TRUESHARES
STRUCTURED OUTCOME ETFs
PROSPECTUS
April 30,
2023
| TRUESHARES STRUCTURED OUTCOME (JANUARY) ETF | |||||||||||
| TRUESHARES STRUCTURED OUTCOME (FEBRUARY) ETF | |||||||||||
| TRUESHARES STRUCTURED OUTCOME (MARCH) ETF | |||||||||||
| TRUESHARES STRUCTURED OUTCOME (APRIL) ETF | |||||||||||
| TRUESHARES STRUCTURED OUTCOME (MAY) ETF | |||||||||||
| TRUESHARES STRUCTURED OUTCOME (JUNE) ETF | |||||||||||
| TRUESHARES STRUCTURED OUTCOME (JULY) ETF | |||||||||||
| TRUESHARES STRUCTURED OUTCOME (AUGUST) ETF | |||||||||||
| TRUESHARES STRUCTURED OUTCOME (SEPTEMBER) ETF | |||||||||||
| TRUESHARES STRUCTURED OUTCOME (OCTOBER) ETF | |||||||||||
| TRUESHARES STRUCTURED OUTCOME (NOVEMBER) ETF | |||||||||||
| TRUESHARES STRUCTURED OUTCOME (DECEMBER) ETF | |||||||||||
Shares
of the Funds are listed on Cboe BZX Exchange, Inc.
Important
Information about the Funds
Each
Fund intends to invest substantially all of its assets in FLexible
EXchange®
Options (“FLEX Options”) on the S&P 500 Price Index or an ETF that seeks to
track the performance of the S&P 500 Price Index. FLEX Options are
customizable exchange-traded option contracts guaranteed for settlement by the
Options Clearing Corporation. The Funds use FLEX Options to facilitate the
implementation of their “structured outcome strategies.” Structured outcome
strategies seek to produce pre-determined investment outcomes based upon the
performance of an underlying security or index. The pre-determined outcomes
sought by the Funds, which include the buffer referenced below and discussed in
greater detail in the Prospectus, are based upon the performance of the S&P
500 Price Index or an ETF that seeks to track the performance of that Index over
a 12-month period beginning on a specified day (each, a “Roll Date”). The period
from one Roll Date to the next Roll Date is referred to as the “Investment
Period,” and the first day of the Investment Period is referred to as the
“Initial Investment Day.” The
Funds will not terminate after the conclusion of their respective Investment
Periods. After the conclusion of an Investment Period, another will begin.
There
is no guarantee that the outcomes for an Investment Period will be
realized.
Each
Fund’s investment strategy has been structured to produce an outcome based upon
the performance of the S&P 500 Price Index or an ETF that seeks to track the
performance of the S&P 500 Price Index over the duration of the Investment
Period. The
outcome may be realized only if you hold shares on the first day of the
Investment Period and continue to hold them on the last day of the Investment
Period.
If you purchase shares after the Investment Period has begun or sell shares
prior to the Investment Period’s conclusion, you may experience investment
returns very different from, and potentially less favorable than, those that the
Fund seeks to provide. There is no guarantee that a Fund will successfully
achieve its investment objective. A shareholder that holds shares for an entire
Investment Period may still lose his or her investment in the Fund.
Each
Fund seeks to provide only those shareholders that hold shares for the entire
Investment Period with a buffer against the first 8%-12% of S&P 500 Price
Index losses (based upon the value of the S&P 500 Price Index at the time
the Fund entered into the FLEX Options (or standard exchange-listed options) on
the first day of the Investment Period) during the Investment Period.
Shareholders will bear any and all S&P 500 Price Index losses exceeding the
8%-12% buffer. The buffer is determined based on the performance of the S&P
500 Price Index only and does not take into account the effect of a Fund’s Total
Annual Fund Operating Expenses on its performance. In addition, the returns that
each Fund generally seeks to provide does not include the costs of purchasing
Fund shares and certain expenses incurred by the Fund. While each Fund seeks to
limit losses for shareholders who hold their shares for the entire Investment
Period, there is no guarantee that the Adviser and Sub-Adviser will implement a
Fund’s investment strategy successfully or that such investment strategy,
including the buffer, will produce the intended results.
As
explained in greater detail in this Prospectus, if a Fund has experienced
certain levels of gains or losses since the beginning of an Investment Period,
there may be little to no ability for the Fund to achieve gains or benefit from
the buffer for the remainder of the Investment Period regardless of the
Adviser’s and Sub-Adviser’s effective implementation of the Fund’s investment
strategy.
Depending
on market conditions at the time of purchase, it also is possible that a
shareholder that purchases shares after an Investment Period has begun may lose
his or her entire investment. For example, if a Fund decreases in value beyond
the pre-determined 8%-12% buffer after an Investment Period begins, an investor
purchasing shares of the Fund at that price may not benefit from the buffer even
if the investor holds the shares for the remainder of the Investment Period.
Similarly, if a Fund increases in value, an investor purchasing shares of the
Fund at that price may not benefit from the buffer until the Fund’s value
decreases to its value at the commencement of the Investment Period. An
investment in a Fund is only appropriate for shareholders willing to bear those
losses. The Funds’ website contains important information that will assist you
in determining whether to buy shares.
A
Fund’s investment outcome depends, in part, on the Fund’s net asset value
(“NAV”) per share on the first day of an Investment Period. As noted above, a
Fund’s assets will be principally composed of FLEX Options (or standardized
exchange-listed options), the values of which are a function of the performance
of the S&P 500 Price Index and the number of days remaining until
expiration. While each Fund’s investment adviser and sub-adviser generally
anticipate that the Fund’s NAV will move in the same direction as the S&P
500 Price Index (meaning that the Fund’s NAV will increase if the S&P 500
Price Index experiences gains and that the Fund’s NAV will decrease if the
S&P 500 Price Index experiences losses), the Fund’s NAV may not increase or
decrease at the same rate as the S&P 500 Price Index. The amount of time
remaining until the end of an Investment Period also affects the effect of the
buffer on a Fund’s NAV. A Fund’s buffer may not be in full effect prior to the
end of the Investment Period. Each
Fund’s investment strategy is designed to produce an outcome upon the expiration
of the options it holds on the last day of the Investment Period. Shareholders
should not expect that such outcome will be provided at any point prior to that
time and there is no guarantee that the outcome will be achieved on the last day
of the Investment Period.
The
Funds’ website, www.true-shares.com,
provides important Fund information, including Investment Period start and end
dates and buffer information, as well as information relating to the potential
outcome of an investment in each Fund on a daily basis. If
you are contemplating purchasing shares of Fund, please visit the website to
learn more. Investors considering purchasing shares after an Investment Period
has begun or selling shares prior to the end of an Investment Period should
understand they may not realize the intended benefit of a Fund’s strategy. Prior
to making such an investment decision, you should visit the Funds’ website to
fully understand the potential investment outcomes of a holding period that is
different than a Fund’s Investment Period.
The
Funds have characteristics unlike many other traditional investment products and
may not be suitable for all investors. The next page sets forth important
considerations to assist you in determining whether an investment in a Fund is
appropriate for you.
The
U.S. Securities and Exchange Commission (the “SEC”) has not approved or
disapproved of these securities or passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal
offense.
You
should consider an investment in a Fund only if you:
•understand
the risks inherent in an investment in the Fund;
•desire
to invest in a product with a return that is dependent on the performance of the
S&P 500 Price Index over the Investment Period;
•are
willing to hold the Fund’s shares for the duration of the Investment Period to
achieve the returns that the Fund seeks to provide;
•understand
that purchases and/or sales of Fund shares made in between Roll Dates or during
an Investment Period may have limited to no upside;
•seek
the protection of an 8% to 12% buffer on S&P 500 Price Index losses, if any,
for the Fund investment held for the entirety of the Investment Period and
understand that there is no guarantee that the buffer will be successful in
protecting your investment in the Fund against loss;
•understand
that the Fund’s investments do not provide for dividends to the
Fund;
•understand
that investments in the Fund made after an Investment Period has begun may not
fully benefit from the buffer;
•are
willing to accept the risk of losing your entire investment; and
•have
visited the Funds’ website and understand the investment outcomes available to
you based upon the timing of your purchase.
You
should not
consider an investment in a Fund if you:
•do
not fully understand the risks inherent in an investment in the
Fund;
•do
not desire to invest in a product with a return that is dependent on the
performance of the S&P 500 Price Index over the Investment
Period;
•are
unwilling to hold Fund shares for the duration of the Investment Period to
achieve the returns that the Fund seeks to provide;
•do
not fully understand that purchases and/or sales of Fund shares made between
Roll Dates may have limited to no upside;
•seek
an investment that provides total protection against S&P 500 Price Index
losses or Fund losses generally for an investment held for the duration of an
Investment Period;
•do
not fully understand that the Fund’s investments do not provide for dividends to
the Fund;
•do
not fully understand that investments in the Fund made after an Investment
Period has begun may not fully benefit from the buffer;
•are
unwilling to accept the risk of losing your entire investment; and
•have
not visited the Funds’ website and do not understand the investment outcomes
available to you based upon the timing of your purchase.
TABLE
OF CONTENTS
|
TrueShares
Structured Outcome (January)
ETF |
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| TrueShares Structured Outcome (February) ETF | |||||
| TrueShares Structured Outcome (March) ETF | |||||
| TrueShares Structured Outcome (April) ETF | |||||
| TrueShares Structured Outcome (May) ETF | |||||
| TrueShares Structured Outcome (June) ETF | |||||
| TrueShares Structured Outcome (July) ETF | |||||
| TrueShares Structured Outcome (August) ETF | |||||
| TrueShares Structured Outcome (September) ETF | |||||
| TrueShares Structured Outcome (October) ETF | |||||
| TrueShares Structured Outcome (November) ETF | |||||
| TrueShares Structured Outcome (December) ETF | |||||
| Investment Objective | |||||
| Structured Outcome Strategy | |||||
| Principal Investment Strategy | |||||
| Principal Investment Risks | |||||
| Investment Adviser | |||||
| Sub-Adviser | |||||
| Portfolio Managers | |||||
| Other Service Providers | |||||
| Book Entry | |||||
| Frequent Purchases and Redemptions of Shares | |||||
| Determination of NAV | |||||
| Fair Value Pricing | |||||
| Investments by Registered Investment Companies | |||||
| Delivery of Shareholder Documents - Householding | |||||
| Dividends and Distributions | |||||
| Taxes | |||||
| Tax Treatment of the Options | |||||
| Taxes on Distributions | |||||
| Taxes When Shares are Sold on the Exchange | |||||
| Taxes on Purchases and Redemptions of Creation Units | |||||
| Net Investment Income Tax | |||||
|
Distribution
Plan |
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| Management Fee | |||||
|
Distribution
and/or Service (12b-1) Fees |
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| Other Expenses | |||||
| Total Annual Fund Operating Expenses | |||||
| 1 Year: | $ |
3 Years: | $ |
5 Years: | $ |
10 Years: | $ | ||||||||||||||||
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing substantially all of its assets in options
on the S&P 500 Price Index. The Fund’s investment adviser, TrueMark
Investments, LLC (“TrueMark” or the “Adviser”), and sub-adviser, SpiderRock
Advisors, LLC (“SpiderRock” or the “Sub-Adviser”), will employ a “buffer
protect” options strategy that uses such options to seek to achieve exposure to
the performance of the S&P 500 Price Index while mitigating the first 8% to
12% decline in the performance of the S&P 500 Price Index (the “Buffer”)
over a 12-month period beginning on a specified day each January (each, a “Roll
Date”). The period from one Roll Date to the next Roll Date is referred to as
the “Investment Period,” and the first day of the Investment Period is referred
to as the “Initial Investment Day.”
The
Fund will purchase call options and sell (write) put options on the S&P 500
Price Index or an ETF that seeks to track the performance of the S&P 500
Price Index (each, a “S&P 500 Price Index ETF”) on each Initial Investment
Day with an expiration on the next Roll Date. An option gives the purchaser of
the option the right to purchase (for a call option) or sell (for a put option)
the reference asset (or deliver cash equal to the value of the reference asset)
at a specified price (“strike price”). In the event the reference asset declines
in value, the value of a put option generally will increase and the value of a
call option generally will decrease and may become worthless. In the event the
reference asset appreciates in value, the value of a put option generally will
decrease and become worthless and the value of a call option generally will
increase.
On
each Initial Investment Day, the Fund will sell (write) put options on the
S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index with a
strike price within a range of approximately 8% to 12% lower than the current
value of the S&P 500 Price Index or a S&P 500 Price Index ETF. As the
seller of these options, the Fund receives a premium from the buyer of the
options, which the Fund invests in at-the-money call options on the S&P 500
Price Index or a S&P 500 Price Index ETF (i.e.,
call options having a strike price roughly equal to the current value of the
S&P 500 Price Index or a S&P 500 Price Index ETF). The relative price of
the put
2
options
sold (written) by the Fund to the price of the call options purchased by the
Fund will determine the Fund’s exposure to the performance of the S&P 500
Price Index during the Investment Period. Due
to the cost of the options used by the Fund, the correlation of the Fund’s
performance to that of the S&P 500 Price Index
is
expected to be less than if the Fund invested directly in the constituents of
the S&P 500 Price Index (i.e.,
without using options), and could be substantially less.
This means that if the S&P 500 Price Index experiences gains for an
Investment Period, the Fund may not realize gains to the same extent.
The
Fund’s strategy also seeks to protect investors from a decline of up to 8% to
12% in the performance of the S&P 500 Price Index from one Roll Date to the
next Roll Date. When the Adviser or Sub-Adviser sells puts on the S&P 500
Price Index to create the buffer range, the proceeds are used to purchase calls
at the money. However, not all puts generate the same premium relative to the
downside exposure of the Fund. The Adviser and Sub-Adviser will seek to deliver
a buffer of 10% from the reference price of the S&P 500 Price Index on the
first trading day of the month. However, the market could fluctuate on or after
the buffer is set and this range allows for market condition volatility.
The
Fund is not designed to protect against declines of more than 8% to 12% in the
performance of the S&P 500 Price Index, and there can be no guarantee that
the Fund will be successful in implementing the buffer protect options strategy
to protect against the first 8% to 12% decline. Additionally,
even if the Fund mitigates a decline in the performance of the S&P 500 Price
Index from one Roll Date to the next Roll Date, the Fund’s returns during the
Investment Period (prior to the next Roll Date) may not reflect the buffer
protect options strategy.
The
Fund will invest in either standardized exchange-listed options or in
exchange-traded FLexible EXchange Options (“FLEX Options”). FLEX Options are
customized exchange-traded option contracts available through the Chicago Board
Option Exchange (“Cboe”) that are guaranteed for settlement by The Options
Clearing Corporation (“OCC”). FLEX Options provide investors with the ability to
customize exercise prices, exercise styles, and expiration dates, while
achieving price discovery in competitive, transparent, auction markets and
avoiding the counterparty exposure of over-the-counter (“OTC”) options
positions. The Fund will invest in European-style FLEX Options (i.e.,
they can only be exercised at the expiration date of the option) based on the
performance of the S&P 500 Price Index or a S&P 500 Price Index ETF and
which have an expiration date that is the last day of the Investment Period
only. In general, the Fund intends to invest to the greatest extent possible in
FLEX Options, as these options provide the best combination of OCC guarantees,
price discovery, customization, and European-style settlement that is ideal for
the Fund. However, the Fund may use listed options to provide an additional
source of desired market exposure when the Sub-Adviser believes doing so will be
beneficial to the Fund. The Fund also expects to invest in U.S. Treasury bonds.
The
Fund is designed to provide the following outcomes during each individual
Investment Period:
| Change in the Returns of the S&P 500 Price Index | Expected Change in the Returns of the Fund | ||||
| Declines between -8% and ‑12% (or more) |
Declines
8% to 12% percentage points less than the S&P 500 Price Index
(e.g.,
if the S&P 500 Price Index returns -35%, the Fund is designed to
return -23% to -27%) | ||||
| Declines between 0% and ‑8% | No change | ||||
| Appreciates | The Fund’s returns will appreciate to a similar extent as the S&P 500 Price Index, but will be less than those of the S&P 500 Price Index due to the cost of the options used by the Fund | ||||
The
charts below illustrate the hypothetical returns that the Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
These charts do not take into account payment by the Fund of Total Annual Fund
Operating Expenses and assume a buffer of 10%. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
3
The
Fund includes a mix of purchased and written (sold) put and call options
structured to seek to achieve the results described above. The Fund is designed
to seek to achieve the results described above for investments made on the
Initial Investment Day and held until the last day of the Investment
Period.
Investments made on any day other than the Initial Investment Day may differ
significantly, positively or negatively, from the results described above.
The
Fund’s website, www.true-shares.com, contains information about the Fund’s
holdings, and the performance of the S&P 500 Price Index as of the Initial
Investment Day and the prior business day to assist an investor in understanding
the range of results such investor can expect for investments made at times
other than on the Initial Investment Day.
4
Additionally,
the Fund’s website provides information relating to the returns of the Fund,
including the Fund’s Buffer and its position relative to the performance of the
S&P 500 Price Index on a daily basis.
The
Fund’s operations are intended to be continuous. It will not terminate and
distribute its assets at the conclusion of an Investment Period. On each Roll
Date, another Investment Period will commence and the Fund will invest in a new
set of options.
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that the Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. The Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by the Fund), while limiting
downside losses, if Shares are bought on the day on which the Fund enters into
the options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that the Fund seeks to provide may not be available. The
Fund does not provide principal protection and an investor may experience
significant losses on its investment, including the loss of its entire
investment.
◦FLEX
Options Risk.
The Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, the Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
The Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of the Fund. The Fund’s use of call and
put options can lead to losses because of adverse movements in the price or
value of the underlying stock, index, or other asset, which may be magnified by
certain features of the options. These risks are heightened when the Fund’s
portfolio managers use options to enhance the Fund’s return or as a substitute
for a position or security. When selling a call or put option, the Fund will
receive a premium; however, this premium may not be enough to offset a loss
incurred by the Fund if the price of the underlying asset is above or below,
respectively, the strike price by an amount equal to or greater than the
premium. The value of an option may be adversely affected if the market for the
option becomes less liquid or smaller, and will be affected by changes in the
value or yield of the option’s underlying asset, an increase in interest rates,
a change in the actual or perceived volatility of the stock market or the
underlying asset and the remaining time to expiration. Additionally, the value
of an option does not increase or decrease at the same rate as the underlying
asset(s). The Fund’s use of options, due to the cost of the options, will reduce
the Fund’s ability to get returns equal to the S&P 500 Price Index. This
means that if the S&P 500 Price Index experiences gains for an Investment
Period, the Fund will not benefit to the same extent from those gains. In
addition, if the price of the underlying asset of an option is above the strike
price of a written call option or below the strike price for a written put
option, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund invests in options that derive their
performance from the performance of the S&P 500 Price Index and can be
volatile and involve various types and degrees of risks. The Fund could
experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of their underlying stock or if the Fund is
unable to purchase or liquidate a position because of an illiquid secondary
market.
◦Purchase
and Sale Timing Risk. The
Fund is designed to protect against the first 8% to 12% decline in the value of
the S&P 500 Price Index and provide for participation in any gains, although
not to the same extent, as the value of the S&P 500 Price Index, for a
12-month period from one Roll Date to the next Roll Date. Because the options
purchased and written by the Fund will expire on the next Roll Date, if you
purchase or sell Shares on a date other than a Roll Date or if you hold Shares
for more or less than the time from the most recent Roll Date to the next Roll
Date, the value of your investment in Shares may not be protected against the
first 8% to 12% decline in the value of the S&P 500 Price Index and may not
participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by the Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price
5
Index
and interest rates, any or all of which may vary, sometimes significantly,
during the period from the most recent Roll Date to the next Roll Date.
Consequently, the value of the Fund may not directly track changes in the value
of the S&P 500 Price Index in between Roll Dates.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders.
•Equity
Market Risk.
The Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the Cboe BZX Exchange, Inc. (the “Exchange”)
and may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than the Shares.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk. The
Fund is actively managed and may not meet its investment objective based on the
Adviser’s and Sub-Adviser’s success or failure to implement investment
strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
6
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Options
Tax Risk. The
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by the Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment. In addition, generally, straddles are
subject to certain rules that may affect the amount, character and timing of the
Fund’s gains and losses with respect to straddle positions.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for
shareholders.
•Tax
Efficiency Risk. A
significant portion of income received from the Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if the Fund
were to engage in a different investment strategy. Additionally, the Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, the Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize investment income and/or capital gains or losses that it might
not have recognized if it had completely satisfied the redemption in-kind. As a
result, the Fund may be less tax efficient if it includes such a cash payment
than if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by the Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of the Fund’s U.S. Treasury obligations to
decline.
7
Average
Annual Total Returns
(for
periods ended December 31, 2022)
| TrueShares Structured Outcome (January) ETF | 1 Year |
Since
Inception
( | ||||||
| - |
||||||||
| - |
||||||||
| - |
||||||||
S&P
500 Price Index
|
- |
|||||||
Portfolio
Management
|
Investment
Adviser: |
TrueMark
Investments, LLC | ||||
|
Sub-Adviser: |
SpiderRock Advisors, LLC | ||||
| Portfolio Managers: | Eric Metz, Chief Investment Officer for the Sub-Adviser, and Fred Sloneker, Portfolio Manager for the Sub-Adviser, have been portfolio managers of the Fund since its inception in 2020 | ||||
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an IRA or other tax-advantaged account. Distributions on investments
made through tax-deferred arrangements may be taxed later upon withdrawal of
assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
8
|
|
||||||||||||||
|
| |||||
| Management Fee | |||||
|
Distribution
and/or Service (12b-1) Fees |
|||||
| Other Expenses | |||||
| Total Annual Fund Operating Expenses | |||||
| 1 Year: | $ |
3 Years: | $ |
5 Years: | $ |
10 Years: | $ | ||||||||||||||||
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing substantially all of its assets in options
on the S&P 500 Price Index. The Fund’s investment adviser, TrueMark
Investments, LLC (“TrueMark” or the “Adviser”), and sub-adviser, SpiderRock
Advisors, LLC (“SpiderRock” or the “Sub-Adviser”), will employ a “buffer
protect” options strategy that uses such options to seek to achieve exposure to
the performance of the S&P 500 Price Index while mitigating the first 8% to
12% decline in the performance of the S&P 500 Price Index (the “Buffer”)
over a 12-month period beginning on a specified day each February (each, a “Roll
Date”). The period from one Roll Date to the next Roll Date is referred to as
the “Investment Period,” and the first day of the Investment Period is referred
to as the “Initial Investment Day.”
The
Fund will purchase call options and sell (write) put options on the S&P 500
Price Index or an ETF that seeks to track the performance of the S&P 500
Price Index (each, a “S&P 500 Price Index ETF”) on each Initial Investment
Day with an expiration on the next Roll Date. An option gives the purchaser of
the option the right to purchase (for a call option) or sell (for a put option)
the reference asset (or deliver cash equal to the value of the reference asset)
at a specified price (“strike price”). In the event the reference asset declines
in value, the value of a put option generally will increase and the value of a
call option generally will decrease and may become worthless. In the event the
reference asset appreciates in value, the value of a put option generally will
decrease and become worthless and the value of a call option generally will
increase.
On
each Initial Investment Day, the Fund will sell (write) put options on the
S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index with a
strike price within a range of approximately 8% to 12% lower than the current
value of the S&P 500 Price Index or a S&P 500 Price Index ETF. As the
seller of these options, the Fund receives a premium from the buyer of the
options, which the Fund invests in at-the-money call options on the S&P 500
Price Index or a S&P 500 Price Index ETF (i.e.,
call options having a strike price roughly equal to the current value of the
S&P 500 Price Index or a S&P 500 Price Index ETF). The relative price of
the put
9
options
sold (written) by the Fund to the price of the call options purchased by the
Fund will determine the Fund’s exposure to the performance of the S&P 500
Price Index during the Investment Period. Due
to the cost of the options used by the Fund, the correlation of the Fund’s
performance to that of the S&P 500 Price Index
is
expected to be less than if the Fund invested directly in the constituents of
the S&P 500 Price Index (i.e.,
without using options), and could be substantially less.
This means that if the S&P 500 Price Index experiences gains for an
Investment Period, the Fund may not realize gains to the same extent.
The
Fund’s strategy also seeks to protect investors from a decline of up to 8% to
12% in the performance of the S&P 500 Price Index from one Roll Date to the
next Roll Date. When the Adviser or Sub-Adviser sells puts on the S&P 500
Price Index to create the buffer range, the proceeds are used to purchase calls
at the money. However, not all puts generate the same premium relative to the
downside exposure of the Fund. The Adviser and Sub-Adviser will seek to deliver
a buffer of 10% from the reference price of the S&P 500 Price Index on the
first trading day of the month. However, the market could fluctuate on or after
the buffer is set and this range allows for market condition volatility.
The
Fund is not designed to protect against declines of more than 8% to 12% in the
performance of the S&P 500 Price Index, and there can be no guarantee that
the Fund will be successful in implementing the buffer protect options strategy
to protect against the first 8% to 12% decline. Additionally,
even if the Fund mitigates a decline in the performance of the S&P 500 Price
Index from one Roll Date to the next Roll Date, the Fund’s returns during the
Investment Period (prior to the next Roll Date) may not reflect the buffer
protect options strategy.
