exposure to
companies that have business operations in the provision of clean water.
Specifically, the Solactive Global Clean Water Industry Index will include
securities issued by “Clean Water Companies” as defined by Solactive AG, the
provider of the Solactive Global Clean Water Industry Index. Clean Water
Companies are those companies that derive at least 50% of their revenues,
operating income, or assets from the following business activities:
1.Industrial
water treatment, recycling (including water reclamation), purification, and
conservation.
2.Water
storage, transportation, metering, and distribution infrastructure.
3.Production
of household and commercial water purifier and heating products.
4.Provision
of consulting services identifying and implementing water efficiency strategies
at the corporate and/or municipal levels.
In
constructing the Solactive Global Clean Water Industry Index, Solactive AG first
applies a proprietary natural language processing algorithm to the eligible
universe, which seeks to identify and rank companies involved in the provision
of clean water based on filings, disclosures and other public information (e.g.
regulatory filings, earnings transcripts, etc.). Solactive AG also applies an
ESG (Environmental, Social and Governance) screening process to the universe of
eligible companies. Solactive AG, in partnership with ESG data provider Minerva,
on a quarterly basis reviews each constituent of the Solactive Global Clean
Water Industry Index for compliance with the principles of the United Nations
Global Compact. Any existing or potential constituent of the Solactive Global
Clean Water Industry Index which does not meet the labor, human rights,
environmental, and anti-corruption standards as defined by the United Nations
Global Compact Principles as of the quarterly review will be excluded from the
Solactive Global Clean Water Industry Index, as determined by Solactive AG. The
highest-ranking companies identified by the natural language processing
algorithm, as of the selection date, are further reviewed by Solactive AG to
confirm they derive at least 50% of their revenues from the provision of clean
water.
To
be a part of the eligible universe of the Solactive Global Clean Water Industry
Index, certain minimum market capitalization and liquidity criteria, as defined
by Solactive AG, must be met. As of January 31, 2023, companies must have a
minimum market capitalization of $200 million and a minimum average daily
turnover for the last 6 months greater than or equal to $2 million in order to
be eligible for inclusion in the Solactive Global Clean Water Industry Index. As
of January 31, 2023, companies listed in the following countries were
eligible for inclusion in the Solactive Global Clean Water Industry Index:
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New
Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar, Saudi Arabia, South
Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand,
Turkey, United Arab Emirates, the United Kingdom, and the United
States.
The
Solactive Global Clean Water Industry Index is weighted according to a modified
capitalization weighting methodology and is reconstituted and re-weighted
semi-annually. Modified capitalization weighting seeks to weight constituents
primarily based on market capitalization, but subject to caps on the weights of
the individual securities. During each rebalance, the maximum weight of a
company is capped at 8%, the aggregate weight of companies with a weight greater
than or equal to 4.5% is capped at 40%, and all remaining companies are capped
at a weight of 4.5%, and all constituents are subject to a minimum weight of
0.3%. Generally speaking, this approach will limit the amount of concentration
in the largest market capitalization companies and increase company-level
diversification. The Solactive Global Clean Water Industry Index may include
large-, mid- or small-capitalization companies, and components primarily include
utilities and industrials companies. As of January 31, 2023, the Solactive
Global Clean Water Industry Index had 39 constituents.
Solactive
Global Hydrogen Index
The
Solactive Global Hydrogen Index is designed to provide exposure to companies
that are positioned to benefit from further advances in the field of hydrogen
technology. Hydrogen technology includes products and services focused on the
development and implementation of hydrogen gas as a renewable fuel source.
Hydrogen technology may play an important role in the transition toward
renewable energy from fossil fuels. Specifically, the Solactive Global Hydrogen
Index will include securities issued by “Hydrogen Companies” as defined by
Solactive AG, the provider of the Solactive Global Hydrogen Index. “Hydrogen
Companies” are those companies that derive at least 50% of their revenues,
operating income, or assets from the following business activities:
1.Hydrogen
Production:
Companies involved in the production, transportation, storage, and distribution
of hydrogen (including renewable hydrogen) that can be used as an energy
source.
2.Hydrogen
Fuel Cells:
Companies that develop and/or manufacture fuel cells (and the components
thereof) that convert chemical energy into electricity and heat, powered by
hydrogen fuel and/or reformed hydrogen-rich gas.
3.Hydrogen
Technology:
Companies involved in the production of hydrogen electrolyzers (which produce
hydrogen gas from water), tanks and pipelines, commercial and residential
infrastructure, generators, engines, and vehicles powered by hydrogen fuel
cells, as well as hydrogen fueling stations.
4.Hydrogen
Integration:
Companies that provide engineering and consulting services for the adoption and
utilization of hydrogen-based fuel and/or energy sources at the residential,
commercial, and industrial levels.
In
addition, companies identified by Solactive AG as deriving greater than 0% but
less than 50% of revenue from the business activities described above
("Diversified Hydrogen Companies"), as well as companies identified by Solactive
AG as having primary business operations in the business activities described
above but that do not currently generate revenues (“Pre-Revenue Hydrogen
Companies”), are eligible for inclusion in the Solactive Global Hydrogen Index
if there are fewer than 25
eligible
Hydrogen Companies. Diversified Hydrogen Companies and Pre-Revenue Hydrogen
Companies are collectively subject to an aggregate weight cap of 10% at each
semi-annual rebalance.
In
constructing the Solactive Global Hydrogen Index, Solactive AG first applies a
proprietary natural language processing algorithm to the eligible universe,
which seeks to identify and rank companies involved in the fields of hydrogen
and fuel cells based on filings, disclosures and other public information (e.g.
regulatory filings, earnings transcripts, etc.). The highest-ranking companies
identified by the natural language processing algorithm, as of the selection
date, are further reviewed by Solactive AG to confirm they derive at least 50%
of their revenues from the business activities described above, greater than 0%
of their revenues from the business activities described above in the case of
Diversified Hydrogen Companies, or that they have primary business operations in
the business activities described above but do not currently generate revenues
in the case of Pre-Revenue Hydrogen Companies.
To
be a part of the eligible universe of the Solactive Global Hydrogen Index,
certain minimum market capitalization and liquidity criteria, as defined by
Solactive AG, must be met. As of January 31, 2023, companies must have a
minimum market capitalization of $50 million and a minimum average daily
turnover for the last 6 months greater than or equal to $0.5 million in order to
be eligible for inclusion in the Solactive Global Hydrogen Index. As of
January 31, 2023, companies listed in the following countries were eligible
for inclusion in the Solactive Global Hydrogen Index: Australia, Austria,
Belgium, Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Egypt,
Finland, France, Germany, Greece, Hong Kong, Hungary, Indonesia, Ireland,
Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New Zealand, Norway, Peru,
Philippines, Poland, Portugal, Qatar, Saudi Arabia, South Africa, South Korea,
Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab
Emirates, the United Kingdom, and the United States. The Fund may invest in
China A-Shares, which are issued by companies incorporated in mainland China and
traded on Chinese exchanges. The Fund may invest in securities of issuers
located in emerging markets
The
Solactive Global Hydrogen Index is weighted according to a modified
capitalization weighting methodology and is reconstituted and re-weighted
semi-annually. Modified capitalization weighting seeks to weight constituents
primarily based on market capitalization, but subject to caps on the weights of
the individual securities. During each rebalance, the maximum weight of a
company is capped at 12%, the aggregate weight of companies with a weight
greater than or equal to 4.5% is capped at 45%, and all remaining companies are
capped at a weight of 4.5%, and all constituents are subject to a minimum weight
of 0.3%. In addition, Diversified Hydrogen Companies and Pre-Revenue Hydrogen
Companies are subject to an individual weight cap of 2% and an aggregate weight
cap of 10% at each semi-annual rebalance. Generally speaking, modified
capitalization weighting will limit the amount of concentration in the largest
market capitalization companies and increase company-level diversification. The
Solactive Global Hydrogen Index may include large-, mid- or small-capitalization
companies, and components primarily include industrials companies. As of
January 31, 2023, the Solactive Global Hydrogen Index had 25
constituents.
