ck0001742912-20201130
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SPUS |
SP Funds S&P 500 Sharia Industry
Exclusions ETF |
SPSK |
SP Funds Dow Jones Global Sukuk
ETF
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each
listed on NYSE Arca, Inc. |
PROSPECTUS
March 31,
2021
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.
Table
of Contents
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SP
Funds S&P 500 Sharia Industry Exclusions ETF - Fund Summary |
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SP
Funds Dow Jones Global Sukuk ETF - Fund Summary |
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Additional
Information About the Funds |
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Additional
Information About Each Index |
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Portfolio
Holdings Information |
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Management |
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Fund
Sponsor |
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How
to Buy and Sell Shares |
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Dividends,
Distributions, and Taxes |
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Distribution |
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Premium/Discount
Information |
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Additional
Notices |
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Financial
Highlights |
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SP
Funds S&P 500 Sharia Industry Exclusions ETF
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Fund Summary
Investment Objective
The SP Funds S&P 500
Sharia Industry Exclusions ETF (the “Fund” or the “Sharia ETF”) seeks to track
the performance, before fees and expenses, of the S&P 500 Shariah Industry
Exclusions Index (the “Index” or the “Shariah
Index”).
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares of the Fund
(“Shares”). You may pay other fees, such as
brokerage commissions and other fees to financial intermediaries, which are not
reflected in the table and Example below.
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Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
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Management
Fees |
0.49% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
0.49% |
Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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1 Year |
3
Years |
5
Years |
10
Years |
$50 |
$157 |
$274 |
$616 |
Portfolio
Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in total annual fund operating expenses or
in the expense example above, affect the Fund’s performance. For the fiscal
period December 17, 2019 (commencement of operations) through November 30, 2020,
the Fund’s portfolio turnover rate was 46% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund uses a “passive management” (or indexing) approach to track the
performance, before fees and expenses, of the Index.
The
Index is composed of the constituents of the S&P 500 Shariah Index other
than those from the following sub-industries: Aerospace & Defense, Financial
Exchanges & Data, and Data Processing & Outsourced Services. The S&P
500 Shariah Index includes all Sharia-compliant constituents of the S&P 500
Index, which consists of approximately 500 leading U.S.-listed companies
representing approximately 80% of the U.S. equity market capitalization. Islamic
religious law, commonly known as “Sharia,” has certain restrictions regarding
finance and commercial activities permitted for Muslims, including interest
restrictions and prohibited industries. Constituents of the S&P 500 Shariah
Index have been screened for non-compliant business activities (companies that
offer products and services that are not compliant with Sharia law such as
gambling, alcohol or tobacco) and compliance with certain accounting-based
financial ratios (companies must satisfy financial ratios governing leverage,
cash, and the share of revenues derived from non-compliant
activities).
The
Index was co-developed in 2019 by S&P Dow Jones Indices LLC (the “Index
Provider”), a division of S&P Global, and ShariaPortfolio, Inc.
(“ShariaPortfolio” or, the “Sub-Adviser”), the Fund’s sub-adviser, and is owned
and administered by the Index Provider.
The
Index is rebalanced and reconstituted monthly and weighted based on the
float-adjusted market capitalization of each constituent. As of February 26,
2021, the Index was composed of 243 constituents.
The
Fund’s Investment Strategy
The
Fund attempts to invest all, or substantially all, of its assets in the
component securities that make up the Index. Under normal circumstances, at
least 80% of the Fund’s total assets will be invested in the component
securities of the Index. The Fund’s investment adviser expects that, over time,
the correlation between the Fund’s performance and that of the Index, before
fees and expenses, will be 95% or better.
The
Fund will generally use a “replication” strategy to achieve its investment
objective, meaning it generally will invest in all of the component securities
of the Index. However, the Fund may use a “representative sampling” strategy,
meaning it may invest in a sample of the securities in the Index whose risk,
return and other characteristics closely resemble the risk, return and other
characteristics of the Index as a whole, when the Fund’s investment adviser
believes it is in the best interests of the Fund (e.g., when replicating
the Index involves practical difficulties or substantial costs, an Index
constituent becomes temporarily illiquid, unavailable, or less liquid, or as a
result of legal restrictions or limitations that apply to the Fund but not to
the Index).
The
Fund generally may invest up to 20% of its total assets in Sharia-compliant
securities or other Sharia-compliant investments not included in the Index, but
which the Fund’s investment adviser believes will help the Fund track the Index.
For example, the Fund may invest in Sharia-compliant securities that are not
components of the Index to reflect various corporate actions and other changes
to the Index (such as reconstitutions, additions, and deletions). Each
investment made by the Fund is pre-screened and approved as Sharia-compliant
before investment by the Fund.
To
the extent the Index concentrates (i.e., holds more than 25% of its total
assets) in the securities of a particular industry or group of related
industries, the Fund will concentrate its investments to approximately the same
extent as the Index. The Fund is deemed to be “non-diversified,” which means
that it may invest a greater percentage of its assets in the securities of a
single issuer or a small number of issuers than if it was a diversified
fund.
Principal Investment
Risks
The
principal risks of investing in the Fund are summarized below. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return, and/or ability to meet its
objective. For more information about the risks of investing in the Fund, see
the section in the Fund’s Prospectus titled “Additional Information About the
Funds—Principal Risks of Investing in Each Fund.”
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.
•Concentration
Risk. The
Fund’s investments will be concentrated in an industry or group of industries to
the extent the Index is so concentrated. In such event, the value of Shares may
rise and fall more than the value of shares that invest in securities of
companies in a broader range of industries.
•Equity
Market Risk. The
Fund will invest in common stocks directly or indirectly through ETFs. Common
stocks are generally exposed to greater risk that other types of securities,
such as preferred stock and debt obligations, because common stockholders
generally have inferior rights to receive payment from specific issuers. The
equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, or sectors in which the Fund invests. Common
stocks, such as those held by the Fund, are generally exposed to greater risk
than other types of securities, such as preferred stock and debt obligations,
because common stockholders generally have inferior rights to receive payment
from issuers. .
•ETF
Risk.
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that are authorized to
purchase and redeem Shares directly from the Fund (known as “Authorized
Participants” or “APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become unable to
process creation and/or redemption orders and no other APs step forward to
perform these services; or (ii) market makers and/or liquidity providers exit
the business or significantly reduce their business activities and no other
entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares. Due
to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be
significant.
◦Trading.
Although Shares are listed on a national securities exchange, such as the NYSE
Arca, Inc. (the “Exchange”), and may be traded on U.S. exchanges other than the
Exchange, there can be no assurance that Shares will trade with any volume, or
at all, on any stock exchange. In stressed market conditions, the liquidity of
Shares may begin to mirror the liquidity of the Fund’s underlying portfolio
holdings, which can be significantly less liquid than Shares.
•General
Market Risk.
Economies and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market, or
other asset classes, due to a number of factors, including inflation (or
expectations for inflation), interest rates, global demand for particular
products or resources, natural disasters or events, pandemic diseases,
terrorism, regulatory events, and government controls.
•Large-Capitalization
Investing Risk.
The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and therefore subject to slower growth during times of
economic expansion. Large-capitalization companies may also be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
•Models
and Data Risk. The
composition of the Index is heavily dependent on proprietary quantitative models
as well as information and data supplied by third parties (“Models and Data”).
When Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon may lead to the inclusion or exclusion of securities from the
Index universe that would have been excluded or included had the Models and Data
been correct and complete. If the composition of the Index reflects such errors,
the Fund’s portfolio can be expected to also reflect the errors.
•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 smaller number of issuers than if it was a diversified fund. As a result, a
decline in the value of an investment in a single issuer or a smaller number of
issuers could cause the Fund’s overall value to decline to a greater degree than
if the Fund held a more diversified portfolio.
•Passive
Investment Risk. The
Fund invests in the securities included in, or representative of, its Index
regardless of their investment merit. The Fund does not attempt to outperform
its Index or take defensive positions in declining markets. As a result, the
Fund’s performance may be adversely affected by a general decline in the market
segments relating to its Index.
•Recent
Market Events Risk.
U.S. and international markets have experienced significant periods of
volatility in recent years and months due to a number of economic, political and
global macro factors including the impact of the novel coronavirus (COVID-19) as
a global pandemic, which has resulted in public health issues, growth concerns
in the U.S. and overseas, layoffs, rising unemployment claims, changed travel
and social behaviors, and reduced consumer spending. The effects of COVID-19 may
lead to a substantial economic downturn or recession in the U.S. and global
economies, the recovery from which is uncertain and may last for an extended
period of time. 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.
•Recently
Organized Fund Risk. The
Fund is a recently organized, non-diversified management 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.
•Sector
Risk. To
the extent the Fund invests more heavily in particular sectors of the economy,
its performance will be especially sensitive to developments that significantly
affect those sectors.
◦Information
Technology Sector Risk.
The Fund may invest in companies in the information technology sector, and
therefore the performance of the Fund could be negatively impacted by events
affecting this sector. Market or economic factors impacting information
technology companies and companies that rely heavily on technological advances
could have a significant effect on the value of the Fund’s investments. The
value of stocks of information technology companies and companies that rely
heavily on technology is particularly vulnerable to rapid changes in technology
product cycles, rapid product obsolescence, government regulation and
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Stocks of information
technology companies and companies that rely heavily on technology, especially
those of smaller, less-seasoned companies, tend to be more volatile than the
overall market. Information technology companies are heavily dependent on patent
and intellectual property rights, the loss or impairment of which may adversely
affect profitability. As of November 30, 2020, 38.9% of the Fund’s net assets
were invested in the information technology sector.
◦Consumer
Discretionary Sector Risk.
The Fund may invest in companies in the consumer discretionary sector, and
therefore the performance of the Fund could be negatively impacted by events
affecting this sector. The success of consumer product manufacturers and
retailers is tied closely to the performance of domestic and international
economies, interest rates, exchange rates, competition, consumer confidence,
changes in demographics and consumer preferences. Companies in the consumer
discretionary sector depend heavily on disposable household income and consumer
spending, and may be strongly affected by social trends and marketing campaigns.
These companies may be subject to severe competition, which may have an adverse
impact on their profitability. As of November 30, 2020, 23.8% of the Fund’s net
assets were invested in the consumer discretionary sector.
•Sharia-Compliant
Investing Risk.