The
Fund will invest in either standardized exchange-listed options or in
exchange-traded FLexible EXchange Options (“FLEX Options”). FLEX Options are
customized exchange-traded option contracts available through the Chicago Board
Option Exchange (“Cboe”) that are guaranteed for settlement by The Options
Clearing Corporation (“OCC”). FLEX Options provide investors with the ability to
customize exercise prices, exercise styles, and expiration dates, while
achieving price discovery in competitive, transparent, auction markets and
avoiding the counterparty exposure of over-the-counter (“OTC”) options
positions. The Fund will invest in European-style FLEX Options (i.e.,
they can only be exercised at the expiration date of the option) based on the
performance of the S&P 500 Price Index or a S&P 500 Price Index ETF and
which have an expiration date that is the last day of the Investment Period
only. In general, the Fund intends to invest to the greatest extent possible in
FLEX Options, as these options provide the best combination of OCC guarantees,
price discovery, customization, and European-style settlement that is ideal for
the Fund. However, the Fund may use listed options to provide an additional
source of desired market exposure when the Sub-Adviser believes doing so will be
beneficial to the Fund. The Fund also expects to invest in U.S. Treasury bonds.
The
Fund is designed to provide the following outcomes during each individual
Investment Period:
| Change in the Returns of the S&P 500 Price Index | Expected Change in the Returns of the Fund | ||||
| Declines between -8% and ‑12% (or more) |
Declines
8% to 12% percentage points less than the S&P 500 Price Index
(e.g.,
if the S&P 500 Price Index returns -35%, the Fund is designed to
return -23% to -27%) | ||||
| Declines between 0% and ‑8% | No change | ||||
| Appreciates | The Fund’s returns will appreciate to a similar extent as the S&P 500 Price Index, but will be less than those of the S&P 500 Price Index due to the cost of the options used by the Fund | ||||
The
charts below illustrate the hypothetical returns that the Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
These charts do not take into account payment by the Fund of Total Annual Fund
Operating Expenses and assume a buffer of 10%. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
10
The
Fund includes a mix of purchased and written (sold) put and call options
structured to seek to achieve the results described above. The Fund is designed
to seek to achieve the results described above for investments made on the
Initial Investment Day and held until the last day of the Investment
Period.
Investments made on any day other than the Initial Investment Day may differ
significantly, positively or negatively, from the results described above.
The
Fund’s website, www.true-shares.com, contains information about the Fund’s
holdings, and the performance of the S&P 500 Price Index as of the Initial
Investment Day and the prior business day to assist an investor in understanding
the range of results such investor can expect for investments made at times
other than on the Initial Investment Day.
11
Additionally,
the Fund’s website provides information relating to the returns of the Fund,
including the Fund’s Buffer and its position relative to the performance of the
S&P 500 Price Index on a daily basis.
The
Fund’s operations are intended to be continuous. It will not terminate and
distribute its assets at the conclusion of an Investment Period. On each Roll
Date, another Investment Period will commence and the Fund will invest in a new
set of options.
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that the Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. The Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by the Fund), while limiting
downside losses, if Shares are bought on the day on which the Fund enters into
the options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that the Fund seeks to provide may not be available. The
Fund does not provide principal protection and an investor may experience
significant losses on its investment, including the loss of its entire
investment.
◦FLEX
Options Risk.
The Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, the Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
The Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of the Fund. The Fund’s use of call and
put options can lead to losses because of adverse movements in the price or
value of the underlying stock, index, or other asset, which may be magnified by
certain features of the options. These risks are heightened when the Fund’s
portfolio managers use options to enhance the Fund’s return or as a substitute
for a position or security. When selling a call or put option, the Fund will
receive a premium; however, this premium may not be enough to offset a loss
incurred by the Fund if the price of the underlying asset is above or below,
respectively, the strike price by an amount equal to or greater than the
premium. The value of an option may be adversely affected if the market for the
option becomes less liquid or smaller, and will be affected by changes in the
value or yield of the option’s underlying asset, an increase in interest rates,
a change in the actual or perceived volatility of the stock market or the
underlying asset and the remaining time to expiration. Additionally, the value
of an option does not increase or decrease at the same rate as the underlying
asset(s). The Fund’s use of options, due to the cost of the options, will reduce
the Fund’s ability to get returns equal to the S&P 500 Price Index. This
means that if the S&P 500 Price Index experiences gains for an Investment
Period, the Fund will not benefit to the same extent from those gains. In
addition, if the price of the underlying asset of an option is above the strike
price of a written call option or below the strike price for a written put
option, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund invests in options that derive their
performance from the performance of the S&P 500 Price Index and can be
volatile and involve various types and degrees of risks. The Fund could
experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of their underlying stock or if the Fund is
unable to purchase or liquidate a position because of an illiquid secondary
market.
◦Purchase
and Sale Timing Risk. The
Fund is designed to protect against the first 8% to 12% decline in the value of
the S&P 500 Price Index and provide for participation in any gains, although
not to the same extent, as the value of the S&P 500 Price Index, for a
12-month period from one Roll Date to the next Roll Date. Because the options
purchased and written by the Fund will expire on the next Roll Date, if you
purchase or sell Shares on a date other than a Roll Date or if you hold Shares
for more or less than the time from the most recent Roll Date to the next Roll
Date, the value of your investment in Shares may not be protected against the
first 8% to 12% decline in the value of the S&P 500 Price Index and may not
participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by the Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price
12
Index
and interest rates, any or all of which may vary, sometimes significantly,
during the period from the most recent Roll Date to the next Roll Date.
Consequently, the value of the Fund may not directly track changes in the value
of the S&P 500 Price Index in between Roll Dates.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders.
•Equity
Market Risk.
The Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the Cboe BZX Exchange, Inc. (the “Exchange”)
and may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than the Shares.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk. The
Fund is actively managed and may not meet its investment objective based on the
Adviser’s and Sub-Adviser’s success or failure to implement investment
strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
13
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Options
Tax Risk. The
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by the Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment. In addition, generally, straddles are
subject to certain rules that may affect the amount, character and timing of the
Fund’s gains and losses with respect to straddle positions.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for
shareholders.
•Tax
Efficiency Risk. A
significant portion of income received from the Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if the Fund
were to engage in a different investment strategy. Additionally, the Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, the Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize investment income and/or capital gains or losses that it might
not have recognized if it had completely satisfied the redemption in-kind. As a
result, the Fund may be less tax efficient if it includes such a cash payment
than if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by the Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of the Fund’s U.S. Treasury obligations to
decline.
14
Average
Annual Total Returns
(for
periods ended December 31, 2022)
| TrueShares Structured Outcome (February) ETF | 1 Year |
Since
Inception
( | ||||||
| - |
||||||||
| - |
||||||||
| - |
||||||||
S&P
500 Price Index
|
- |
|||||||
Portfolio
Management
|
Investment
Adviser: |
TrueMark
Investments, LLC | ||||
|
Sub-Adviser: |
SpiderRock Advisors, LLC | ||||
| Portfolio Managers: | Eric Metz, Chief Investment Officer for the Sub-Adviser, and Fred Sloneker, Portfolio Manager for the Sub-Adviser, have been portfolio managers of the Fund since its inception in 2021 | ||||
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an IRA or other tax-advantaged account. Distributions on investments
made through tax-deferred arrangements may be taxed later upon withdrawal of
assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
15
|
|
||||||||||||||
|
| |||||
| Management Fee | |||||
|
Distribution
and/or Service (12b-1) Fees |
|||||
| Other Expenses | |||||
| Total Annual Fund Operating Expenses | |||||
| 1 Year: | $ |
3 Years: | $ |
5 Years: | $ |
10 Years: | $ | ||||||||||||||||
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing substantially all of its assets in options
on the S&P 500 Price Index. The Fund’s investment adviser, TrueMark
Investments, LLC (“TrueMark” or the “Adviser”), and sub-adviser, SpiderRock
Advisors, LLC (“SpiderRock” or the “Sub-Adviser”), will employ a “buffer
protect” options strategy that uses such options to seek to achieve exposure to
the performance of the S&P 500 Price Index while mitigating the first 8% to
12% decline in the performance of the S&P 500 Price Index (the “Buffer”)
over a 12-month period beginning on a specified day each March (each, a “Roll
Date”). The period from one Roll Date to the next Roll Date is referred to as
the “Investment Period,” and the first day of the Investment Period is referred
to as the “Initial Investment Day.”
The
Fund will purchase call options and sell (write) put options on the S&P 500
Price Index or an ETF that seeks to track the performance of the S&P 500
Price Index (each, a “S&P 500 Price Index ETF”) on each Initial Investment
Day with an expiration on the next Roll Date. An option gives the purchaser of
the option the right to purchase (for a call option) or sell (for a put option)
the reference asset (or deliver cash equal to the value of the reference asset)
at a specified price (“strike price”). In the event the reference asset declines
in value, the value of a put option generally will increase and the value of a
call option generally will decrease and may become worthless. In the event the
reference asset appreciates in value, the value of a put option generally will
decrease and become worthless and the value of a call option generally will
increase.
On
each Initial Investment Day, the Fund will sell (write) put options on the
S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index with a
strike price within a range of approximately 8% to 12% lower than the current
value of the S&P 500 Price Index or a S&P 500 Price Index ETF. As the
seller of these options, the Fund receives a premium from the buyer of the
options, which the Fund invests in at-the-money call options on the S&P 500
Price Index or a S&P 500 Price Index ETF (i.e.,
call options having a strike price roughly equal to the current value of the
S&P 500 Price Index or a S&P 500 Price Index ETF). The relative price of
the put
16
options
sold (written) by the Fund to the price of the call options purchased by the
Fund will determine the Fund’s exposure to the performance of the S&P 500
Price Index during the Investment Period. Due
to the cost of the options used by the Fund, the correlation of the Fund’s
performance to that of the S&P 500 Price Index
is
expected to be less than if the Fund invested directly in the constituents of
the S&P 500 Price Index (i.e.,
without using options), and could be substantially less.
This means that if the S&P 500 Price Index experiences gains for an
Investment Period, the Fund may not realize gains to the same extent.
The
Fund’s strategy also seeks to protect investors from a decline of up to 8% to
12% in the performance of the S&P 500 Price Index from one Roll Date to the
next Roll Date. When the Adviser or Sub-Adviser sells puts on the S&P 500
Price Index to create the buffer range, the proceeds are used to purchase calls
at the money. However, not all puts generate the same premium relative to the
downside exposure of the Fund. The Adviser and Sub-Adviser will seek to deliver
a buffer of 10% from the reference price of the S&P 500 Price Index on the
first trading day of the month. However, the market could fluctuate on or after
the buffer is set and this range allows for market condition volatility.
The
Fund is not designed to protect against declines of more than 8% to 12% in the
performance of the S&P 500 Price Index, and there can be no guarantee that
the Fund will be successful in implementing the buffer protect options strategy
to protect against the first 8% to 12% decline. Additionally,
even if the Fund mitigates a decline in the performance of the S&P 500 Price
Index from one Roll Date to the next Roll Date, the Fund’s returns during the
Investment Period (prior to the next Roll Date) may not reflect the buffer
protect options strategy.
The
Fund will invest in either standardized exchange-listed options or in
exchange-traded FLexible EXchange Options (“FLEX Options”). FLEX Options are
customized exchange-traded option contracts available through the Chicago Board
Option Exchange (“Cboe”) that are guaranteed for settlement by The Options
Clearing Corporation (“OCC”). FLEX Options provide investors with the ability to
customize exercise prices, exercise styles, and expiration dates, while
achieving price discovery in competitive, transparent, auction markets and
avoiding the counterparty exposure of over-the-counter (“OTC”) options
positions. The Fund will invest in European-style FLEX Options (i.e.,
they can only be exercised at the expiration date of the option) based on the
performance of the S&P 500 Price Index or a S&P 500 Price Index ETF and
which have an expiration date that is the last day of the Investment Period
only. In general, the Fund intends to invest to the greatest extent possible in
FLEX Options, as these options provide the best combination of OCC guarantees,
price discovery, customization, and European-style settlement that is ideal for
the Fund. However, the Fund may use listed options to provide an additional
source of desired market exposure when the Sub-Adviser believes doing so will be
beneficial to the Fund. The Fund also expects to invest in U.S. Treasury bonds.
The
Fund is designed to provide the following outcomes during each individual
Investment Period:
| Change in the Returns of the S&P 500 Price Index | Expected Change in the Returns of the Fund | ||||
| Declines between -8% and ‑12% (or more) |
Declines
8% to 12% percentage points less than the S&P 500 Price Index
(e.g.,
if the S&P 500 Price Index returns -35%, the Fund is designed to
return -23% to -27%) | ||||
| Declines between 0% and ‑8% | No change | ||||
| Appreciates | The Fund’s returns will appreciate to a similar extent as the S&P 500 Price Index, but will be less than those of the S&P 500 Price Index due to the cost of the options used by the Fund | ||||
The
charts below illustrate the hypothetical returns that the Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
These charts do not take into account payment by the Fund of Total Annual Fund
Operating Expenses and assume a buffer of 10%. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
17
The
Fund includes a mix of purchased and written (sold) put and call options
structured to seek to achieve the results described above. The Fund is designed
to seek to achieve the results described above for investments made on the
Initial Investment Day and held until the last day of the Investment
Period.
Investments made on any day other than the Initial Investment Day may differ
significantly, positively or negatively, from the results described above.
The
Fund’s website, www.true-shares.com, contains information about the Fund’s
holdings, and the performance of the S&P 500 Price Index as of the Initial
Investment Day and the prior business day to assist an investor in understanding
the range of results such investor can expect for investments made at times
other than on the Initial Investment Day.
18
Additionally,
the Fund’s website provides information relating to the returns of the Fund,
including the Fund’s Buffer and its position relative to the performance of the
S&P 500 Price Index on a daily basis.
The
Fund’s operations are intended to be continuous. It will not terminate and
distribute its assets at the conclusion of an Investment Period. On each Roll
Date, another Investment Period will commence and the Fund will invest in a new
set of options.
The
Fund is classified as “non-diversified” under the Investment Company Act of 1940
(the “1940 Act”).
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that the Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. The Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by the Fund), while limiting
downside losses, if Shares are bought on the day on which the Fund enters into
the options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that the Fund seeks to provide may not be available. The
Fund does not provide principal protection and an investor may experience
significant losses on its investment, including the loss of its entire
investment.
◦FLEX
Options Risk.
The Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, the Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
The Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of the Fund. The Fund’s use of call and
put options can lead to losses because of adverse movements in the price or
value of the underlying stock, index, or other asset, which may be magnified by
certain features of the options. These risks are heightened when the Fund’s
portfolio managers use options to enhance the Fund’s return or as a substitute
for a position or security. When selling a call or put option, the Fund will
receive a premium; however, this premium may not be enough to offset a loss
incurred by the Fund if the price of the underlying asset is above or below,
respectively, the strike price by an amount equal to or greater than the
premium. The value of an option may be adversely affected if the market for the
option becomes less liquid or smaller, and will be affected by changes in the
value or yield of the option’s underlying asset, an increase in interest rates,
a change in the actual or perceived volatility of the stock market or the
underlying asset and the remaining time to expiration. Additionally, the value
of an option does not increase or decrease at the same rate as the underlying
asset(s). The Fund’s use of options, due to the cost of the options, will reduce
the Fund’s ability to get returns equal to the S&P 500 Price Index. This
means that if the S&P 500 Price Index experiences gains for an Investment
Period, the Fund will not benefit to the same extent from those gains. In
addition, if the price of the underlying asset of an option is above the strike
price of a written call option or below the strike price for a written put
option, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund invests in options that derive their
performance from the performance of the S&P 500 Price Index and can be
volatile and involve various types and degrees of risks. The Fund could
experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of their underlying stock or if the Fund is
unable to purchase or liquidate a position because of an illiquid secondary
market.
◦Purchase
and Sale Timing Risk. The
Fund is designed to protect against the first 8% to 12% decline in the value of
the S&P 500 Price Index and provide for participation in any gains, although
not to the same extent, as the value of the S&P 500 Price Index, for a
12-month period from one Roll Date to the next Roll Date. Because the options
purchased and written by the Fund will expire on the next Roll Date, if you
purchase or sell Shares on a date other than a Roll Date or if you hold Shares
for more or less than the time from the most recent Roll Date to the next Roll
Date, the value of your investment in Shares may not be protected against the
first 8% to 12% decline in the value of the S&P 500 Price Index and may not
participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by the Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price
19
Index
and interest rates, any or all of which may vary, sometimes significantly,
during the period from the most recent Roll Date to the next Roll Date.
Consequently, the value of the Fund may not directly track changes in the value
of the S&P 500 Price Index in between Roll Dates.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders.
•Equity
Market Risk.
The Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the Cboe BZX Exchange, Inc. (the “Exchange”)
and may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than the Shares.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk. The
Fund is actively managed and may not meet its investment objective based on the
Adviser’s and Sub-Adviser’s success or failure to implement investment
strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
20
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Options
Tax Risk. The
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by the Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment. In addition, generally, straddles are
subject to certain rules that may affect the amount, character and timing of the
Fund’s gains and losses with respect to straddle positions.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for
shareholders.
•Tax
Efficiency Risk. A
significant portion of income received from the Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if the Fund
were to engage in a different investment strategy. Additionally, the Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, the Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize investment income and/or capital gains or losses that it might
not have recognized if it had completely satisfied the redemption in-kind. As a
result, the Fund may be less tax efficient if it includes such a cash payment
than if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by the Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of the Fund’s U.S. Treasury obligations to
decline.
21
Average
Annual Total Returns
(for
periods ended December 31, 2022)
| TrueShares Structured Outcome (March) ETF | 1 Year |
Since
Inception
( | ||||||
| - |
||||||||
| - |
||||||||
| - |
||||||||
S&P
500 Price Index
|
- |
|||||||
Portfolio
Management
|
Investment
Adviser: |
TrueMark
Investments, LLC | ||||
|
Sub-Adviser: |
SpiderRock Advisors, LLC | ||||
| Portfolio Managers: | Eric Metz, Chief Investment Officer for the Sub-Adviser, and Fred Sloneker, Portfolio Manager for the Sub-Adviser, have been portfolio managers of the Fund since its inception in 2021 | ||||
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an IRA or other tax-advantaged account. Distributions on investments
made through tax-deferred arrangements may be taxed later upon withdrawal of
assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
22
|
|
||||||||||||||
|
| |||||
| Management Fee | |||||
|
Distribution
and/or Service (12b-1) Fees |
|||||
| Other Expenses | |||||
| Total Annual Fund Operating Expenses | |||||
| 1 Year: | $ |
3 Years: | $ |
5 Years: | $ |
10 Years: | $ | ||||||||||||||||
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing substantially all of its assets in options
on the S&P 500 Price Index. The Fund’s investment adviser, TrueMark
Investments, LLC (“TrueMark” or the “Adviser”), and sub-adviser, SpiderRock
Advisors, LLC (“SpiderRock” or the “Sub-Adviser”), will employ a “buffer
protect” options strategy that uses such options to seek to achieve exposure to
the performance of the S&P 500 Price Index while mitigating the first 8% to
12% decline in the performance of the S&P 500 Price Index (the “Buffer”)
over a 12-month period beginning on a specified day each April (each, a “Roll
Date”). The period from one Roll Date to the next Roll Date is referred to as
the “Investment Period,” and the first day of the Investment Period is referred
to as the “Initial Investment Day.”
The
Fund will purchase call options and sell (write) put options on the S&P 500
Price Index or an ETF that seeks to track the performance of the S&P 500
Price Index (each, a “S&P 500 Price Index ETF”) on each Initial Investment
Day with an expiration on the next Roll Date. An option gives the purchaser of
the option the right to purchase (for a call option) or sell (for a put option)
the reference asset (or deliver cash equal to the value of the reference asset)
at a specified price (“strike price”). In the event the reference asset declines
in value, the value of a put option generally will increase and the value of a
call option generally will decrease and may become worthless. In the event the
reference asset appreciates in value, the value of a put option generally will
decrease and become worthless and the value of a call option generally will
increase.
On
each Initial Investment Day, the Fund will sell (write) put options on the
S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index with a
strike price within a range of approximately 8% to 12% lower than the current
value of the S&P 500 Price Index or a S&P 500 Price Index ETF. As the
seller of these options, the Fund receives a premium from the buyer of the
options, which the Fund invests in at-the-money call options on the S&P 500
Price Index or a S&P 500 Price Index ETF (i.e.,
call options having a strike price roughly equal to the current value of the
S&P 500 Price Index or a S&P 500 Price Index ETF). The relative price of
the put
23
options
sold (written) by the Fund to the price of the call options purchased by the
Fund will determine the Fund’s exposure to the performance of the S&P 500
Price Index during the Investment Period. Due
to the cost of the options used by the Fund, the correlation of the Fund’s
performance to that of the S&P 500 Price Index
is
expected to be less than if the Fund invested directly in the constituents of
the S&P 500 Price Index (i.e.,
without using options), and could be substantially less.
This means that if the S&P 500 Price Index experiences gains for an
Investment Period, the Fund may not realize gains to the same extent.
The
Fund’s strategy also seeks to protect investors from a decline of up to 8% to
12% in the performance of the S&P 500 Price Index from one Roll Date to the
next Roll Date. When the Adviser or Sub-Adviser sells puts on the S&P 500
Price Index to create the buffer range, the proceeds are used to purchase calls
at the money. However, not all puts generate the same premium relative to the
downside exposure of the Fund. The Adviser and Sub-Adviser will seek to deliver
a buffer of 10% from the reference price of the S&P 500 Price Index on the
first trading day of the month. However, the market could fluctuate on or after
the buffer is set and this range allows for market condition volatility.
The
Fund is not designed to protect against declines of more than 8% to 12% in the
performance of the S&P 500 Price Index, and there can be no guarantee that
the Fund will be successful in implementing the buffer protect options strategy
to protect against the first 8% to 12% decline. Additionally,
even if the Fund mitigates a decline in the performance of the S&P 500 Price
Index from one Roll Date to the next Roll Date, the Fund’s returns during the
Investment Period (prior to the next Roll Date) may not reflect the buffer
protect options strategy.
The
Fund will invest in either standardized exchange-listed options or in
exchange-traded FLexible EXchange Options (“FLEX Options”). FLEX Options are
customized exchange-traded option contracts available through the Chicago Board
Option Exchange (“Cboe”) that are guaranteed for settlement by The Options
Clearing Corporation (“OCC”). FLEX Options provide investors with the ability to
customize exercise prices, exercise styles, and expiration dates, while
achieving price discovery in competitive, transparent, auction markets and
avoiding the counterparty exposure of over-the-counter (“OTC”) options
positions. The Fund will invest in European-style FLEX Options (i.e.,
they can only be exercised at the expiration date of the option) based on the
performance of the S&P 500 Price Index or a S&P 500 Price Index ETF and
which have an expiration date that is the last day of the Investment Period
only. In general, the Fund intends to invest to the greatest extent possible in
FLEX Options, as these options provide the best combination of OCC guarantees,
price discovery, customization, and European-style settlement that is ideal for
the Fund. However, the Fund may use listed options to provide an additional
source of desired market exposure when the Sub-Adviser believes doing so will be
beneficial to the Fund. The Fund also expects to invest in U.S. Treasury bonds.
The
Fund is designed to provide the following outcomes during each individual
Investment Period:
| Change in the Returns of the S&P 500 Price Index | Expected Change in the Returns of the Fund | ||||
| Declines between -8% and ‑12% (or more) |
Declines
8% to 12% percentage points less than the S&P 500 Price Index
(e.g.,
if the S&P 500 Price Index returns -35%, the Fund is designed to
return -23% to -27%) | ||||
| Declines between 0% and ‑8% | No change | ||||
| Appreciates | The Fund’s returns will appreciate to a similar extent as the S&P 500 Price Index, but will be less than those of the S&P 500 Price Index due to the cost of the options used by the Fund | ||||
The
charts below illustrate the hypothetical returns that the Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
These charts do not take into account payment by the Fund of Total Annual Fund
Operating Expenses and assume a buffer of 10%. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
24
The
Fund includes a mix of purchased and written (sold) put and call options
structured to seek to achieve the results described above. The Fund is designed
to seek to achieve the results described above for investments made on the
Initial Investment Day and held until the last day of the Investment
Period.
Investments made on any day other than the Initial Investment Day may differ
significantly, positively or negatively, from the results described above.
The
Fund’s website, www.true-shares.com, contains information about the Fund’s
holdings, and the performance of the S&P 500 Price Index as of the Initial
Investment Day and the prior business day to assist an investor in understanding
the range of results such investor can expect for investments made at times
other than on the Initial Investment Day.
25
Additionally,
the Fund’s website provides information relating to the returns of the Fund,
including the Fund’s Buffer and its position relative to the performance of the
S&P 500 Price Index on a daily basis.
The
Fund’s operations are intended to be continuous. It will not terminate and
distribute its assets at the conclusion of an Investment Period. On each Roll
Date, another Investment Period will commence and the Fund will invest in a new
set of options.
The
Fund is classified as “non-diversified” under the Investment Company Act of 1940
(the “1940 Act”).
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that the Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. The Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by the Fund), while limiting
downside losses, if Shares are bought on the day on which the Fund enters into
the options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that the Fund seeks to provide may not be available. The
Fund does not provide principal protection and an investor may experience
significant losses on its investment, including the loss of its entire
investment.
◦FLEX
Options Risk.
The Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, the Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
The Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of the Fund. The Fund’s use of call and
put options can lead to losses because of adverse movements in the price or
value of the underlying stock, index, or other asset, which may be magnified by
certain features of the options. These risks are heightened when the Fund’s
portfolio managers use options to enhance the Fund’s return or as a substitute
for a position or security. When selling a call or put option, the Fund will
receive a premium; however, this premium may not be enough to offset a loss
incurred by the Fund if the price of the underlying asset is above or below,
respectively, the strike price by an amount equal to or greater than the
premium. The value of an option may be adversely affected if the market for the
option becomes less liquid or smaller, and will be affected by changes in the
value or yield of the option’s underlying asset, an increase in interest rates,
a change in the actual or perceived volatility of the stock market or the
underlying asset and the remaining time to expiration. Additionally, the value
of an option does not increase or decrease at the same rate as the underlying
asset(s). The Fund’s use of options, due to the cost of the options, will reduce
the Fund’s ability to get returns equal to the S&P 500 Price Index. This
means that if the S&P 500 Price Index experiences gains for an Investment
Period, the Fund will not benefit to the same extent from those gains. In
addition, if the price of the underlying asset of an option is above the strike
price of a written call option or below the strike price for a written put
option, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund invests in options that derive their
performance from the performance of the S&P 500 Price Index and can be
volatile and involve various types and degrees of risks. The Fund could
experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of their underlying stock or if the Fund is
unable to purchase or liquidate a position because of an illiquid secondary
market.
◦Purchase
and Sale Timing Risk. The
Fund is designed to protect against the first 8% to 12% decline in the value of
the S&P 500 Price Index and provide for participation in any gains, although
not to the same extent, as the value of the S&P 500 Price Index, for a
12-month period from one Roll Date to the next Roll Date. Because the options
purchased and written by the Fund will expire on the next Roll Date, if you
purchase or sell Shares on a date other than a Roll Date or if you hold Shares
for more or less than the time from the most recent Roll Date to the next Roll
Date, the value of your investment in Shares may not be protected against the
first 8% to 12% decline in the value of the S&P 500 Price Index and may not
participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by the Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price
26
Index
and interest rates, any or all of which may vary, sometimes significantly,
during the period from the most recent Roll Date to the next Roll Date.
Consequently, the value of the Fund may not directly track changes in the value
of the S&P 500 Price Index in between Roll Dates.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders.
•Equity
Market Risk.
The Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the Cboe BZX Exchange, Inc. (the “Exchange”)
and may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than the Shares.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk. The
Fund is actively managed and may not meet its investment objective based on the
Adviser’s and Sub-Adviser’s success or failure to implement investment
strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
27
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Options
Tax Risk. The
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by the Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment. In addition, generally, straddles are
subject to certain rules that may affect the amount, character and timing of the
Fund’s gains and losses with respect to straddle positions.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for
shareholders.
•Tax
Efficiency Risk. A
significant portion of income received from the Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if the Fund
were to engage in a different investment strategy. Additionally, the Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, the Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize investment income and/or capital gains or losses that it might
not have recognized if it had completely satisfied the redemption in-kind. As a
result, the Fund may be less tax efficient if it includes such a cash payment
than if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by the Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of the Fund’s U.S. Treasury obligations to
decline.
28
Average
Annual Total Returns
(for
periods ended December 31, 2022)
| TrueShares Structured Outcome (April) ETF | 1 Year |
Since
Inception
( | ||||||
| - |
||||||||
| - |
||||||||
| - |
||||||||
S&P
500 Price Index
|
- |
- | ||||||
Portfolio
Management
|
Investment
Adviser: |
TrueMark
Investments, LLC | ||||
|
Sub-Adviser: |
SpiderRock Advisors, LLC | ||||
| Portfolio Managers: | Eric Metz, Chief Investment Officer for the Sub-Adviser, and Fred Sloneker, Portfolio Manager for the Sub-Adviser, have been portfolio managers of the Fund since its inception in 2021 | ||||
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an IRA or other tax-advantaged account. Distributions on investments
made through tax-deferred arrangements may be taxed later upon withdrawal of
assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
29
|
|
||||||||||||||
|
| |||||
| Management Fee | |||||
|
Distribution
and/or Service (12b-1) Fees |
|||||
| Other Expenses | |||||
| Total Annual Fund Operating Expenses | |||||
| 1 Year: | $ |
3 Years: | $ |
5 Years: | $ |
10 Years: | $ | ||||||||||||||||
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing substantially all of its assets in options
on the S&P 500 Price Index. The Fund’s investment adviser, TrueMark
Investments, LLC (“TrueMark” or the “Adviser”), and sub-adviser, SpiderRock
Advisors, LLC (“SpiderRock” or the “Sub-Adviser”), will employ a “buffer
protect” options strategy that uses such options to seek to achieve exposure to
the performance of the S&P 500 Price Index while mitigating the first 8% to
12% decline in the performance of the S&P 500 Price Index (the “Buffer”)
over a 12-month period beginning on a specified day each May (each, a “Roll
Date”). The period from one Roll Date to the next Roll Date is referred to as
the “Investment Period,” and the first day of the Investment Period is referred
to as the “Initial Investment Day.”
The
Fund will purchase call options and sell (write) put options on the S&P 500
Price Index or an ETF that seeks to track the performance of the S&P 500
Price Index (each, a “S&P 500 Price Index ETF”) on each Initial Investment
Day with an expiration on the next Roll Date. An option gives the purchaser of
the option the right to purchase (for a call option) or sell (for a put option)
the reference asset (or deliver cash equal to the value of the reference asset)
at a specified price (“strike price”). In the event the reference asset declines
in value, the value of a put option generally will increase and the value of a
call option generally will decrease and may become worthless. In the event the
reference asset appreciates in value, the value of a put option generally will
decrease and become worthless and the value of a call option generally will
increase.
On
each Initial Investment Day, the Fund will sell (write) put options on the
S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index with a
strike price within a range of approximately 8% to 12% lower than the current
value of the S&P 500 Price Index or a S&P 500 Price Index ETF. As the
seller of these options, the Fund receives a premium from the buyer of the
options, which the Fund invests in at-the-money call options on the S&P 500
Price Index or a S&P 500 Price Index ETF (i.e.,
call options having a strike price roughly equal to the current value of the
S&P 500 Price Index or a S&P 500 Price Index ETF). The relative price of
the put
30
options
sold (written) by the Fund to the price of the call options purchased by the
Fund will determine the Fund’s exposure to the performance of the S&P 500
Price Index during the Investment Period. Due
to the cost of the options used by the Fund, the correlation of the Fund’s
performance to that of the S&P 500 Price Index
is
expected to be less than if the Fund invested directly in the constituents of
the S&P 500 Price Index (i.e.,
without using options), and could be substantially less.
This means that if the S&P 500 Price Index experiences gains for an
Investment Period, the Fund may not realize gains to the same extent.
The
Fund’s strategy also seeks to protect investors from a decline of up to 8% to
12% in the performance of the S&P 500 Price Index from one Roll Date to the
next Roll Date. When the Adviser or Sub-Adviser sells puts on the S&P 500
Price Index to create the buffer range, the proceeds are used to purchase calls
at the money. However, not all puts generate the same premium relative to the
downside exposure of the Fund. The Adviser and Sub-Adviser will seek to deliver
a buffer of 10% from the reference price of the S&P 500 Price Index on the
first trading day of the month. However, the market could fluctuate on or after
the buffer is set and this range allows for market condition volatility.
The
Fund is not designed to protect against declines of more than 8% to 12% in the
performance of the S&P 500 Price Index, and there can be no guarantee that
the Fund will be successful in implementing the buffer protect options strategy
to protect against the first 8% to 12% decline. Additionally,
even if the Fund mitigates a decline in the performance of the S&P 500 Price
Index from one Roll Date to the next Roll Date, the Fund’s returns during the
Investment Period (prior to the next Roll Date) may not reflect the buffer
protect options strategy.
The
Fund will invest in either standardized exchange-listed options or in
exchange-traded FLexible EXchange Options (“FLEX Options”). FLEX Options are
customized exchange-traded option contracts available through the Chicago Board
Option Exchange (“Cboe”) that are guaranteed for settlement by The Options
Clearing Corporation (“OCC”). FLEX Options provide investors with the ability to
customize exercise prices, exercise styles, and expiration dates, while
achieving price discovery in competitive, transparent, auction markets and
avoiding the counterparty exposure of over-the-counter (“OTC”) options
positions. The Fund will invest in European-style FLEX Options (i.e.,
they can only be exercised at the expiration date of the option) based on the
performance of the S&P 500 Price Index or a S&P 500 Price Index ETF and
which have an expiration date that is the last day of the Investment Period
only. In general, the Fund intends to invest to the greatest extent possible in
FLEX Options, as these options provide the best combination of OCC guarantees,
price discovery, customization, and European-style settlement that is ideal for
the Fund. However, the Fund may use listed options to provide an additional
source of desired market exposure when the Sub-Adviser believes doing so will be
beneficial to the Fund. The Fund also expects to invest in U.S. Treasury
bonds.
The
Fund is designed to provide the following outcomes during each individual
Investment Period:
| Change in the Returns of the S&P 500 Price Index | Expected Change in the Returns of the Fund | ||||
| Declines between -8% and ‑12% (or more) |
Declines
8% to 12% percentage points less than the S&P 500 Price Index
(e.g.,
if the S&P 500 Price Index returns -35%, the Fund is designed to
return -23% to -27%) | ||||
| Declines between 0% and ‑8% | No change | ||||
| Appreciates | The Fund’s returns will appreciate to a similar extent as the S&P 500 Price Index, but will be less than those of the S&P 500 Price Index due to the cost of the options used by the Fund | ||||
The
charts below illustrate the hypothetical returns that the Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
These charts do not take into account payment by the Fund of Total Annual Fund
Operating Expenses and assume a buffer of 10%. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
31
The
Fund includes a mix of purchased and written (sold) put and call options
structured to seek to achieve the results described above. The Fund is designed
to seek to achieve the results described above for investments made on the
Initial Investment Day and held until the last day of the Investment
Period.
Investments made on any day other than the Initial Investment Day may differ
significantly, positively or negatively, from the results described above.
The
Fund’s website, www.true-shares.com, contains information about the Fund’s
holdings, and the performance of the S&P 500 Price Index as of the Initial
Investment Day and the prior business day to assist an investor in understanding
the range of results such investor can expect for investments made at times
other than on the Initial Investment Day.
32
Additionally,
the Fund’s website provides information relating to the returns of the Fund,
including the Fund’s Buffer and its position relative to the performance of the
S&P 500 Price Index on a daily basis.
The
Fund’s operations are intended to be continuous. It will not terminate and
distribute its assets at the conclusion of an Investment Period. On each Roll
Date, another Investment Period will commence and the Fund will invest in a new
set of options.
The
Fund is classified as “non-diversified” under the Investment Company Act of 1940
(the “1940 Act”).
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that the Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. The Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by the Fund), while limiting
downside losses, if Shares are bought on the day on which the Fund enters into
the options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that the Fund seeks to provide may not be available. The
Fund does not provide principal protection and an investor may experience
significant losses on its investment, including the loss of its entire
investment.
◦FLEX
Options Risk.
The Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, the Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
The Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of the Fund. The Fund’s use of call and
put options can lead to losses because of adverse movements in the price or
value of the underlying stock, index, or other asset, which may be magnified by
certain features of the options. These risks are heightened when the Fund’s
portfolio managers use options to enhance the Fund’s return or as a substitute
for a position or security. When selling a call or put option, the Fund will
receive a premium; however, this premium may not be enough to offset a loss
incurred by the Fund if the price of the underlying asset is above or below,
respectively, the strike price by an amount equal to or greater than the
premium. The value of an option may be adversely affected if the market for the
option becomes less liquid or smaller, and will be affected by changes in the
value or yield of the option’s underlying asset, an increase in interest rates,
a change in the actual or perceived volatility of the stock market or the
underlying asset and the remaining time to expiration. Additionally, the value
of an option does not increase or decrease at the same rate as the underlying
asset(s). The Fund’s use of options, due to the cost of the options, will reduce
the Fund’s ability to get returns equal to the S&P 500 Price Index. This
means that if the S&P 500 Price Index experiences gains for an Investment
Period, the Fund will not benefit to the same extent from those gains. In
addition, if the price of the underlying asset of an option is above the strike
price of a written call option or below the strike price for a written put
option, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund invests in options that derive their
performance from the performance of the S&P 500 Price Index and can be
volatile and involve various types and degrees of risks. The Fund could
experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of their underlying stock or if the Fund is
unable to purchase or liquidate a position because of an illiquid secondary
market.
◦Purchase
and Sale Timing Risk. The
Fund is designed to protect against the first 8% to 12% decline in the value of
the S&P 500 Price Index and provide for participation in any gains, although
not to the same extent, as the value of the S&P 500 Price Index, for a
12-month period from one Roll Date to the next Roll Date. Because the options
purchased and written by the Fund will expire on the next Roll Date, if you
purchase or sell Shares on a date other than a Roll Date or if you hold Shares
for more or less than the time from the most recent Roll Date to the next Roll
Date, the value of your investment in Shares may not be protected against the
first 8% to 12% decline in the value of the S&P 500 Price Index and may not
participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by the Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price
33
Index
and interest rates, any or all of which may vary, sometimes significantly,
during the period from the most recent Roll Date to the next Roll Date.
Consequently, the value of the Fund may not directly track changes in the value
of the S&P 500 Price Index in between Roll Dates.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders.
•Equity
Market Risk.
The Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the Cboe BZX Exchange, Inc. (the “Exchange”)
and may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than the Shares.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk. The
Fund is actively managed and may not meet its investment objective based on the
Adviser’s and Sub-Adviser’s success or failure to implement investment
strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
34
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Options
Tax Risk. The
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by the Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment. In addition, generally, straddles are
subject to certain rules that may affect the amount, character and timing of the
Fund’s gains and losses with respect to straddle positions.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for
shareholders.
•Tax
Efficiency Risk. A
significant portion of income received from the Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if the Fund
were to engage in a different investment strategy. Additionally, the Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, the Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize investment income and/or capital gains or losses that it might
not have recognized if it had completely satisfied the redemption in-kind. As a
result, the Fund may be less tax efficient if it includes such a cash payment
than if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by the Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of the Fund’s U.S. Treasury obligations to
decline.
35
Average
Annual Total Returns
(for
periods ended December 31, 2022)
| TrueShares Structured Outcome (May) ETF | 1 Year |
Since
Inception
( | ||||||
| - |
- | |||||||
| - |
- | |||||||
| - |
- | |||||||
S&P
500 Price Index
|
- |
- | ||||||
Portfolio
Management
|
Investment
Adviser: |
TrueMark
Investments, LLC | ||||
|
Sub-Adviser: |
SpiderRock Advisors, LLC | ||||
| Portfolio Managers: | Eric Metz, Chief Investment Officer for the Sub-Adviser, and Fred Sloneker, Portfolio Manager for the Sub-Adviser, have been portfolio managers of the Fund since its inception in 2021 | ||||
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an IRA or other tax-advantaged account. Distributions on investments
made through tax-deferred arrangements may be taxed later upon withdrawal of
assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
36
|
|
||||||||||||||
|
| |||||
| Management Fee | |||||
|
Distribution
and/or Service (12b-1) Fees |
|||||
| Other Expenses | |||||
| Total Annual Fund Operating Expenses | |||||
| 1 Year: | $ |
3 Years: | $ |
5 Years: | $ |
10 Years: | $ | ||||||||||||||||
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing substantially all of its assets in options
on the S&P 500 Price Index. The Fund’s investment adviser, TrueMark
Investments, LLC (“TrueMark” or the “Adviser”), and sub-adviser, SpiderRock
Advisors, LLC (“SpiderRock” or the “Sub-Adviser”), will employ a “buffer
protect” options strategy that uses such options to seek to achieve exposure to
the performance of the S&P 500 Price Index while mitigating the first 8% to
12% decline in the performance of the S&P 500 Price Index (the “Buffer”)
over a 12-month period beginning on a specified day each June (each, a “Roll
Date”). The period from one Roll Date to the next Roll Date is referred to as
the “Investment Period,” and the first day of the Investment Period is referred
to as the “Initial Investment Day.”
The
Fund will purchase call options and sell (write) put options on the S&P 500
Price Index or an ETF that seeks to track the performance of the S&P 500
Price Index (each, a “S&P 500 Price Index ETF”) on each Initial Investment
Day with an expiration on the next Roll Date. An option gives the purchaser of
the option the right to purchase (for a call option) or sell (for a put option)
the reference asset (or deliver cash equal to the value of the reference asset)
at a specified price (“strike price”). In the event the reference asset declines
in value, the value of a put option generally will increase and the value of a
call option generally will decrease and may become worthless. In the event the
reference asset appreciates in value, the value of a put option generally will
decrease and become worthless and the value of a call option generally will
increase.
On
each Initial Investment Day, the Fund will sell (write) put options on the
S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index with a
strike price within a range of approximately 8% to 12% lower than the current
value of the S&P 500 Price Index or a S&P 500 Price Index ETF. As the
seller of these options, the Fund receives a premium from the buyer of the
options, which the Fund invests in at-the-money call options on the S&P 500
Price Index or a S&P 500 Price Index ETF (i.e.,
call options having a strike price roughly equal to the current value of the
S&P 500 Price Index or a S&P 500 Price Index ETF). The relative price of
the put
37
options
sold (written) by the Fund to the price of the call options purchased by the
Fund will determine the Fund’s exposure to the performance of the S&P 500
Price Index during the Investment Period. Due
to the cost of the options used by the Fund, the correlation of the Fund’s
performance to that of the S&P 500 Price Index
is
expected to be less than if the Fund invested directly in the constituents of
the S&P 500 Price Index (i.e.,
without using options), and could be substantially less.
This means that if the S&P 500 Price Index experiences gains for an
Investment Period, the Fund may not realize gains to the same extent.
The
Fund’s strategy also seeks to protect investors from a decline of up to 8% to
12% in the performance of the S&P 500 Price Index from one Roll Date to the
next Roll Date. When the Adviser or Sub-Adviser sells puts on the S&P 500
Price Index to create the buffer range, the proceeds are used to purchase calls
at the money. However, not all puts generate the same premium relative to the
downside exposure of the Fund. The Adviser and Sub-Adviser will seek to deliver
a buffer of 10% from the reference price of the S&P 500 Price Index on the
first trading day of the month. However, the market could fluctuate on or after
the buffer is set and this range allows for market condition volatility.
The
Fund is not designed to protect against declines of more than 8% to 12% in the
performance of the S&P 500 Price Index, and there can be no guarantee that
the Fund will be successful in implementing the buffer protect options strategy
to protect against the first 8% to 12% decline. Additionally,
even if the Fund mitigates a decline in the performance of the S&P 500 Price
Index from one Roll Date to the next Roll Date, the Fund’s returns during the
Investment Period (prior to the next Roll Date) may not reflect the buffer
protect options strategy.
The
Fund will invest in either standardized exchange-listed options or in
exchange-traded FLexible EXchange Options (“FLEX Options”). FLEX Options are
customized exchange-traded option contracts available through the Chicago Board
Option Exchange (“Cboe”) that are guaranteed for settlement by The Options
Clearing Corporation (“OCC”). FLEX Options provide investors with the ability to
customize exercise prices, exercise styles, and expiration dates, while
achieving price discovery in competitive, transparent, auction markets and
avoiding the counterparty exposure of over-the-counter (“OTC”) options
positions. The Fund will invest in European-style FLEX Options (i.e.,
they can only be exercised at the expiration date of the option) based on the
performance of the S&P 500 Price Index or a S&P 500 Price Index ETF and
which have an expiration date that is the last day of the Investment Period
only. In general, the Fund intends to invest to the greatest extent possible in
FLEX Options, as these options provide the best combination of OCC guarantees,
price discovery, customization, and European-style settlement that is ideal for
the Fund. However, the Fund may use listed options to provide an additional
source of desired market exposure when the Sub-Adviser believes doing so will be
beneficial to the Fund. The Fund also expects to invest in U.S. Treasury bonds.
The
Fund is designed to provide the following outcomes during each individual
Investment Period:
| Change in the Returns of the S&P 500 Price Index | Expected Change in the Returns of the Fund | ||||
| Declines between -8% and ‑12% (or more) |
Declines
8% to 12% percentage points less than the S&P 500 Price Index
(e.g.,
if the S&P 500 Price Index returns -35%, the Fund is designed to
return -23% to -27%) | ||||
| Declines between 0% and ‑8% | No change | ||||
| Appreciates | The Fund’s returns will appreciate to a similar extent as the S&P 500 Price Index, but will be less than those of the S&P 500 Price Index due to the cost of the options used by the Fund | ||||
The
charts below illustrate the hypothetical returns that the Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
These charts do not take into account payment by the Fund of Total Annual Fund
Operating Expenses and assume a buffer of 10%. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
38
The
Fund includes a mix of purchased and written (sold) put and call options
structured to seek to achieve the results described above. The Fund is designed
to seek to achieve the results described above for investments made on the
Initial Investment Day and held until the last day of the Investment
Period.
Investments made on any day other than the Initial Investment Day may differ
significantly, positively or negatively, from the results described above.
The
Fund’s website, www.true-shares.com, contains information about the Fund’s
holdings, and the performance of the S&P 500 Price Index as of the Initial
Investment Day and the prior business day to assist an investor in understanding
the range of results such investor can expect for investments made at times
other than on the Initial Investment Day.
39
Additionally,
the Fund’s website provides information relating to the returns of the Fund,
including the Fund’s Buffer and its position relative to the performance of the
S&P 500 Price Index on a daily basis.
The
Fund’s operations are intended to be continuous. It will not terminate and
distribute its assets at the conclusion of an Investment Period. On each Roll
Date, another Investment Period will commence and the Fund will invest in a new
set of options.
The
Fund is classified as “non-diversified” under the Investment Company Act of 1940
(the “1940 Act”).
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that the Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. The Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by the Fund), while limiting
downside losses, if Shares are bought on the day on which the Fund enters into
the options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that the Fund seeks to provide may not be available. The
Fund does not provide principal protection and an investor may experience
significant losses on its investment, including the loss of its entire
investment.
◦FLEX
Options Risk.
The Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, the Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
The Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of the Fund. The Fund’s use of call and
put options can lead to losses because of adverse movements in the price or
value of the underlying stock, index, or other asset, which may be magnified by
certain features of the options. These risks are heightened when the Fund’s
portfolio managers use options to enhance the Fund’s return or as a substitute
for a position or security. When selling a call or put option, the Fund will
receive a premium; however, this premium may not be enough to offset a loss
incurred by the Fund if the price of the underlying asset is above or below,
respectively, the strike price by an amount equal to or greater than the
premium. The value of an option may be adversely affected if the market for the
option becomes less liquid or smaller, and will be affected by changes in the
value or yield of the option’s underlying asset, an increase in interest rates,
a change in the actual or perceived volatility of the stock market or the
underlying asset and the remaining time to expiration. Additionally, the value
of an option does not increase or decrease at the same rate as the underlying
asset(s). The Fund’s use of options, due to the cost of the options, will reduce
the Fund’s ability to get returns equal to the S&P 500 Price Index. This
means that if the S&P 500 Price Index experiences gains for an Investment
Period, the Fund will not benefit to the same extent from those gains. In
addition, if the price of the underlying asset of an option is above the strike
price of a written call option or below the strike price for a written put
option, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund invests in options that derive their
performance from the performance of the S&P 500 Price Index and can be
volatile and involve various types and degrees of risks. The Fund could
experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of their underlying stock or if the Fund is
unable to purchase or liquidate a position because of an illiquid secondary
market.
◦Purchase
and Sale Timing Risk. The
Fund is designed to protect against the first 8% to 12% decline in the value of
the S&P 500 Price Index and provide for participation in any gains, although
not to the same extent, as the value of the S&P 500 Price Index, for a
12-month period from one Roll Date to the next Roll Date. Because the options
purchased and written by the Fund will expire on the next Roll Date, if you
purchase or sell Shares on a date other than a Roll Date or if you hold Shares
for more or less than the time from the most recent Roll Date to the next Roll
Date, the value of your investment in Shares may not be protected against the
first 8% to 12% decline in the value of the S&P 500 Price Index and may not
participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by the Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price
40
Index
and interest rates, any or all of which may vary, sometimes significantly,
during the period from the most recent Roll Date to the next Roll Date.
Consequently, the value of the Fund may not directly track changes in the value
of the S&P 500 Price Index in between Roll Dates.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders.
•Equity
Market Risk.
The Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the Cboe BZX Exchange, Inc. (the “Exchange”)
and may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than the Shares.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk. The
Fund is actively managed and may not meet its investment objective based on the
Adviser’s and Sub-Adviser’s success or failure to implement investment
strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
41
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Options
Tax Risk. The
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by the Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment. In addition, generally, straddles are
subject to certain rules that may affect the amount, character and timing of the
Fund’s gains and losses with respect to straddle positions.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for
shareholders.
•Tax
Efficiency Risk.
A significant portion of income received from the Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if the Fund
were to engage in a different investment strategy. Additionally, the Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, the Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize investment income and/or capital gains or losses that it might
not have recognized if it had completely satisfied the redemption in-kind. As a
result, the Fund may be less tax efficient if it includes such a cash payment
than if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by the Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of the Fund’s U.S. Treasury obligations to
decline.