Solactive
Solar Index
The
Solactive Solar Index is designed to provide exposure to companies that are
positioned to benefit from further advances in the field of solar technology.
Specifically, the Solactive Solar Index consists of securities issued by “Solar
Companies” as defined by Solactive AG, the provider of the Solactive Solar
Index. Solar Companies are those companies that derive at least 50% of their
revenues from the following business activities:
Solar
Energy Materials:
Companies involved in the production of raw materials that are primarily used in
photovoltaic solar cells or concentrating solar-thermal mirrors or lenses
(including silicon, cadmium telluride, copper indium gallium deselenide,
titanium dioxide, and/or perovskite).
Solar
Energy Systems & Components: Companies
involved in the development and/or manufacturing of solar energy systems (and
the components thereof) that harness energy from the photovoltaic effect or from
sunlight to generate electricity. For example, a company involved in the
production of solar panels may be categorized as having business activities
related to Solar Energy Systems & Components. Solar panels consist of an
arrangement of solar photovoltaic cells mounted in a framework for
installation.
Solar
Power Production: Companies
that generate and distribute electricity from light energy.
Solar
Technology:
Companies that develop commercial and residential infrastructure, generators,
and engines powered by solar energy, as well as residential and commercial scale
batteries for electricity produced from solar power, and solar-powered charging
systems for electric vehicles or other electric devices.
Solar
Installation, Integration & Maintenance:
Companies that provide engineering and/or advisory services for the
installation, integration, maintenance, and/or utilization of solar power at the
residential, commercial, and industrial levels.
In
constructing the Solactive Solar Index, Solactive AG first applies a proprietary
natural language processing algorithm to the eligible universe, which seeks to
identify and rank companies involved in the field of solar technology based on
filings, disclosures and other public information (e.g. regulatory filings,
earnings transcripts, etc.). Solactive AG also applies an ESG (Environmental,
Social and Governance) screening process to the universe of eligible companies.
Solactive AG, in partnership with ESG data provider Minerva, on a quarterly
basis reviews each constituent of the Solactive Solar Index for compliance with
the principles of the United Nations Global Compact. Any existing or potential
constituent of the Solactive Solar Index which does not meet the labor, human
rights, environmental, and anti-corruption standards as defined by the United
Nations Global Compact Principles as of the quarterly review will be excluded
from the Solactive Solar Index, as determined by Solactive AG. The
highest-ranking companies identified by the natural language processing
algorithm, as of the selection date, are further reviewed by Solactive AG to
confirm they derive at least 50% of their revenues from the business activities
described above.
To
be a part of the eligible universe of the Solactive Solar Index, certain minimum
market capitalization and liquidity criteria, as defined by Solactive AG, must
be met. As of January 31, 2023, companies must have a minimum market
capitalization of $200 million and a minimum average daily turnover for the last
6 months greater than or equal to $2 million in order to be eligible for
inclusion in the Solactive Solar Index. As of January 31, 2023, companies
listed in the following countries were eligible for inclusion in the Solactive
Solar Index: Australia, Austria, Belgium, Brazil, Canada, Chile, China,
Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong
Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico,
Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar,
Saudi Arabia, South Africa, South Korea, Singapore, Spain, Sweden, Switzerland,
Taiwan, Thailand, Turkey, United Arab Emirates, the United Kingdom, and the
United States. As of January 31, 2023, the Solactive Solar Index had
significant exposure to Chinese issuers. The Fund may invest in China A-Shares,
which are issued by companies incorporated in mainland China and traded on
Chinese exchanges.
The
Solactive Solar Index is weighted according to a modified capitalization
weighting methodology and is reconstituted and re-weighted semi-annually.
Modified capitalization weighting seeks to weight constituents primarily based
on market capitalization, but subject to caps on the weights of the individual
securities. During each rebalance, the maximum weight of a company is capped at
8%, the aggregate weight of companies with a weight greater than or equal to
4.5% is capped at 40%, and all remaining companies are capped at a weight of
4.5%, and all constituents are subject to a minimum weight of 0.3%. Generally
speaking, this approach will limit the amount of concentration in the largest
market capitalization companies and increase company-level diversification. The
Solactive Solar Index may include large-, mid- or small-capitalization
companies, and components primarily include information technology companies. As
of January 31, 2023, the Solactive Solar Index had 50
constituents.
Solactive
Wind Energy Index
The
Solactive Wind Energy Index is designed to provide exposure to companies that
are positioned to benefit from further advances in the field of wind energy
technology. Specifically, the Solactive Wind Energy Index will include
securities issued by “Wind Energy Companies” as defined by Solactive AG, the
provider of the Solactive Wind Energy Index. Wind Energy Companies are those
companies that derive at least 50% of their revenues from the following business
activities:
Wind
Energy Systems:
Companies involved in development, manufacturing, integration, and/or
maintenance of turbine components and turbines that harness energy from the wind
and convert it into electrical power.
Wind
Power Production: Companies
that generate and distribute electricity from wind power.
Wind
Energy Technology:
Companies that develop commercial and residential infrastructure and systems
powered by wind energy, as well as residential and commercial scale batteries
for electricity produced from wind power.
Wind
Power Integration & Maintenance:
Companies that provide engineering and/or advisory services for the
installation, maintenance, and/or utilization of wind energy at the residential,
commercial, and industrial levels.
In
addition, companies identified by Solactive AG as having primary business
operations in the business activities described above but that do not currently
generate revenues (“Pre-Revenue Wind Energy Companies”), are eligible for
inclusion in the
Solactive
Wind Energy Index if there are fewer than 25 eligible Wind Energy Companies.
Pre-Revenue Wind Energy Companies are subject to an aggregate weight cap of 10%
at each semi-annual rebalance.
In
constructing the Solactive Wind Energy Index, Solactive AG first applies a
proprietary natural language processing algorithm to the eligible universe,
which seeks to identify and rank companies involved in field of wind energy
technology based on filings, disclosures and other public information (e.g.
regulatory filings, earnings transcripts, etc.). The Index Provider also applies
an ESG (Environmental, Social and Governance) screening process to the universe
of eligible companies. Solactive AG, in partnership with ESG data provider
Minerva, on a quarterly basis reviews each constituent of the Solactive Wind
Energy Index for compliance with the principles of the United Nations Global
Compact. Any existing or potential constituent of the Underlying Index which
does not meet the labor, human rights, environmental, and anti-corruption
standards as defined by the United Nations Global Compact Principles as of the
quarterly review will be excluded from the Solactive Wind Energy Index, as
determined by the Solactive AG. The highest-ranking companies identified by the
natural language processing algorithm, as of the selection date, are further
reviewed by Solactive AG to confirm they derive at least 50% of their revenues
from the business activities described above, or that they have primary business
operations in the business activities described above but do not currently
generate revenues in the case of Pre-Revenue Wind Energy Companies.
To
be a part of the eligible universe of the Solactive Wind Energy Index, certain
minimum market capitalization and liquidity criteria, as defined by Solactive
AG, must be met. As of January 31, 2023, companies must have a minimum
market capitalization of $200 million and a minimum average daily turnover for
the last 6 months greater than or equal to $2 million in order to be eligible
for inclusion in the Underlying Index. As of January 31, 2023, companies
listed in the following countries were eligible for inclusion in the Solactive
Wind Energy Index: Australia, Austria, Belgium, Brazil, Canada, Chile, China,
Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong
Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico,
Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Qatar,
Saudi Arabia, South Africa, South Korea, Singapore, Spain, Sweden, Switzerland,
Taiwan, Thailand, Turkey, United Arab Emirates, the United Kingdom, and the
United States. As of January 31, 2023, the Solactive Wind Energy Index had
significant exposure to Chinese issuers. The Fund may invest in China A-Shares,
which are issued by companies incorporated in mainland China and traded on
Chinese exchanges.
The
Solactive Wind Energy Index is weighted according to a modified capitalization
weighting methodology and is reconstituted and re-weighted semi-annually.