Islamic religious law, commonly known as “Sharia,” has certain restrictions
regarding finance and commercial activities permitted for Muslims, including
interest restrictions and prohibited industries, which reduces the size of the
overall universe in which the Fund can invest. The strategy to reduce the
investable universe may limit investment opportunities and adversely affect the
Fund’s performance, especially in comparison to a more diversified fund. Because
Islamic principles preclude the use of interest-paying instruments, cash
reserves do not earn income.
•Tracking
Error Risk.
As with all index funds, the performance of the Fund and its Index may differ
from each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the Index.
•Underlying
Index Risk. Neither
the Fund’s investment adviser nor the Index Provider is able to guarantee the
continuous availability or timeliness of the production of the Index. The
calculation and dissemination of the Index values may be delayed if the
information technology or other facilities of the Index Provider, calculation
agent, data providers and/or relevant stock exchange malfunction for any reason.
A significant delay may cause trading in shares of the Fund to be suspended.
Errors in Index data, computation and/or the construction in accordance with its
methodology may occur from time to time and may not be identified and corrected
by the Index Provider, calculation agent or other applicable party for a period
of time or at all, which may have an adverse impact on the Fund and its
shareholders.
Performance
The following performance
information indicates some of the risks of investing in the Fund. The bar chart
shows the Fund’s performance for the calendar year ended December 31, 2020.
The table
illustrates how the Fund’s average annual returns for the 1-year and since
inception periods compare with those of a broad measure of market performance
and the Index. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is also available on the
Fund’s website at www.sp-funds.com.
Calendar Year Ended December 31,
During the period of time shown
in the bar chart, the Fund’s highest quarterly return
was 23.50% for the quarter ended June 30, 2020 and the
lowest quarterly return was
-16.05% for the quarter ended March 31, 2020.
Average
Annual Total Returns
For
the Periods Ended December 31, 2020
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1
Year |
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Since
Inception
(12/17/2019) |
Return Before
Taxes |
25.66% |
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26.39% |
Return After Taxes on
Distributions |
25.32% |
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26.05% |
Return After Taxes on Distributions and
Sale of Fund Shares |
15.36% |
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20.05% |
S&P
500 Shariah Industry Exclusions Index (reflects no deduction for
fees, expenses, or taxes) |
25.66% |
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26.39% |
S&P
500® Total Return Index
(reflects
no deduction for fees, expenses, or taxes) |
18.40% |
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19.09% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. After-tax
returns shown are not relevant to investors who hold their Shares through
tax-deferred arrangements such as an individual retirement account (“IRA”) or
other tax-advantaged accounts.
Management
Investment
Adviser:
Toroso Investments, LLC (“Toroso” or the “Adviser”) serves as investment adviser
to the Fund.
Investment
Sub-Adviser:
ShariaPortfolio, Inc. serves as the sub-adviser to the Fund.
Adviser
Portfolio Managers: Michael
Venuto, Chief Investment Officer for the Adviser, is responsible for the
day-to-day portfolio management of the Fund and has been a portfolio manager of
the Fund since March 2021. Charles A. Ragauss, CFA, Portfolio Manager for the
Adviser, is responsible for the day-to-day portfolio management of the Fund and
has been a portfolio manager of the Fund since its inception in December
2019.
Sub-Adviser
Portfolio Manager:
Naushad Virji, Chief Executive Officer at ShariaPortfolio, is responsible for
ensuring the Fund follows the character of the Index and providing advice with
regard to the interpretation of and compliance with Sharia principles and has
been a portfolio manager of the Fund since its inception in December
2019.
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 (the “Deposit Securities”) and/or a designated amount of U.S.
cash.
Shares
are listed on a national securities exchange, such as the Exchange, and
individual Shares may only be bought and sold in the secondary market through
brokers at market prices, rather than NAV. Because Shares trade at market prices
rather than NAV, Shares may trade at a price greater than NAV (premium) or less
than NAV (discount).
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. This difference in bid and ask
prices is often 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.sp-funds.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless an investment is in an IRA
or other tax-advantaged account. Distributions on investments made through
tax-deferred arrangements may be taxed later upon withdrawal of assets from
those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser, the Sub-Adviser, or their
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.
SP
Funds Dow Jones Global Sukuk ETF - Fund Summary
Investment Objective
The SP Funds Dow Jones Global
Sukuk ETF (the “Fund” or the “Sukuk ETF”) seeks to track the performance, before
fees and expenses, of the Dow Jones Sukuk Total Return (ex‑Reinvestment) Index
(the “Index” or the “Sukuk Index”).
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares of the Fund
(“Shares”). You may pay other fees, such as
brokerage commissions and other fees to financial intermediaries, which are not
reflected in the table and Example below.
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Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
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Management
Fees |
0.65% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
0.65% |
Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would
be:
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1 Year |
3
Years |
5
Years |
10
Years |
$66 |
$208 |
$362 |
$810 |
Portfolio
Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in total annual fund operating expenses or
in the expense example above, affect the Fund’s performance. For the fiscal
period December 27, 2019 (commencement of operations) through November 30, 2020,
the Fund’s portfolio turnover rate was 15% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund uses a “passive management” (or indexing) approach to track the
performance, before fees and expenses, of the Index.
The
Index includes U.S. dollar-denominated investment-grade sukuk, which are
financial certificates, similar to bonds, issued in the global markets and
structured to comply with Islamic religious law, commonly known as “Sharia,” and
its investment principles. To be eligible for inclusion in the Index, sukuk must
have an outstanding issue size of at least US $200 million, a minimum time to
maturity of one year, and a credit quality rating of at least BBB- by Standard
& Poor’s Financial Services LLC or Fitch Ratings, Inc. and/or at least Baa3
by Moody’s Investors Service, Inc. The Index was created in 2006 and is owned
and administered by S&P Dow Jones Indices LLC (the “Index Provider”), a
division of S&P Global.
Unlike
conventional bonds, sukuk are based on a variety of contracts to create
financial obligations, and the returns to investors are considered to be profit
sharing, not interest. Issuers of sukuk may include international financial
institutions, foreign governments (including in emerging markets), and foreign
government agencies or instrumentalities that issue sukuk through a secondary
issuing vehicle such as a trust. Sharia has certain restrictions regarding
finance and commercial activities, including interest restrictions and
prohibited industries and only sukuk, as screened by Thomson Reuters, is
eligible for the Index. The Fund considers emerging market countries to be those
countries included in the MSCI Emerging Markets
Index.
The
Index is rebalanced and reconstituted monthly and is market value weighted. As
of February 26, 2021, the Index was composed of 94 constituents, representing
investments in seven foreign countries, and had an average weighted maturity of
5.48 years.
The
Fund’s Investment Strategy
The
Fund attempts to invest all, or substantially all, of its assets in the
component securities that make up the Index. Under normal circumstances, at
least 80% of the Fund’s total assets will be invested in the component
securities of the Index. The Fund’s investment adviser expects that, over time,
the correlation between the Fund’s performance and that of the Index, before
fees and expenses, will be 95% or better.
The
Fund will generally use a “replication” strategy to achieve its investment
objective, meaning it generally will invest in all of the component securities
of the Index. However, the Fund may use a “representative sampling” strategy,
meaning it may invest in a sample of the securities in the Index whose risk,
return, and other characteristics closely resemble the risk, return, and other
characteristics of the Index as a whole, when the Fund’s investment adviser
believes it is in the best interests of the Fund (e.g., when replicating the
Index involves practical difficulties or substantial costs, an Index constituent
becomes temporarily illiquid, unavailable, or less liquid, or as a result of
legal restrictions or limitations that apply to the Fund but not to the Index).
The
Fund generally may invest up to 20% of its total assets in Sharia-compliant
securities or other Sharia-compliant investments not included in the Index, but
which the Fund’s investment adviser believes will help the Fund track the Index.
For example, the Fund may invest in Sharia-compliant securities that are not
components of the Index to reflect various corporate actions and other changes
to the Index (such as reconstitutions, additions, and deletions). Each
investment made by the Fund is pre-screened and approved as Sharia-compliant
before investment by the Fund.
To
the extent the Index concentrates (i.e., holds more than 25% of its total
assets) in the securities of a particular industry or group of related
industries, the Fund will concentrate its investments to approximately the same
extent as the Index. The Fund is deemed to be “non-diversified,” which means
that it may invest a greater percentage of its assets in the securities of a
single issuer or a small number of issuers than if it was a diversified
fund.
Principal Investment
Risks
The
principal risks of investing in the Fund are summarized below. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return, and/or ability to meet its
objective. For more information about the risks of investing in the Fund, see
the section in the Fund’s Prospectus titled “Additional Information About the
Funds—Principal Risks of Investing in Each Fund.”
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.
•Concentration
Risk. The
Fund’s investments will be concentrated in an industry or group of industries to
the extent the Index is so concentrated. In such event, the value of Shares may
rise and fall more than the value of shares that invest in securities of
companies in a broader range of industries.
•Credit
Risk.
Credit
risk is the risk that an issuer or guarantor of debt instruments or the
counterparty to a derivatives contract, repurchase agreement or loan of
portfolio securities will be unable or unwilling to make its timely interest
and/or principal payments or to otherwise honor its obligations. Debt
instruments are subject to varying degrees of credit risk, which may be
reflected in their credit ratings. There is the chance that the Fund’s portfolio
holdings will have their credit ratings downgraded or will default (i.e., fail
to make scheduled interest or principal payments), potentially reducing the
Fund’s income level or share price.
•Emerging
Markets Risk.
Investments in emerging market securities impose risks different from, or
greater than, risks of investing in foreign developed countries, including:
smaller market capitalization; significant price volatility; and restrictions on
foreign investment. Emerging market countries may have relatively unstable
governments and may present the risk of nationalization of businesses,
expropriation, and confiscatory taxation, or, in certain instances, reversion to
closed market, centrally planned economies. Emerging market economies may also
experience more severe downturns. The currencies of emerging market countries
may experience significant declines against the U.S. dollar, and devaluation may
occur subsequent to investments in these currencies by the Fund. Inflation and
rapid fluctuations in inflation rates have had, and may continue to have,
negative effects on the economies and securities markets of certain emerging
market countries. In addition, less information may be
available
about companies in emerging markets than in developed markets because such
emerging markets companies may not be subject to accounting, auditing and
financial reporting standards or to other regulatory practices required by U.S.
companies which may lead to potential errors in index data, index computation
and/or index construction. Such conditions may impact the ability of the
Fund to buy, sell or otherwise transfer securities; adversely affect the trading
market and price for such securities; and/or cause the Fund to decline in
value.