42
Average
Annual Total Returns
(for
periods ended December 31, 2022)
| TrueShares Structured Outcome (June) ETF | 1 Year |
Since
Inception
( | ||||||
| - |
- | |||||||
| - |
- | |||||||
| - |
- | |||||||
S&P
500 Price Index
|
- |
- | ||||||
Portfolio
Management
|
Investment
Adviser: |
TrueMark
Investments, LLC | ||||
|
Sub-Adviser: |
SpiderRock Advisors, LLC | ||||
| Portfolio Managers: | Eric Metz, Chief Investment Officer for the Sub-Adviser, and Fred Sloneker, Portfolio Manager for the Sub-Adviser, have been portfolio managers of the Fund since its inception in 2021 | ||||
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an IRA or other tax-advantaged account. Distributions on investments
made through tax-deferred arrangements may be taxed later upon withdrawal of
assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
43
|
|
||||||||||||||
|
| |||||
| Management Fee | |||||
|
Distribution
and/or Service (12b-1) Fees |
|||||
| Other Expenses | |||||
| Total Annual Fund Operating Expenses | |||||
| 1 Year: | $ |
3 Years: | $ |
5 Years: | $ |
10 Years: | $ | ||||||||||||||||
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing substantially all of its assets in options
on the S&P 500 Price Index. The Fund’s investment adviser, TrueMark
Investments, LLC (“TrueMark” or the “Adviser”), and sub-adviser, SpiderRock
Advisors, LLC (“SpiderRock” or the “Sub-Adviser”), will employ a “buffer
protect” options strategy that uses such options to seek to achieve exposure to
the performance of the S&P 500 Price Index while mitigating the first 8% to
12% decline in the performance of the S&P 500 Price Index (the “Buffer”)
over a 12-month period beginning on a specified day each July (each, a “Roll
Date”). The period from one Roll Date to the next Roll Date is referred to as
the “Investment Period,” and the first day of the Investment Period is referred
to as the “Initial Investment Day.”
The
Fund will purchase call options and sell (write) put options on the S&P 500
Price Index or an ETF that seeks to track the performance of the S&P 500
Price Index (each, a “S&P 500 Price Index ETF”) on each Initial Investment
Day with an expiration on the next Roll Date. An option gives the purchaser of
the option the right to purchase (for a call option) or sell (for a put option)
the reference asset (or deliver cash equal to the value of the reference asset)
at a specified price (“strike price”). In the event the reference asset declines
in value, the value of a put option generally will increase and the value of a
call option generally will decrease and may become worthless. In the event the
reference asset appreciates in value, the value of a put option generally will
decrease and become worthless and the value of a call option generally will
increase.
On
each Initial Investment Day, the Fund will sell (write) put options on the
S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index with a
strike price within a range of approximately 8% to 12% lower than the current
value of the S&P 500 Price Index or a S&P 500 Price Index ETF. As the
seller of these options, the Fund receives a premium from the buyer of the
options, which the Fund invests in at-the-money call options on the S&P 500
Price Index or a S&P 500 Price Index ETF (i.e.,
call options having a strike price roughly equal to the current value of the
S&P 500 Price Index or a S&P 500 Price Index ETF). The relative price of
the put
44
options
sold (written) by the Fund to the price of the call options purchased by the
Fund will determine the Fund’s exposure to the performance of the S&P 500
Price Index during the Investment Period. Due
to the cost of the options used by the Fund, the correlation of the Fund’s
performance to that of the S&P 500 Price Index
is
expected to be less than if the Fund invested directly in the constituents of
the S&P 500 Price Index (i.e.,
without using options), and could be substantially less.
This means that if the S&P 500 Price Index experiences gains for an
Investment Period, the Fund may not realize gains to the same extent.
The
Fund’s strategy also seeks to protect investors from a decline of up to 8% to
12% in the performance of the S&P 500 Price Index from one Roll Date to the
next Roll Date. When the Adviser or Sub-Adviser sells puts on the S&P 500
Price Index to create the buffer range, the proceeds are used to purchase calls
at the money. However, not all puts generate the same premium relative to the
downside exposure of the Fund. The Adviser and Sub-Adviser will seek to deliver
a buffer of 10% from the reference price of the S&P 500 Price Index on the
first trading day of the month. However, the market could fluctuate on or after
the buffer is set and this range allows for market condition volatility.
The
Fund is not designed to protect against declines of more than 8% to 12% in the
performance of the S&P 500 Price Index, and there can be no guarantee that
the Fund will be successful in implementing the buffer protect options strategy
to protect against the first 8% to 12% decline. Additionally,
even if the Fund mitigates a decline in the performance of the S&P 500 Price
Index from one Roll Date to the next Roll Date, the Fund’s returns during the
Investment Period (prior to the next Roll Date) may not reflect the buffer
protect options strategy.
The
Fund will invest in either standardized exchange-listed options or in
exchange-traded FLexible EXchange Options (“FLEX Options”). FLEX Options are
customized exchange-traded option contracts available through the Chicago Board
Option Exchange (“Cboe”) that are guaranteed for settlement by The Options
Clearing Corporation (“OCC”). FLEX Options provide investors with the ability to
customize exercise prices, exercise styles, and expiration dates, while
achieving price discovery in competitive, transparent, auction markets and
avoiding the counterparty exposure of over-the-counter (“OTC”) options
positions. The Fund will invest in European-style FLEX Options (i.e.,
they can only be exercised at the expiration date of the option) based on the
performance of the S&P 500 Price Index or a S&P 500 Price Index ETF and
which have an expiration date that is the last day of the Investment Period
only. In general, the Fund intends to invest to the greatest extent possible in
FLEX Options, as these options provide the best combination of OCC guarantees,
price discovery, customization, and European-style settlement that is ideal for
the Fund. However, the Fund may use listed options to provide an additional
source of desired market exposure when the Sub-Adviser believes doing so will be
beneficial to the Fund. The Fund also expects to invest in U.S. Treasury bonds.
The
Fund is designed to provide the following outcomes during each individual
Investment Period:
| Change in the Returns of the S&P 500 Price Index | Expected Change in the Returns of the Fund | ||||
| Declines between -8% and ‑12% (or more) |
Declines
8% to 12% percentage points less than the S&P 500 Price Index
(e.g.,
if the S&P 500 Price Index returns -35%, the Fund is designed to
return -23% to -27%) | ||||
| Declines between 0% and ‑8% | No change | ||||
| Appreciates | The Fund’s returns will appreciate to a similar extent as the S&P 500 Price Index, but will be less than those of the S&P 500 Price Index due to the cost of the options used by the Fund | ||||
The
charts below illustrate the hypothetical returns that the Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
These charts do not take into account payment by the Fund of Total Annual Fund
Operating Expenses and assume a buffer of 10%. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
45
The
Fund includes a mix of purchased and written (sold) put and call options
structured to seek to achieve the results described above. The Fund is designed
to seek to achieve the results described above for investments made on the
Initial Investment Day and held until the last day of the Investment
Period.
Investments made on any day other than the Initial Investment Day may differ
significantly, positively or negatively, from the results described above.
The
Fund’s website, www.true-shares.com, contains information about the Fund’s
holdings, and the performance of the S&P 500 Price Index as of the Initial
Investment Day and the prior business day to assist an investor in understanding
the range of results such investor can expect for investments made at times
other than on the Initial Investment Day.
46
Additionally,
the Fund’s website provides information relating to the returns of the Fund,
including the Fund’s Buffer and its position relative to the performance of the
S&P 500 Price Index on a daily basis.
The
Fund’s operations are intended to be continuous. It will not terminate and
distribute its assets at the conclusion of an Investment Period. On each Roll
Date, another Investment Period will commence and the Fund will invest in a new
set of options.
The
Fund is classified as “non-diversified” under the Investment Company Act of 1940
(the “1940 Act”).
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that the Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. The Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by the Fund), while limiting
downside losses, if Shares are bought on the day on which the Fund enters into
the options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that the Fund seeks to provide may not be available. The
Fund does not provide principal protection and an investor may experience
significant losses on its investment, including the loss of its entire
investment.
◦FLEX
Options Risk.
The Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, the Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
The Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of the Fund. The Fund’s use of call and
put options can lead to losses because of adverse movements in the price or
value of the underlying stock, index, or other asset, which may be magnified by
certain features of the options. These risks are heightened when the Fund’s
portfolio managers use options to enhance the Fund’s return or as a substitute
for a position or security. When selling a call or put option, the Fund will
receive a premium; however, this premium may not be enough to offset a loss
incurred by the Fund if the price of the underlying asset is above or below,
respectively, the strike price by an amount equal to or greater than the
premium. The value of an option may be adversely affected if the market for the
option becomes less liquid or smaller, and will be affected by changes in the
value or yield of the option’s underlying asset, an increase in interest rates,
a change in the actual or perceived volatility of the stock market or the
underlying asset and the remaining time to expiration. Additionally, the value
of an option does not increase or decrease at the same rate as the underlying
asset(s). The Fund’s use of options, due to the cost of the options, will reduce
the Fund’s ability to get returns equal to the S&P 500 Price Index. This
means that if the S&P 500 Price Index experiences gains for an Investment
Period, the Fund will not benefit to the same extent from those gains. In
addition, if the price of the underlying asset of an option is above the strike
price of a written call option or below the strike price for a written put
option, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund invests in options that derive their
performance from the performance of the S&P 500 Price Index and can be
volatile and involve various types and degrees of risks. The Fund could
experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of their underlying stock or if the Fund is
unable to purchase or liquidate a position because of an illiquid secondary
market.
◦Purchase
and Sale Timing Risk. The
Fund is designed to protect against the first 8% to 12% decline in the value of
the S&P 500 Price Index and provide for participation in any gains, although
not to the same extent, as the value of the S&P 500 Price Index, for a
12-month period from one Roll Date to the next Roll Date. Because the options
purchased and written by the Fund will expire on the next Roll Date, if you
purchase or sell Shares on a date other than a Roll Date or if you hold Shares
for more or less than the time from the most recent Roll Date to the next Roll
Date, the value of your investment in Shares may not be protected against the
first 8% to 12% decline in the value of the S&P 500 Price Index and may not
participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by the Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price
47
Index
and interest rates, any or all of which may vary, sometimes significantly,
during the period from the most recent Roll Date to the next Roll Date.
Consequently, the value of the Fund may not directly track changes in the value
of the S&P 500 Price Index in between Roll Dates.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders.
•Equity
Market Risk.
The Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the Cboe BZX Exchange, Inc. (the “Exchange”)
and may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than the Shares.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk. The
Fund is actively managed and may not meet its investment objective based on the
Adviser’s and Sub-Adviser’s success or failure to implement investment
strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
48
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Options
Tax Risk. The
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by the Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment. In addition, generally, straddles are
subject to certain rules that may affect the amount, character and timing of the
Fund’s gains and losses with respect to straddle positions.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for
shareholders.
•Tax
Efficiency Risk. A
significant portion of income received from the Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if the Fund
were to engage in a different investment strategy. Additionally, the Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, the Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize investment income and/or capital gains or losses that it might
not have recognized if it had completely satisfied the redemption in-kind. As a
result, the Fund may be less tax efficient if it includes such a cash payment
than if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by the Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of the Fund’s U.S. Treasury obligations to
decline.
49
Average
Annual Total Returns
(for
periods ended December 31, 2022)
| TrueShares Structured Outcome (July) ETF | 1 Year |
Since
Inception
( | ||||||
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S&P
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Portfolio
Management
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Investment
Adviser: |
TrueMark
Investments, LLC | ||||
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Sub-Adviser: |
SpiderRock Advisors, LLC | ||||
| Portfolio Managers: | Eric Metz, Chief Investment Officer for the Sub-Adviser, and Fred Sloneker, Portfolio Manager for the Sub-Adviser, have been portfolio managers of the Fund since its inception in 2020 | ||||
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an IRA or other tax-advantaged account. Distributions on investments
made through tax-deferred arrangements may be taxed later upon withdrawal of
assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
50
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| Management Fee | |||||
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Distribution
and/or Service (12b-1) Fees |
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Other
Expenses(1) |
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| Total Annual Fund Operating Expenses | |||||
(1)
“ Other Expenses” include interest expense.
Interest expense is borne by the Fund separately from the management fee paid to
TrueMark Investments, LLC (the “Adviser”).
| 1 Year: | $ |
3
Years:
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$ |
5 Years: | $ |
10 Years: | $ | ||||||||||||||||
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing substantially all of its assets in options
on the S&P 500 Price Index. The Adviser and sub-adviser, SpiderRock
Advisors, LLC (“SpiderRock” or the “Sub-Adviser”), will employ a “buffer
protect” options strategy that uses such options to seek to achieve exposure to
the performance of the S&P 500 Price Index while mitigating the first 8% to
12% decline in the performance of the S&P 500 Price Index (the “Buffer”)
over a 12-month period beginning on a specified day each August (each, a “Roll
Date”). The period from one Roll Date to the next Roll Date is referred to as
the “Investment Period,” and the first day of the Investment Period is referred
to as the “Initial Investment Day.”
The
Fund will purchase call options and sell (write) put options on the S&P 500
Price Index or an ETF that seeks to track the performance of the S&P 500
Price Index (each, a “S&P 500 Price Index ETF”) on each Initial Investment
Day with an expiration on the next Roll Date. An option gives the purchaser of
the option the right to purchase (for a call option) or sell (for a put option)
the reference asset (or deliver cash equal to the value of the reference asset)
at a specified price (“strike price”). In the event the reference asset declines
in value, the value of a put option generally will increase and the value of a
call option generally will decrease and may become worthless. In the event the
reference asset appreciates in value, the value of a put option generally will
decrease and become worthless and the value of a call option generally will
increase.
On
each Initial Investment Day, the Fund will sell (write) put options on the
S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index with a
strike price within a range of approximately 8% to 12% lower than the current
value of the S&P 500 Price Index or a S&P 500 Price Index ETF. As the
seller of these options, the Fund receives a premium from the buyer of the
options, which the
51
Fund
invests in at-the-money call options on the S&P 500 Price Index or a S&P
500 Price Index ETF (i.e.,
call options having a strike price roughly equal to the current value of the
S&P 500 Price Index or a S&P 500 Price Index ETF). The relative price of
the put options sold (written) by the Fund to the price of the call options
purchased by the Fund will determine the Fund’s exposure to the performance of
the S&P 500 Price Index during the Investment Period. Due
to the cost of the options used by the Fund, the correlation of the Fund’s
performance to that of the S&P 500 Price Index
is
expected to be less than if the Fund invested directly in the constituents of
the S&P 500 Price Index (i.e.,
without using options), and could be substantially less.
This means that if the S&P 500 Price Index experiences gains for an
Investment Period, the Fund may not realize gains to the same extent.
The
Fund’s strategy also seeks to protect investors from a decline of up to 8% to
12% in the performance of the S&P 500 Price Index from one Roll Date to the
next Roll Date. When the Adviser or Sub-Adviser sells puts on the S&P 500
Price Index to create the buffer range, the proceeds are used to purchase calls
at the money. However, not all puts generate the same premium relative to the
downside exposure of the Fund. The Adviser and Sub-Adviser will seek to deliver
a buffer of 10% from the reference price of the S&P 500 Price Index on the
first trading day of the month. However, the market could fluctuate on or after
the buffer is set and this range allows for market condition volatility.
The
Fund is not designed to protect against declines of more than 8% to 12% in the
performance of the S&P 500 Price Index, and there can be no guarantee that
the Fund will be successful in implementing the buffer protect options strategy
to protect against the first 8% to 12% decline. Additionally,
even if the Fund mitigates a decline in the performance of the S&P 500 Price
Index from one Roll Date to the next Roll Date, the Fund’s returns during the
Investment Period (prior to the next Roll Date) may not reflect the buffer
protect options strategy.
The
Fund will invest in either standardized exchange-listed options or in
exchange-traded FLexible EXchange Options (“FLEX Options”). FLEX Options are
customized exchange-traded option contracts available through the Chicago Board
Option Exchange (“Cboe”) that are guaranteed for settlement by The Options
Clearing Corporation (“OCC”). FLEX Options provide investors with the ability to
customize exercise prices, exercise styles, and expiration dates, while
achieving price discovery in competitive, transparent, auction markets and
avoiding the counterparty exposure of over-the-counter (“OTC”) options
positions. The Fund will invest in European-style FLEX Options (i.e.,
they can only be exercised at the expiration date of the option) based on the
performance of the S&P 500 Price Index or a S&P 500 Price Index ETF and
which have an expiration date that is the last day of the Investment Period
only. In general, the Fund intends to invest to the greatest extent possible in
FLEX Options, as these options provide the best combination of OCC guarantees,
price discovery, customization, and European-style settlement that is ideal for
the Fund. However, the Fund may use listed options to provide an additional
source of desired market exposure when the Sub-Adviser believes doing so will be
beneficial to the Fund. The Fund also expects to invest in U.S. Treasury bonds.
The
Fund is designed to provide the following outcomes during each individual
Investment Period:
| Change in the Returns of the S&P 500 Price Index | Expected Change in the Returns of the Fund | ||||
| Declines between -8% and ‑12% (or more) |
Declines
8% to 12% percentage points less than the S&P 500 Price Index
(e.g.,
if the S&P 500 Price Index returns -35%, the Fund is designed to
return -23% to -27%) | ||||
| Declines between 0% and ‑8% | No change | ||||
| Appreciates | The Fund’s returns will appreciate to a similar extent as the S&P 500 Price Index, but will be less than those of the S&P 500 Price Index due to the cost of the options used by the Fund | ||||
The
charts below illustrate the hypothetical returns that the Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
These charts do not take into account payment by the Fund of Total Annual Fund
Operating Expenses and assume a buffer of 10%. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
52
The
Fund includes a mix of purchased and written (sold) put and call options
structured to seek to achieve the results described above. The Fund is designed
to seek to achieve the results described above for investments made on the
Initial Investment Day and held until the last day of the Investment
Period.
Investments made on any day other than the Initial Investment Day may differ
significantly, positively or negatively, from the results described above.
The
Fund’s website, www.true-shares.com, contains information about the Fund’s
holdings, and the performance of the S&P 500 Price Index as of the Initial
Investment Day and the prior business day to assist an investor in understanding
the range of results such investor can expect for investments made at times
other than on the Initial Investment Day.
53
Additionally,
the Fund’s website provides information relating to the returns of the Fund,
including the Fund’s Buffer and its position relative to the performance of the
S&P 500 Price Index on a daily basis.
The
Fund’s operations are intended to be continuous. It will not terminate and
distribute its assets at the conclusion of an Investment Period. On each Roll
Date, another Investment Period will commence and the Fund will invest in a new
set of options.
The
Fund is classified as “non-diversified” under the Investment Company Act of 1940
(the “1940 Act”).
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that the Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. The Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by the Fund), while limiting
downside losses, if Shares are bought on the day on which the Fund enters into
the options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that the Fund seeks to provide may not be available. The
Fund does not provide principal protection and an investor may experience
significant losses on its investment, including the loss of its entire
investment.
◦FLEX
Options Risk.
The Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, the Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
The Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of the Fund. The Fund’s use of call and
put options can lead to losses because of adverse movements in the price or
value of the underlying stock, index, or other asset, which may be magnified by
certain features of the options. These risks are heightened when the Fund’s
portfolio managers use options to enhance the Fund’s return or as a substitute
for a position or security. When selling a call or put option, the Fund will
receive a premium; however, this premium may not be enough to offset a loss
incurred by the Fund if the price of the underlying asset is above or below,
respectively, the strike price by an amount equal to or greater than the
premium. The value of an option may be adversely affected if the market for the
option becomes less liquid or smaller, and will be affected by changes in the
value or yield of the option’s underlying asset, an increase in interest rates,
a change in the actual or perceived volatility of the stock market or the
underlying asset and the remaining time to expiration. Additionally, the value
of an option does not increase or decrease at the same rate as the underlying
asset(s). The Fund’s use of options, due to the cost of the options, will reduce
the Fund’s ability to get returns equal to the S&P 500 Price Index. This
means that if the S&P 500 Price Index experiences gains for an Investment
Period, the Fund will not benefit to the same extent from those gains. In
addition, if the price of the underlying asset of an option is above the strike
price of a written call option or below the strike price for a written put
option, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund invests in options that derive their
performance from the performance of the S&P 500 Price Index and can be
volatile and involve various types and degrees of risks. The Fund could
experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of their underlying stock or if the Fund is
unable to purchase or liquidate a position because of an illiquid secondary
market.
◦Purchase
and Sale Timing Risk. The
Fund is designed to protect against the first 8% to 12% decline in the value of
the S&P 500 Price Index and provide for participation in any gains, although
not to the same extent, as the value of the S&P 500 Price Index, for a
12-month period from one Roll Date to the next Roll Date. Because the options
purchased and written by the Fund will expire on the next Roll Date, if you
purchase or sell Shares on a date other than a Roll Date or if you hold Shares
for more or less than the time from the most recent Roll Date to the next Roll
Date, the value of your investment in Shares may not be protected against the
first 8% to 12% decline in the value of the S&P 500 Price Index and may not
participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by the Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price
54
Index
and interest rates, any or all of which may vary, sometimes significantly,
during the period from the most recent Roll Date to the next Roll Date.
Consequently, the value of the Fund may not directly track changes in the value
of the S&P 500 Price Index in between Roll Dates.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders.
•Equity
Market Risk.
The Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the Cboe BZX Exchange, Inc. (the “Exchange”)
and may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than the Shares.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk. The
Fund is actively managed and may not meet its investment objective based on the
Adviser’s and Sub-Adviser’s success or failure to implement investment
strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
55
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Options
Tax Risk. The
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by the Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment. In addition, generally, straddles are
subject to certain rules that may affect the amount, character and timing of the
Fund’s gains and losses with respect to straddle positions.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for shareholders.
•Tax
Efficiency Risk. A
significant portion of income received from the Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if the Fund
were to engage in a different investment strategy. Additionally, the Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, the Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize investment income and/or capital gains or losses that it might
not have recognized if it had completely satisfied the redemption in-kind. As a
result, the Fund may be less tax efficient if it includes such a cash payment
than if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by the Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of the Fund’s U.S. Treasury obligations to
decline.
56
Average
Annual Total Returns
(for
periods ended December 31, 2022)
| TrueShares Structured Outcome (August) ETF | 1 Year |
Since
Inception
( | ||||||
| - |
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| - |
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| - |
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S&P
500 Price Index
|
- |
|||||||
Portfolio
Management
|
Investment
Adviser: |
TrueMark
Investments, LLC | ||||
|
Sub-Adviser: |
SpiderRock Advisors, LLC | ||||
| Portfolio Managers: | Eric Metz, Chief Investment Officer for the Sub-Adviser, and Fred Sloneker, Portfolio Manager for the Sub-Adviser, have been portfolio managers of the Fund since its inception in 2020 | ||||
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an IRA or other tax-advantaged account. Distributions on investments
made through tax-deferred arrangements may be taxed later upon withdrawal of
assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
57
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|
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|
| |||||
| Management Fee | |||||
|
Distribution
and/or Service (12b-1) Fees |
|||||
| Other Expenses | |||||
| Total Annual Fund Operating Expenses | |||||
| 1 Year: | $ |
3 Years: | $ |
5 Years: | $ |
10 Years: | $ | ||||||||||||||||
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing substantially all of its assets in options
on the S&P 500 Price Index. The Fund’s investment adviser, TrueMark
Investments, LLC (“TrueMark” or the “Adviser”), and sub-adviser, SpiderRock
Advisors, LLC (“SpiderRock” or the “Sub-Adviser”), will employ a “buffer
protect” options strategy that uses such options to seek to achieve exposure to
the performance of the S&P 500 Price Index while mitigating the first 8% to
12% decline in the performance of the S&P 500 Price Index (the “Buffer”)
over a 12-month period beginning on a specified day each September (each, a
“Roll Date”). The period from one Roll Date to the next Roll Date is referred to
as the “Investment Period,” and the first day of the Investment Period is
referred to as the “Initial Investment Day.”
The
Fund will purchase call options and sell (write) put options on the S&P 500
Price Index or an ETF that seeks to track the performance of the S&P 500
Price Index (each, a “S&P 500 Price Index ETF”) on each Initial Investment
Day with an expiration on the next Roll Date. An option gives the purchaser of
the option the right to purchase (for a call option) or sell (for a put option)
the reference asset (or deliver cash equal to the value of the reference asset)
at a specified price (“strike price”). In the event the reference asset declines
in value, the value of a put option generally will increase and the value of a
call option generally will decrease and may become worthless. In the event the
reference asset appreciates in value, the value of a put option generally will
decrease and become worthless and the value of a call option generally will
increase.
On
each Initial Investment Day, the Fund will sell (write) put options on the
S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index with a
strike price within a range of approximately 8% to 12% lower than the current
value of the S&P 500 Price Index or a S&P 500 Price Index ETF. As the
seller of these options, the Fund receives a premium from the buyer of the
options, which the Fund invests in at-the-money call options on the S&P 500
Price Index or a S&P 500 Price Index ETF (i.e.,
call options having a strike price roughly equal to the current value of the
S&P 500 Price Index or a S&P 500 Price Index ETF). The relative price of
the put
58
options
sold (written) by the Fund to the price of the call options purchased by the
Fund will determine the Fund’s exposure to the performance of the S&P 500
Price Index during the Investment Period. Due
to the cost of the options used by the Fund, the correlation of the Fund’s
performance to that of the S&P 500 Price Index
is
expected to be less than if the Fund invested directly in the constituents of
the S&P 500 Price Index (i.e.,
without using options), and could be substantially less.
This means that if the S&P 500 Price Index experiences gains for an
Investment Period, the Fund may not realize gains to the same extent.