Modified capitalization weighting seeks to weight constituents primarily based
on market capitalization, but subject to caps on the weights of the individual
securities. During each rebalance, the maximum weight of a company is capped at
12%, the aggregate weight of companies with a weight greater than or equal to
4.5% is capped at 45%, and all remaining companies are capped at a weight of
4.5%, and all constituents are subject to a minimum weight of 0.3%. In addition,
Pre-Revenue Wind Energy Companies are subject to an individual weight cap of 2%
and an aggregate weight cap of 10% at each semi-annual rebalance. Generally
speaking, this approach will limit the amount of concentration in the largest
market capitalization companies and increase company-level diversification. The
Solactive Wind Energy Index may include large-, mid- or small-capitalization
companies, and components primarily include utilities and industrials companies.
As of January 31, 2023, the Solactive Wind Energy Index had 29
constituents.
Global
X Metaverse Index
The
Global X Metaverse Index is owned and was developed by Global X Management
Company LLC, the index provider, which is an affiliate of the Fund and is also
the Adviser. As is the case with any use of an affiliated index provider by any
ETF, this relationship poses potential conflicts. However, Global X Management
Company LLC, as a registered investment adviser, has taken steps that are
designed to ensure that these potential conflicts are mitigated.
The
Global X Metaverse Index is administered and calculated by Indxx, LLC (the
“Index Administrator”). The Global X Metaverse Index is designed to provide
exposure to companies that are positioned to benefit from the development and
commercialization of the metaverse. The metaverse is a set of virtual, three
dimensional (“3D”), real-time rendered spaces and simulations that can be
experienced simultaneously by users regardless of the users’ physical location.
Specifically, the Global X Metaverse Index consists of securities issued by
“Metaverse Leaders”, as determined by Indxx, LLC. Metaverse Leaders are those
companies that derive at least 50% of their revenues from one or more of the
following business activities in aggregate (“Metaverse Business
Activities”):
i.Augmented/Virtual/Mixed
Reality and Spatial Computing –
Companies involved in the development of hardware and/or software that allow
users to experience or interact with extended digital realities, including fully
immersive simulated virtual experience (“Virtual Reality”), real-world
environments that are enhanced by computer generated information (“Augmented
Reality”), and hybridized displays that represent both physical and virtual
worlds, providing users the ability to experience and interact with both
simultaneously (“Mixed Reality”). Such technologies can
simulate
or relay visual, audio, haptic (creating the sensation of touch for users by
utilizing vibrations or other forces), or movement-driven information, among
others.
ii.Creator
Platforms
- Companies involved in the development of immersive digital platforms that
enable users to create, share, and consume content and digital goods, including
social networking, online video games/video game engines and esports, live
streaming, digital live events, and other media content in three dimensional
simulations, environments or worlds.
iii.Creator
Economy
– Companies involved in the development of infrastructure and applications that
involve digital payment services for the metaverse, including cryptocurrency
payments, blockchain technologies, decentralized finance solutions, the creation
and distribution of Non-Fungible Tokens (“NFTs”) and digital asset payment
gateways.
iv.Digital
Infrastructure/Hardware –
Companies that produce semiconductors, cloud computing technology (including
edge computing and cloud computing security) and 5G infrastructure that are
utilized for digital media consumption and/or in the development and maintenance
of metaverse and related devices.
In
constructing the Global X Metaverse Index, Indxx, LLC first identifies FactSet
Industries related to the metaverse. FactSet is a leading financial data
provider that maintains a comprehensive structured taxonomy designed to offer
precise classification of global companies and their individual business units.
Companies within these FactSet Industries, as of the selection date, are further
reviewed by the Index Administrator on the basis of revenue related to Metaverse
Business Activities. To be eligible for the Global X Metaverse Index, a company
is considered by Indxx, LLC to be a Metaverse Leader if the company generates at
least 50% of its revenues from Metaverse Business Activities, as determined by
Indxx, LLC.
In
addition, companies identified by Indxx, LLC as having primary business
operations in Metaverse Business Activities but that do not currently generate
revenues (“Pre-Revenue Metaverse Leaders”), as well as companies that derive
greater than 0% but less than 50% of revenue from Metaverse Business Activities
(“Diversified Metaverse Leaders”), are eligible for inclusion. Primary business
operations are determined by Indxx, LLC based on the business description
provided by the company in official reporting documents such as Form 10-K or
equivalent. Diversified Metaverse Leaders and Pre-Revenue Metaverse Leaders are
subject to an individual weight cap of 4% and an aggregate weight cap of 15% at
each semi-annual rebalance.
To
be a part of the eligible universe of the Global X Metaverse Index, certain
minimum market capitalization and liquidity criteria, as defined by the Index
Administrator, must be met. As of March 1, 2022, companies must have a minimum
market capitalization of $200 million and a minimum average daily turnover for
the last 6 months greater than or equal to $2 million in order to be eligible
for inclusion in the Global X Metaverse Index. As of March 1, 2022, companies
listed in the following countries were eligible for inclusion in the Global X
Metaverse Index: Australia, Austria, Belgium, Brazil, Canada, Chile, China,
Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong
Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia,
Mexico, Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal,
Qatar, South Africa, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan,
Thailand, Turkey, United Arab Emirates, the United Kingdom, and the United
States.
The
Global X Metaverse Index is weighted according to a modified capitalization
weighting methodology and is reconstituted and re-weighted semi-annually.
Modified capitalization weighting seeks to weight constituents primarily based
on market capitalization, but subject to caps on the weights of the individual
securities. During each rebalance, the maximum weight of each Metaverse Leader
is individually capped at 6%, the aggregate weight of Metaverse Leaders with a
weight greater than or equal to 4.5% is capped at 40%, all remaining Metaverse
Leaders are individually capped at a weight of 4.5%, and all constituents are
subject to a minimum weight of 0.3%. Generally speaking, this approach will
limit the amount of concentration in the largest market capitalization companies
and increase company-level diversification. The Global X Metaverse Index may
include large-, mid- or small-capitalization companies, and components primarily
include communication services and information technology companies. As of March
1, 2022, the Global X Metaverse Index included companies with market
capitalizations ranging from $1.4 billion to $2.7 trillion. As of
January 31, 2023, the Global X Metaverse Index had 40 constituents.
Solactive
Green Building Index
The
Solactive Green Building Index is designed to provide exposure to companies that
are positioned to benefit from increased demand for buildings that reduce or
eliminate negative impacts, and/or create positive impacts, on the natural
environment (“Green Building”). Specifically, the Solactive Green Building Index
consists of securities issued by “Green Building Companies” as defined by
Solactive AG, the provider of the Solactive Green Building Index. “Green
Building Companies” are those companies that derive at least 50% of their
revenues from one or more of the following business activities, as determined by
Solactive AG:
•Green
Building Development:
Companies that design, construct, redevelop, or retrofit properties that meet
reputable green building certification standards. Solactive AG utilizes ESG
(Environmental, Social and Governance) data provider Sustainalytics for its
assessment of reputable green building certification standards. As of April 1,
2022 examples of green building certification standards that Sustainalytics has
identified as reputable currently include LEED, BREEAM, Greenstar, DGNB, CASBEE,
and Verde.
•Green
Building Management:
Companies that manage and/or operate buildings that have obtained a green
certification.
•Green
Building Technologies & Materials:
Companies that provide products/services that increase the energy efficiency of
residential, commercial, or public buildings. This includes products/services
such as insulation and building envelopes, controls and displays for heating,
cooling, lighting and home automation, HVAC, energy management services,
windows, doors, elevators, etc. These products and services help residential,
commercial and/or public buildings to reduce or eliminate negative impacts on
the natural environment and/or to create positive impacts on the natural
environment, which improves the environmental footprint of a building and makes
it more “green” across measures such as energy efficiency, water usage, carbon
emissions, and overall environmental impact.