•ETF
Risk.
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that are authorized to
purchase and redeem Shares directly from the Fund (known as “Authorized
Participants” or “APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become unable to
process creation and/or redemption orders and no other APs step forward to
perform these services; or (ii) market makers and/or liquidity providers exit
the business or significantly reduce their business activities and no other
entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares. Due
to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant. Because
securities held by the Fund may trade on foreign exchanges that are closed when
the Fund’s primary listing exchange is open, the Fund is likely to experience
premiums and discounts greater than those of ETFs holding only domestic
securities.
◦Trading.
Although Shares are listed on a national securities exchange, such as the NYSE
Arca, Inc. (the “Exchange”), and may be traded on U.S. exchanges other than the
Exchange, there can be no assurance that Shares will trade with any volume, or
at all, on any stock exchange. In stressed market conditions, the liquidity of
Shares may begin to mirror the liquidity of the Fund’s underlying portfolio
holdings, which can be significantly less liquid than Shares.
•Foreign
Government Risk.
The Fund’s investment in securities issued by foreign governments or their
agencies or instrumentalities (sovereign debt), including those that issue sukuk
through a secondary issuing vehicle, differs from debt obligations issued by
private entities in that, generally, remedies for defaults must be pursued in
the courts of the defaulting party. Legal recourse is therefore limited. The
foreign sovereign debt securities the Fund purchases involve specific risk,
including that (i) the governmental entity that controls the repayment of
sovereign debt may not be willing or able to repay the principal and/or interest
when it becomes due because of political constraints, cash flow problems, and
other national economic factors; (ii) governments may default on their sovereign
debt, which may require holders of such sovereign debt to participate in debt
rescheduling or additional lending to defaulting governments; and (iii) there
are no bankruptcy proceedings by which defaulted sovereign debt may be collected
in whole or in part. These and other factors can make investments in the Fund
more volatile and potentially less liquid than other types of investments that
track an index of domestic securities.
•General
Market Risk.
Economies and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market, or
other asset classes, due to a number of factors, including inflation (or
expectations for inflation), interest rates, global demand for particular
products or resources, natural disasters or events, pandemic diseases,
terrorism, regulatory events, and government controls.
•Geographic
Investment Risk.
To the extent the Fund invests a significant portion of its assets in the
securities of companies of a single country or region, it is more likely to be
impacted by events or conditions affecting that country or
region.
◦Risks
of Investing in Saudi Arabia.
The ability of foreign investors to invest in Saudi Arabian issuers is new and
untested. Such ability could be restricted or revoked by the Saudi Arabian
government at any time, and unforeseen risks could materialize due to foreign
ownership in such securities. The economy of Saudi Arabia is dominated by
petroleum exports. A sustained decrease in petroleum prices could have a
negative impact on all aspects of the economy. Investments in securities of
Saudi Arabian issuers involves risks not typically associated with investments
in securities of issuers in more developed countries that may negatively affect
the value of the Fund’s investments. Such heightened risks may include, among
others, expropriation and/or nationalization of assets, restrictions on and
government intervention in international trade, confiscatory taxation, political
instability, including authoritarian and/ or military involvement in
governmental decision making, armed conflict, crime and instability as a result
of religious, ethnic and/or socioeconomic unrest. There remains the possibility
that instability in the larger Middle East region could adversely impact the
economy of Saudi Arabia, and there is no assurance of political stability in
Saudi Arabia. As of November 30, 2020, 40.9% of the Fund’s total investments
were invested in Saudi Arabia.
◦Risks
of Investing in the United Arab Emirates.
The economy of the United Arab Emirates (“UAE”) is dominated by petroleum
exports. A sustained decrease in commodity prices, particularly oil and natural
gas, could have a negative impact on all aspects of the UAE economy. The nonoil
UAE economy, which is concentrated in Dubai’s service sector, could be affected
by declines in tourism, real estate, banking and re-export trade. The UAE and
the governments of the individual emirates exercise substantial influence over
many aspects of the private sector. Governmental actions could have a
significant effect on economic conditions in the UAE, which could adversely
affect the value of the Fund. In addition, recent political instability and
protests in North Africa and the Middle East have caused significant disruptions
to many industries. Continued political and social unrest in these areas may
adversely affect the value of the Fund. As of November 30, 2020, 26.5% of the
Fund’s total investments were invested in the UAE.
•Interest
Rate Risk.
Generally, the value of fixed income securities will change inversely with
changes in interest rates. As interest rates rise, the market value of fixed
income securities tends to decrease. Conversely, as interest rates fall, the
market value of fixed income securities tends to increase. This risk will be
greater for long-term securities than for short-term securities. Changes in
government intervention may have adverse effects on investments, volatility, and
illiquidity in debt markets. In addition, the interest rates payable on floating
rate securities are not fixed and may fluctuate based upon changes in market
rates. The interest rate on a floating rate security is a variable rate which is
tied to another interest rate. Floating rate securities are subject to interest
rate risk and credit risk.
•Models
and Data Risk. The
composition of the Index is heavily dependent on proprietary quantitative models
as well as information and data supplied by third parties (“Models and Data”).
When Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon may lead to the inclusion or exclusion of securities from the
Index universe that would have been excluded or included had the Models and Data
been correct and complete. If the composition of the Index reflects such errors,
the Fund’s portfolio can be expected to also reflect the errors.
•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 smaller number of issuers than if it was a diversified fund. As a result, a
decline in the value of an investment in a single issuer or a smaller number of
issuers could cause the Fund’s overall value to decline to a greater degree than
if the Fund held a more diversified portfolio.
•Passive
Investment Risk. The
Fund invests in the securities included in, or representative of, its Index
regardless of their investment merit. The Fund does not attempt to outperform
its Index or take defensive positions in declining markets. As a result, the
Fund’s performance may be adversely affected by a general decline in the market
segments relating to its Index.
•Recent
Market Events Risk.
U.S. and international markets have experienced significant periods of
volatility in recent years and months due to a number of economic, political and
global macro factors including the impact of the novel coronavirus (COVID-19) as
a global pandemic, which has resulted in public health issues, growth concerns
in the U.S. and overseas, layoffs, rising unemployment claims, changed travel
and social behaviors, and reduced consumer spending. The effects of COVID-19 may
lead to a substantial economic downturn or recession in the U.S. and global
economies, the recovery from which is uncertain and may last for an extended
period of time. 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.
•Recently
Organized Fund Risk. The
Fund is a recently organized, non-diversified management 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.
•Sharia-Compliant
Investing Risk.
Islamic religious law, commonly known as “Sharia,” has certain restrictions
regarding finance and commercial activities permitted for Muslims, including
interest restrictions and prohibited industries, which reduces the size of the
overall universe in which the Fund can invest. The strategy to reduce the
investable universe may limit investment opportunities and adversely affect the
Fund’s performance, especially in comparison to a more diversified fund. Because
Sharia principles preclude the use of interest-paying instruments, cash reserves
do not earn income.
•Sukuk
Risk.
Sukuk are financial certificates that are similar to conventional bonds but are
structured to comply with Sharia law and its investments principles, which,
among other things, prohibit charging or paying interest. Sukuk involve many of
the same risks that conventional bonds incur such as credit risk and interest
rate risk. In addition to these risks, there are certain risks specific to
sukuk. Sukuk represent undivided shares in the ownership of certificates, and
such certificates are linked to a specific investment activity, such as an
underlying asset or contractual payment obligations of the issuer. Because no
collateral is pledged as security for sukuk, purchasers of sukuk are subject to
the risk that an issuer may not meet its payment obligations or that an
underlying asset may not perform as expected or lose value. While the sukuk
market has grown significantly in recent years, there may be times when the
market is illiquid and it is difficult for the Fund to make an investment in or
dispose of sukuk.
•Tracking
Error Risk.
As with all index funds, the performance of the Fund and its Index may differ
from each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the Index.
•Underlying
Index Risk. Neither
the Fund’s investment adviser nor the Index Provider is able to guarantee the
continuous availability or timeliness of the production of the Index. The
calculation and dissemination of the Index values may be delayed if the
information technology or other facilities of the Index Provider, calculation
agent, data providers and/or relevant stock exchange malfunction for any reason.
A significant delay may cause trading in shares of the Fund to be suspended.
Errors in Index data, computation and/or the construction in accordance with its
methodology may occur from time to time and may not be identified and corrected
by the Index Provider, calculation agent or other applicable party for a period
of time or at all, which may have an adverse impact on the Fund and its
shareholders.
Performance
The following performance
information indicates some of the risks of investing in the Fund. The bar chart
shows the Fund’s performance for the calendar year ended December 31, 2020.
The table
illustrates how the Fund’s average annual returns for the 1-year and since
inception periods compare with those of a broad measure of market performance
and the Index. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is available on the
Fund’s website at www.sp-funds.com.
Calendar Year Ended December 31,
During the period of time shown
in the bar chart, the Fund’s highest quarterly return
was 5.65% for the quarter ended June 30, 2020 and the
lowest quarterly return was
-4.89% for the quarter ended March 31, 2020.
Average
Annual Total Returns
For
the Periods Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Year |
|
Since
Inception
(12/27/2019) |
Return Before
Taxes |
4.09% |
|
3.97% |
Return After Taxes on
Distributions |
3.37% |
|
3.26% |
Return After Taxes on Distributions and
Sale of Fund Shares |
2.41% |
|
2.72% |
Dow
Jones Sukuk Total Return Index (ex-Reinvestment) (reflects no deduction for
fees, expenses, or taxes) |
7.91% |
|
7.67% |
Bloomberg
Barclays Global Aggregate Bond Index
(reflects
no deduction for fees, expenses, or taxes) |
9.20% |
|
9.30% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. After-tax
returns shown are not relevant to investors who hold their Shares through
tax-deferred arrangements such as an individual retirement account (“IRA”) or
other tax-advantaged accounts.
Management
Investment
Adviser:
Toroso Investments, LLC (“Toroso” or the “Adviser”) serves as investment adviser
to the Fund.
Investment
Sub-Adviser:
ShariaPortfolio, Inc. (“ShariaPortfolio” or the “Sub-Adviser”) serves as
investment sub-adviser to the Fund.