The
Fund’s strategy also seeks to protect investors from a decline of up to 8% to
12% in the performance of the S&P 500 Price Index from one Roll Date to the
next Roll Date. When the Adviser or Sub-Adviser sells puts on the S&P 500
Price Index to create the buffer range, the proceeds are used to purchase calls
at the money. However, not all puts generate the same premium relative to the
downside exposure of the Fund. The Adviser and Sub-Adviser will seek to deliver
a buffer of 10% from the reference price of the S&P 500 Price Index on the
first trading day of the month. However, the market could fluctuate on or after
the buffer is set and this range allows for market condition volatility.
The
Fund is not designed to protect against declines of more than 8% to 12% in the
performance of the S&P 500 Price Index, and there can be no guarantee that
the Fund will be successful in implementing the buffer protect options strategy
to protect against the first 8% to 12% decline. Additionally,
even if the Fund mitigates a decline in the performance of the S&P 500 Price
Index from one Roll Date to the next Roll Date, the Fund’s returns during the
Investment Period (prior to the next Roll Date) may not reflect the buffer
protect options strategy.
The
Fund will invest in either standardized exchange-listed options or in
exchange-traded FLexible EXchange Options (“FLEX Options”). FLEX Options are
customized exchange-traded option contracts available through the Chicago Board
Option Exchange (“Cboe”) that are guaranteed for settlement by The Options
Clearing Corporation (“OCC”). FLEX Options provide investors with the ability to
customize exercise prices, exercise styles, and expiration dates, while
achieving price discovery in competitive, transparent, auction markets and
avoiding the counterparty exposure of over-the-counter (“OTC”) options
positions. The Fund will invest in European-style FLEX Options (i.e.,
they can only be exercised at the expiration date of the option) based on the
performance of the S&P 500 Price Index or a S&P 500 Price Index ETF and
which have an expiration date that is the last day of the Investment Period
only. In general, the Fund intends to invest to the greatest extent possible in
FLEX Options, as these options provide the best combination of OCC guarantees,
price discovery, customization, and European-style settlement that is ideal for
the Fund. However, the Fund may use listed options to provide an additional
source of desired market exposure when the Sub-Adviser believes doing so will be
beneficial to the Fund. The Fund also expects to invest in U.S. Treasury bonds.
The
Fund is designed to provide the following outcomes during each individual
Investment Period:
| Change in the Returns of the S&P 500 Price Index | Expected Change in the Returns of the Fund | ||||
| Declines between -8% and ‑12% (or more) |
Declines
8% to 12% percentage points less than the S&P 500 Price Index
(e.g.,
if the S&P 500 Price Index returns -35%, the Fund is designed to
return -23% to -27%) | ||||
| Declines between 0% and ‑8% | No change | ||||
| Appreciates | The Fund’s returns will appreciate to a similar extent as the S&P 500 Price Index, but will be less than those of the S&P 500 Price Index due to the cost of the options used by the Fund | ||||
The
charts below illustrate the hypothetical returns that the Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
These charts do not take into account payment by the Fund of Total Annual Fund
Operating Expenses and assume a buffer of 10%. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
59
The
Fund includes a mix of purchased and written (sold) put and call options
structured to seek to achieve the results described above. The Fund is designed
to seek to achieve the results described above for investments made on the
Initial Investment Day and held until the last day of the Investment
Period.
Investments made on any day other than the Initial Investment Day may differ
significantly, positively or negatively, from the results described above.
The
Fund’s website, www.true-shares.com, contains information about the Fund’s
holdings, and the performance of the S&P 500 Price Index as of the Initial
Investment Day and the prior business day to assist an investor in understanding
the range of results such investor can expect for investments made at times
other than on the Initial Investment Day.
60
Additionally,
the Fund’s website provides information relating to the returns of the Fund,
including the Fund’s Buffer and its position relative to the performance of the
S&P 500 Price Index on a daily basis.
The
Fund’s operations are intended to be continuous. It will not terminate and
distribute its assets at the conclusion of an Investment Period. On each Roll
Date, another Investment Period will commence and the Fund will invest in a new
set of options.
The
Fund is classified as “non-diversified” under the Investment Company Act of 1940
(the “1940 Act”).
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that the Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. The Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by the Fund), while limiting
downside losses, if Shares are bought on the day on which the Fund enters into
the options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that the Fund seeks to provide may not be available. The
Fund does not provide principal protection and an investor may experience
significant losses on its investment, including the loss of its entire
investment.
◦FLEX
Options Risk.
The Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, the Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
The Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of the Fund. The Fund’s use of call and
put options can lead to losses because of adverse movements in the price or
value of the underlying stock, index, or other asset, which may be magnified by
certain features of the options. These risks are heightened when the Fund’s
portfolio managers use options to enhance the Fund’s return or as a substitute
for a position or security. When selling a call or put option, the Fund will
receive a premium; however, this premium may not be enough to offset a loss
incurred by the Fund if the price of the underlying asset is above or below,
respectively, the strike price by an amount equal to or greater than the
premium. The value of an option may be adversely affected if the market for the
option becomes less liquid or smaller, and will be affected by changes in the
value or yield of the option’s underlying asset, an increase in interest rates,
a change in the actual or perceived volatility of the stock market or the
underlying asset and the remaining time to expiration. Additionally, the value
of an option does not increase or decrease at the same rate as the underlying
asset(s). The Fund’s use of options, due to the cost of the options, will reduce
the Fund’s ability to get returns equal to the S&P 500 Price Index. This
means that if the S&P 500 Price Index experiences gains for an Investment
Period, the Fund will not benefit to the same extent from those gains. In
addition, if the price of the underlying asset of an option is above the strike
price of a written call option or below the strike price for a written put
option, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund invests in options that derive their
performance from the performance of the S&P 500 Price Index and can be
volatile and involve various types and degrees of risks. The Fund could
experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of their underlying stock or if the Fund is
unable to purchase or liquidate a position because of an illiquid secondary
market.
◦Purchase
and Sale Timing Risk. The
Fund is designed to protect against the first 8% to 12% decline in the value of
the S&P 500 Price Index and provide for participation in any gains, although
not to the same extent, as the value of the S&P 500 Price Index, for a
12-month period from one Roll Date to the next Roll Date. Because the options
purchased and written by the Fund will expire on the next Roll Date, if you
purchase or sell Shares on a date other than a Roll Date or if you hold Shares
for more or less than the time from the most recent Roll Date to the next Roll
Date, the value of your investment in Shares may not be protected against the
first 8% to 12% decline in the value of the S&P 500 Price Index and may not
participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by the Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price
61
Index
and interest rates, any or all of which may vary, sometimes significantly,
during the period from the most recent Roll Date to the next Roll Date.
Consequently, the value of the Fund may not directly track changes in the value
of the S&P 500 Price Index in between Roll Dates.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders.
•Equity
Market Risk.
The Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the Cboe BZX Exchange, Inc. (the “Exchange”)
and may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than the Shares.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk. The
Fund is actively managed and may not meet its investment objective based on the
Adviser’s and Sub-Adviser’s success or failure to implement investment
strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
62
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Options
Tax Risk. The
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by the Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment. In addition, generally, straddles are
subject to certain rules that may affect the amount, character and timing of the
Fund’s gains and losses with respect to straddle positions.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for shareholders.
•Tax
Efficiency Risk. A
significant portion of income received from the Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if the Fund
were to engage in a different investment strategy. Additionally, the Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, the Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize investment income and/or capital gains or losses that it might
not have recognized if it had completely satisfied the redemption in-kind. As a
result, the Fund may be less tax efficient if it includes such a cash payment
than if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by the Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of the Fund’s U.S. Treasury obligations to
decline.
63
Average
Annual Total Returns
(for
periods ended December 31, 2022)
| TrueShares Structured Outcome (September) ETF | 1 Year |
Since
Inception
( | ||||||
| - |
||||||||
| - |
||||||||
| - |
||||||||
S&P
500 Price Index
|
- |
|||||||
Portfolio
Management
|
Investment
Adviser: |
TrueMark
Investments, LLC | ||||
|
Sub-Adviser: |
SpiderRock Advisors, LLC | ||||
| Portfolio Managers: | Eric Metz, Chief Investment Officer for the Sub-Adviser, and Fred Sloneker, Portfolio Manager for the Sub-Adviser, have been portfolio managers of the Fund since its inception in 2020 | ||||
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an IRA or other tax-advantaged account. Distributions on investments
made through tax-deferred arrangements may be taxed later upon withdrawal of
assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
64
|
|
||||||||||||||
|
| |||||
| Management Fee | |||||
|
Distribution
and/or Service (12b-1) Fees |
|||||
| Other Expenses | |||||
| Total Annual Fund Operating Expenses | |||||
| 1 Year: | $ |
3 Years: | $ |
5 Years: | $ |
10 Years: | $ | ||||||||||||||||
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing substantially all of its assets in options
on the S&P 500 Price Index. The Fund’s investment adviser, TrueMark
Investments, LLC (“TrueMark” or the “Adviser”), and sub-adviser, SpiderRock
Advisors, LLC (“SpiderRock” or the “Sub-Adviser”), will employ a “buffer
protect” options strategy that uses such options to seek to achieve exposure to
the performance of the S&P 500 Price Index while mitigating the first 8% to
12% decline in the performance of the S&P 500 Price Index (the “Buffer”)
over a 12-month period beginning on a specified day each October (each, a “Roll
Date”). The period from one Roll Date to the next Roll Date is referred to as
the “Investment Period,” and the first day of the Investment Period is referred
to as the “Initial Investment Day.”
The
Fund will purchase call options and sell (write) put options on the S&P 500
Price Index or an ETF that seeks to track the performance of the S&P 500
Price Index (each, a “S&P 500 Price Index ETF”) on each Initial Investment
Day with an expiration on the next Roll Date. An option gives the purchaser of
the option the right to purchase (for a call option) or sell (for a put option)
the reference asset (or deliver cash equal to the value of the reference asset)
at a specified price (“strike price”). In the event the reference asset declines
in value, the value of a put option generally will increase and the value of a
call option generally will decrease and may become worthless. In the event the
reference asset appreciates in value, the value of a put option generally will
decrease and become worthless and the value of a call option generally will
increase.
On
each Initial Investment Day, the Fund will sell (write) put options on the
S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index with a
strike price within a range of approximately 8% to 12% lower than the current
value of the S&P 500 Price Index or a S&P 500 Price Index ETF. As the
seller of these options, the Fund receives a premium from the buyer of the
options, which the Fund invests in at-the-money call options on the S&P 500
Price Index or a S&P 500 Price Index ETF (i.e.,
call options having a strike price roughly equal to the current value of the
S&P 500 Price Index or a S&P 500 Price Index ETF). The relative price of
the put
65
options
sold (written) by the Fund to the price of the call options purchased by the
Fund will determine the Fund’s exposure to the performance of the S&P 500
Price Index during the Investment Period. Due
to the cost of the options used by the Fund, the correlation of the Fund’s
performance to that of the S&P 500 Price Index
is
expected to be less than if the Fund invested directly in the constituents of
the S&P 500 Price Index (i.e.,
without using options), and could be substantially less.
This means that if the S&P 500 Price Index experiences gains for an
Investment Period, the Fund may not realize gains to the same extent.
The
Fund’s strategy also seeks to protect investors from a decline of up to 8% to
12% in the performance of the S&P 500 Price Index from one Roll Date to the
next Roll Date. When the Adviser or Sub-Adviser sells puts on the S&P 500
Price Index to create the buffer range, the proceeds are used to purchase calls
at the money. However, not all puts generate the same premium relative to the
downside exposure of the Fund. The Adviser and Sub-Adviser will seek to deliver
a buffer of 10% from the reference price of the S&P 500 Price Index on the
first trading day of the month. However, the market could fluctuate on or after
the buffer is set and this range allows for market condition volatility.
The
Fund is not designed to protect against declines of more than 8% to 12% in the
performance of the S&P 500 Price Index, and there can be no guarantee that
the Fund will be successful in implementing the buffer protect options strategy
to protect against the first 8% to 12% decline. Additionally,
even if the Fund mitigates a decline in the performance of the S&P 500 Price
Index from one Roll Date to the next Roll Date, the Fund’s returns during the
Investment Period (prior to the next Roll Date) may not reflect the buffer
protect options strategy.
The
Fund will invest in either standardized exchange-listed options or in
exchange-traded FLexible EXchange Options (“FLEX Options”). FLEX Options are
customized exchange-traded option contracts available through the Chicago Board
Option Exchange (“Cboe”) that are guaranteed for settlement by The Options
Clearing Corporation (“OCC”). FLEX Options provide investors with the ability to
customize exercise prices, exercise styles, and expiration dates, while
achieving price discovery in competitive, transparent, auction markets and
avoiding the counterparty exposure of over-the-counter (“OTC”) options
positions. The Fund will invest in European-style FLEX Options (i.e.,
they can only be exercised at the expiration date of the option) based on the
performance of the S&P 500 Price Index or a S&P 500 Price Index ETF and
which have an expiration date that is the last day of the Investment Period
only. In general, the Fund intends to invest to the greatest extent possible in
FLEX Options, as these options provide the best combination of OCC guarantees,
price discovery, customization, and European-style settlement that is ideal for
the Fund. However, the Fund may use listed options to provide an additional
source of desired market exposure when the Sub-Adviser believes doing so will be
beneficial to the Fund. The Fund also expects to invest in U.S. Treasury
bonds.
The
Fund is designed to provide the following outcomes during each individual
Investment Period:
| Change in the Returns of the S&P 500 Price Index | Expected Change in the Returns of the Fund | ||||
| Declines between -8% and ‑12% (or more) |
Declines
8% to 12% percentage points less than the S&P 500 Price Index
(e.g.,
if the S&P 500 Price Index returns -35%, the Fund is designed to
return -23% to -27%) | ||||
| Declines between 0% and ‑8% | No change | ||||
| Appreciates | The Fund’s returns will appreciate to a similar extent as the S&P 500 Price Index, but will be less than those of the S&P 500 Price Index due to the cost of the options used by the Fund | ||||
The
charts below illustrate the hypothetical returns that the Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
These charts do not take into account payment by the Fund of Total Annual Fund
Operating Expenses and assume a buffer of 10%. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
66
The
Fund includes a mix of purchased and written (sold) put and call options
structured to seek to achieve the results described above. The Fund is designed
to seek to achieve the results described above for investments made on the
Initial Investment Day and held until the last day of the Investment
Period.
Investments made on any day other than the Initial Investment Day may differ
significantly, positively or negatively, from the results described above.
The
Fund’s website, www.true-shares.com, contains information about the Fund’s
holdings, and the performance of the S&P 500 Price Index as of the Initial
Investment Day and the prior business day to assist an investor in understanding
the range of results such investor can expect for investments made at times
other than on the Initial Investment Day.
67
Additionally,
the Fund’s website provides information relating to the returns of the Fund,
including the Fund’s Buffer and its position relative to the performance of the
S&P 500 Price Index on a daily basis.
The
Fund’s operations are intended to be continuous. It will not terminate and
distribute its assets at the conclusion of an Investment Period. On each Roll
Date, another Investment Period will commence and the Fund will invest in a new
set of options.
The
Fund is classified as “non-diversified” under the Investment Company Act of 1940
(the “1940 Act”).
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that the Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. The Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by the Fund), while limiting
downside losses, if Shares are bought on the day on which the Fund enters into
the options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that the Fund seeks to provide may not be available. The
Fund does not provide principal protection and an investor may experience
significant losses on its investment, including the loss of its entire
investment.
◦FLEX
Options Risk.
The Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, the Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
The Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of the Fund. The Fund’s use of call and
put options can lead to losses because of adverse movements in the price or
value of the underlying stock, index, or other asset, which may be magnified by
certain features of the options. These risks are heightened when the Fund’s
portfolio managers use options to enhance the Fund’s return or as a substitute
for a position or security. When selling a call or put option, the Fund will
receive a premium; however, this premium may not be enough to offset a loss
incurred by the Fund if the price of the underlying asset is above or below,
respectively, the strike price by an amount equal to or greater than the
premium. The value of an option may be adversely affected if the market for the
option becomes less liquid or smaller, and will be affected by changes in the
value or yield of the option’s underlying asset, an increase in interest rates,
a change in the actual or perceived volatility of the stock market or the
underlying asset and the remaining time to expiration. Additionally, the value
of an option does not increase or decrease at the same rate as the underlying
asset(s). The Fund’s use of options, due to the cost of the options, will reduce
the Fund’s ability to get returns equal to the S&P 500 Price Index. This
means that if the S&P 500 Price Index experiences gains for an Investment
Period, the Fund will not benefit to the same extent from those gains. In
addition, if the price of the underlying asset of an option is above the strike
price of a written call option or below the strike price for a written put
option, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund invests in options that derive their
performance from the performance of the S&P 500 Price Index and can be
volatile and involve various types and degrees of risks. The Fund could
experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of their underlying stock or if the Fund is
unable to purchase or liquidate a position because of an illiquid secondary
market.
◦Purchase
and Sale Timing Risk. The
Fund is designed to protect against the first 8% to 12% decline in the value of
the S&P 500 Price Index and provide for participation in any gains, although
not to the same extent, as the value of the S&P 500 Price Index, for a
12-month period from one Roll Date to the next Roll Date. Because the options
purchased and written by the Fund will expire on the next Roll Date, if you
purchase or sell Shares on a date other than a Roll Date or if you hold Shares
for more or less than the time from the most recent Roll Date to the next Roll
Date, the value of your investment in Shares may not be protected against the
first 8% to 12% decline in the value of the S&P 500 Price Index and may not
participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by the Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price
68
Index
and interest rates, any or all of which may vary, sometimes significantly,
during the period from the most recent Roll Date to the next Roll Date.
Consequently, the value of the Fund may not directly track changes in the value
of the S&P 500 Price Index in between Roll Dates.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders.
•Equity
Market Risk.
The Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the Cboe BZX Exchange, Inc. (the “Exchange”)
and may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than the Shares.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk.
The Fund is actively managed and may not meet its investment objective based on
the Adviser’s and Sub-Adviser’s success or failure to implement investment
strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
69
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Options
Tax Risk. The
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by the Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment. In addition, generally, straddles are
subject to certain rules that may affect the amount, character and timing of the
Fund’s gains and losses with respect to straddle positions.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for shareholders.
•Tax
Efficiency Risk. A
significant portion of income received from the Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if the Fund
were to engage in a different investment strategy. Additionally, the Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, the Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize investment income and/or capital gains or losses that it might
not have recognized if it had completely satisfied the redemption in-kind. As a
result, the Fund may be less tax efficient if it includes such a cash payment
than if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by the Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of the Fund’s U.S. Treasury obligations to
decline.
70
Average
Annual Total Returns
(for
periods ended December 31, 2022)
| TrueShares Structured Outcome (October) ETF | 1 Year |
Since
Inception
( | ||||||
| - |
||||||||
| - |
||||||||
| - |
||||||||
S&P
500 Price Index
|
- |
|||||||
Portfolio
Management
|
Investment
Adviser: |
TrueMark
Investments, LLC | ||||
|
Sub-Adviser: |
SpiderRock Advisors, LLC | ||||
| Portfolio Managers: | Eric Metz, Chief Investment Officer for the Sub-Adviser, and Fred Sloneker, Portfolio Manager for the Sub-Adviser, have been portfolio managers of the Fund since its inception in 2020 | ||||
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an IRA or other tax-advantaged account. Distributions on investments
made through tax-deferred arrangements may be taxed later upon withdrawal of
assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
71
|
|
||||||||||||||
|
| |||||
| Management Fee | |||||
|
Distribution
and/or Service (12b-1) Fees |
|||||
| Other Expenses | |||||
| Total Annual Fund Operating Expenses | |||||
| 1 Year: | $ |
3 Years: | $ |
5 Years: | $ |
10 Years: | $ | ||||||||||||||||
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing substantially all of its assets in options
on the S&P 500 Price Index. The Fund’s investment adviser, TrueMark
Investments, LLC (“TrueMark” or the “Adviser”), and sub-adviser, SpiderRock
Advisors, LLC (“SpiderRock” or the “Sub-Adviser”), will employ a “buffer
protect” options strategy that uses such options to seek to achieve exposure to
the performance of the S&P 500 Price Index while mitigating the first 8% to
12% decline in the performance of the S&P 500 Price Index (the “Buffer”)
over a 12-month period beginning on a specified day each November (each, a “Roll
Date”). The period from one Roll Date to the next Roll Date is referred to as
the “Investment Period,” and the first day of the Investment Period is referred
to as the “Initial Investment Day.”
The
Fund will purchase call options and sell (write) put options on the S&P 500
Price Index or an ETF that seeks to track the performance of the S&P 500
Price Index (each, a “S&P 500 Price Index ETF”) on each Initial Investment
Day with an expiration on the next Roll Date. An option gives the purchaser of
the option the right to purchase (for a call option) or sell (for a put option)
the reference asset (or deliver cash equal to the value of the reference asset)
at a specified price (“strike price”). In the event the reference asset declines
in value, the value of a put option generally will increase and the value of a
call option generally will decrease and may become worthless. In the event the
reference asset appreciates in value, the value of a put option generally will
decrease and become worthless and the value of a call option generally will
increase.
On
each Initial Investment Day, the Fund will sell (write) put options on the
S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index with a
strike price within a range of approximately 8% to 12% lower than the current
value of the S&P 500 Price Index or a S&P 500 Price Index ETF. As the
seller of these options, the Fund receives a premium from the buyer of the
options, which the Fund invests in at-the-money call options on the S&P 500
Price Index or a S&P 500 Price Index ETF (i.e.,
call options having a strike price roughly equal to the current value of the
S&P 500 Price Index or a S&P 500 Price Index ETF). The relative price of
the put
72
options
sold (written) by the Fund to the price of the call options purchased by the
Fund will determine the Fund’s exposure to the performance of the S&P 500
Price Index during the Investment Period. Due
to the cost of the options used by the Fund, the correlation of the Fund’s
performance to that of the S&P 500 Price Index
is
expected to be less than if the Fund invested directly in the constituents of
the S&P 500 Price Index (i.e.,
without using options), and could be substantially less.
This means that if the S&P 500 Price Index experiences gains for an
Investment Period, the Fund may not realize gains to the same extent.
The
Fund’s strategy also seeks to protect investors from a decline of up to 8% to
12% in the performance of the S&P 500 Price Index from one Roll Date to the
next Roll Date. When the Adviser or Sub-Adviser sells puts on the S&P 500
Price Index to create the buffer range, the proceeds are used to purchase calls
at the money. However, not all puts generate the same premium relative to the
downside exposure of the Fund. The Adviser and Sub-Adviser will seek to deliver
a buffer of 10% from the reference price of the S&P 500 Price Index on the
first trading day of the month. However, the market could fluctuate on or after
the buffer is set and this range allows for market condition volatility.
The
Fund is not designed to protect against declines of more than 8% to 12% in the
performance of the S&P 500 Price Index, and there can be no guarantee that
the Fund will be successful in implementing the buffer protect options strategy
to protect against the first 8% to 12% decline. Additionally,
even if the Fund mitigates a decline in the performance of the S&P 500 Price
Index from one Roll Date to the next Roll Date, the Fund’s returns during the
Investment Period (prior to the next Roll Date) may not reflect the buffer
protect options strategy.
The
Fund will invest in either standardized exchange-listed options or in
exchange-traded FLexible EXchange Options (“FLEX Options”). FLEX Options are
customized exchange-traded option contracts available through the Chicago Board
Option Exchange (“Cboe”) that are guaranteed for settlement by The Options
Clearing Corporation (“OCC”). FLEX Options provide investors with the ability to
customize exercise prices, exercise styles, and expiration dates, while
achieving price discovery in competitive, transparent, auction markets and
avoiding the counterparty exposure of over-the-counter (“OTC”) options
positions. The Fund will invest in European-style FLEX Options (i.e.,
they can only be exercised at the expiration date of the option) based on the
performance of the S&P 500 Price Index or a S&P 500 Price Index ETF and
which have an expiration date that is the last day of the Investment Period
only. In general, the Fund intends to invest to the greatest extent possible in
FLEX Options, as these options provide the best combination of OCC guarantees,
price discovery, customization, and European-style settlement that is ideal for
the Fund. However, the Fund may use listed options to provide an additional
source of desired market exposure when the Sub-Adviser believes doing so will be
beneficial to the Fund. The Fund also expects to invest in U.S. Treasury
bonds.
The
Fund is designed to provide the following outcomes during each individual
Investment Period:
| Change in the Returns of the S&P 500 Price Index | Expected Change in the Returns of the Fund | ||||
| Declines between -8% and ‑12% (or more) |
Declines
8% to 12% percentage points less than the S&P 500 Price Index
(e.g.,
if the S&P 500 Price Index returns -35%, the Fund is designed to
return -23% to -27%) | ||||
| Declines between 0% and ‑8% | No change | ||||
| Appreciates | The Fund’s returns will appreciate to a similar extent as the S&P 500 Price Index, but will be less than those of the S&P 500 Price Index due to the cost of the options used by the Fund | ||||
The
charts below illustrate the hypothetical returns that the Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
These charts do not take into account payment by the Fund of Total Annual Fund
Operating Expenses and assume a buffer of 10%. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
73
The
Fund includes a mix of purchased and written (sold) put and call options
structured to seek to achieve the results described above. The Fund is designed
to seek to achieve the results described above for investments made on the
Initial Investment Day and held until the last day of the Investment
Period.