To
be a part of the eligible universe of the Solactive Green Building Index,
certain minimum market capitalization and liquidity criteria, as defined by
Solactive AG, must be met. As of April 1, 2022, companies must have a minimum
market capitalization of $200 million and a minimum average daily turnover for
the last 6 months greater than or equal to $2 million in order to be eligible
for inclusion in the Solactive Green Building Index. As of April 1, 2022,
companies listed in the following countries were eligible for inclusion in the
Solactive Green Building Index: Australia, Argentina, Austria, Belgium, Brazil,
Canada, Chile, China, Colombia, Czech Republic, Denmark, Egypt, Finland, France,
Germany, Greece, Hong Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan,
Kuwait, Malaysia, Mexico, Netherlands, New Zealand, Norway, Pakistan, Peru,
Philippines, Poland, Portugal, Qatar, Russia, Saudi Arabia, Singapore, South
Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey,
United Kingdom, United States, and the United Arab Emirates.
In
constructing the Solactive Green Building Index, Solactive AG, in partnership
with ESG (Environmental, Social and Governance) data provider Sustainalytics,
reviews the companies from the eligible universe to confirm the companies that
derive at least 50% of their revenues from the business activities described
above. Revenue exposure is determined using company filings, disclosures, and
other public information. In addition, Solactive AG also applies an ESG
screening process to the universe of eligible companies. Solactive AG, in
partnership with ESG data provider Minerva, on a quarterly basis reviews each
constituent of the Solactive Green Building Index for compliance with the
principles of the United Nations Global Compact, as well as their involvement in
controversial activities. Any existing or potential constituent of the Solactive
Green Building Index which does not meet the labor, human rights, environmental,
and anti-corruption standards as defined by the United Nations Global Compact
Principles as of the quarterly review will be excluded from the Solactive Green
Building Index, as determined by Solactive AG.
The
Solactive Green Building Index is weighted according to a modified
capitalization weighting methodology and is reconstituted and re-weighted
semi-annually. Modified capitalization weighting seeks to weight constituents
primarily based on market capitalization, but subject to caps on the weights of
the individual securities. During each rebalance, the maximum weight of a
company is capped at 4%, and all constituents are subject to a minimum weight of
0.3%. Generally speaking, modified capitalization weighting will limit the
amount of concentration in the largest market capitalization companies and
increase company-level diversification. The Solactive Green Building Index may
include large-, mid- or small-capitalization companies, and components primarily
include real estate companies. As of April 1, 2022, the Solactive Green Building
Index had 75 constituents.
Disclaimers
The
Index Providers are independent of the Fund and Global X Management Company LLC,
the investment adviser for the Fund ("Adviser"). The Index Provider determines
the relative weightings of the constituents of the Underlying Index and
publishes information regarding the market value of the Underlying Index.
Solactive
AG ("Solactive") is a leading company in the structuring and indexing business
for institutional clients. Solactive runs the Solactive index platform.
Solactive indices are used by issuers worldwide as underlying indices for
financial products. Solactive does not sponsor, endorse or promote any Fund and
is not in any way connected to it and does not accept any liability in relation
to their issue, operation and trading.
Concinnity
has a background in corporate consulting with a focus on causal path modeling
comprised of stakeholder indices, as well as significant experience in
quantitative analysis and portfolio management. Concinnity has developed a
proprietary, blended qualitative and quantitative framework for identifying
companies guided by an MsOS and has been conducting this analysis for nearly a
decade. Concinnity makes no representation or warranty, express or implied, to
the shareholders of this Fund or any member of the public regarding the
advisability of investing in securities generally or in this Fund particularly
or the ability of any data supplied by Concinnity to track general stock market
performance.
The
Funds are not sponsored, promoted, sold or supported in any other manner by
Solactive AG or Concinnity, nor does Solactive AG or Concinnity offer any
express or implicit guarantee or assurance either with regard to the results of
using the index and/or index trade mark or the index price at any time or in any
other respect. The relevant indexes are calculated and published by Solactive AG
and/or Concinnity. Solactive AG and/or Concinnity uses its best efforts to
ensure that the relevant indexes are calculated correctly. Irrespective of its
obligations towards the issuer, Solactive AG and/or Concinnity have no
obligations to point out errors in the index to third parties including but not
limited to investors and/or financial intermediaries of the Funds. Neither
publication of the index by Solactive AG or Concinnity nor the licensing of the
index or index trade mark by Concinnity and/or Solactive AG for the purpose of
use in connection with the Funds constitutes a recommendation by Solactive AG or
Concinnity to invest capital in said Funds nor does it in any way represent an
assurance or opinion of Solactive AG or Concinnity with regard to any investment
in the Funds.
Indxx
is a service mark of Indxx LLC ("Indxx") and has been licensed for use for
certain purposes by the Adviser. The Funds are not sponsored, endorsed, sold or
promoted by Indxx. Indxx makes no representation or warranty, express or
implied, to the owners of the Funds or any member of the public regarding the
advisability of investing in securities generally or in the Funds particularly.
Indxx has no obligation to take the needs of the Adviser or the shareholders of
the Funds into consideration in determining, composing or calculating the
Underlying Indices. Indxx is not responsible for and has not participated in the
determination of the timing, amount or pricing of the Fund Shares to be issued
or in the determination or calculation of the equation by which the Fund Shares
are to be converted into cash. Indxx has no obligation or liability in
connection with the administration, marketing or trading of the
Funds.
Global
X Management Company LLC owns all rights to the trademark, name and intellectual
property associated with the Global X Metaverse Index. No representation is made
by Global X Management Company LLC that the Global X Metaverse Index is accurate
or complete or that investment in the Global X Metaverse Index or the Fund will
be profitable or suitable for any person. The Global X Metaverse Index is
administered and calculated by Indxx, LLC and Global X Management Company LLC
will have no liability for any error in calculation of the Global X Metaverse
Index. Global X Management Company LLC does not guarantee that the Global X
Metaverse Index or the underlying methodology is accurate or
complete.
OTHER
SERVICE PROVIDERS
SEI
Investments Global Funds Services is the sub-administrator for each Fund.
Brown
Brothers Harriman & Co. serves as the custodian and transfer agent for the
Global X Cloud Computing ETF, the Global X Millennial Consumer ETF, the Global X
Education ETF, the Global X China Biotech Innovation ETF, the Global X
Telemedicine & Digital Health ETF, the Global X Health & Wellness ETF
and the Global X U.S. Infrastructure Development ETF. The Bank of New York
Mellon serves as custodian and transfer agent to each Fund except for the Global
X Cloud Computing ETF, the Global X Millennial Consumer ETF, the Global X
Education ETF, the Global X China Biotech Innovation ETF, the Global X
Telemedicine & Digital Health ETF, the Global X Health & Wellness ETF
and the Global X U.S. Infrastructure Development ETF.
Stradley
Ronon Stevens & Young, LLP serves as counsel for the Trust and the Trust's
Independent Trustees.
PricewaterhouseCoopers
LLP serves as each Fund's independent registered public accounting
firm.
ADDITIONAL
INFORMATION
The
Trust enters into contractual arrangements with various parties, including among
others, the Funds’ Adviser, sub-adviser(s) (as applicable), custodian(s), and
transfer agent(s) who provide services to the Funds. Shareholders are not
parties to any such contractual arrangements and are not intended beneficiaries
of those contractual arrangements, and those contractual arrangements are not
intended to create in any shareholder any right to enforce them against the
service providers or to seek any remedy under them against the service
providers, either directly or on behalf of the Trust.
This
Prospectus provides information concerning the Funds that investors should
consider in determining whether to purchase Fund Shares. Neither this Prospectus
nor the SAI is intended, or should be read, to be or give rise to an agreement
or contract between the Trust or the Funds and any investor, or to give rise to
any rights in any shareholder or other person other than any rights under
federal or state law that may not be waived.
FINANCIAL
HIGHLIGHTS
Each
Fund has commenced operations and has financial highlights for the fiscal year
ended November 30, 2022.
The
financial highlights tables are intended to help investors understand each
Fund's financial performance since the Fund's inception. Certain information
reflects financial results for a single Share of each Fund. The total returns in
the tables represent the rate that an investor would have earned (or lost) on an
investment in each Fund, assuming reinvestment of all dividends and
distributions. PricewaterhouseCoopers LLP served as the Funds' independent
registered public accounting firm for the fiscal year ending November 30,
2018, 2019, 2020, 2021 and 2022. The most recent report appears in the Funds'
November 30, 2022 annual reports to shareholders, which is available
without charge upon request.