Adviser
Portfolio Managers: Michael
Venuto, Chief Investment Officer for the Adviser, is responsible for the
day-to-day portfolio management of the Fund and has been a portfolio manager of
the Fund since March 2021. Charles A. Ragauss, CFA, Portfolio Manager for the
Adviser, is responsible for the day-to-day portfolio management of the Fund and
has been a portfolio manager of the Fund since its inception in December
2019.
Sub-Adviser
Portfolio Manager:
Naushad Virji, Chief Executive Officer at ShariaPortfolio, is responsible for
ensuring the Fund follows the character of the Index and providing advice with
regard to the interpretation of and compliance with Sharia principles and has
been a portfolio manager of the Fund since its inception in December
2019.
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 (the “Deposit Securities”) and/or a designated amount of U.S.
cash.
Shares
are listed on a national securities exchange, such as the Exchange, and
individual Shares may only be bought and sold in the secondary market through
brokers at market prices, rather than NAV. Because Shares trade at market prices
rather than NAV, Shares may trade at a price greater than NAV (premium) or less
than NAV (discount).
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. This difference in bid and ask
prices is often 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.sp-funds.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless an investment is in an IRA
or other tax-advantaged account. Distributions on investments made through
tax-deferred arrangements may be taxed later upon withdrawal of assets from
those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser, the Sub-Adviser, or their
affiliates may pay Intermediaries for certain activities related to the Fund,
including participation in activities that are designed to make Intermediaries
more knowledgeable about exchange-traded products, including the Fund, or for
other activities, such as marketing, educational training, or other initiatives
related to the sale or
promotion
of Shares. These payments may create a conflict of interest by influencing the
Intermediary and your salesperson to recommend the Fund over another investment.
Any such arrangements do not result in increased Fund expenses. Ask your
salesperson or visit the Intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUNDS
Investment
Objective
Each
Fund seeks to track the performance, before fees and expenses, of the applicable
Index.
An
investment objective is fundamental if it cannot be changed without the consent
of the holders of a majority of the outstanding Shares. The Funds’ investment
objectives have not been adopted as fundamental investment policies and
therefore a Fund’s investment objective may be changed without the consent of a
Fund’s shareholders upon approval by the Trust’s Board of Trustees (the “Board”)
and written notice to shareholders.
Principal
Investment Strategies
The
following information is in addition to, and should be read along with, the
description of each Fund’s principal investment strategies in the sections
titled “Fund Summary-Principal Investment Strategies” above.
To
the extent its applicable Index concentrates (i.e., holds more than 25% of its
total assets) in the securities of a particular industry or group of related
industries, a Fund will concentrate its investments to approximately the same
extent as the Index. Each Fund is deemed to be “non-diversified,” which means
that 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.
Manager
of Managers Structure
The
Funds and the Adviser have received exemptive relief from the SEC permitting the
Adviser (subject to certain conditions and the approval of the Board) to change
or select new unaffiliated sub-advisers without obtaining shareholder approval.
The relief also permits the Adviser to materially amend the terms of agreements
with an unaffiliated sub-adviser (including an increase in the fee paid by the
Adviser to the unaffiliated sub-adviser (and not paid by a Fund)) or to continue
the employment of an unaffiliated sub-adviser after an event that would
otherwise cause the automatic termination of services with Board approval, but
without shareholder approval. Shareholders will be notified of any unaffiliated
sub-adviser changes. The Adviser has the ultimate responsibility, subject to
oversight by the Board, to oversee a sub-adviser(s) and recommend their hiring,
termination and replacement.
Principal
Risks of Investing in each Fund
There
can be no assurance that a Fund will achieve its investment objective. The
following information is in addition to, and should be read along with, the
description of each Fund’s principal investment risks in the section titled
“Fund Summary— Principal Investment Risks” above.
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 Funds,
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 a Fund. Some or
all of these risks may adversely affect a Fund’s NAV per share, trading price,
yield, total return and/or ability to meet its investment objective. The
following risks could affect the value of your performance in the Funds: The
risks below apply to each Fund as indicated in the following table. Additional
information about each such risk and its potential impact on a Fund is set forth
below the table.
|
|
|
|
|
|
|
|
|
|
Sharia
ETF |
Sukuk
ETF |
Concentration
Risk |
X |
X |
Credit
Risk |
|
X |
Emerging
Markets Risk |
|
X |
Equity
Market Risk |
X |
|
ETF
Risks |
|
|
—Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk |
X |
X |
—
Costs of Buying or Selling Shares |
X |
X |
—
Shares May Trade at Prices Other Than NAV |
X |
X |
—
Trading |
X |
X |
Foreign
Government Risk |
|
X |
General
Market Risk |
X |
X |
Geographic
Investment Risk |
|
X |
|
|
|
|
|
|
|
|
|
|
Sharia
ETF |
Sukuk
ETF |
—Risks
of Investing In Saudi Arabia |
|
X |
—Risks
of Investing in the United Arab Emirates |
|
X |
Interest
Rate Risk |
|
X |
Large-Capitalization
Investing Risk |
X |
|
Models
and Data Risk |
X |
X |
Non-Diversification
Risk |
X |
X |
Passive
Investment Risk |
X |
X |
Recent
Market Events Risk |
X |
X |
Recently
Organized Fund Risk |
X |
X |
Sector
Risk |
X |
|
—Information
Technology Sector Risk |
X |
|
—Consumer
Discretionary Sector Risk |
X |
|
Sharia-Compliant
Investing Risk |
X |
X |
Sukuk
Risk |
|
X |
Tracking
Error Risk |
X |
X |
Underlying
Index Risk |
X |
X |
•Concentration
Risk. The
Fund’s investments will be concentrated in an industry or group of industries to
the extent the Index is so concentrated. In such event, the value of Shares may
rise and fall more than the value of shares that invest in securities of
companies in a broader range of industries.
•Credit
Risk.
Debt securities are subject to the risk of an issuer’s (or other party’s)
failure or inability to meet its obligations under the security. Multiple
parties may have obligations under a debt security. An issuer or borrower may
fail to pay principal and interest when due. A guarantor, insurer or credit
support provider may fail to provide the agreed upon protection. A counterparty
to a transaction may fail to perform its side of the bargain. An intermediary or
agent interposed between the investor and other parties may fail to perform the
terms of its service. Also, performance under a debt security may be linked to
the obligations of other persons who may fail to meet their obligations. The
credit risk associated with a debt security could increase to the extent that
the Fund’s ability to benefit fully from its investment in the security depends
on the performance by multiple parties of their respective contractual or other
obligations. The market value of a debt security is also affected by the
market’s perception of the creditworthiness of the issuer.
•Emerging
Markets Risk.
The Fund’s investments in emerging market securities impose risks different
from, or greater than, risks of investing in foreign developed countries. These
risks include: smaller market capitalization of securities markets, which may
suffer periods of relative illiquidity; significant price volatility; and
restrictions on foreign investment. Emerging market countries may have
relatively unstable governments and may present the risk of nationalization of
businesses, expropriation, and confiscatory taxation or, in certain instances,
reversion to closed market, centrally planned economies. Emerging market
economies may also experience more severe downturns. In addition, foreign
investors may be required to register or pay taxes or tariffs on the proceeds of
securities sales; future economic or political crises could lead to price
controls, forced mergers, expropriation or confiscatory taxation, seizure,
nationalization, or creation of government monopolies. The currencies of
emerging market countries may experience significant declines against the U.S.
dollar, and devaluation may occur subsequent to investments in these currencies
by the Fund. Inflation and rapid fluctuations in inflation rates have had, and
may continue to have, negative effects on the economies and securities markets
of certain emerging market countries.
Additional
risks of emerging markets securities may include: greater social, economic and
political uncertainty and instability; more substantial governmental involvement
in the economy; less governmental supervision and regulation; unavailability of
currency hedging techniques; companies that are newly organized and small;
differences in auditing and financial reporting standards, which may result in
unavailability of material information about issuers; and less developed legal
systems. Emerging securities markets may have different clearance and settlement
procedures, which may be unable to keep pace with the volume of securities
transactions or otherwise make it difficult to engage in such transactions.
Settlement problems may cause the Fund to miss attractive investment
opportunities, hold a portion of its assets in cash pending investment, or be
delayed in disposing of a portfolio security. Such a delay could result in
possible liability to a purchaser of the security. In addition, less
information
may be available about companies in emerging markets than in developed markets
because such emerging markets companies may not be subject to accounting,
auditing and financial reporting standards or to other regulatory practices
required by U.S. companies which may lead to potential errors in index data,
index computation and/or index construction. Such conditions may impact the
ability of the Fund to buy, sell or otherwise transfer securities; adversely
affect the trading market and price for such securities; and/or cause the Fund
to decline in value.
•Equity
Market Risk. The
equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, or sectors in which the Fund invests. Common
stocks, such as those held by the Fund, are generally exposed to greater risk
than other types of securities, such as preferred stock and debt obligations,
because common stockholders generally have inferior rights to receive payment
from issuers.
•ETF
Risk.
◦APs,
Market Makers, and Liquidity Providers Concentration Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to NAV and possibly face
delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services; or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
◦Costs
of Buying or Selling Shares. Investors
buying or selling Shares in the secondary market will pay brokerage commissions
or other charges imposed by brokers, as determined by that broker. Brokerage
commissions are often a fixed amount and may be a significant proportional cost
for investors seeking to buy or sell relatively small amounts of Shares. In
addition, secondary market investors will also incur the cost of the bid-ask
spread. The bid-ask spread varies over time for Shares based on trading volume
and market liquidity, and is generally lower if Shares have more trading volume
and market liquidity and higher if Shares have little trading volume and market
liquidity. Further, a relatively small investor base in the Fund, asset swings
in the Fund and/or increased market volatility may cause increased bid-ask
spreads. Due to the costs of buying or selling Shares, including bid-ask
spreads, frequent trading of Shares may significantly reduce investment results
and an investment in Shares may not be advisable for investors who anticipate
regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV. 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 the 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 the Shares or during periods of market
volatility. This risk is heightened in times of market volatility or periods of
steep market declines. 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 the
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.
◦Trading.
Although
Shares are listed for trading on the Exchange and may be listed or traded on
U.S. and non-U.S. stock exchanges other than the Exchange, there can be no
assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 500 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.
•Foreign
Government Risk..