Investments made on any day other than the Initial Investment Day may differ
significantly, positively or negatively, from the results described above.
The
Fund’s website, www.true-shares.com, contains information about the Fund’s
holdings, and the performance of the S&P 500 Price Index as of the Initial
Investment Day and the prior business day to assist an investor in understanding
the range of results such investor can expect for investments made at times
other than on the Initial Investment Day.
74
Additionally,
the Fund’s website provides information relating to the returns of the Fund,
including the Fund’s Buffer and its position relative to the performance of the
S&P 500 Price Index on a daily basis.
The
Fund’s operations are intended to be continuous. It will not terminate and
distribute its assets at the conclusion of an Investment Period. On each Roll
Date, another Investment Period will commence and the Fund will invest in a new
set of options.
The
Fund is classified as “non-diversified” under the Investment Company Act of 1940
(the “1940 Act”).
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that the Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. The Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by the Fund), while limiting
downside losses, if Shares are bought on the day on which the Fund enters into
the options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that the Fund seeks to provide may not be available. The
Fund does not provide principal protection and an investor may experience
significant losses on its investment, including the loss of its entire
investment.
◦FLEX
Options Risk.
The Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, the Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
The Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of the Fund. The Fund’s use of call and
put options can lead to losses because of adverse movements in the price or
value of the underlying stock, index, or other asset, which may be magnified by
certain features of the options. These risks are heightened when the Fund’s
portfolio managers use options to enhance the Fund’s return or as a substitute
for a position or security. When selling a call or put option, the Fund will
receive a premium; however, this premium may not be enough to offset a loss
incurred by the Fund if the price of the underlying asset is above or below,
respectively, the strike price by an amount equal to or greater than the
premium. The value of an option may be adversely affected if the market for the
option becomes less liquid or smaller, and will be affected by changes in the
value or yield of the option’s underlying asset, an increase in interest rates,
a change in the actual or perceived volatility of the stock market or the
underlying asset and the remaining time to expiration. Additionally, the value
of an option does not increase or decrease at the same rate as the underlying
asset(s). The Fund’s use of options, due to the cost of the options, will reduce
the Fund’s ability to get returns equal to the S&P 500 Price Index. This
means that if the S&P 500 Price Index experiences gains for an Investment
Period, the Fund will not benefit to the same extent from those gains. In
addition, if the price of the underlying asset of an option is above the strike
price of a written call option or below the strike price for a written put
option, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund invests in options that derive their
performance from the performance of the S&P 500 Price Index and can be
volatile and involve various types and degrees of risks. The Fund could
experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of their underlying stock or if the Fund is
unable to purchase or liquidate a position because of an illiquid secondary
market.
◦Purchase
and Sale Timing Risk. The
Fund is designed to protect against the first 8% to 12% decline in the value of
the S&P 500 Price Index and provide for participation in any gains, although
not to the same extent, as the value of the S&P 500 Price Index, for a
12-month period from one Roll Date to the next Roll Date. Because the options
purchased and written by the Fund will expire on the next Roll Date, if you
purchase or sell Shares on a date other than a Roll Date or if you hold Shares
for more or less than the time from the most recent Roll Date to the next Roll
Date, the value of your investment in Shares may not be protected against the
first 8% to 12% decline in the value of the S&P 500 Price Index and may not
participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by the Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price
75
Index
and interest rates, any or all of which may vary, sometimes significantly,
during the period from the most recent Roll Date to the next Roll Date.
Consequently, the value of the Fund may not directly track changes in the value
of the S&P 500 Price Index in between Roll Dates.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders.
•Equity
Market Risk.
The Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the Cboe BZX Exchange, Inc. (the “Exchange”)
and may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than the Shares.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk.
The Fund is actively managed and may not meet its investment objective based on
the Adviser’s and Sub-Adviser’s success or failure to implement investment
strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
76
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Options
Tax Risk. The
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by the Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment. In addition, generally, straddles are
subject to certain rules that may affect the amount, character and timing of the
Fund’s gains and losses with respect to straddle positions.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for shareholders.
•Tax
Efficiency Risk. A
significant portion of income received from the Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if the Fund
were to engage in a different investment strategy. Additionally, the Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, the Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize investment income and/or capital gains or losses that it might
not have recognized if it had completely satisfied the redemption in-kind. As a
result, the Fund may be less tax efficient if it includes such a cash payment
than if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by the Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of the Fund’s U.S. Treasury obligations to
decline.
77
Average
Annual Total Returns
(for
periods ended December 31, 2022)
| TrueShares Structured Outcome (November) ETF | 1 Year |
Since
Inception
( | ||||||
| - |
||||||||
| - |
||||||||
| - |
||||||||
S&P
500 Price Index
|
- |
|||||||
Portfolio
Management
|
Investment
Adviser: |
TrueMark
Investments, LLC | ||||
|
Sub-Adviser: |
SpiderRock Advisors, LLC | ||||
| Portfolio Managers: | Eric Metz, Chief Investment Officer for the Sub-Adviser, and Fred Sloneker, Portfolio Manager for the Sub-Adviser, have been portfolio managers of the Fund since its inception in 2020 | ||||
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an IRA or other tax-advantaged account. Distributions on investments
made through tax-deferred arrangements may be taxed later upon withdrawal of
assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
78
|
|
||||||||||||||
|
| |||||
| Management Fee | |||||
|
Distribution
and/or Service (12b-1) Fees |
|||||
|
Other
Expenses(1) |
|||||
| Total Annual Fund Operating Expenses | |||||
(1)
“ Other Expenses” include interest expense.
Interest expense is borne by the Fund separately from the management fee paid to
TrueMark Investments, LLC (the “Adviser”).
| 1 Year: | $ |
3 Years: | $ |
5 Years: | $ |
10 Years: | $ | ||||||||||||||||
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing substantially all of its assets in options
on the S&P 500 Price Index. The Adviser and sub-adviser, SpiderRock
Advisors, LLC (“SpiderRock” or the “Sub-Adviser”), will employ a “buffer
protect” options strategy that uses such options to seek to achieve exposure to
the performance of the S&P 500 Price Index while mitigating the first 8% to
12% decline in the performance of the S&P 500 Price Index (the “Buffer”)
over a 12-month period beginning on a specified day each December (each, a “Roll
Date”). The period from one Roll Date to the next Roll Date is referred to as
the “Investment Period,” and the first day of the Investment Period is referred
to as the “Initial Investment Day.”
The
Fund will purchase call options and sell (write) put options on the S&P 500
Price Index or an ETF that seeks to track the performance of the S&P 500
Price Index (each, a “S&P 500 Price Index ETF”) on each Initial Investment
Day with an expiration on the next Roll Date. An option gives the purchaser of
the option the right to purchase (for a call option) or sell (for a put option)
the reference asset (or deliver cash equal to the value of the reference asset)
at a specified price (“strike price”). In the event the reference asset declines
in value, the value of a put option generally will increase and the value of a
call option generally will decrease and may become worthless. In the event the
reference asset appreciates in value, the value of a put option generally will
decrease and become worthless and the value of a call option generally will
increase.
On
each Initial Investment Day, the Fund will sell (write) put options on the
S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index with a
strike price within a range of approximately 8% to 12% lower than the current
value of the S&P 500 Price Index or a S&P 500 Price Index ETF. As the
seller of these options, the Fund receives a premium from the buyer of the
options, which the
79
Fund
invests in at-the-money call options on the S&P 500 Price Index or a S&P
500 Price Index ETF (i.e.,
call options having a strike price roughly equal to the current value of the
S&P 500 Price Index or a S&P 500 Price Index ETF). The relative price of
the put options sold (written) by the Fund to the price of the call options
purchased by the Fund will determine the Fund’s exposure to the performance of
the S&P 500 Price Index during the Investment Period. Due
to the cost of the options used by the Fund, the correlation of the Fund’s
performance to that of the S&P 500 Price Index
is
expected to be less than if the Fund invested directly in the constituents of
the S&P 500 Price Index (i.e.,
without using options), and could be substantially less.
This means that if the S&P 500 Price Index experiences gains for an
Investment Period, the Fund may not realize gains to the same extent.
The
Fund’s strategy also seeks to protect investors from a decline of up to 8% to
12% in the performance of the S&P 500 Price Index from one Roll Date to the
next Roll Date. When the Adviser or Sub-Adviser sells puts on the S&P 500
Price Index to create the buffer range, the proceeds are used to purchase calls
at the money. However, not all puts generate the same premium relative to the
downside exposure of the Fund. The Adviser and Sub-Adviser will seek to deliver
a buffer of 10% from the reference price of the S&P 500 Price Index on the
first trading day of the month. However, the market could fluctuate on or after
the buffer is set and this range allows for market condition volatility.
The
Fund is not designed to protect against declines of more than 8% to 12% in the
performance of the S&P 500 Price Index, and there can be no guarantee that
the Fund will be successful in implementing the buffer protect options strategy
to protect against the first 8% to 12% decline. Additionally,
even if the Fund mitigates a decline in the performance of the S&P 500 Price
Index from one Roll Date to the next Roll Date, the Fund’s returns during the
Investment Period (prior to the next Roll Date) may not reflect the buffer
protect options strategy.
The
Fund will invest in either standardized exchange-listed options or in
exchange-traded FLexible EXchange Options (“FLEX Options”). FLEX Options are
customized exchange-traded option contracts available through the Chicago Board
Option Exchange (“Cboe”) that are guaranteed for settlement by The Options
Clearing Corporation (“OCC”). FLEX Options provide investors with the ability to
customize exercise prices, exercise styles, and expiration dates, while
achieving price discovery in competitive, transparent, auction markets and
avoiding the counterparty exposure of over-the-counter (“OTC”) options
positions. The Fund will invest in European-style FLEX Options (i.e.,
they can only be exercised at the expiration date of the option) based on the
performance of the S&P 500 Price Index or a S&P 500 Price Index ETF and
which have an expiration date that is the last day of the Investment Period
only. In general, the Fund intends to invest to the greatest extent possible in
FLEX Options, as these options provide the best combination of OCC guarantees,
price discovery, customization, and European-style settlement that is ideal for
the Fund. However, the Fund may use listed options to provide an additional
source of desired market exposure when the Sub-Adviser believes doing so will be
beneficial to the Fund. The Fund also expects to invest in U.S. Treasury
bonds.
The
Fund is designed to provide the following outcomes during each individual
Investment Period:
| Change in the Returns of the S&P 500 Price Index | Expected Change in the Returns of the Fund | ||||
| Declines between -8% and ‑12% (or more) |
Declines
8% to 12% percentage points less than the S&P 500 Price Index
(e.g.,
if the S&P 500 Price Index returns -35%, the Fund is designed to
return -23% to -27%) | ||||
| Declines between 0% and ‑8% | No change | ||||
| Appreciates | The Fund’s returns will appreciate to a similar extent as the S&P 500 Price Index, but will be less than those of the S&P 500 Price Index due to the cost of the options used by the Fund | ||||
The
charts below illustrate the hypothetical returns that the Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
These charts do not take into account payment by the Fund of Total Annual Fund
Operating Expenses and assume a buffer of 10%. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
80
The
Fund includes a mix of purchased and written (sold) put and call options
structured to seek to achieve the results described above. The Fund is designed
to seek to achieve the results described above for investments made on the
Initial Investment Day and held until the last day of the Investment
Period.
Investments made on any day other than the Initial Investment Day may differ
significantly, positively or negatively, from the results described above.
The
Fund’s website, www.true-shares.com, contains information about the Fund’s
holdings, and the performance of the S&P 500 Price Index as of the Initial
Investment Day and the prior business day to assist an investor in understanding
the range of results such investor can expect for investments made at times
other than on the Initial Investment Day.
81
Additionally,
the Fund’s website provides information relating to the returns of the Fund,
including the Fund’s Buffer and its position relative to the performance of the
S&P 500 Price Index on a daily basis.
The
Fund’s operations are intended to be continuous. It will not terminate and
distribute its assets at the conclusion of an Investment Period. On each Roll
Date, another Investment Period will commence and the Fund will invest in a new
set of options.
The
Fund is classified as “non-diversified” under the Investment Company Act of 1940
(the “1940 Act”).
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that the Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. The Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by the Fund), while limiting
downside losses, if Shares are bought on the day on which the Fund enters into
the options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that the Fund seeks to provide may not be available. The
Fund does not provide principal protection and an investor may experience
significant losses on its investment, including the loss of its entire
investment.
◦FLEX
Options Risk.
The Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, the Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
The Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of the Fund. The Fund’s use of call and
put options can lead to losses because of adverse movements in the price or
value of the underlying stock, index, or other asset, which may be magnified by
certain features of the options. These risks are heightened when the Fund’s
portfolio managers use options to enhance the Fund’s return or as a substitute
for a position or security. When selling a call or put option, the Fund will
receive a premium; however, this premium may not be enough to offset a loss
incurred by the Fund if the price of the underlying asset is above or below,
respectively, the strike price by an amount equal to or greater than the
premium. The value of an option may be adversely affected if the market for the
option becomes less liquid or smaller, and will be affected by changes in the
value or yield of the option’s underlying asset, an increase in interest rates,
a change in the actual or perceived volatility of the stock market or the
underlying asset and the remaining time to expiration. Additionally, the value
of an option does not increase or decrease at the same rate as the underlying
asset(s). The Fund’s use of options, due to the cost of the options, will reduce
the Fund’s ability to get returns equal to the S&P 500 Price Index. This
means that if the S&P 500 Price Index experiences gains for an Investment
Period, the Fund will not benefit to the same extent from those gains. In
addition, if the price of the underlying asset of an option is above the strike
price of a written call option or below the strike price for a written put
option, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund invests in options that derive their
performance from the performance of the S&P 500 Price Index and can be
volatile and involve various types and degrees of risks. The Fund could
experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of their underlying stock or if the Fund is
unable to purchase or liquidate a position because of an illiquid secondary
market.
◦Purchase
and Sale Timing Risk. The
Fund is designed to protect against the first 8% to 12% decline in the value of
the S&P 500 Price Index and provide for participation in any gains, although
not to the same extent, as the value of the S&P 500 Price Index, for a
12-month period from one Roll Date to the next Roll Date. Because the options
purchased and written by the Fund will expire on the next Roll Date, if you
purchase or sell Shares on a date other than a Roll Date or if you hold Shares
for more or less than the time from the most recent Roll Date to the next Roll
Date, the value of your investment in Shares may not be protected against the
first 8% to 12% decline in the value of the S&P 500 Price Index and may not
participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by the Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price
82
Index
and interest rates, any or all of which may vary, sometimes significantly,
during the period from the most recent Roll Date to the next Roll Date.
Consequently, the value of the Fund may not directly track changes in the value
of the S&P 500 Price Index in between Roll Dates.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Shares, potentially resulting in financial losses to the Fund
and its shareholders.
•Equity
Market Risk.
The Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the Cboe BZX Exchange, Inc. (the “Exchange”)
and may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than the Shares.
•Limited
Operating History Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk.
The Fund is actively managed and may not meet its investment objective based on
the Adviser’s and Sub-Adviser’s success or failure to implement investment
strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
83
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Options
Tax Risk. The
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by the Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment. In addition, generally, straddles are
subject to certain rules that may affect the amount, character and timing of the
Fund’s gains and losses with respect to straddle positions.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for shareholders.
•Tax
Efficiency Risk. A
significant portion of income received from the Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if the Fund
were to engage in a different investment strategy. Additionally, the Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, the Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize investment income and/or capital gains or losses that it might
not have recognized if it had completely satisfied the redemption in-kind. As a
result, the Fund may be less tax efficient if it includes such a cash payment
than if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by the Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of the Fund’s U.S. Treasury obligations to
decline.
84
Average
Annual Total Returns
(for
periods ended December 31, 2022)
| TrueShares Structured Outcome (December) ETF | 1 Year |
Since
Inception
( | ||||||
| - |
||||||||
| - |
||||||||
| - |
||||||||
S&P
500 Price Index
|
- |
|||||||
Portfolio
Management
|
Investment
Adviser: |
TrueMark
Investments, LLC | ||||
|
Sub-Adviser: |
SpiderRock Advisors, LLC | ||||
| Portfolio Managers: | Eric Metz, Chief Investment Officer for the Sub-Adviser, and Fred Sloneker, Portfolio Manager for the Sub-Adviser, have been portfolio managers of the Fund since its inception in 2020 | ||||
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
held in an IRA or other tax-advantaged account. Distributions on investments
made through tax-deferred arrangements may be taxed later upon withdrawal of
assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
85
ADDITIONAL
INFORMATION ABOUT THE FUNDS
Investment
Objective
Each
Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed by the Board of Trustees (the “Board”) of Listed Funds
Trust (the “Trust”) without shareholder approval upon written notice to
shareholders.
Structured
Outcome Strategy
Any
FLEX Options that are written by a Fund that create an obligation to sell or buy
the value of the S&P 500 Price Index will be fully offset by FLEX Options
purchased by the Fund that create the right to buy or sell the value of the
S&P 500 Price Index such that each Fund will always be in a net long
position with respect to the value of the S&P 500 Price Index (i.e.,
any obligations of a Fund created by its writing of FLEX Options will be fully
offset by positions in purchased FLEX Options).
Principal
Investment Strategy
A
Fund’s ability to implement the buffer protection options strategy against the
first 8% to 12% decline in the value of the S&P 500 Price Index generally is
dependent on a shareholder purchasing Shares at a price equal to their NAV on
the Initial Investment Day and holding them until the last day of the Investment
Period for the Fund. The market price at which shareholders purchase Shares on a
Fund’s Initial Investment Day may be higher or lower than their NAV per share.
Shareholders may realize a gain or loss on their investment in a Fund that is
higher or lower than intended by the Fund’s investment strategy for a variety of
reasons, including as a result of purchasing Shares on a day other than an
Initial Investment Day, as a result of selling Shares prior to the last day of
an Investment Period, in instances when the Fund terminates options prior to
their expiration on the last day of an Investment Period, if the Fund is unable
to maintain an appropriate ratio of offsetting put and call
options.
The
chart below illustrates the hypothetical returns that each Fund seeks to provide
in certain illustrative scenarios for a shareholder that purchases Shares on the
Initial Investment Day and holds such Shares for the entire Investment Period.
This chart does not take into account payment by a Fund of Total Annual Fund
Operating Expenses. There
is no guarantee that a Fund will be successful in providing these investment
outcomes for any Investment Period.
There
is no assurance that a Fund will achieve its investment objective.
86
Principal
Investment Risks
An
investment in a Fund entails risks. A Fund could lose money, or its performance
could trail that of other investment alternatives. The following provides
additional information about each Fund’s principal risks. It is important that
investors closely review and understand these risks before making an investment
in a Fund. Each risk applies to each Fund unless otherwise specified. Just as in
each Fund’s summary section above, the principal risks below are presented in
alphabetical order to facilitate finding particular risks and comparing them
with those of other funds. Each risk summarized below is considered a “principal
risk” of investing in the applicable Fund, regardless of the order in which it
appears.
•Buffered
Strategy Investment Risk.
◦Buffered
Loss Risk. There
can be no guarantee that a Fund will be successful in its strategy to provide
buffer protection against S&P 500 Price Index losses if the S&P 500
Price Index decreases over the Investment Period by 8% or less. A shareholder
may lose their entire investment. Each Fund’s strategy seeks to deliver returns
that match the S&P 500 Price Index (but will be less than the S&P 500
Price Index due to the cost of the options used by a Fund), while limiting
downside losses, if Shares are bought on the day on which a Fund enters into the
options and held until those options expire at the end of each Investment
Period. In the event an investor purchases Shares after the date on which the
options were entered into or sells Shares prior to the expiration of the
options, the buffer that a Fund seeks to provide may not be available. A Fund
does not provide principal protection and an investor may experience significant
losses on its investment, including the loss of its entire investment.
◦FLEX
Options Risk.
Each Fund may invest in FLEX Options issued and guaranteed for settlement by the
OCC. A Fund bears the risk that the OCC will be unable or unwilling to perform
its obligations under the FLEX Options contracts. Additionally, FLEX Options may
be illiquid, and in such cases, a Fund may have difficulty closing out certain
FLEX Options positions at desired times and prices.
◦Options
Risk.
Each Fund invests in options that derive their performance from the performance
of the S&P 500 Price Index. Writing and buying options are speculative
activities and entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in an option could have a
substantial impact on the performance of a Fund. A Fund’s use of call and put
options can lead to losses because of adverse movements in the price or value of
the underlying stock, index, or other asset, which may be magnified by certain
features of the options. These risks are heightened when a Fund’s portfolio
managers use options to enhance such Fund’s return or as a substitute for a
position or security. When selling a call or put option, a Fund will receive a
premium; however, this premium may not be enough to offset a loss incurred by
such Fund if the price of the underlying asset is above or below, respectively,
the strike price by an amount equal to or greater than the premium. The value of
an option may be adversely affected if the market for the option becomes less
liquid or smaller, and will be affected by changes in the value or yield of the
option’s underlying asset, an increase in interest rates, a change in the actual
or perceived volatility of the stock market or the underlying asset and the
remaining time to expiration. Additionally, the value of an option does not
increase or decrease at the same rate as the underlying asset(s). A Fund’s use
of options, due to the cost of the options, will reduce such Fund’s ability to
get returns equal to the S&P 500 Price Index. This means that if the S&P
500 Price Index experiences gains for an Investment Period, a Fund will not
benefit to the same extent from those gains. In addition, if the price of the
underlying asset of an option is above the strike price of a written call option
or below the strike price for a written put option, the value of the option, and
consequently of the applicable Fund, may decline significantly more than if such
Fund invested directly in the underlying asset instead of using options. A Fund
invests in options that derive their performance from the performance of the
S&P 500 Price Index and can be volatile and involve various types and
degrees of risks. A Fund could experience a loss if its options do not perform
as anticipated, or are not correlated with the performance of their underlying
stock or if a Fund is unable to purchase or liquidate a position because of an
illiquid secondary market.
◦Purchase
and Sale Timing Risk.
Each Fund is designed to protect against the first 8% to 12% decline in the
value of the S&P 500 Price Index and provide for participation in any gains,
although not to the same extent, as the value of the S&P 500 Price Index,
for a 12-month period from one Roll Date to the next Roll Date. Because the
options purchased and written by a Fund will expire on the next Roll Date, if
you purchase or sell Shares on a date other than a Roll Date or if you hold
Shares for more or less than the time from the most recent Roll Date to the next
Roll Date, the value of your investment in Shares may not be protected against
the first 8% to 12% decline in the value of the S&P 500 Price Index and may
not participate in a gain in the value of the S&P 500 Price Index for your
investment period. The value of the options purchased and written by a Fund is
dependent on, among other factors, the value, implied volatility, and implied
dividend rate of the S&P 500 Price Index and interest rates, any or all of
which may vary, sometimes significantly, during the period from the most recent
Roll Date to the next Roll Date. Consequently, the value of a Fund may not
directly track changes in the value of the S&P 500 Price Index in between
Roll Dates.
•Cybersecurity
Risk.
With the increased use of technologies such as the Internet and the dependence
on computer systems to perform business and operational functions, funds (such
as a Fund) and their service providers may be prone to operational and
information security risks resulting from cyber-attacks and/or technological
malfunctions. In general, cyber-attacks are deliberate,
87
but
unintentional events may have similar effects. Cyber-attacks include, among
others, stealing or corrupting data maintained online or digitally, preventing
legitimate users from accessing information or services on a website, releasing
confidential information without authorization, and causing operational
disruption. Cybersecurity incidents may allow an unauthorized party to gain
access to Fund assets or proprietary information, or cause a Fund, the Adviser,
the Sub-Adviser and/or other service providers (including custodians and
financial intermediaries) to suffer data breaches or data corruption.
Additionally, cybersecurity failures or breaches of the electronic systems of a
Fund, the Adviser, the Sub-Adviser or a Fund’s other service providers, market
makers, APs, a Fund’s primary listing exchange or the issuers of securities in
which such Fund invests have the ability to disrupt and negatively affect the
Fund’s business operations, including the ability to purchase and sell Shares,
potentially resulting in financial losses to the Fund and its shareholders. For
instance, cyber-attacks or technical malfunctions may interfere with the
processing of shareholder or other transactions, affect a Fund’s ability to
calculate its NAV, cause the release of private shareholder information or
confidential Fund information, impede trading, cause reputational damage, and
subject a Fund to regulatory fines, penalties or financial losses, reimbursement
or other compensation costs, and additional compliance costs. Cyber-attacks or
technical malfunctions may render records of Fund assets and transactions,
shareholder ownership of Shares, and other data integral to the functioning of a
Fund inaccessible or inaccurate or incomplete. A Fund also may incur substantial
costs for cybersecurity risk management to prevent cyber incidents in the
future. A Fund and its respective shareholders could be negatively impacted as a
result.
•Equity
Market Risk.
Each Fund invests in options that derive their performance from the S&P 500
Price Index, which is made up of common stocks. Common stocks are susceptible to
general stock market fluctuations and to volatile increases and decreases in
value as market confidence in and perceptions of their issuers change. These
investor perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises. Common stocks generally expose
their holder to greater risk than preferred stocks and debt obligations of the
issuer because common stockholders, or holders of equivalent interests,
generally have inferior rights to receive payments from issuers in comparison
with the rights of preferred stockholders, bondholders, and other creditors of
such issuers.