Selected Per Share Data & Ratios
For a Share Outstanding Throughout the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period ($) |
Net
Investment Income ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net Asset
Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
Global
X Millennial Consumer ETF |
2022 |
42.68 |
0.05 |
(14.23) |
(14.18) |
(0.07) |
— |
— |
(0.07) |
28.43 |
(33.29) |
105,459 |
0.50 |
0.17 |
14.75 |
2021 |
35.23 |
0.08 |
7.43 |
7.51 |
(0.06) |
— |
— |
(0.06) |
42.68 |
21.33 |
227,075 |
0.50 |
0.18 |
11.59 |
2020 |
25.55 |
0.05 |
9.74 |
9.79 |
(0.10) |
(0.01) |
— |
(0.11) |
35.23 |
38.47 |
114,511 |
0.50^ |
0.19 |
7.11 |
2019 |
21.57 |
0.10 |
3.99 |
4.09 |
(0.10) |
(0.01) |
— |
(0.11) |
25.55 |
19.07 |
75,383 |
0.50^ |
0.42 |
10.44 |
2018 |
19.11 |
0.09 |
2.54 |
2.63 |
(0.05) |
(0.12) |
— |
(0.17) |
21.57 |
13.87 |
31,279 |
0.50^ |
0.40 |
10.94 |
Global
X Aging Population ETF |
2022 |
27.41 |
0.20 |
(0.87) |
(0.67) |
(0.26) |
— |
(0.02) |
(0.28) |
26.46 |
(2.47) |
41,800 |
0.50 |
0.76 |
13.50 |
2021 |
26.82 |
0.13 |
0.55 |
0.68 |
(0.09) |
— |
— |
(0.09) |
27.41 |
2.51 |
59,756 |
0.50 |
0.43 |
19.57 |
2020 |
23.55 |
0.10 |
3.35 |
3.45 |
(0.13) |
(0.05) |
— |
(0.18) |
26.82 |
14.79 |
42,907 |
0.50^^ |
0.43 |
9.10 |
2019 |
20.67 |
0.13 |
2.99 |
3.12 |
(0.18) |
(0.06) |
— |
(0.24) |
23.55 |
15.38 |
23,548 |
0.50^^ |
0.62 |
14.18 |
2018 |
19.60 |
0.13 |
1.14 |
1.27 |
(0.09) |
(0.11) |
— |
(0.20) |
20.67 |
6.55 |
15,503 |
0.50^^ |
0.63 |
14.39 |
Global
X Health & Wellness ETF |
2022 |
28.04 |
0.21 |
(6.66) |
(6.45) |
(0.22) |
— |
— |
(0.22) |
21.37 |
(23.11) |
22,652 |
0.50 |
0.90 |
13.49 |
2021 |
24.11 |
0.20 |
3.87 |
4.07 |
(0.14) |
— |
— |
(0.14) |
28.04 |
16.90 |
40,091 |
0.50 |
0.71 |
14.90 |
2020 |
21.17 |
0.10 |
2.92 |
3.02 |
(0.08) |
— |
— |
(0.08) |
24.11 |
14.34 |
20,496 |
0.50‡ |
0.48 |
20.54 |
2019 |
18.59 |
0.14 |
2.60 |
2.74 |
(0.16) |
— |
— |
(0.16) |
21.17 |
14.89 |
20,115 |
0.50‡ |
0.74 |
18.05 |
2018 |
16.75 |
0.14 |
2.18 |
2.32 |
(0.15) |
(0.33) |
— |
(0.48) |
18.59 |
14.16 |
10,222 |
0.50‡ |
0.77 |
20.93 |
Global
X Robotics & Artificial Intelligence ETF |
2022 |
36.24 |
0.04 |
(15.14) |
(15.10) |
(0.04) |
— |
(0.01) |
(0.05) |
21.09 |
(41.67) |
1,341,942 |
0.69
|
0.16 |
29.86 |
2021 |
31.78 |
0.02 |
4.50 |
4.52 |
(0.02) |
— |
(0.04) |
(0.06) |
36.24 |
14.23 |
2,703,488 |
0.68
|
0.06 |
22.66 |
2020 |
21.43 |
0.05 |
10.39 |
10.44 |
(0.08) |
— |
(0.01) |
(0.09) |
31.78 |
48.90 |
2,158,175 |
0.68
|
0.21 |
22.27 |
2019 |
19.70 |
0.19 |
1.93 |
2.12 |
(0.39) |
— |
— |
(0.39) |
21.43 |
11.16 |
1,479,984 |
0.68
|
0.98 |
10.97 |
2018 |
23.96 |
0.19 |
(4.45) |
(4.26) |
—*** |
—*** |
— |
—*** |
19.70 |
(17.77) |
1,726,274 |
0.70
|
0.83 |
28.50 |
*
Per share data calculated using average shares method.
**
Total Return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
***
Amount is less than $0.005.
††
Portfolio turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers.
^
Effective April 1, 2020, the Fund's fees were permanently lowered to 0.50%.
Prior to April 1, 2020, the ratio of Expenses to Average Net Assets included the
effect of a waiver. If these offsets were excluded, the ratio would have been
0.56%, 0.68% and 0.68%, for the years ended November 30, 2020, 2019, and 2018,
respectively.
^^
Effective April 1, 2020, the Fund's fees were permanently lowered to 0.50%.
Prior to April 1, 2020, the ratio of Expenses to Average Net Assets included the
effect of a waiver. If these offsets were excluded, the ratio would have been
0.55%, 0.68%, and 0.68%, for the years ended November 30, 2020, 2019, and 2018,
respectively.
‡
Effective April 1, 2020, the Fund's fees were permanently lowered to 0.50%.
Prior to April 1, 2020, the ratio of Expenses to Average Net Assets included the
effect of a waiver. If these offsets were excluded, the ratio would have been
0.57%, 0.68%, and 0.68%, for the years ended November 30, 2020, 2019, and 2018,
respectively.
Amounts
designated as "—" are either $0 or have been rounded to $0.