The
Fund’s investment in securities issued by foreign governments or agencies or
instrumentalities of foreign governments (sovereign debt), including those that
issue sukuk through a secondary issuing vehicle, differs from debt obligations
issued by private entities in that, generally, remedies for defaults must
be
pursued in the courts of the defaulting party. Legal recourse is therefore
limited. The foreign sovereign debt securities the Fund purchases involve
specific risk, including that (i) the governmental entity that controls the
repayment of sovereign debt may not be willing or able to repay the principal
and/or interest when it becomes due because of political constraints, cash flow
problems and other national economic factors; (ii) governments may default
on their sovereign debt, which may require holders of such sovereign debt to
participate in debt rescheduling or additional lending to defaulting
governments; and (iii) there are no bankruptcy proceedings by which defaulted
sovereign debt may be collected in whole or in part. These and other factors can
make investments in the Fund more volatile and potentially less liquid than
other types of investments that track an index of domestic
securities.
A
country whose exports are concentrated in a few commodities could be vulnerable
to a decline in the international price of such commodities. Another factor
bearing on the ability of a country to repay sovereign debt is the level of the
country’s international reserves. Fluctuations in the level of these reserves
can affect the amount of foreign exchange readily available for external debt
payments and, thus, could have a bearing on the capacity of the country to make
payments on its sovereign debt. Also, there can be no assurance that the holders
of commercial bank loans to the same sovereign entity may not contest payments
to the holders of sovereign debt in the event of default under commercial bank
loan agreements.
Because
securities held by the Fund may trade on foreign exchanges that are closed when
the Fund’s primary listing exchange is open, the Fund is likely to experience
premiums and discounts greater than those of ETFs holding only domestic
securities.
•General
Market Risk.
Economies and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market or
other asset classes, due to a number of factors, including inflation (or
expectations for inflation), interest rates, global demand for particular
products or resources, natural disasters or events, pandemic diseases,
terrorism, regulatory events, and government controls.
•Geographic
Investment Risk.
To the extent the Fund invests a significant portion of its assets in the
securities of companies of a single country or region, it is more likely to be
impacted by events or conditions affecting that country or region.
◦Risks
of Investing in Saudi Arabia.
The ability of foreign investors to invest in Saudi Arabian issuers is new and
untested. Such ability could be restricted or revoked by the Saudi Arabian
government at any time, and unforeseen risks could materialize due to foreign
ownership in such securities. The economy of Saudi Arabia is dominated by
petroleum exports. A sustained decrease in petroleum prices could have a
negative impact on all aspects of the economy. Investments in securities of
Saudi Arabian issuers involves risks not typically associated with investments
in securities of issuers in more developed countries that may negatively affect
the value of the Fund’s investments. Such heightened risks may include, among
others, expropriation and/or nationalization of assets, restrictions on and
government intervention in international trade, confiscatory taxation, political
instability, including authoritarian and/ or military involvement in
governmental decision making, armed conflict, crime and instability as a result
of religious, ethnic and/or socioeconomic unrest. There remains the possibility
that instability in the larger Middle East region could adversely impact the
economy of Saudi Arabia, and there is no assurance of political stability in
Saudi Arabia. As of November 30, 2020, 40.9% of the Fund’s total investments
were invested in Saudi Arabia.
◦Risks
of Investing in the United Arab Emirates.
The economy of the United Arab Emirates (“UAE”) is dominated by petroleum
exports. A sustained decrease in commodity prices, particularly oil and natural
gas, could have a negative impact on all aspects of the UAE economy. The nonoil
UAE economy, which is concentrated in Dubai’s service sector, could be affected
by declines in tourism, real estate, banking and re-export trade. The UAE and
the governments of the individual emirates exercise substantial influence over
many aspects of the private sector. Governmental actions could have a
significant effect on economic conditions in the UAE, which could adversely
affect the value of the Fund. In addition, recent political instability and
protests in North Africa and the Middle East have caused significant disruptions
to many industries. Continued political and social unrest in these areas may
adversely affect the value of the Fund. As of November 30, 2020, 26.5% of the
Fund’s total investments were invested in the UAE.
•Interest
Rate Risk.
Generally, the value of fixed income securities will change inversely with
changes in interest rates. As interest rates rise, the market value of fixed
income securities tends to decrease. Conversely, as interest rates fall, the
market value of fixed income securities tends to increase. This risk will be
greater for long-term securities than for short-term securities. Changes in
government intervention may have adverse effects on investments, volatility, and
illiquidity in debt markets. In addition, the interest rates payable on floating
rate securities are not fixed and may fluctuate based upon changes in market
rates. The interest rate on a floating rate security is a variable rate which is
tied to another interest rate. Floating rate securities are subject to interest
rate risk and credit risk.
•Large-Capitalization
Investing Risk.
The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and therefore subject to slower growth during times of
economic expansion. Large-capitalization companies may also be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
•Models
and Data Risk. The
composition of the Index is heavily dependent on proprietary quantitative models
as well as information and data supplied by third parties (“Models and Data”).
When Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon may lead to the inclusion or exclusion of securities from the
Index universe that would have been excluded or included had the Models and Data
been correct and complete. If the composition of the Index reflects such errors,
the Fund’s portfolio can be expected to also reflect the errors.
•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 smaller number of issuers than
if it was a diversified fund. As a result, a decline in the value of an
investment in a single issuer or a smaller number of issuers could cause the
Fund’s overall value to decline to a greater degree than if the Fund held a more
diversified portfolio. This may increase the Fund’s volatility and have a
greater impact on the Fund’s performance.
•Passive
Investment Risk.
The Fund invests in the securities included in, or representative of, its Index
regardless of its investment merit. The Fund does not attempt to outperform its
Index or take defensive positions in declining markets. As a result, the Fund’s
performance may be adversely affected by a general decline in the market
segments relating to its Index.
•Recent
Market Events Risk.
U.S. and international markets have experienced significant periods of
volatility in recent years and months due to a number of economic, political and
global macro factors including the impact of the novel coronavirus (COVID-19) as
a global 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 particular,
the spread of COVID-19 worldwide has resulted in disruptions to supply chains
and customer activity, stress on the global healthcare system, temporary and
permanent layoffs in the private sector, and rising unemployment claims, reduced
consumer spending, quarantines, cancellations, market declines, the closing of
borders, restrictions on travel, changed travel and social behaviors, and
widespread concern and uncertainty, all of which may lead to a substantial
economic downturn or recession in the U.S. and global economies. The recovery
from the effects of COVID-19 is uncertain and may last for an extended period of
time. Health crises and related political, social and economic disruptions
caused by the spread of COVID-19 may also exacerbate other pre-existing
political, social and economic risks in certain countries. 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, despite government
efforts to address market disruptions. In addition, the Fund may face challenges
with respect to its day-to-day operations if key personnel of the Fund’s Adviser
or Sub-Adviser or other service providers are unavailable due to quarantines and
restrictions on travel related to COVID-19. As a result, the risk environment
remains elevated. The Adviser and the Sub-Adviser will monitor developments and
seek to manage the Fund in a manner consistent with achieving the Fund’s
investment objective, but there can be no assurance that they will be successful
in doing so.
•Recently
Organized Fund Risk. The
Fund is a recently organized, non-diversified management 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.
•Sector
Risk. To
the extent the Fund invests more heavily in particular sectors of the economy,
its performance will be especially sensitive to developments that significantly
affect those sectors.
◦Information
Technology Sector Risk.
The Fund may invest in companies in the information technology sector, and
therefore the performance of the Fund could be negatively impacted by events
affecting this sector. Market or economic factors impacting information
technology companies and companies that rely heavily on technological advances
could have a significant effect on the value of the Fund’s investments. The
value of stocks of information technology companies and companies that rely
heavily on technology is particularly vulnerable to rapid changes in technology
product cycles, rapid product obsolescence, government regulation and
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Stocks of information
technology companies and companies that rely heavily on technology, especially
those of smaller, less-seasoned companies, tend to be more volatile than the
overall market. Information technology companies are heavily dependent on patent
and intellectual property rights, the loss or impairment of which may adversely
affect profitability. As of November 30, 2020, 38.9% of the Fund’s net assets
were invested in the information technology sector.
◦Consumer
Discretionary Sector Risk.
The Fund may invest in companies in the consumer discretionary sector, and
therefore the performance of the Fund could be negatively impacted by events
affecting this sector. The success of consumer product manufacturers and
retailers is tied closely to the performance of domestic and international
economies, interest rates, exchange rates, competition, consumer confidence,
changes in demographics and consumer preferences. Companies in the consumer
discretionary sector depend heavily on disposable household income and consumer
spending, and may be strongly affected by social trends and marketing campaigns.
These companies may be subject to severe competition, which may have an adverse
impact on their profitability. As of November 30, 2020, 23.8% of the Fund’s net
assets were invested in the consumer discretionary sector.
•Sharia-Compliant
Investing Risk.
Islamic principles restrict the Fund’s ability to invest in certain market
sectors, such as financial companies and conventional fixed-income securities,
and reduce the size of the overall universe in which a Fund can invest. The
strategy to reduce the investable universe may limit investment opportunities
and adversely affect a Fund’s performance, especially in comparison to a more
diversified fund. Because Islamic principles preclude the use of interest-paying
instruments, cash reserves do not earn income.
•Sukuk
Risk. Sukuk
are financial certificates that are similar to conventional bonds but are
structured to comply with Sharia law and its investments principles, which,
among other things, prohibit charging or paying interest. Sukuk involve many of
the same risks that conventional bonds incur such as credit risk and interest
rate risk. In addition to these risks, there are certain risks specific to
sukuk. Sukuk represent undivided shares in the ownership of certificates and
such certificates are linked to a specific investment activity including, but
not limited to, tangible assets or the contractual payment obligations of the
sukuk issuer. Generally, issuers of sukuk include, but are not limited to,
international financial institutions, foreign governments and agencies or
instrumentalities of foreign governments that issue the sukuk through a
secondary issuing vehicle such as a trust. No collateral is pledged as security
for the sukuk. As unsecured investments, sukuk are backed only by the credit of
the issuer or issuing vehicle, which may be a vehicle that holds no other
assets. Sukuk are thus subject to the risk that the issuer or issuing vehicle
may not be able to repurchase the sukuk at the agreed upon date for the agreed
upon price, if at all. Sukuk are also subject to the risks associated with
developing and emerging market economies, which include, among others,
inconsistent accounting and legal principles. The process to resolve a default
on sukuk may take longer than resolving a default on conventional bonds. It is
possible that interpretations of Sharia law by courts or scholars can evolve in
ways that may affect the free transferability of sukuk. While the sukuk market
has grown significantly in recent years, there may be times when the market is
illiquid and it is difficult for the Fund to make an investment in or dispose of
sukuk. Unlike conventional bonds, sukuk are generally held to maturity and
trading is limited to the primary market.