The
respiratory illness COVID-19 has spread globally for over two years, resulting
in a global pandemic and major disruption to economies and markets around the
world, including the United States. During this time, financial markets have
experienced extreme volatility and severe losses, and trading in many
instruments has been disrupted or suspended. Liquidity for many instruments has
been greatly reduced for periods of time. Some sectors of the economy and
individual issuers have experienced particularly large losses. Governments and
central banks, including the Federal Reserve in the U.S., have taken
extraordinary and unprecedented actions to support local and global economies
and the financial markets. The impact of these measures, and whether they will
be effective to mitigate the economic and market disruption, will not be known
for some time. However, the rapid COVID-19 vaccination rollout in the United
States and certain other developed countries, coupled with the passage of
stimulus programs in the U.S. and abroad, have resulted in the re-opening of
businesses, a reduction in quarantine and masking requirements, increased
consumer demand, and the resumption of in-person schooling, travel and events.
As a result, many global economies, including the U.S. economy, have either
re-opened fully or decreased significantly the number of public safety measures
in place that are designed to mitigate virus transmission. Despite these
positive trends, the prevalence of new COVID-19 variants, a failure to achieve
herd immunity, or other unforeseen circumstances may result in the continued
spread of the virus throughout unvaccinated populations or a resurgence in
infections among vaccinated individuals. As a result, it remains unclear if
recent positive trends will continue in developed markets and whether such
trends will spread world-wide to countries with limited access to effective
vaccines that are still experiencing rising COVID-19 hospitalizations and
deaths.
•ETF
Risks.
Each Fund is an ETF and, as a result of its structure, is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk.
The Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Investors buying or selling Shares in the secondary market will pay brokerage
commissions or other charges imposed by brokers, as determined by that broker.
Brokerage commissions are often a fixed amount and may be a significant
proportional cost for investors seeking to buy or sell relatively small amounts
of Shares. In addition, secondary market investors also will incur the cost of
the difference between the price at which an investor is willing to buy Shares
(the “bid” price) and the price at which an investor is willing to sell Shares
(the “ask” price). This difference in bid and ask prices is often referred to as
the “spread” or “bid/ask spread.” The bid/ask spread varies over time for Shares
based on trading volume and market liquidity and is generally lower if Shares
have more trading volume and market liquidity and higher if Shares have little
trading volume and market liquidity. Further, a relatively small investor base
in the Fund, asset swings in the Fund and/or increased market volatility may
cause increased bid/ask spreads. Due to the costs
88
of
buying or selling Shares, including bid/ask spreads, frequent trading of Shares
may significantly reduce investment results and an investment in Shares may not
be advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility or periods of
steep market declines and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant. The market price of Shares during the trading day, like the price
of any exchange-traded security, includes a “bid/ask” spread charged by the
exchange specialist, market makers or other participants that trade Shares. In
times of severe market disruption, the bid/ask spread can increase
significantly. At those times, Shares are most likely to be traded at a discount
to NAV, and the discount is likely to be greatest when the price of Shares is
falling fastest, which may be the time that you most want to sell your Shares.
The Adviser believes that, under normal market conditions, large market price
discounts or premiums to NAV will not be sustained because of arbitrage
opportunities.
◦Trading
Risk.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can
be no assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 500®
Index during a single day reaches certain thresholds (e.g.,
7%, 13%, and 20%). Additional rules applicable to the Exchange may halt trading
in Shares when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance that Shares will trade with
any volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than
Shares.
•Limited
Operating History. Each
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk.
Each Fund is actively managed and may not meet its investment objective based on
the investment Adviser’s and Sub-Adviser’s success or failure to implement
investment strategies for the Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. A Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
economic, political and global macro factors, including public health issues,
growth concerns in the U.S. and overseas, uncertainties regarding interest
rates, trade tensions and the threat of tariffs imposed by the U.S. and other
countries. In addition, local, regional or global events such as war, including
Russia’s invasion of Ukraine, acts of terrorism, spread of infectious diseases
or other public health issues, recessions, rising inflation, or other events
could have a significant negative impact on the performance of the Fund and its
investments. These developments as well as other events could result in further
market volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets, which could have an adverse effect on a Fund.
The
COVID-19 pandemic has significantly impacted economies and markets around the
world, including the United States. The pandemic has resulted in a wide range of
social and economic disruptions, including closed borders, voluntary or
compelled quarantines of large populations, stressed healthcare systems, reduced
or prohibited domestic or international travel, supply chain disruptions, and
so-called “stay-at-home” orders throughout much of the United States and many
other countries. Financial markets have experienced extreme volatility and
severe losses, and trading in many instruments has been disrupted. Some sectors
of the economy and individual issuers have experienced particularly large
losses. Such disruptions may continue for an extended period of time or reoccur
in the future to a similar or greater extent. Liquidity for many instruments has
been greatly reduced for periods of time. In response to these disruptions, the
U.S. government and the Federal Reserve have taken extraordinary actions to
support the domestic economy and financial markets. It is unknown how long
circumstances related to the COVID-19 pandemic will persist, whether they will
reoccur in the future, whether efforts to support the economy and financial
markets will be successful, and what additional implications may follow from the
pandemic. The impact of these events and other epidemics or pandemics in the
future could adversely affect Fund performance.
•Non-Diversification
Risk.
Because each Fund is “non-diversified,” it may invest a greater percentage of
its assets in the securities of a single issuer or a smaller number of issuers
than if it was a diversified fund. As a result, a Fund may be more exposed to
the risks associated with and developments affecting an individual issuer or a
smaller number of issuers than a fund
89
that
invests more widely. This may increase a Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
a Fund’s performance.
•Options
Tax Risk. A
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by a Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment for shareholders that are individuals and
would not be eligible for the dividends received deduction for corporate
shareholders. In addition, generally, straddles are subject to certain rules
that may affect the amount, character and timing of a Fund’s gains and losses
with respect to straddle positions by requiring, among other things, that: (1)
any loss realized on disposition of one position of a straddle may not be
recognized to the extent that such Fund has unrealized gains with respect to the
other position in such straddle; (2) such Fund’s holding period in straddle
positions be suspended while the straddle exists (possibly resulting in a gain
being treated as short-term capital gain rather than long-term capital gain);
(3) the losses recognized with respect to certain straddle positions that are
part of a mixed straddle and that are not subject to Section 1256 of the
Internal Revenue Code of 1986, as amended (the “Code”) be treated as 60%
long-term and 40% short-term capital loss; (4) losses recognized with respect to
certain straddle positions that would otherwise constitute short-term capital
losses be treated as long-term capital losses; and (5) the deduction of interest
and carrying charges attributable to certain straddle positions may be
deferred.
•Portfolio
Turnover Risk.
Because
each Fund may “turn over” some or all of its options as frequently as monthly, a
Fund may incur high levels of transaction costs from commissions or mark-ups in
the bid/offer spread. Higher portfolio turnover may result in a Fund paying
higher levels of transaction costs and generating greater tax liabilities for
shareholders. Portfolio turnover risk may cause a Fund’s performance to be less
than you expect. While the turnover of the warrants is not deemed “portfolio
turnover” for accounting purposes, the economic impact to a Fund is similar to
what could occur if such Fund experienced high portfolio turnover (e.g.,
in excess of 100% per year).
•Tax
Efficiency Risk. A
significant portion of income received from each Fund may be subject to tax at
effective tax rates that are higher than the rates that would apply if a Fund
were to engage in a different investment strategy. Additionally, each Fund’s
investment strategy may require it to effect redemptions, in whole or in part,
for cash. As a result, a Fund may be required to sell portfolio securities to
obtain the cash needed to distribute redemption proceeds. This may cause a Fund
to recognize investment income and/or capital gains or losses that it might not
have recognized if it had completely satisfied the redemption in-kind. As a
result, a Fund may be less tax efficient if it includes such a cash payment than
if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by a Fund and negatively impact Fund performance. You
should consult your tax advisor as to the tax consequences of purchasing,
owning, and selling Shares.
•U.S.
Treasury Obligations Risk.
U.S. Treasury obligations may differ from other fixed income securities in their
interest rates, maturities, times of issuance and other characteristics. Similar
to other issuers, changes to the financial condition or credit rating of the
U.S. government may cause the value of a Fund’s U.S. Treasury obligations to
decline. The total public debt of the United States as a percentage of gross
domestic product has grown rapidly since the beginning of the 2008 financial
downturn and is expected to rise even further as the U.S. government implements
crisis-fighting efforts in response to the COVID-19 outbreak. Although high debt
levels do not necessarily indicate or cause economic problems, they may create
certain systemic risks if sound debt management practices are not implemented. A
high national debt level may increase market pressures to meet government
funding needs, which may drive debt cost higher and cause a country to sell
additional debt, thereby increasing refinancing risk. A high national debt also
raises concerns that a government will not be able to make principal or interest
payments when they are due. In the worst case, unsustainable debt levels can
cause a decline in the value of the dollar (which may lead to inflation), and
can prevent the U.S. government from implementing effective counter-cyclical
fiscal policy in economic downturns. U.S. Treasury securities are currently
given the top rating by all major ratings agencies except Standard & Poor’s
Ratings Services, which rates them AA+, one grade below their top rating. Since
downgrading U.S. Treasury securities from AAA to AA+ in 2011, Standard &
Poor’s Ratings Services has affirmed its rating. A downgrade of the ratings of
U.S. government debt obligations, such as U.S. Treasury obligations, which are
often used as a benchmark for other borrowing arrangements, could result in
higher interest rates for individual and corporate borrowers, cause disruptions
in the international bond markets and have a substantial negative effect on the
U.S. economy. A downgrade of U.S. Treasury securities from another ratings
agency or a further downgrade below AA+ rating by Standard & Poor’s Ratings
Services may cause the value of a Fund’s U.S. Treasury obligations to
decline.
In
response to the outbreak of COVID-19, as with other serious economic
disruptions, governmental authorities and regulators are enacting significant
fiscal and monetary policy changes, including providing direct capital infusions
into companies, creating new monetary programs and lowering interest rates
considerably. These actions present heightened risks to fixed-income and debt
instruments, and such risks could be even further heightened if these actions
are unexpectedly or suddenly reversed or are ineffective in achieving their
desired outcomes. In light of these actions and current conditions, interest
rates and bond yields in the United States and many other countries are at or
near historic lows, and in some cases, such rates and yields are negative,
90
magnifying
interest rate risk and diminishing yield and performance. The current
environment has also caused volatility and illiquidity in the markets. In
particular, in March 2020, the COVID-19 crisis triggered a short period of heavy
investor demand for trading in U.S. Treasury obligations, leading to reduced
liquidity in the Treasuries market during that period.
PORTFOLIO
HOLDINGS INFORMATION
Information
about each Fund’s daily portfolio holdings is available at www.true-shares.com.
A complete description of the Funds’ policies and procedures with respect to the
disclosure of the Funds’ portfolio holdings is available in the Funds’ Statement
of Additional Information (the “SAI”).
MANAGEMENT
Investment
Adviser
TrueMark
Investments, LLC, a Delaware limited liability company located at 433 West Van
Buren Street, 1150-E, Chicago, Illinois 60607, serves as the investment adviser
for each Fund. The Adviser, subject to the oversight of the Board, provides an
investment management program for each Fund and co-manages the day-to-day
investment of the Funds’ assets. The Adviser also arranges for transfer agency,
custody, fund administration, distribution and all other services necessary for
each Fund to operate. An SEC-registered investment adviser formed in 2019, the
Adviser is majority owned by the TrueMark Group, LLC, which in turn is
controlled by Michael Loukas.
The
Adviser continuously reviews, supervises, and administers each Fund’s investment
program. In particular, the Adviser provides investment and operational
oversight of the Sub-Adviser. The Board supervises the Adviser and establishes
policies that the Adviser must follow in its day-to-day management activities.
For the services it provides to the Funds, TrueMark is entitled to a unified
management fee, which is calculated daily and paid monthly, at an annual rate of
0.79% of each Fund’s average daily net assets.
Pursuant
to an investment advisory agreement between the Trust, on behalf of each Fund,
and the Adviser (the “Advisory Agreement”), the Adviser has agreed to pay all
expenses of the Funds except the fee payable to the Adviser under the Advisory
Agreement, interest charges on any borrowings, dividends and other expenses on
securities sold short, taxes, brokerage commissions and other expenses incurred
in placing orders for the purchase and sale of securities and other investment
instruments, acquired fund fees and expenses, accrued deferred tax liability,
extraordinary expenses, and distribution (12b-1) fees and expenses (if any). The
Adviser, in turn, compensates the Sub-Adviser from the management fee it
receives.
A
discussion of the basis for the Board’s approval of the Advisory Agreement is
available in the Funds’ Semi-Annual
Report to Shareholders
for the fiscal period ended June 30, 2022.
Sub-Adviser
SpiderRock
Advisors, LLC, a Delaware limited liability company located at 300 South Wacker
Drive, Suite 2840, Chicago, Illinois 60606, co-manages the day-to-day investment
of the Funds’ assets, subject to the supervision of the Adviser and the Board.
The Sub-Adviser is an SEC-registered investment adviser formed in 2014. The
Sub-Adviser’s primary shareholders are Eric Metz, SpiderRock Holdings, LLC, Web
Holdings, LLC, David Donnelly, and Bruce Mumford.
The
Sub-Adviser is responsible for trading the Funds’ portfolio investments,
including selecting broker-dealers to execute purchase and sale transactions.
For its services, the Sub-Adviser is entitled to a fee payable by the Adviser,
which fee is calculated daily and paid monthly, at an annual rate of 0.34% on
the first $150 million in average daily net assets of each Fund and 0.39% on
average daily net assets of each Fund over $150 million.
A
discussion of the basis for the Board’s approval of the Sub-Advisory Agreement
is available in the Funds’ Semi-Annual
Report to Shareholders
for the fiscal period ended June 30, 2022.
Portfolio
Managers
The
individuals identified below are jointly and primarily responsible for the
day-to-day management for the Funds.
Mr.
Metz oversees all investment strategies and portfolio management activities at
SpiderRock. Prior to joining SpiderRock, he was the Derivatives Strategist and
Portfolio Manager at RiverNorth Capital Management, managing both mutual fund
and hedge fund assets. Mr. Metz began his career with the Chicago Trading
Company on the floors of the Chicago Mercantile Exchange (CME) and the Chicago
Board Options Exchange (CBOE). After his time on the trading floors, Mr. Metz
was a senior trader and partner at Ronin Capital and Bengal Capital, both
proprietary trading firms specializing in volatility arbitrage. He graduated,
Magna Cum Laude, from the University of Michigan with a BSE in Industrial and
Operations Engineering. Mr. Metz earned his MSE, with honors, in Industrial and
Operational Engineering, and was enrolled in the program’s PhD program. He is a
Chartered Financial Analyst, a member of the CFA Institute, the CFA Society of
Chicago and a board member of the OIC Institutional Advisory
Council.
Mr.
Sloneker joined SpiderRock in 2019 and serves as portfolio manager. Prior to
joining SpiderRock, he was the Head Quantitative Trader for a series of
SpiderRock trading subsidiaries. Mr. Sloneker began his career as a Trader and
Portfolio Manager for hedge funds JMG Triton Offshore and St. Claire Capital
Management in San Francisco, specializing in a broad variety of convertible
91
arbitrage
strategies. He later created and managed a volatility strategy for Toronto
Dominion (TD) Securities. Mr. Sloneker graduated from the California
Institute of Technology (Caltech) with a B.S. in Economics.
The
Funds’ SAI provides additional information about the Portfolio Managers’
compensation structure, other accounts managed by the Portfolio Managers, and
the Portfolio Managers’ ownership of Shares.
Other
Service Providers
Foreside
Fund Services, LLC, a wholly-owned subsidiary of Foreside Financial Group, LLC
(doing business as ACA Group), (the “Distributor”) serves as the principal
underwriter and distributor of each Fund’s Shares. The Distributor’s principal
address is Three Canal Plaza, Suite 100, Portland, Maine 04101. The Distributor
will not distribute Shares in less than whole Creation Units, and it does not
maintain a secondary market in the Shares. The Distributor is a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
Financial Industry Regulatory Authority, Inc. (“FINRA”). The Distributor has no
role in determining the policies of the Funds or the securities that are
purchased or sold by a Fund and is not affiliated with the Adviser, Sub-Adviser,
or any of their respective affiliates.
U.S.
Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services,
located at 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as the
administrator and transfer agent for the Funds.
U.S.
Bank National Association, located at 1555 North Rivercenter Drive, Suite 302,
Milwaukee, Wisconsin 53212, serves as the custodian for the Funds.
Morgan,
Lewis & Bockius LLP, located at 1111 Pennsylvania Avenue, N.W., Washington,
D.C. 20004, serves as legal counsel to the Trust.
Cohen
& Company, Ltd., located at 1350 Euclid Avenue, Suite 800, Cleveland, Ohio
44115, serves as the Funds’ independent registered public accounting firm. The
independent registered public accounting firm is responsible for auditing the
annual financial statements of the Funds.
HOW
TO BUY AND SELL SHARES
Each
Fund issues and redeems Shares only in Creation Units at the NAV per share next
determined after receipt of an order from an AP. Only APs may acquire Shares
directly from a Fund, and only APs may tender their Shares for redemption
directly to a Fund, at NAV. APs must be a member or participant of a clearing
agency registered with the SEC and must execute a Participant Agreement that has
been agreed to by the Distributor, and that has been accepted by the Funds’
transfer agent, with respect to purchases and redemptions of Creation Units.
Once created, Shares trade in the secondary market in quantities less than a
Creation Unit.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Individual Shares are listed for trading on the secondary market on the Exchange
and can be bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the
bid and the offer price in the secondary market on each leg of a round trip
(purchase and sale) transaction. In addition, because secondary market
transactions occur at market prices, you may pay more than NAV when you buy
Shares and receive less than NAV when you sell those Shares.
Book
Entry
Shares
are held in book-entry form, which means that no stock certificates are issued.
The Depository Trust Company (the “DTC”) or its nominee is the record owner of
all outstanding Shares.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares. DTC’s
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other institutions that directly or indirectly
maintain a custodial relationship with DTC. As a beneficial owner of Shares, you
are not entitled to receive physical delivery of stock certificates or to have
Shares registered in your name, and you are not considered a registered owner of
Shares. Therefore, to exercise any right as an owner of Shares, you must rely
upon the procedures of DTC and its participants. These procedures are the same
as those that apply to any other securities that you hold in book entry or
“street name” through your brokerage account.
Frequent
Purchases and Redemptions of Shares
The
Funds impose no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly from the Funds, are an essential part of the ETF process and
help keep Share trading prices in line with NAV. As such, the Funds accommodate
frequent purchases and redemptions by APs. However, frequent purchases and
redemptions for cash may increase tracking error and portfolio transaction costs
and lead to the realization of capital gains. The Funds’ fair valuation of their
holdings consistent with the 1940 Act and Rule 2a-5 thereunder and their ability
to impose transaction fees on purchases and redemptions of Creation Units to
cover the custodial and other costs incurred by the Funds in effecting trades
help to minimize the potential adverse consequences of frequent purchases and
redemptions.
92
Determination
of NAV
Each
Fund’s NAV is calculated as of the scheduled close of regular trading on the New
York Stock Exchange (the “NYSE”), generally 4:00 p.m. Eastern time, each day the
NYSE is open for business. The NAV for a Fund is calculated by dividing the
applicable Fund’s net assets by its Shares outstanding.
In
calculating its NAV, each Fund generally values its assets on the basis of
market quotations, last sale prices, or estimates of value furnished by a
pricing service or brokers who make markets in such instruments. For example, a
Fund generally values equity securities at their readily available market
quotations. If such information is not available for an investment held by a
Fund or is determined to be unreliable, the investment will be valued by the
Adviser at fair value pursuant to procedures established by the Adviser and
approved by the Board (as described below).
The
Adviser uses pricing information provided by Cboe to assist it in determining
the fair value of FLEX Options held by the Funds. Cboe, in turn, uses an equity
option valuation model that takes into consideration, among other factors, the
calculated volatility value of an option and the reference asset (i.e.,
the S&P 500 Price Index), the time between the effective date of the option
and its expiration, and the agreed upon strike price. All inputs used by Cboe in
valuing the FLEX Options are considered observable market inputs.
Fair
Value Pricing
The
Adviser has been designated by the Board as the valuation designee for the Funds
pursuant to Rule 2a-5 under the 1940 Act. In its capacity as valuation designee,
the Adviser has adopted procedures and methodologies to fair value Fund
investments whose market prices are not “readily available” or are deemed to be
unreliable. For example, such circumstances may arise when: (i) an investment
has been de-listed or has had its trading halted or suspended; (ii) an
investment’s primary pricing source is unable or unwilling to provide a price;
(iii) an investment’s primary trading market is closed during regular market
hours; or (iv) an investment’s value is materially affected by events occurring
after the close of the investment’s primary trading market. Generally, when fair
valuing an investment held by a Fund, the Adviser will take into account all
reasonably available information that may be relevant to a particular valuation
including, but not limited to, fundamental analytical data regarding the issuer,
information relating to the issuer’s business, recent trades or offers of the
investment, general and/or specific market conditions and the specific facts
giving rise to the need to fair value the investment. Fair value determinations
are made in good faith and in accordance with the fair value methodologies
established by the Adviser. Due to the subjective and variable nature of
determining the fair value of a security or other investment, there can be no
assurance that the Adviser’s determined fair value will match or closely
correlate to any market quotation that subsequently becomes available or the
price quoted or published by other sources. In addition, a Fund may not be able
to obtain the fair value assigned to an investment if the Fund were to sell such
investment at or near the time its fair value is determined.
Investments
by Registered Investment Companies
Section
12(d)(1) of the 1940 Act and the rules thereunder restrict investments by
registered investment companies in the securities of other investment companies.
Registered investment companies are permitted to invest in a Fund beyond the
limits set forth in section 12(d)(1), subject to certain terms and conditions,
including that such investment companies enter into an agreement with the
Funds.
Delivery
of Shareholder Documents – Householding
Householding
is an option available to certain investors of the Funds. Householding is a
method of delivery, based on the preference of the individual investor, in which
a single copy of certain shareholder documents can be delivered to investors who
share the same address, even if their accounts are registered under different
names. Householding for the Funds is available through certain broker-dealers.
If you are interested in enrolling in householding and receiving a single copy
of prospectuses and other shareholder documents, please contact your
broker-dealer. If you are currently enrolled in householding and wish to change
your householding status, please contact your broker-dealer.
DIVIDENDS,
DISTRIBUTIONS, AND TAXES
Dividends
and Distributions
Each
Fund intends to pay out dividends, if any, and distribute any net realized
capital gains to its shareholders at least annually. Each Fund will declare and
pay capital gain distributions in cash, if any. Distributions in cash may be
reinvested automatically in additional whole Shares only if the broker through
whom you purchased Shares makes such option available. Your broker is
responsible for distributing the income and capital gain distributions to
you.
Taxes
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Funds. Your investment
in a Fund may have other tax implications. Please consult your tax advisor about
the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws. This summary does not apply
to Shares held in an IRA or other tax-qualified plans, which are generally not
subject to current tax. Transactions relating to Shares held in such accounts
may, however, be taxable at some time in the future. This summary is based on
current tax laws, which may change.
93
Each
Fund has elected and intends to qualify each year for treatment as a regulated
investment company (“RIC”). If it meets certain minimum distribution
requirements, a RIC is not subject to tax at the fund level on income and gains
from investments that are timely distributed to shareholders. However, a Fund’s
failure to qualify as a RIC or to meet minimum distribution requirements would
result (if certain relief provisions were not available) in fund-level taxation
and, consequently, a reduction in income available for distribution to
shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA, you need to be aware of the possible tax consequences
when a Fund makes distributions, when you sell your Shares listed on the
Exchange, and when you purchase or redeem Creation Units (APs only).
Tax
Treatment
of the Options
A
Fund’s investments in offsetting positions with respect to the S&P 500 Price
Index may be considered “straddles” for U.S. federal income tax purposes. If
positions held by a Fund were treated as straddles for federal income tax
purposes, or a Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in applicable Treasury regulations, dividends on stocks
that are part of such positions would not constitute qualified dividend subject
to such favorable income tax treatment for shareholders that are individuals and
would not be eligible for the dividends received deduction for corporate
shareholders.The straddle rules may affect the character of gains (or losses)
realized by a Fund, and losses realized by a Fund on positions that are part of
a straddle may be deferred under the straddle rules, rather than being taken
into account in calculating taxable income for the taxable year in which the
losses are realized. In addition, certain carrying charges (including interest
expense) associated with positions in a straddle may be required to be
capitalized rather than deducted currently. Certain elections that a Fund may
make with respect to its straddle positions may also affect the amount,
character and timing of the recognition of gains or losses from the affected
positions.
The
tax consequences of straddle transactions to a Fund are not entirely clear in
all situations under currently available authority. The straddle rules may
increase the amount of short-term capital gain realized by a Fund, which is
taxed as ordinary income when distributed to U.S. shareholders in a
non-liquidating distribution. Because application of the straddle rules may
affect the character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle positions, if a Fund
makes a non-liquidating distribution of its short-term capital gain, the amount
which must be distributed to U.S. shareholders as ordinary income may be
increased or decreased substantially as compared to a Fund that did not engage
in such transactions.
The
FLEX Options included in the Funds’ portfolios are exchange-traded options.