Selected Per Share Data & Ratios
For a Share Outstanding Throughout the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period ($) |
Net
Investment Income (Loss) ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net Asset
Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income (Loss) to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
Global
X FinTech ETF |
2022 |
45.52 |
0.09 |
(22.96) |
(22.87) |
(2.16) |
— |
(0.05) |
(2.21) |
20.44 |
(52.58) |
455,463 |
0.68 |
0.33 |
38.15 |
2021 |
42.75 |
(0.13) |
2.90 |
2.77 |
— |
— |
— |
— |
45.52 |
6.48 |
1,289,006 |
0.68 |
(0.28) |
29.60 |
2020 |
30.49 |
(0.11) |
12.37 |
12.26 |
— |
— |
— |
— |
42.75 |
40.21 |
874,175 |
0.68 |
(0.33) |
15.75 |
2019 |
24.55 |
(0.08) |
6.06 |
5.98 |
— |
— |
(0.04) |
(0.04) |
30.49 |
24.42 |
413,152 |
0.68 |
(0.29) |
16.40 |
2018 |
21.79 |
(0.08) |
2.86 |
2.78 |
— |
(0.02) |
— |
(0.02) |
24.55 |
12.79 |
327,734 |
0.68 |
(0.29) |
20.58 |
Global
X Internet of Things ETF |
2022 |
37.68 |
0.21 |
(7.17) |
(6.96) |
(0.13) |
(0.05) |
— |
(0.18) |
30.54 |
(18.52) |
305,697 |
0.68 |
0.67 |
8.40 |
2021 |
29.95 |
0.13 |
7.72 |
7.85 |
(0.12) |
— |
— |
(0.12) |
37.68 |
26.24 |
517,291 |
0.68 |
0.37 |
9.25 |
2020 |
22.89 |
0.17 |
7.08 |
7.25 |
(0.19) |
— |
— |
(0.19) |
29.95 |
31.88 |
296,508 |
0.68 |
0.71 |
14.28 |
2019 |
18.04 |
0.20 |
4.93 |
5.13 |
(0.28) |
— |
— |
(0.28) |
22.89 |
29.01 |
131,627 |
0.68 |
1.04 |
11.71 |
2018 |
20.12 |
0.17 |
(2.03) |
(1.86) |
(0.11) |
(0.11) |
— |
(0.22) |
18.04 |
(9.33) |
82,983 |
0.69 |
0.88
|
16.69 |
Global
X U.S. Infrastructure Development ETF |
2022 |
27.19 |
0.19 |
0.74 |
0.93 |
(0.17) |
(0.01) |
— |
(0.18) |
27.94 |
3.48 |
3,748,693 |
0.47 |
0.74 |
9.78 |
2021 |
20.24 |
0.17 |
6.87 |
7.04 |
(0.09) |
—*** |
— |
(0.09) |
27.19 |
34.90 |
5,186,497 |
0.47 |
0.64 |
10.07 |
2020 |
17.43 |
0.16 |
2.74 |
2.90 |
(0.09) |
— |
— |
(0.09) |
20.24 |
16.77 |
653,635 |
0.47 |
0.96 |
9.08 |
2019 |
15.57 |
0.13 |
1.90 |
2.03 |
(0.17) |
— |
— |
(0.17) |
17.43 |
13.28 |
183,065 |
0.47^^ |
0.81 |
9.18 |
2018 |
16.16 |
0.14 |
(0.68) |
(0.54) |
(0.05) |
— |
— |
(0.05) |
15.57 |
(3.36) |
140,914 |
0.47^^ |
0.77
|
6.76 |
Global
X Autonomous & Electric Vehicles ETF |
2022 |
30.41 |
0.19 |
(7.56) |
(7.37) |
(0.13) |
(0.02) |
— |
(0.15) |
22.89 |
(24.25) |
883,478 |
0.68 |
0.74
|
34.76 |
2021 |
21.75 |
0.09 |
8.65 |
8.74 |
(0.08) |
— |
— |
(0.08) |
30.41 |
40.22 |
1,323,546 |
0.68 |
0.33
|
18.17 |
2020 |
14.15 |
0.11 |
7.61 |
7.72 |
(0.12) |
— |
— |
(0.12) |
21.75 |
54.98 |
135,923 |
0.68 |
0.67
|
13.76 |
2019 |
13.26 |
0.22 |
1.11 |
1.33 |
(0.44) |
— |
— |
(0.44) |
14.15 |
10.61 |
14,855 |
0.68 |
1.67
|
31.26 |
2018(1) |
15.00 |
0.11 |
(1.85) |
(1.74) |
— |
— |
— |
— |
13.26 |
(11.60) |
15,248 |
0.68† |
1.21† |
23.57 |
*
Per share data calculated using average shares method.
**
Total Return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
***
Amount is less than $0.005.
†
Annualized.
††
Portfolio turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers.
^^
Effective April 1, 2019, the Fund's fees were permanently lowered to 0.47%.
Prior to April 1, 2019, the ratio of Expenses to Average Net Assets included the
effect of a waiver. If these offsets were excluded, the ratio would have been
0.50% and 0.58% for the years ended November 30, 2019 and 2018,
respectively.
(1)
The Fund commenced operations on April 13, 2018.
Amounts
designated as "—" are either $0 or have been rounded to $0.
Selected Per Share Data & Ratios
For a Share Outstanding Throughout the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period ($) |
Net
Investment Income (Loss) ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net Asset
Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income (Loss) to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
Global
X Artificial Intelligence & Technology ETF |
2022 |
31.58 |
0.11 |
(10.08) |
(9.97) |
(0.07) |
— |
— |
(0.07) |
21.54 |
(31.58) |
130,518 |
0.68 |
0.46 |
21.28 |
2021 |
25.84 |
0.05 |
5.78 |
5.83 |
(0.09) |
— |
— |
(0.09) |
31.58 |
22.60 |
186,334 |
0.68 |
0.17 |
26.37 |
2020 |
17.35 |
0.17 |
8.44 |
8.61 |
(0.12) |
— |
— |
(0.12) |
25.84 |
49.84 |
120,169 |
0.68 |
0.79 |
19.45 |
2019 |
14.24 |
0.10 |
3.13 |
3.23 |
(0.12) |
— |
— |
(0.12) |
17.35 |
22.87 |
44,245 |
0.68 |
0.61 |
16.34 |
2018(1) |
15.00 |
0.05 |
(0.81) |
(0.76) |
— |
— |
— |
— |
14.24 |
(5.07) |
42,001 |
0.68† |
0.54† |
7.93 |
Global
X Genomics & Biotechnology ETF |
2022 |
20.61 |
(0.03) |
(7.12) |
(7.15) |
(0.01) |
— |
— |
(0.01) |
13.45 |
(34.72) |
209,341 |
0.50 |
(0.21) |
39.39 |
2021 |
21.01 |
(0.08) |
(0.29) |
(0.37) |
— |
(0.03) |
— |
(0.03) |
20.61 |
(1.77) |
255,572 |
0.50 |
(0.35) |
29.25 |
2020 |
15.61 |
(0.07) |
5.47 |
5.40 |
— |
— |
— |
— |
21.01 |
34.59 |
81,951 |
0.56‡ |
(0.40) |
29.76 |
2019(2) |
15.28 |
(0.05) |
0.38 |
0.33 |
— |
— |
— |
— |
15.61 |
2.16 |
18,734 |
0.68† |
(0.59)† |
23.12 |
Global
X Cloud Computing ETF |
2022 |
28.38 |
(0.15) |
(10.99) |
(11.14) |
— |
(0.47) |
— |
(0.47) |
16.77 |
(39.88) |
589,085 |
0.68 |
(0.74) |
31.21 |
2021 |
25.84 |
(0.15) |
2.69 |
2.54 |
— |
— |
— |
— |
28.38 |
9.83 |
1,317,544 |
0.68 |
(0.53) |
23.77 |
2020 |
15.99 |
(0.11) |
9.97 |
9.86 |
— |
(0.01) |
— |
(0.01) |
25.84 |
61.68 |
1,405,489 |
0.68 |
(0.53) |
23.03 |
2019(3) |
15.06 |
(0.04) |
0.97 |
0.93 |
— |
— |
— |
— |
15.99 |
6.18 |
472,386 |
0.68† |
(0.44)† |
12.52 |
Global
X Cannabis ETF |
2022(4) |
43.32 |
0.69 |
(27.82) |
(27.13) |
(1.21) |
— |
(0.03) |
(1.24) |
14.95 |
(63.88) |
55,904 |
0.51 |
3.05 |
65.14 |
2021(4) |
72.30 |
1.32 |
(28.86) |
(27.54) |
(1.44) |
— |
— |
(1.44) |
43.32 |
(38.79) |
105,549 |
0.50 |
1.76 |
113.26 |
2020(4) |
91.86 |
4.86 |
(20.76) |
(15.90) |
(3.66) |
— |
— |
(3.66) |
72.30 |
(17.03) |
36,160 |
0.51 |
8.11 |
59.79 |
2019(4)(5) |
146.46 |
1.32 |
(55.92) |
(54.60) |
— |
— |
— |
— |
91.86 |
(37.28) |
4,594 |
0.50† |
6.19† |
11.40 |
*
Per share data calculated using average shares method.
**
Total Return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
†
Annualized.
††
Portfolio turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers.
‡
Effective June 15 2020, the Fund's fees were permanently lowered to
0.50%.
(1) The
Fund commenced operations on May 11, 2018.
(2)
The Fund commenced operations on April 5, 2019.
(3)
The Fund commenced operations on April 12, 2019.
(4)
Per share amounts have been adjusted for a 1 for 6 reverse share split on June
10, 2022 (See Note 9 in the
Notes
to Financial Statements.)
(5)
The Fund commenced operations on September 17, 2019.
Amounts
designated as "—" are either $0 or have been rounded to $0.