•Tracking
Error Risk. As
with all index funds, the performance of the Fund and its Index may differ from
each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the Index. The use of sampling techniques
may affect the Fund’s ability to achieve close correlation with its Index. The
Fund may use a representative sampling strategy to achieve its investment
objective, if the Sub-Adviser believes it is in the best interests of the Fund,
which generally can be expected to produce a greater non-correlation
risk.
•Underlying
Index Risk.
Neither the Adviser nor the Index Provider is able to guarantee the continuous
availability or timeliness of the production of the Index. The calculation and
dissemination of Index values may be delayed if the information technology or
other facilities of the Index Provider, calculation agent, data providers and/or
relevant
stock
exchange malfunction for any reason. A significant delay may cause trading in
shares of the Fund to be suspended. Errors in Index data, computation and/or the
construction in accordance with its methodology may occur from time to time and
may not be identified and corrected by the Index Provider, calculation agent or
other applicable party for a period of time or at all, which may have an adverse
impact on the Fund and its shareholders.
Additional
Information About Each Index
S&P
Dow Jones Indices LLC is the index provider and calculation agent for each Index
(“S&P” or, as previously defined, the “Index Provider”). S&P Dow Jones
Indices LLC is not affiliated with the Funds, the Adviser, the Sub-Adviser, the
Funds’ distributor, or any of their respective affiliates. The Index Provider
provides information to the Funds about the constituents of the Indexes and does
not provide investment advice with respect to the desirability of investing in,
purchasing, or selling securities.
Sharia
Compliance
Islamic
religious law, commonly known as “Sharia,” has certain restrictions regarding
finance and commercial activities permitted for Muslims, including interest
restrictions and prohibited industries. Each Fund may utilize a liquidation
period of up to 90 days to exit its position in holdings that are deemed to be
non-Sharia compliant. This liquidation period may only be utilized to minimize
liquidation costs.
S&P
500 Shariah Industry Exclusions Index. The
S&P 500 Shariah Industry Exclusions Index is composed of the constituents of
the S&P 500 Shariah Index other than those from the following
sub-industries: Aerospace & Defense, Financial Exchanges & Data, and
Data Processing & Outsourced Services. The S&P 500 Shariah Index
includes all Sharia-compliant constituents of the S&P 500 Index.
Constituents of the S&P 500 Shariah Index have been screened to exclude
companies with non-compliant business activities (companies that offer products
and services that are not compliant with Sharia law such as gambling, alcohol or
tobacco) and to include companies compliant with certain accounting-based
financial ratios (companies must satisfy financial ratios governing leverage,
cash, and the share of revenues derived from non-compliant activities), as
described below. Ratings Intelligence Partners, an independent
London/Kuwait-based consulting company, provides the Sharia screens and filters
the S&P 500 Shariah Index based on these screens. Ratings Intelligence
Partners has a team of qualified Islamic researchers who work directly with a
Sharia supervisory board of five Islamic scholars that interprets business
issues and recommends actions related to the constituents of the S&P 500
Shariah Index.
Companies
that receive income in excess of 5% of its total revenue from Sharia-prohibited
business activities are removed from the list of companies eligible for
inclusion in the S&P 500 Shariah Index. Sharia-prohibited business
activities include:
•Advertising
of all non-Islamic activities;
•Media
& Entertainment (certain producers, distributors and broadcasters of music,
movies, television shows and musical radio shows and cinema
operators);
•Alcohol
production or sale;
•Cloning;
•Conventional
Finance (except: Islamic Banks, Islamic Financial Institutions and Islamic
Insurance Companies);
•Casino
management and gambling;
•Pork-related
products or production, packaging, and process or any other activity related to
pork;
•Pornography;
•Tobacco
manufacturing or sale; and
•Trading
of gold and silver as cash on deferred basis.
After
companies have been screened by their business activities, the remaining
companies’ finances are further examined to ensure they are Sharia compliant.
Only those companies that satisfy the following financial ratios will be
considered Sharia compliant:
•Debt
is less than 33.333% of total assets;
•Cash
and interest-bearing items are less than 33.333% of total assets;
•Accounts
receivable and cash are less than 50% of total assets; and
•Total
interest and non-compliant activities income are less than 5% of total
revenue.
The
S&P 500 Shariah Industry Exclusions Index constituents are reviewed on an
ongoing and monthly basis to ensure they continue to be Sharia-compliant
companies. The S&P 500 Shariah Industry Exclusions Index is reconstituted
monthly.
Dow
Jones Sukuk Total Return (ex-Reinvestment) Index. Only
sukuk, as screened by Thomson Reuters, is eligible for the Dow Jones Sukuk Total
Return (ex-Reinvestment)
Index.
The Index includes fixed and floating rate coupon instruments. The Dow Jones
Sukuk Total Return (ex-Reinvestment)
Index
constituents are reviewed on an ongoing and monthly basis. The Index is
reconstituted monthly.
Dividend
Purification
If
a company derives a portion of its total income from interest income and/or
Sharia-prohibited business activities, Sharia investment principles state that
this portion must be “purified” from the distributions paid out to shareholders.
Shareholders may purify their portion of prohibited income received by absolving
an equivalent amount to charitable purposes. Accordingly, for investors seeking
to purify prohibited income received from the Funds, if any, ShariaPortfolio
will publish an income purification calculator on the Funds’ website,
www.sp-funds.com, to assist Sharia ETF investors in calculating the per share
amount to be purified on a monthly basis. The Sukuk ETF does not require
purification because sukuk are by definition Sharia-compliant.
ShariaPortfolio,
in conjunction with the Sharia Advisor (defined below), determines such amount
by evaluating income earned from Sharia-prohibited business activities. In
making such determination, ShariaPortfolio and the Sharia Advisor consider the
amount of prohibited income in relation to the number of shares of the company
held by a Fund and the Fund’s holding period of such shares. A company may have
prohibited income whether or not the company’s profits have been distributed and
whether or not the company has declared a profit or suffered a loss.
Such
information will generally be posted prior to each Fund’s scheduled distribution
of any dividend income to shareholders. For additional information about the
Funds’ distribution policies, see “Dividends, Distributions and Taxes” below in
this Prospectus.
PORTFOLIO
HOLDINGS INFORMATION
Information
about each Fund’s daily portfolio holdings is available on the Funds’ website at
www.sp-funds.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 (“SAI”).
MANAGEMENT
Investment
Adviser
Toroso
Investments, LLC, 898 N. Broadway, Suite 2, Massapequa, New York 11758, serves
as investment adviser to the Funds pursuant to an investment advisory agreement
with the Trust on behalf of the Funds (the “Advisory Agreement”) and has overall
responsibility for the general management and administration of the Funds. The
Adviser also arranges for sub-advisory, transfer agency, custody, fund
administration, and all other related services necessary for the Funds to
operate. Toroso is a Delaware limited liability company founded in March 2012
that is dedicated to understanding, researching and managing assets within the
expanding ETF universe. As of February 28, 2021, Toroso had assets under
management of approximately $6.9 billion.
The
Adviser provides oversight of the Sub-Adviser and review of the Sub-Adviser’s
performance. For the services it provides to the Funds, each Fund pays the
Adviser a unified management fee, which is calculated daily and paid monthly, at
an annual rate based on the applicable Fund’s average daily net assets as set
forth in the table below.
|
|
|
|
|
|
Name
of Fund |
Management
Fee |
Sharia
ETF |
0.49% |
Sukuk
ETF |
0.65% |
Under
the Advisory Agreement, the Adviser has agreed to pay all expenses incurred by
each Fund except for 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, distribution fees and expenses paid by
the Fund under any distribution plan adopted pursuant to Rule 12b-1 under the
1940 Act, and the unified management fee payable to the Adviser (collectively,
the “Excluded Expenses”).
Investment
Sub-Adviser
ShariaPortfolio,
Inc, 1331 International Pkwy, Suite 2291, Lake Mary, Florida 32746, serves as
the investment sub-adviser to the Funds pursuant to a sub-advisory agreement
between ShariaPortfolio and the Adviser (the “Sub-Advisory Agreement”) and is
responsible for ensuring the Funds follow the character of each applicable Index
and providing advice with regard to the interpretation of and compliance with
Sharia principles. For its services, ShariaPortfolio is paid a fee by the
Adviser, which fee is calculated daily and paid monthly, at an annual rate of
0.02% of each Fund’s average daily net assets. As of March 30, 2021,
ShariaPortfolio had assets under management of approximately $227
million.
A
discussion regarding the basis for the Board’s approval of the Funds’ Investment
Advisory Agreement and Sub-Advisory Agreement is available in the Funds’
semi-annual report to shareholders for the reporting period ended May 31, 2020.
Portfolio
Managers
Charles
A. Ragauss, CFA, Portfolio Manager for the Adviser, and Naushad Virji, Portfolio
Manager for the Sub-Adviser, have been portfolio managers of the Funds since
their inception in December 2019.
Michael
Venuto, Portfolio Manager for the Adviser, has been a portfolio manager of the
Funds since March 2021.
Michael
Venuto, Chief Investment Officer for the Adviser
Mr.
Venuto is a co-founder and has been the Chief Investment Officer of the Adviser
since 2012. Mr. Venuto is an ETF industry veteran with over a decade of
experience in the design and implementation of ETF-based investment strategies.
Previously, he was Head of Investments at Global X Funds where he provided
portfolio optimization services to institutional clients. Before that, he was
Senior Vice President at Horizon Kinetics where his responsibilities included
new business development, investment strategy and client and strategic
initiatives.
Charles
A. Ragauss, CFA, Portfolio Manager for the Adviser
Mr.
Ragauss serves as Portfolio Manager at the Adviser, having joined the Adviser in
September 2020. Through the Adviser, Mr. Ragauss also provides support services
to CSat Investment Advisory, L.P., doing business as Exponential ETFs
(“Exponential”). Mr. Ragauss previously served as Chief Operating Officer and in
other roles at Exponential from April 2016 to September 2020. Previously, Mr.