Under Section 1256 of the Code, certain types of exchange-traded options are
treated as if they were sold (i.e.,
“marked to market”) at the end of each year. Gain or loss is recognized on this
deemed sale. Such treatment could cause a Fund to have taxable income without
receiving cash. In order to maintain its RIC qualification, a Fund must
distribute at least 90% of its income annually. If the Options are subject to
Section 1256 of the Code and a Fund is unable to distribute marked-to-market
gains to its shareholders, the Fund may lose its RIC qualification and be taxed
as a regular corporation. On the other hand, positions that are subject to the
Section 1256 of the Code mark-to-market rules statutorily produce gain or loss
that is 60% long-term capital gain and 40% short-term capital gain. In addition,
offsetting positions that are both subject to Section 1256 of the Code are not
subject to the straddle rules discussed above. Thus, positions subject to
Section 1256 of the Code may force a Fund to make increased distributions, but
also increase the amount of long-term capital gain recognized as compared to
positions subject to the straddle rules.
Taxes
on Distributions
Each
Fund intends to distribute, at least annually, substantially all of its net
investment income and net capital gains income. For federal income tax purposes,
distributions of investment income are generally taxable as ordinary income or
qualified dividend income. Taxes on distributions of capital gains (if any) are
determined by how long a Fund owned the investments that generated them, rather
than how long a shareholder has owned his or her Shares. Sales of assets held by
a Fund for more than one year generally result in long-term capital gains and
losses, and sales of assets held by a Fund for one year or less generally result
in short-term capital gains and losses. Distributions of a Fund’s net capital
gain (the excess of net long-term capital gains over net short-term capital
losses) that are reported by such Fund as capital gain dividends (“Capital Gain
Dividends”) will be taxable as long-term capital gains, which for non-corporate
shareholders are subject to tax at reduced rates of up to 20% (lower rates apply
to individuals in lower tax brackets). Distributions of short-term capital gain
will generally be taxable as ordinary income. Dividends and distributions are
generally taxable to you whether you receive them in cash or reinvest them in
additional Shares.
Distributions
reported by a Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income derived from dividends paid by U.S. corporations or
certain foreign corporations that are either incorporated in a U.S. possession
or eligible for tax benefits under certain U.S. income tax treaties. In
addition, dividends that a Fund receives in respect of stock of certain foreign
corporations may be qualified dividend income if that stock is readily tradable
on an established U.S. securities market. Corporate shareholders may be entitled
to a dividends received deduction for the portion of dividends they receive from
a Fund that are attributable to dividends received by the Fund from U.S.
corporations, subject to certain limitations. A Fund’s option strategy may
prevent its income from being eligible for treatment as qualified dividend
income in the hands of non-corporate shareholders or eligible for the dividends
received deduction for corporate shareholders.
94
The
determination of the value and the identity of the issuer of certain derivative
investments are often unclear for purposes of the “asset test” (described in the
section entitled “Federal Income Taxes” in the SAI). Each Fund intends to
carefully monitor such investments to ensure that it is adequately diversified
under the “asset test.” However, there are no assurances that the Internal
Revenue Service will agree with the Fund’s determination of the “asset test”
with respect to such derivatives.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from a Fund.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable even if they are paid from income or gains earned by a Fund before your
investment (and thus were included in the Shares’ NAV when you purchased your
Shares).
You
may wish to avoid investing in a Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your
investment.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
a Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. Gains from the sale or other disposition of
your Shares from non-U.S. shareholders generally are not subject to U.S.
taxation, unless you are a nonresident alien individual who is physically
present in the U.S. for 183 days or more per year. A Fund may, under certain
circumstances, report all or a portion of a dividend as an “interest-related
dividend” or a “short-term capital gain dividend,” which would generally be
exempt from this 30% U.S. withholding tax, provided certain other requirements
are met. Different tax consequences may result if you are a foreign shareholder
engaged in a trade or business within the United States or if a tax treaty
applies.
Under
legislation generally known as “FATCA” (the Foreign Account Tax Compliance Act),
a Fund is required to withhold 30% of certain ordinary dividends it pays to
shareholders that are foreign entities and that fail to meet prescribed
information reporting or certification requirements.
A
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage of the taxable distributions and sale proceeds paid to any
shareholder who fails to properly furnish a correct taxpayer identification
number, who has underreported dividend or interest income, or who fails to
certify that the shareholder is not subject to such withholding.
Taxes
When Shares are Sold on the Exchange
Provided
that a shareholder holds Shares as capital assets, any capital gain or loss
realized upon a sale or exchange of Shares generally is treated as a long-term
capital gain or loss if Shares have been held for more than one year and as a
short-term capital gain or loss if Shares have been held for one year or less.
However, any capital loss on a sale of Shares held for six months or less is
treated as long-term capital loss to the extent of Capital Gain Dividends paid
with respect to such Shares. Any loss realized on a sale will be disallowed to
the extent Shares of a Fund are acquired, including through reinvestment of
dividends, within a 61-day period beginning 30 days before and ending 30 days
after the disposition of Shares. The ability to deduct capital losses may be
limited.
The
cost basis of Shares of a Fund acquired by purchase will generally be based on
the amount paid for the Shares and then may be subsequently adjusted for other
applicable transactions as required by the Code. The difference between the
selling price and the cost basis of Shares generally determines the amount of
the capital gain or loss realized on the sale or exchange of Shares. Contact the
broker through whom you purchased your Shares to obtain information with respect
to the available cost basis reporting methods and elections for your
account.
Taxes
on Purchases and Redemptions of Creation Units
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The IRS may
assert, however, that a loss that is realized upon an exchange of securities for
Creation Units may not be currently deducted under the rules governing “wash
sales” (for an AP who does not mark-to-market their holdings) or on the basis
that there has been no significant change in economic position. APs exchanging
securities should consult their own tax advisor with respect to whether the wash
sales rule applies and when a loss might be deductible.
A
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. A Fund may sell
portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause a Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in-kind. As a result, a Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
95
Net
Investment Income Tax
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8% tax
on all or a portion of their “net investment income,” which includes interest,
dividends, and certain capital gains (generally including capital gains
distributions and capital gains realized on the sale of Shares). This 3.8% tax
also applies to all or a portion of the undistributed net investment income of
certain shareholders that are estates and trusts.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in each Fund. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Fund
distributions and sales of Shares. Consult your personal tax advisor about the
potential tax consequences of an investment in Shares
under
all applicable tax laws. For more information, please see the section entitled
“Federal Income Taxes” in the SAI.
DISTRIBUTION
PLAN
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, each Fund is authorized
to pay an amount up to 0.25% of its average daily net assets each year for
certain distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Funds, and there are no plans to
impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because the fees are paid out of Fund assets, over time these fees will
increase the cost of your investment and may cost you more than certain other
types of sales charges.
PREMIUM/DISCOUNT
INFORMATION
Information
regarding how often each Fund’s Shares traded on the Exchange at a price above
(i.e.,
at a premium) or below (i.e.,
at a discount) its NAV is available on the Funds’ website at
www.true-shares.com.
ADDITIONAL
NOTICES
Shares
are not sponsored, endorsed, or promoted by the Exchange. The Exchange is not
responsible for, nor has it participated in the determination of the timing,
prices, or quantities of Shares to be issued, nor in the determination or
calculation of the equation by which Shares are redeemable. The Exchange has no
obligation or liability to owners of Shares in connection with the
administration, marketing, or trading of Shares.
Without
limiting any of the foregoing, in no event shall the Exchange have any liability
for any lost profits or indirect, punitive, special, or consequential damages
even if notified of the possibility thereof.
The
Adviser and the Funds make no representation or warranty, express or implied, to
the owners of Shares or any member of the public regarding the advisability of
investing in securities generally or in the Funds particularly.
FINANCIAL
HIGHLIGHTS
The
financial highlights table is intended to help you understand each Fund’s
financial performance since the Fund commenced operations. Certain information
reflects financial results for a single Fund share. The total returns in each
Fund’s table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Cohen & Company, Ltd.,
the Funds’ independent registered public accounting firm, whose report, along
with the Funds’ financial statements, is included in the Funds’ Annual
Report,
which is available upon request.
96
TrueShares
Structured Outcome ETFs
Financial
Highlights
| Per Share Operating Performance (For a share outstanding throughout each period) | |||||||||||||||||||||||
| Income from Investment Operations | Less Distributions Paid From: | ||||||||||||||||||||||
| Net
Asset Value, Beginning of Period |
Net
investment
income (loss)(1) |
Net realized and unrealized gain (loss) on investments | Total from investment operations | Net Investment Income |
Net realized gains | Total distributions paid | |||||||||||||||||
| TrueShares Structured Outcome (July) ETF | |||||||||||||||||||||||
| For the year 01/01/2022 - 12/31/2022 | $35.21 | 0.16 | (3.51) | (3.35) | (0.02) | — | (0.02) | ||||||||||||||||
| For the year 01/01/2021 - 12/31/2021 | $29.20 | (0.25) | 6.25 | 6.00 | — | — | — | ||||||||||||||||
|
For
the period 7/01/2020(7)
- 12/31/2020 |
$25.00 | (0.09) | 4.29 | 4.20 | — | — | — | ||||||||||||||||
| TrueShares Structured Outcome (August) ETF | |||||||||||||||||||||||
| For the year 01/01/2022 - 12/31/2022 | $33.70 | 0.16 | (3.72) | (3.56) | (0.12) | — | (0.12) | ||||||||||||||||
| For the year 01/01/2021 - 12/31/2021 | $27.89 | (0.24) | 6.04 | 5.80 | — | — | — | ||||||||||||||||
|
For
the period 8/03/2020(7)
- 12/31/2020 |
$25.00 | (0.08) | 2.96 | 2.88 | — | — | — | ||||||||||||||||
| TrueShares Structured Outcome (September) ETF | |||||||||||||||||||||||
| For the year 01/01/2022 - 12/31/2022 | $32.33 | 0.18 | (2.88) | (2.70) | (0.20) | — | (0.20) | ||||||||||||||||
| For the year 01/01/2021 - 12/31/2021 | $26.63 | (0.23) | 5.94 | 5.71 | — | (0.02) | (0.02) | ||||||||||||||||
|
For
the period 9/01/2020(7)
- 12/31/2020 |
$25.00 | (0.06) | 1.68 | 1.62 | — | — | — | ||||||||||||||||
| TrueShares Structured Outcome (October) ETF | |||||||||||||||||||||||
| For the year 01/01/2022 - 12/31/2022 | $32.75 | 0.14 | (3.51) | (3.37) | (0.20) | — | (0.20) | ||||||||||||||||
| For the year 01/01/2021 - 12/31/2021 | $27.21 | (0.23) | 5.77 | 5.54 | — | — | — | ||||||||||||||||
|
For
the period 10/01/2020(7)
- 12/31/2020 |
$25.00 | (0.05) | 2.26 | 2.21 | — | — | — | ||||||||||||||||
(1)Per
share net investment income (loss) was calculated using average shares
outstanding.
(2)Annualized
for periods less than one year.
(3)Total
return in the table represents the rate that the investor would have earned or
lost on an investment in the Fund, assuming reinvestment of
dividends.
(4)Not
annualized for periods less than one year.
(5)Excludes
in-kind transactions associated with creations and redemptions of the
Fund.
(6)The
returns reflect the actual performance for the period and do not include the
impact of trades executed on the last business day of the period that were
recorded on the first business day of the next period.
(7)Commencement
of operations.
(8)Less
than $0.005.
(9)Includes
interest expense of 0.01%.
97
TrueShares
Structured Outcome ETFs
Financial
Highlights
| Per Share Operating Performance (For a share outstanding throughout each period) | Ratios/Supplemental Data | ||||||||||||||||||||||
| Capital Share Transactions: |
Ratios
to Average Net Assets of:(2) |
||||||||||||||||||||||
| Transaction fees | Net Asset Value, End of Period |
Total
return, at NAV(3)(4) |
Total
return, at Market(3)(4) |
Net
assets, end of period (000’s) |
Expenses | Net investment income (loss) |
Portfolio
turnover rate(4)(5) | ||||||||||||||||
|
0.00(8) |
$31.84 | (9.50)% | (9.35)% | $11,939 | 0.79% | 0.49% | 0% | ||||||||||||||||
| 0.01 | $35.21 | 20.56% | 20.66% | $14,963 | 0.79% | (0.76)% | 1307% | ||||||||||||||||
|
0.00(8) |
$29.20 | 16.81% | 16.55% | $6,571 | 0.79% | (0.68)% | 0% | ||||||||||||||||
|
0.00(8) |
$30.02 | (10.55)% | (10.42)% | $12,761 |
0.80%
(9) |
0.51% | 134% | ||||||||||||||||
| 0.01 | $33.70 | 20.83% | 20.74% | $18,536 | 0.79% | (0.77)% | 1297% | ||||||||||||||||
| 0.01 | $27.89 | 11.57% | 11.31% | $9,065 | 0.79% | (0.73)% | 0% | ||||||||||||||||
|
0.00(8) |
$29.43 | (8.34)% | (8.51)% | $20,598 | 0.79% | 0.60% | 0% | ||||||||||||||||
| 0.01 | $32.33 | 21.47% | 21.83% | $25,861 | 0.79% | (0.76)% | 1301% | ||||||||||||||||
| 0.01 | $26.63 | 6.51% | 6.08% | $10,651 | 0.79% | (0.73)% | 0% | ||||||||||||||||
|
0.00(8) |
$29.18 | (10.31)% | (10.23)% | $4,377 | 0.79% | 0.48% | 0% | ||||||||||||||||
|
0.00(8) |
$32.75 | 20.37% | 20.49% | $8,189 | 0.79% | (0.77)% | 1021% | ||||||||||||||||
|
0.00(8) |
$27.21 | 8.85% | 8.57% | $4,082 | 0.79% | (0.73)% | 0% | ||||||||||||||||
98
TrueShares
Structured Outcome ETFs
Financial
Highlights
| Per Share Operating Performance (For a share outstanding throughout each period) | |||||||||||||||||||||||
| Income from Investment Operations | Less Distributions Paid From: | ||||||||||||||||||||||
| Net
Asset Value, Beginning of Period |
Net
investment
income (loss)(1) |
Net realized and unrealized gain on investments | Total from investment operations | Net Investment Income |
Net realized gains | Total distributions paid | |||||||||||||||||
| TrueShares Structured Outcome (November) ETF | |||||||||||||||||||||||
| For the year 01/01/2022 - 12/31/2022 | $33.37 | 0.07 | (3.30) | (3.23) | (0.07) | — | (0.07) | ||||||||||||||||
| For the year 01/01/2021 - 12/31/2021 | $27.62 | (0.24) | 6.14 | 5.90 | — | (0.17) | (0.17) | ||||||||||||||||
|
For
the period 11/02/2020(7)
- 12/31/2020 |
$25.00 | (0.03) | 2.65 | 2.62 | — | — | — | ||||||||||||||||
| TrueShares Structured Outcome (December) ETF | |||||||||||||||||||||||
| For the year 01/01/2022 - 12/31/2022 | $30.43 | (0.05) | (2.63) | (2.68) | — | (0.39) | (0.39) | ||||||||||||||||
| For the year 01/01/2021 - 12/31/2021 | $25.44 | (0.21) | 5.33 | 5.12 | — | (0.14) | (0.14) | ||||||||||||||||
|
For
the period 12/01/2020(7)
- 12/31/2020 |
$25.00 | (0.02) | 0.46 | 0.44 | — | — | — | ||||||||||||||||
| TrueShares Structured Outcome (January) ETF | |||||||||||||||||||||||
| For the year 01/01/2022 - 12/31/2022 | $29.10 | (0.08) | (3.20) | (3.28) | — | (0.05) | (0.05) | ||||||||||||||||
|
For
the period 01/04/2021(7) -
12/31/2021 |
$25.00 | (0.19) | 5.61 | 5.42 | — | (1.32) | (1.32) | ||||||||||||||||
| TrueShares Structured Outcome (February) ETF | |||||||||||||||||||||||
| For the year 01/01/2022 - 12/31/2022 | $30.15 | (0.02) | (3.09) | (3.11) | — | — | — | ||||||||||||||||
|
For
the period 02/01/2021(7)
- 12/31/2021 |
$25.00 | (0.20) | 5.35 | 5.15 | — | — | — | ||||||||||||||||
| TrueShares Structured Outcome (March) ETF | |||||||||||||||||||||||
| For the year 01/01/2022 - 12/31/2022 | $28.62 | 0.01 | (3.67) | (3.66) | (0.01) | (0.18) | (0.19) | ||||||||||||||||
|
For
the period 03/01/2021(7)
- 12/31/2021 |
$25.00 | (0.17) | 4.48 | 4.31 | — | (0.70) | (0.70) | ||||||||||||||||
(1)Per
share net investment income (loss) was calculated using average shares
outstanding.
(2)Annualized
for periods less than one year.
(3)Total
return in the table represents the rate that the investor would have earned or
lost on an investment in the Fund, assuming reinvestment of
dividends.
(4)Not
annualized for periods less than one year.
(5)Excludes
in-kind transactions associated with creations and redemptions of the
Fund.
(6)The
returns reflect the actual performance for the period and do not include the
impact of trades executed on the last business day of the period that were
recorded on the first business day of the next period.
(7)Commencement
of operations.
(8)Less
than $0.005.
(9)Includes
interest expense of 0.01%.
99
TrueShares
Structured Outcome ETFs
Financial
Highlights
| Per Share Operating Performance (For a share outstanding throughout each period) | Ratios/Supplemental Data | ||||||||||||||||||||||
| Capital Share Transactions: |
Ratios
to Average Net Assets of:(2) |
||||||||||||||||||||||
| Transaction fees | Net Asset Value, End of Period |
Total
return, at NAV(3)(4) |
Total
return, at Market(3)(4) |
Net
assets, end of period (000’s) |
Expenses | Net investment income (loss) |
Portfolio
turnover rate(4)(5) | ||||||||||||||||
|
0.00(8) |
$30.07 | (9.66)% | (9.58)% | $9,772 | 0.79% | 0.23% | 0% | ||||||||||||||||
| 0.02 | $33.37 | 21.40% | 21.46% | $14,181 | 0.79% | (0.76)% | 1302% | ||||||||||||||||
|
0.00(8) |
$27.62 |
10.51%(6) |
10.35%(6) |
$1,381 | 0.79% | (0.75)% | 0% | ||||||||||||||||
|
0.00(8) |
$27.36 | (8.80)% | (8.94)% | $5,472 |
0.80%
(9) |
(0.17)% | 0% | ||||||||||||||||
| 0.01 | $30.43 | 20.17% | 20.15% | $6,086 | 0.79% | (0.77)% | 1286% | ||||||||||||||||
|
0.00(8) |
$25.44 | 1.75% | 1.72% | $5,723 | 0.79% | (0.74)% | 0% | ||||||||||||||||
|
0.00(8) |
$25.77 | (11.29)% | (11.43)% | $3,866 | 0.79% | (0.32)% | 2899% | ||||||||||||||||
|
0.00(8) |
$29.10 | 21.65% | 21.66% | $2,182 | 0.79% | (0.77)% | 0% | ||||||||||||||||
|
0.00(8) |
$27.04 | (10.30)% | (10.32)% | $2,704 | 0.79% | (0.09)% | 1309% | ||||||||||||||||
|
0.00(8) |
$30.15 | 20.58% | 20.56% | $3,768 | 0.79% | (0.77)% | 0% | ||||||||||||||||
|
0.00(8) |
$24.77 | (12.76)% | (12.70)% | $3,716 | 0.79% | 0.03% | 1280% | ||||||||||||||||
| 0.01 | $28.62 | 17.24% | 17.14% | $5,724 | 0.79% | (0.76)% | 0% | ||||||||||||||||
100
TrueShares
Structured Outcome ETFs
Financial
Highlights
| Per Share Operating Performance (For a share outstanding throughout each period) | |||||||||||||||||||||||||||||||||||||||||
| Income from Investment Operations | Less Distributions Paid From: | ||||||||||||||||||||||||||||||||||||||||
| Net
Asset Value, Beginning of Period |
Net
investment
income (loss)(1) |
Net realized and unrealized gain on investments | Total from investment operations | Net Investment Income |
Net realized gains | Total distributions paid | |||||||||||||||||||||||||||||||||||
| TrueShares Structured Outcome (April) ETF | |||||||||||||||||||||||||||||||||||||||||
| For the year 01/01/2022 - 12/31/2022 | $28.40 | 0.14 | (3.40) | (3.26) | (0.15) | — | (0.15) | ||||||||||||||||||||||||||||||||||
|
For
the period 04/01/2021(7)
- 12/31/2021 |
$25.00 | (0.16) | 3.56 | 3.40 | — | — | — | ||||||||||||||||||||||||||||||||||
| TrueShares Structured Outcome (May) ETF | |||||||||||||||||||||||||||||||||||||||||
| For the year 01/01/2022 - 12/31/2022 | $27.09 | 0.13 | (3.93) | (3.80) | (0.16) | — | (0.16) | ||||||||||||||||||||||||||||||||||
|
For
the period 05/03/2021(7)
- 12/31/2021 |
$25.00 | (0.13) | 2.72 | 2.59 | — | (0.51) | (0.51) | ||||||||||||||||||||||||||||||||||
| TrueShares Structured Outcome (June) ETF | |||||||||||||||||||||||||||||||||||||||||
| For the year 01/01/2022 - 12/31/2022 | $27.45 | 0.11 | (3.65) | (3.54) | (0.13) | — | (0.13) | ||||||||||||||||||||||||||||||||||
|
For
the period 06/01/2021(7)
- 12/31/2021 |
$25.00 | (0.12) | 2.66 | 2.54 | — | (0.09) | (0.09) | ||||||||||||||||||||||||||||||||||
(1)Per
share net investment income (loss) was calculated using average shares
outstanding.
(2)Annualized
for periods less than one year.
(3)Total
return in the table represents the rate that the investor would have earned or
lost on an investment in the Fund, assuming reinvestment of
dividends.
(4)Not
annualized for periods less than one year.
(5)Excludes
in-kind transactions associated with creations and redemptions of the
Fund.
(6)Less
than $0.005.
(7)Commencement
of operations.
101
TrueShares
Structured Outcome ETFs
Financial
Highlights
| Per Share Operating Performance (For a share outstanding throughout each period) | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||
| Capital Share Transactions: |
Ratios
to Average Net Assets of:(2) |
|||||||||||||||||||||||||||||||||||||||||||
| Transaction fees | Net Asset Value, End of Period |
Total
return, at NAV(3)(4) |
Total
return, at Market(3)(4) |
Net
assets, end of period (000’s) |
Expenses | Net investment income (loss) |
Portfolio
turnover rate(4)(5) | |||||||||||||||||||||||||||||||||||||
|
0.00(6) |
$24.99 | (11.47)% | (11.43)% | $5,624 | 0.79% | 0.55% | 1153% | |||||||||||||||||||||||||||||||||||||
|
0.00(6) |
$28.40 | 13.59% | 13.49% | $6,389 | 0.79% | (0.77)% | 0% | |||||||||||||||||||||||||||||||||||||
|
0.00(6) |
$23.13 | (14.03)% | (13.99)% | $3,469 | 0.79% | 0.54% | 0% | |||||||||||||||||||||||||||||||||||||
| 0.01 | $27.09 | 10.39% | 10.17% | $5,417 | 0.79% | (0.77)% | 0% | |||||||||||||||||||||||||||||||||||||
|
0.00(6) |
$23.78 | (12.87)% | (12.97)% | $2,972 | 0.79% | 0.46% | 0% | |||||||||||||||||||||||||||||||||||||
|
0.00(6) |
$27.45 | 10.13% | 9.96% | $4,117 | 0.79% | (0.77)% | 0% | |||||||||||||||||||||||||||||||||||||
102
TRUESHARES
STRUCTURED OUTCOME ETFs
|
Adviser |
TrueMark
Investments, LLC
433
West Van Buren Street, 1150-E
Chicago,
Illinois 60607 |
Sub-Adviser |
SpiderRock
Advisors, LLC
300
South Wacker Drive, Suite 2840
Chicago,
Illinois 60606 | ||||||||
|
Transfer
Agent and Administrator |
U.S.
Bancorp Fund Services, LLC
615
East Michigan Street
Milwaukee,
Wisconsin 53202 |
Distributor |
Foreside
Fund Services, LLC
Three
Canal Plaza, Suite 100
Portland,
Maine 04101 | ||||||||
|
Custodian |
U.S.
Bank National Association
1555
North Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212 |
Legal
Counsel |
Morgan,
Lewis & Bockius LLP
1111
Pennsylvania Avenue NW
Washington,
DC 20004-2541 | ||||||||
|
Independent
Registered Public Accounting Firm |
Cohen
& Company, Ltd.
1350
Euclid Avenue, Suite 800
Cleveland,
Ohio 44115 |
||||||||||
Investors
may find more information about the Funds in the following documents:
Statement
of Additional Information: The
Funds’ SAI provides additional details about the investments of the Funds and
certain other additional information. The SAI is on file with the SEC and is
herein incorporated by reference into this Prospectus. It is legally considered
a part of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about each Fund’s investments is available in the Funds’ annual and
semi-annual reports to shareholders. In the Annual
Report,
you will find a discussion of the market conditions and investment strategies
that significantly affected each Fund’s performance.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Funds by contacting the Funds at c/o U.S. Bank
Global Fund Services P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or by calling
1-800-617-0004.
Shareholder
reports and other information about the Funds are also available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov; or
•Free
of charge from the Funds’ Internet web site at www.true-shares.com; or
•For
a fee, by e-mail request to [email protected].
(SEC
Investment Company Act File No. 811-23226)
103