Selected Per Share Data & Ratios
For a Share Outstanding Throughout the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period ($) |
Net
Investment Income (Loss) ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net Asset
Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income (Loss) to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
Global
X Thematic Growth ETF |
2022 |
47.65 |
0.44 |
(21.33) |
(20.89) |
(0.62) |
— |
— |
(0.62) |
26.14 |
(44.36) |
50,979 |
0.50# |
1.32 |
55.00 |
2021 |
42.45 |
0.39 |
5.10 |
5.49 |
(0.29) |
— |
— |
(0.29) |
47.65 |
12.95 |
110,081 |
(0.13)
‡# |
0.77 |
32.16 |
2020 |
26.50 |
0.10 |
15.96 |
16.06 |
(0.11) |
— |
— |
(0.11) |
42.45 |
60.81 |
36,081 |
(0.12)‡# |
0.29 |
103.23 |
2019(1) |
25.23 |
— |
1.27 |
1.27 |
— |
— |
— |
— |
26.50 |
5.03 |
2,650 |
(0.15)†‡# |
0.15† |
— |
Global
X Video Games & Esports ETF |
2022 |
29.52 |
0.08 |
(10.39) |
(10.31) |
(0.14) |
(0.07) |
(0.04) |
(0.25) |
18.96 |
(35.19) |
174,075 |
0.50 |
0.36 |
55.72 |
2021 |
28.57 |
0.04 |
1.14 |
1.18 |
(0.23) |
—*** |
— |
(0.23) |
29.52 |
4.09 |
485,235 |
0.50 |
0.09 |
23.45 |
2020 |
15.73 |
0.02 |
12.86 |
12.88 |
(0.04) |
— |
— |
(0.04) |
28.57 |
82.04 |
481,341 |
0.50 |
0.04 |
12.02 |
2019(1) |
14.99 |
— |
0.74 |
0.74 |
— |
— |
— |
— |
15.73 |
4.94 |
1,573 |
0.50† |
(0.45)† |
0.27 |
Global
X Cybersecurity ETF |
2022 |
31.75 |
(0.03) |
(8.66) |
(8.69) |
(0.09) |
(0.12) |
— |
(0.21) |
22.85 |
(27.56) |
967,942 |
0.51 |
(0.11) |
57.81 |
2021 |
22.75 |
0.12 |
8.90 |
9.02 |
(0.01) |
(0.01) |
— |
(0.02) |
31.75 |
39.68 |
1,132,090 |
0.50^ |
0.41 |
26.34 |
2020 |
17.14 |
0.09 |
5.67 |
5.76 |
(0.13) |
(0.02) |
— |
(0.15) |
22.75 |
33.78 |
46,634 |
0.50^ |
0.43 |
21.29 |
2019(1) |
15.27 |
— |
1.87 |
1.87 |
— |
— |
— |
— |
17.14 |
12.25 |
1,714 |
0.50^† |
(0.16)† |
3.57 |
Global
X Education ETF |
2022(2) |
28.62 |
0.08 |
(6.61) |
(6.53) |
(0.06) |
— |
— |
(0.06) |
22.03 |
(22.82) |
3,378 |
0.50 |
0.37 |
26.33 |
2021(2) |
51.42 |
0.03 |
(22.80) |
(22.77) |
—*** |
— |
(0.03) |
(0.03) |
28.62 |
(44.30) |
6,488 |
0.50 |
0.04 |
35.89 |
2020(2)(3) |
45.60 |
(0.03) |
5.85 |
5.82 |
— |
— |
— |
— |
51.42 |
12.76 |
6,856 |
0.51† |
(0.23)† |
10.62 |
*
Per share data calculated using average shares method.
**
Total Return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
***
Amount is less than $0.005.
†
Annualized.
††
Portfolio turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers.
‡
Effective for the fiscal year ended November 30, 2022, the Fund began presenting
acquired fund fees borne by the Adviser as part of its unitary fee agreement
(See Note 3 in Notes to Financial Statements) as a realized gain on the
Statement of Operations as compared to a contra-expense as in prior fiscal
years. If such amounts had been presented as a realized gain in years prior to
2022, the ratio of Expenses to Average Net Assets would have been 0.50% each
year.
#
Excludes fees and expenses incurred indirectly as a result of investments in
underlying funds.
^
Effective April 1, 2021, the Fund’s management fees were permanently lowered to
0.50%. Prior to April 1, 2021, the ratio of Expenses to Average Net Assets
included the effect of a waiver. If these offsets were excluded, the ratio would
have been 0.52%, 0.60% and 0.60% for the years ended November 30, 2021, 2020 and
2019, respectively.
(1)
The Fund commenced operations on October 25, 2019.
(2)
Per share amounts have been adjusted for a 1 for 3 reverse share split on
December 19, 2022 (See Note 10 in the Notes to Financial
Statements.)
(3)
The Fund commenced operations on July 10, 2020.
Amounts
designated as "—" are either $0 or have been rounded to $0.
Selected Per Share Data & Ratios
For a Share Outstanding Throughout the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period ($) |
Net
Investment Income (Loss) ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net Asset
Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income (Loss) to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
Global
X Telemedicine & Digital Health ETF |
2022 |
16.32 |
(0.01) |
(4.08) |
(4.09) |
— |
— |
— |
— |
12.23 |
(25.06) |
150,075 |
0.68 |
(0.05) |
43.26 |
2021 |
18.41 |
(0.10) |
(1.98) |
(2.08) |
(0.01) |
— |
— |
(0.01) |
16.32 |
(11.32) |
475,576 |
0.68 |
(0.52) |
42.39 |
2020(1) |
15.23 |
0.01 |
3.17 |
3.18 |
— |
— |
— |
— |
18.41 |
20.88 |
490,675 |
0.68† |
0.18† |
9.67 |
Global
X China Biotech Innovation ETF |
2022 |
15.96 |
0.01 |
(6.27) |
(6.26) |
— |
— |
(0.02) |
(0.02) |
9.68 |
(39.24) |
2,612 |
0.65 |
0.13 |
41.26 |
2021 |
14.88 |
(0.05) |
1.13 |
1.08 |
— |
— |
— |
— |
15.96 |
7.26 |
4,309 |
0.65 |
(0.31) |
50.08 |
2020(2) |
15.09 |
(0.02) |
(0.19) |
(0.21) |
— |
— |
— |
— |
14.88 |
(1.39) |
2,232 |
0.67† |
(0.65)† |
10.48 |
Global
X CleanTech ETF |
2022 |
20.43 |
0.03 |
(4.19) |
(4.16) |
(0.07) |
— |
— |
(0.07) |
16.20 |
(20.38) |
127,842 |
0.50 |
0.17 |
15.72 |
2021 |
19.02 |
0.02 |
1.40 |
1.42 |
(0.01) |
— |
— |
(0.01) |
20.43 |
7.48 |
175,458 |
0.50 |
0.09 |
35.53 |
2020(3) |
15.07 |
0.02 |
3.93 |
3.95 |
— |
— |
— |
— |
19.02 |
26.21 |
28,523 |
0.50† |
1.18† |
— |
Global
X Data Center REITs & Digital Infrastructure ETF |
2022 |
17.83 |
0.15 |
(4.22) |
(4.07) |
(0.16) |
(0.08) |
— |
(0.24) |
13.52 |
(23.11) |
63,143 |
0.50 |
0.99 |
36.96 |
2021 |
14.94 |
0.16 |
2.84 |
3.00 |
(0.11) |
— |
— |
(0.11) |
17.83 |
20.17 |
78,098 |
0.50 |
0.93 |
15.80 |
2020(3) |
14.97 |
— |
(0.03) |
(0.03) |
— |
— |
— |
— |
14.94 |
(0.20) |
3,736 |
0.50† |
0.26† |
— |
Global
X Clean Water ETF |
2022 |
16.73 |
0.23 |
(2.41) |
(2.18) |
(0.25) |
—*** |
— |
(0.25) |
14.30 |
(13.18) |
7,580 |
0.50 |
1.58 |
28.19 |
2021(4) |
15.04 |
0.26 |
1.47 |
1.73 |
(0.04) |
— |
— |
(0.04) |
16.73 |
11.52 |
8,699 |
0.50† |
2.44† |
4.84 |
*
Per share data calculated using average shares method.