Ragauss was Assistant Vice President at Huntington National Bank (“Huntington”),
where he was Product Manager for the Huntington Funds and Huntington Strategy
Shares ETFs, a combined fund complex of almost $4 billion in assets under
management. At Huntington, he led ETF development bringing to market some of the
first actively managed ETFs. Mr. Ragauss joined Huntington in 2010. Mr. Ragauss
attended Grand Valley State University where he received his Bachelor of
Business Administration in Finance and International Business, as well as a
minor in French. He is a member of both the National and West Michigan CFA
societies and holds the CFA designation.
Naushad
Virji, Portfolio Manager for the Sub-Adviser
Naushad
Virji, Chief Executive Officer at ShariaPortfolio, launched ShariaPortfolio in
2014 and ShariaPortfolio Canada, Inc. in 2019. He has also been Chief Executive
Officer at Virji Investments, Inc., a registered investment advisor firm, since
2003. Mr. Virji attended the University of Florida where he received a degree in
business administration.
The
Funds’ SAI provides additional information about the Portfolio Managers’
compensation structure, other accounts that a Portfolio Manager manages, and the
Portfolio Managers’ ownership of Shares.
CFA®
is a registered trademark owned by the CFA Institute.
Sharia
Advisor
Raqaba
LLC
has
been appointed as the Sharia adviser (the “Sharia Advisor”) to advise
ShariaPortfolio with regard to its interpretation of and compliance with Sharia
principles. The Sharia Advisor specializes in providing Sharia compliance
services to the financial services sector and provides its services in
accordance with the collective decisions of Islamic jurisprudence, Islamic
financial standards of Accounting and Auditing Organization for Islamic
Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB),
international financial reporting standards and local regulatory frameworks.
The
Sharia Advisor performs annual Sharia audits to assess the Sharia compliance of
each Fund. The Sharia Advisor does not make investment decisions, provide
investment advice, or otherwise act in the capacity of an investment adviser to
the Funds. Additionally, the Sharia Advisor is not involved in the maintenance
of either Index and does not otherwise act in the capacity of an index
provider.
FUND
SPONSOR
The
Adviser has entered into an Agreement with SP Funds Management, LLC (the “Fund
Sponsor”), under which the Fund Sponsor assumes the obligation of the Adviser to
pay all expenses of the Funds, except Excluded Expenses (such expenses of each
Fund, except Excluded Expenses, the “Unitary Expenses”). The Fund Sponsor is
controlled by, and is therefore an affiliated entity of, ShariaPortfolio.
Although the Fund Sponsor has agreed to be responsible for the Unitary Expenses,
the Adviser retains the ultimate obligation to the Funds to pay such expenses.
The Fund Sponsor will also provide general strategic support for each Fund in
the following areas: product development, capital markets, strategic
relationships and support of marketing and sales efforts. For these
services and payments, the Fund Sponsor is entitled to a fee based on the total
management fee earned by the Adviser under the Advisory Agreement less the
Unitary Expenses. The Fund Sponsor does not make investment decisions, provide
investment advice, or otherwise act in the capacity of an investment adviser to
the Funds. The Fund Sponsor is not involved in the maintenance of either
Index and does not act in the capacity of an index provider.
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 (defined below), 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.
Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding Shares.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares. DTC’s
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other institutions that directly or indirectly
maintain a custodial relationship with DTC. As a beneficial owner of Shares, you
are not entitled to receive physical delivery of stock certificates or to have
Shares registered in your name, and you are not considered a registered owner of
Shares. Therefore, to exercise any right as an owner of Shares, you must rely
upon the procedures of DTC and its participants. These procedures are the same
as those that apply to any other securities that you hold in book-entry or
“street name” through your brokerage account.
Frequent
Purchases and Redemptions of Shares
The
Funds impose no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly with the Funds, are an essential part of the ETF process and
help keep Share trading prices in line with the NAV. As such, the Funds
accommodate frequent purchases and redemptions by APs. However, the Board has
also determined that frequent purchases and redemptions for cash may increase
tracking error and portfolio transaction costs and may lead to the realization
of capital gains. To minimize these potential consequences of frequent purchases
and redemptions, the Funds employ fair value pricing and may impose transaction
fees on purchases and redemptions of Creation Units to cover the custodial and
other costs incurred by the Funds in effecting trades. In addition, the Funds
and the Adviser reserve the right to reject any purchase order at any
time.
Determination
of Net Asset Value
Each
Fund’s NAV is calculated as of the scheduled close of regular trading on the New
York Stock Exchange (“NYSE”), generally 4:00 p.m. Eastern Time, each day
the NYSE is open for business. The NAV for each Fund is calculated by dividing
the 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. The values of
non-U.S. dollar denominated securities are converted to U.S. dollars using
foreign currency exchange rates generally determined as of 4:00 p.m., London
time. If such information is not available for a security held by a Fund or is
determined to be unreliable, the security will be valued at fair value estimates
under guidelines established by the Board (as described below).
Fair
Value Pricing
The
Board has adopted procedures and methodologies to fair value Fund securities
whose market prices are not “readily available” or are deemed to be unreliable.
For example, such circumstances may arise when: (i) a security has been delisted
or has had its trading halted or suspended; (ii) a security’s primary pricing
source is unable or unwilling to provide a price; (iii) a security’s primary
trading market is closed during regular market hours; or (iv) a security’s value
is materially affected by events occurring after the close of the security’s
primary trading market. Generally, when fair valuing a security, the Funds will
take into account all reasonably available information that may be relevant to a
particular valuation including, but not limited to, fundamental analytical data
regarding the issuer, information relating to the issuer’s business, recent
trades or offers of the security, general and/or specific market conditions, and
the specific facts giving rise to the need to fair value the security. Fair
value determinations are made in good faith and in accordance with the fair
value methodologies included in the Board-adopted valuation procedures. Due to
the subjective and variable nature of fair value pricing, there can be no
assurance that a Fund will be able to obtain the fair value assigned to the
security upon the sale of such security.
Investments
by Registered Investment Companies
Section 12(d)(1)
of the 1940 Act restricts investments by registered investment companies in the
securities of other investment companies, including Shares. Registered
investment companies are permitted to invest in the Funds beyond the limits set
forth in Section 12(d)(1), subject to certain terms and conditions set forth in
an SEC exemptive order issued to the Trust or rule under the 1940 Act, 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
The
Sharia ETF and the Sukuk ETF each generally declare and distribute net
investment income, if any, at least monthly, and any net realized capital gains
to its shareholders at least annually.
Each
Fund will declare and pay income and capital gain distributions, if any, in
cash. Distributions in cash may be reinvested automatically in additional whole
Shares only if the broker through whom you purchased Shares makes such option
available. Your broker is responsible for distributing the income and capital
gain distributions to you.
Taxes
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in 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.
Each
Fund intends to qualify each year for treatment as a regulated investment
company (a “RIC”) under the Internal Revenue Code of 1986, as amended. 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 plan, you need to be aware of the possible tax
consequences when a Fund makes distributions, when you sell your Shares listed
on the Exchange, and when you purchase or redeem Creation Units (institutional
investors only).
The
tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax
Act”) made significant changes to the U.S. federal income tax rules for taxation
of individuals and corporations, generally effective for taxable years beginning
after December 31, 2017. Many of the changes applicable to individuals are
temporary and would apply only to taxable years before January 1, 2026. There
were only minor changes with respect to the specific rules only applicable to
RICs, such as the Funds. The Tax Act, however, also made numerous other changes
to the tax rules that may affect shareholders and the Funds. Subsequent
legislation has modified certain changes to the U.S. federal income tax rules
made by the Tax Act which may, in addition, affect shareholders and the Funds.
You are urged to consult with your own tax advisor regarding how this
legislation affects your investment in a Fund.
Taxes
on Distributions
For
federal income tax purposes, distributions of net investment income are
generally taxable as ordinary income or qualified dividend income. Taxes on
distributions of net 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 their 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 such 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. 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 certain 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.
Shortly
after the close of each calendar year, you will be informed of the character of
any distributions received from a Fund.
In
addition to the federal income tax, certain individuals, trusts, and estates may
be subject to a Net Investment Income (“NII”) tax of 3.8%. The NII tax is
imposed on the lesser of: (i) a taxpayer’s investment income, net of deductions
properly allocable to such income; or (ii) the amount by which such taxpayer’s
modified adjusted gross income exceeds certain thresholds ($250,000 for married
individuals filing jointly, $200,000 for unmarried individuals and $125,000 for
married individuals filing separately). A Fund’s distributions are
includable in a shareholder’s investment income for purposes of this NII
tax. In addition, any capital gain realized by a shareholder upon a sale or
redemption of Fund shares is includable in such shareholder’s investment income
for purposes of this NII tax.
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. 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.
Under
the Foreign Account Tax Compliance Act (“FATCA”), a Fund may be required to
withhold a generally nonrefundable 30% tax on (i) distributions of investment
company taxable income and (ii) distributions of net capital gain and the gross
proceeds of a sale or redemption of Fund shares paid to (A) certain “foreign
financial institutions” unless such foreign financial institution agrees to
verify, monitor, and report to the Internal Revenue Service (“IRS”) the identity
of certain of its account-holders, among other items (or unless such entity is
otherwise deemed compliant under the terms of an intergovernmental agreement
between the United States and the foreign financial institution’s country of
residence), and (B) certain “non-financial foreign entities” unless such entity
certifies to the Fund that it does not have any substantial U.S.
owners
or provides the name, address, and taxpayer identification number of each
substantial U.S. owner, among other items. In December 2018, the IRS and
Treasury Department released proposed Treasury Regulations that would eliminate
FATCA withholding on Fund distributions of net capital gain and the gross
proceeds from a sale or redemption of Fund shares. Although taxpayers are
entitled to rely on these proposed Treasury Regulations until final Treasury
Regulations are issued, these proposed Treasury Regulations have not been
finalized, may not be finalized in their proposed form, and are potentially
subject to change. This FATCA withholding tax could also affect a Fund’s return
on its investments in foreign securities or affect a shareholder’s return if the
shareholder holds its Fund shares through a foreign intermediary. You are urged
to consult your tax adviser regarding the application of this FATCA withholding
tax to your investment in a Fund and the potential certification, compliance,
due diligence, reporting, and withholding obligations to which you may become
subject in order to avoid this withholding tax.