**
Total Return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
***
Amount is less than $0.005.
†
Annualized.
††
Portfolio turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers.
(1)
The Fund commenced operations on July 29, 2020.
(2)
The Fund commenced operations on September 22, 2020.
(3)
The Fund commenced operations on October 27, 2020.
(4) The
Fund commenced operations on April 8, 2021.
Amounts
designated as "—" are either $0 or have been rounded to $0.
Selected Per Share Data & Ratios
For a Share Outstanding Throughout the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period ($) |
Net
Investment Income (Loss) ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net Asset
Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income (Loss) to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
Global
X AgTech & Food Innovation ETF |
2022 |
19.76 |
0.11 |
(4.04) |
(3.93) |
(0.10) |
(0.10) |
— |
(0.20) |
15.63 |
(20.06) |
6,721 |
0.50 |
0.62 |
55.85 |
2021(1) |
25.34 |
0.05 |
(5.63) |
(5.58) |
— |
— |
— |
— |
19.76 |
(22.02) |
5,533 |
0.51† |
0.58† |
32.72 |
Global
X Blockchain ETF |
2021(2) |
129.32 |
0.46 |
(109.52) |
(109.06) |
(3.80) |
— |
(0.07) |
(3.87) |
16.39 |
(86.70) |
45,227 |
0.50 |
1.15 |
36.47 |
2021(1)(2) |
100.04 |
0.24 |
29.04 |
29.28 |
— |
— |
— |
— |
129.32 |
29.27 |
127,720 |
0.50† |
0.52† |
19.49 |
Global
X Hydrogen ETF |
2022 |
24.38 |
(0.03) |
(12.07) |
(12.10) |
— |
(0.01) |
— |
(0.01) |
12.27 |
(49.64) |
38,035 |
0.50 |
(0.24) |
36.44 |
2021(1) |
25.04 |
(0.03) |
(0.63) |
(0.66) |
— |
— |
— |
— |
24.38 |
(2.64) |
32,427 |
0.51† |
(0.33)† |
40.38 |
Global
X Solar ETF |
2022 |
25.70 |
(0.04) |
(3.60) |
(3.64) |
— |
—*** |
—*** |
—*** |
22.06 |
(14.14) |
5,955 |
0.51 |
(0.20) |
128.22 |
2021(3) |
24.19 |
(0.01) |
1.52 |
1.51 |
— |
— |
— |
— |
25.70 |
6.24 |
8,995 |
0.50† |
(0.22)† |
9.85 |
Global
X Wind Energy ETF |
2022 |
23.76 |
0.14 |
(6.26) |
(6.12) |
(0.06) |
— |
— |
(0.06) |
17.58 |
(25.79) |
3,341 |
0.50 |
0.68 |
34.53 |
2021(3) |
24.82 |
(0.01) |
(1.05) |
(1.06) |
— |
— |
— |
— |
23.76 |
(4.27) |
4,514 |
0.50† |
(0.10)† |
23.01 |
Global
X Green Building ETF |
2022(4) |
25.37 |
0.50 |
(4.76) |
(4.26) |
(0.16) |
— |
— |
(0.16) |
20.95 |
(16.82) |
2,095 |
0.45† |
3.68† |
30.18 |
Global
X Metaverse ETF |
2022(5) |
24.10 |
0.39 |
(4.91) |
(4.52) |
(0.38) |
— |
— |
(0.38) |
19.20 |
(18.87) |
1,920 |
0.50† |
3.13† |
30.52 |
*
Per share data calculated using average shares method.
**
Total Return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
***
Amount is less than $0.005.
†
Annualized.
††
Portfolio turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers.
(1) The
Fund commenced operations on July 12, 2021.
(2)
Per share amounts have been adjusted for a 1 for 4 reverse share split on
December 19, 2022 (See Note 10 in the Notes to Financial
Statements).
(3)
The Fund commenced operations on September 8, 2021.
(4) The
Fund commenced operations on April 11, 2022.
(5) The
Fund commenced operations on April 26, 2022.
Amounts
designated as "—" are either $0 or have been rounded to $0.
OTHER
INFORMATION
The
Funds are not sponsored, endorsed, sold or promoted by any national securities
exchange. No national securities exchange makes any representation or warranty,
express or implied, to the owners of Shares or any member of the public
regarding the advisability of investing in securities generally or in the Funds
particularly or the ability of the Funds to achieve their objectives. No
national securities exchange has any obligation or liability in connection with
the administration, marketing or trading of the Funds.
For
purposes of the 1940 Act, shares that are issued by a registered investment
company and purchases of such shares by investment companies and companies
relying on Sections 3(c)(1) or 3(c)(7) of the 1940 Act are subject to the
restrictions set forth in Section 12(d)(1) of the 1940 Act. Registered
investment companies are permitted to invest in certain of the Funds beyond the
limits set forth in section 12(d)(1), subject to certain conditions set forth in
Rule 12d1-4 under the 1940 Act, including that such investment companies enter
into an agreement with such Fund.
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Funds on an ongoing basis, a “distribution,” as such term is used in the
Securities Act, may occur at any point. Broker-dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker-dealers
who are not “underwriters” but are participating in a distribution (as
contrasted with ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold allotment” within the meaning of Section
4(a)(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(a)(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that
dealers who are not underwriters but are participating in a distribution (as
contrasted with ordinary secondary market transactions) and thus dealing with
the Shares that are part of an overallotment within the meaning of Section
4(a)(3)(A) of the Securities Act would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
Firms that incur a prospectus delivery obligation with respect to Shares are
reminded that, under Rule 153 of the Securities Act, a prospectus delivery
obligation under Section 5(b)(2) of the Securities Act owed to an exchange
member in connection with a sale on Cboe BZX or NASDAQ is satisfied by the fact
that the prospectus is available at Cboe BZX or NASDAQ upon request. The
prospectus delivery mechanism provided in Rule 153 is only available with
respect to transactions on an exchange.
For
more information visit our website at
www.globalxetfs.com
or
call 1-888-493-8631
|
|
|
Investment
Adviser and Administrator
Global
X Management Company LLC
605
3rd Avenue, 43rd Floor
New
York, NY 10158
|
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
|
Custodians
and Transfer Agents The
Bank of New York Mellon
240
Greenwich Street
New
York, New York 10286
Brothers
Harriman & Co.
50
Post Office Square
Boston,
MA 02110
|
Sub-Administrator
SEI
Investments Global Funds Services
One
Freedom Valley Drive
Oaks,
PA 19456
|
Legal
Counsel to the Global X Funds®
and Independent Trustees
Stradley
Ronon Stevens & Young, LLP
2000
K Street, N.W., Suite 700
Washington,
DC 20006
|
Independent
Registered Public Accounting Firm
PricewaterhouseCoopers
LLP
Two
Commerce Square, Suite 1800
2001
Market Street
Philadelphia,
PA 19103 |
A
Statement of Additional
Information
dated April 1, 2023, which contains more details about the Funds, is
incorporated by reference in its entirety into this Prospectus, which means that
it is legally part of this Prospectus.
Additional
information about each Fund that has commenced operations and its investments is
available in its annual and semi-annual reports to shareholders. The annual
report explains the market conditions and investment strategies affecting each
Fund’s performance during its last fiscal year.
You
can ask questions or obtain a free copy of each such Fund’s semi-annual and
annual report or the Statement of Additional Information by calling
1-888-493-8631. Free copies of a Fund’s semi-annual and annual report and the
Statement of Additional Information are available from our website at
www.globalxetfs.com.
Information
about each Fund, including its semi-annual and annual reports and the Statement
of Additional Information, has been filed with the SEC. It can be reviewed and
copied on the EDGAR database on the SEC’s internet site (http://www.sec.gov).
You can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC’s e-mail address ([email protected]).
PROSPECTUS
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
April 1,
2023
Investment
Company Act File No.: 811-22209
GLX-PS-048-0700