Each
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage of the taxable distributions and sale or redemption proceeds paid to
any shareholder who fails to properly furnish a correct taxpayer identification
number, who has underreported dividend or interest income, or who fails to
certify that they are not subject to such withholding.
Taxes
When Shares are Sold on the Exchange
Any
capital gain or loss realized upon a sale of Shares generally is treated as a
long-term capital gain or loss if Shares have been held for more than one year
and as a short-term capital gain or loss if Shares have been held for one year
or less. However, any capital loss on a sale of Shares held for six months or
less is treated as long-term capital loss to the extent of Capital Gain
Dividends paid with respect to such Shares. Any loss realized on a sale will be
disallowed to the extent Shares of a Fund are acquired, including through
reinvestment of dividends, within a 61-day period beginning 30 days before and
ending 30 days after the sale of Shares.
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. Persons
exchanging securities should consult their own tax advisor with respect to
whether wash sale rules apply and when a loss might be deductible.
Any
capital gain or loss realized upon redemption of Creation Units is generally
treated as long-term capital gain or loss if Shares comprising the Creation
Units have been held for more than one year and as a short-term capital gain or
loss if such Shares have been held for one year or less.
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.
Foreign
Investments by a Fund
Interest
and other income received by a Fund with respect to foreign securities may give
rise to withholding and other taxes imposed by foreign countries. Tax treaties
or conventions between certain countries and the United States may reduce or
eliminate such taxes. If as of the close of a taxable year more than 50% of the
value of a Fund’s assets consists of certain foreign stock or securities, each
such Fund will be eligible to elect to “pass through” to investors the amount of
foreign income and similar taxes (including withholding taxes) paid by such Fund
during that taxable year. This means that investors would be considered to have
received as additional income their respective shares of such foreign taxes, but
may be entitled to either a corresponding tax deduction in calculating taxable
income, or, subject to certain limitations, a credit in calculating federal
income tax. If a Fund does not so elect, each such Fund will be entitled to
claim a deduction for certain foreign taxes incurred by such Fund. A Fund (or
its administrative agent) will notify you if it makes such an election and
provide you with the information necessary to reflect foreign taxes paid on your
income tax return.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in each Fund. It is not a substitute for
personal tax advice. You also may be subject to foreign, 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
Foreside
Fund Services, LLC (the “Distributor”), the Funds’ distributor, is a
broker-dealer registered with the U.S. Securities and Exchange Commission. The
Distributor distributes Creation Units for the Funds on an agency basis and does
not maintain a secondary market in Shares. The Distributor has no role in
determining the policies of the Funds or the securities that are purchased or
sold by the Funds. The Distributor’s principal address is Three Canal Plaza,
Suite 100, Portland, Maine 04101.
The
Board has adopted a Distribution (Rule 12b-1) Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, each Fund is authorized
to pay an amount up to 0.25% of its average daily net assets each year for
certain distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Funds, and there are no plans to
impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because the fees are paid out of Fund assets, over time these fees will
increase the cost of your investment and may cost you more than certain other
types of sales charges.
PREMIUM/DISCOUNT
INFORMATION
Information
regarding how often Shares of a Fund traded on the Exchange at a price above
(i.e., at a premium) or below (i.e., at a discount) the NAV of the applicable
Fund can be found on the Funds’ website at www.sp-funds.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, the Sub-Adviser, and each Fund make no representation or warranty,
express or implied, to the owners of Shares or any member of the public
regarding the advisability of investing in securities generally or in the Funds
particularly.
Each
Index is a product of S&P Dow Jones Indices LLC, a division of S&P
Global, or its affiliates (“SPDJI”), and has been licensed for use by the
Adviser. Standard & Poor’s®, S&P®, and S&P 500® are registered
trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow
Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow
Jones”); and these trademarks have been licensed for use by SPDJI and
sublicensed for certain purposes by the Adviser. It is not possible to invest
directly in an index. The Funds are not sponsored, endorsed, sold or promoted by
SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively,
“S&P Dow Jones Indices”). S&P Dow Jones Indices makes no representation
or warranty, express or implied, to the owners of the Funds or any member of the
public regarding the advisability of investing in securities generally or in the
Funds particularly. Past performance of an index is not an indication or
guarantee of future results. S&P Dow Jones Indices’ only relationship to the
Adviser with respect to each Index is the licensing of each Index and certain
trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or
its licensors. Each Index is determined, composed and calculated by S&P Dow
Jones Indices without regard to the Adviser or the Funds. S&P Dow Jones
Indices has no obligation to take the needs of the Adviser or the owners of the
Funds into consideration in determining, composing or calculating each Index.
S&P Dow Jones Indices is not responsible for and has not participated in the
determination of the prices, and amount of shares of the Funds or the timing of
the issuance or sale of shares of the Funds or in the determination or
calculation of the equation by which shares of the Funds are to be converted
into cash, surrendered or redeemed, as the case may be. S&P Dow Jones
Indices has no obligation or liability in connection with the administration,
marketing or trading of the Funds. There is no assurance that investment
products based on each Index will accurately track index performance or provide
positive investment returns. S&P Dow Jones Indices LLC is not an investment
or tax advisor. A tax advisor should be consulted to evaluate the impact of any
tax-exempt securities on portfolios and the tax consequences of making any
particular investment decision. Inclusion of a security within an index is not a
recommendation by S&P Dow Jones Indices to buy, sell, or hold such security,
nor is it considered to be investment advice.
S&P
DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR
THE COMPLETENESS OF EACH INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION,
INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING
ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL
NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY THE ADVISER, OWNERS
OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF EACH INDEX OR WITH
RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN
NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT
LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY
HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT,
STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY
AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND THE ADVISER,
OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
FINANCIAL
HIGHLIGHTS
The
Financial Highlights table is intended to help you understand each Fund’s
performance for the fiscal period shown. Certain information reflects financial
results for a single Fund share. The total returns in the table represents the
rate that an investor would have earned on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by Tait, Weller & Baker LLP, 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS For a capital share outstanding throughout the period |
|
|
|
|
|
|
|
Periods
Ended November 30, 2020 |
|
|
Sharia
ETF
(1) |
|
Sukuk
ETF
(2) |
|
|
|
|
|
|
Net
asset value, beginning of period |
$ |
20.00 |
|
|
$ |
20.00 |
|
|
|
|
|
|
|
Income
from Investment Operations: |
|
|
|
|
Net
investment income (loss)
(3) |
0.22 |
|
|
0.30 |
|
|
Net
realized and unrealized gain (loss) on investments and payments by
affiliates on the disposal of investments due to trade error |
4.25 |
|
|
0.39 |
|
|
Total
from investment operations |
4.47 |
|
|
0.69 |
|
|
|
|
|
|
|
Less
Distributions: |
|
|
|
|
From
net investment income |
(0.21) |
|
|
(0.28) |
|
|
Total
distributions |
(0.21) |
|
|
(0.28) |
|
|
|
|
|
|
|
Net
asset value, end of period |
$ |
24.26 |
|
|
$ |
20.41 |
|
|
Total
return (4)
(5) |
22.58 |
% |
|
3.48 |
% |
(6) |
|
|
|
|
|
Ratios
/ Supplemental Data: |
|
|
|
|
Net
assets, end of period (millions) |
$ |
38.8 |
|
|
$ |
31.1 |
|
|
Portfolio
turnover rate (4) |
46 |
% |
|
15 |
% |
|
Ratio
of expenses to average net assets (7) |
0.49 |
% |
|
0.65 |
% |
|
Ratio
of net investment income (loss) to average net assets (7) |
1.06 |
% |
|
1.61 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The
Fund commenced operations on December 17, 2019. The information presented
is from December 17, 2019 to November 30, 2020. |
(2)
|
The
Fund commenced operations on December 27, 2019. The information presented
is from December 27, 2019 to November 30, 2020. |
(3) |
Calculated
using average shares outstanding method. |
(4) |
Not
Annualized. |
(5)
|
The
total return is based on each Fund’s net asset value. Additional
performance information is presented in the Performance Summary.
|
(6) |
Net
increase from payments by affiliates on the disposal of investments due to
trade error added 0.11% to this return. |
(7)
|
Annualized.
|
SP
Funds S&P 500 Sharia Industry Exclusions ETF
SP
Funds Dow Jones Global Sukuk ETF
|
|
|
|
|
|
|
|
|
|
|
|
Adviser |
Toroso
Investments, LLC
898
N. Broadway, Suite 2
Massapequa,
New York 11758 |
Administrator |
Tidal
ETF Services LLC
898
N. Broadway, Suite 2
Massapequa,
New York 11758 |
Sub-Adviser |
ShariaPortfolio,
Inc.
1331
International Pkwy
Suite
2291
Lake
Mary, Florida 32746 |
Distributor |
Foreside
Fund Services, LLC
Three
Canal Plaza
Suite
100
Portland,
Maine 04101 |
Custodian |
U.S.
Bank National Association
1555
N. Rivercenter Dr.
Milwaukee,
Wisconsin 53212 |
Independent
Registered Public Accounting Firm |
Tait,
Weller & Baker LLP
Two
Liberty Place
50
S. 16th Street
Philadelphia,
Pennsylvania 19102 |
Sub-Administrator,
Fund Accountant, and Transfer Agent |
U.S.
Bancorp Fund Services, LLC
615
East Michigan Street
Milwaukee,
Wisconsin 53202 |
Legal
Counsel |
Godfrey
& Kahn, S.C.
833
East Michigan Street, Suite 1800
Milwaukee,
Wisconsin 53202 |
Investors
may find more information about the Funds in the following documents:
Statement
of Additional Information: The
Funds’ SAI provides additional details about the investments of the Funds and
certain other additional information. A current SAI dated March 31, 2021, as
supplemented from time to time, is on file with the SEC and is herein
incorporated by reference into this Prospectus. It is legally considered a part
of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about each Fund’s investments 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 during the prior fiscal period.
You
can obtain free copies of these documents, when available, request other
information or make general inquiries about the Funds by contacting the Funds at
ShariaPortfolio, c/o U.S. Bank Global Fund Services, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701 or calling 425-409-9500.
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 website at www.sp-funds.com; or
(SEC
Investment Company Act File No. 811-23377)