ck0001683471-20220126
497Jan 26,
2022LISTED FUNDS TRUST0001683471falseJan 26,
2022N-1A0001683471ck0001683471:S000075116Member2022-01-262022-01-260001683471ck0001683471:C000233950Memberck0001683471:S000075116Member2022-01-262022-01-2600016834712022-01-262022-01-26iso4217:USDxbrli:pure
PROSPECTUS
Morgan Creek-Exos Active SPAC Arbitrage
ETF
(CSH)
Listed
on NYSE Arca, Inc.
January 26,
2022
The
U.S. Securities and Exchange Commission (the “SEC”) has not approved or
disapproved of these securities or passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal
offense.
MORGAN CREEK-EXOS ACTIVE SPAC ARBITRAGE ETF - FUND
SUMMARY
Investment Objective
The Morgan Creek-Exos Active
SPAC Arbitrage ETF (the “Fund”) seeks to preserve capital and provide
incremental total return.
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.
|
|
|
|
|
|
|
|
Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
|
|
Management
Fee |
1.25% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses1 |
0.00% |
Total
Annual Fund Operating Expenses |
1.25% |
|
|
1
Estimated for the current
fiscal year.
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:
|
|
|
|
|
|
|
|
|
|
|
|
1
Year: |
$127 |
3
Years: |
$397 |
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 the Total Annual Fund Operating Expenses
or in the Example, affect the Fund’s performance. Because the Fund is newly
organized, portfolio turnover information is not yet
available.
Principal Investment Strategies
The
Fund is actively managed using a strategy designed around the unique
characteristics of “Pre-Combination” (defined below) SPAC securities. Under
normal market conditions, the Fund seeks to achieve its investment objective by
investing primarily in units made up of common stock, warrants and rights of
U.S.-listed special purpose acquisition companies (“SPACs”). A right is a
privilege granted to existing holders of a company’s stock to receive additional
shares of the common stock before it is offered to the public. A warrant is a
derivative that gives the right, but not the obligation, to buy or sell a
security at a certain price prior to expiration. Exos Asset Management, LLC (the
“Sub-Adviser”) is responsible for the day-to-day management
of the Fund with the oversight of Morgan Creek Capital Management, LLC (the
“Adviser”).
A
SPAC is a “blank check” company with no commercial operations that is designed
to raise capital via an initial public offering (“IPO”) for the purpose of
engaging in a merger, acquisition, reorganization, or similar business
combination (a “Combination”) with one or more operating companies. Sponsors of
SPACs typically pay the SPAC’s offering costs and underwriting fees and
contribute all or a portion of its working capital in exchange for participation
in the common stock and derivatives (such as warrants and rights) of the SPAC. A
SPAC IPO typically involves the sale of units consisting of one share of common
stock and a warrant or right (or portion of a warrant or right) to purchase
common stock at a fixed price upon or after the consummation of a Combination.
The capital raised in the IPO is typically placed into a trust. The proceeds of
the IPO may be used only to consummate a Combination and for other limited
purposes such as paying taxes owed by the SPAC. “Pre-Combination” SPACs are
SPACs that are either seeking a target for a Combination or have not yet
completed a Combination with an identified target. Pre-Combination SPACs often
have predetermined time frames to consummate a Combination (typically two years)
or the SPAC will seek to extend the time frame or liquidate. “Post-Combination”
SPACs are operating companies that have completed a Combination with a SPAC. The
Fund generally will not hold a SPAC’s common stock past the date on which it no
longer has the ability to redeem for its share of the underlying collateral held
in trust but may, in limited circumstances, continue to hold the rights or
warrants on a Post-Combination SPAC
security.
Under normal circumstances, at least 80% of the Fund’s net assets, plus
borrowings for investment purposes, will be invested in Pre-Combination SPACs.
At
times, the Fund may utilize leverage in the form of borrowing, which would
typically be in the form of loans from banks or other lenders, that may be on a
secured or unsecured basis and at fixed or variable rates of interest. The Fund
may borrow funds collateralized by its assets to invest in the shares of
Pre-Combination SPACs. Generally, Fund borrowing may be used to acquire SPACs
trading in the secondary market at a discount to their collateralization or
trust asset value. Fund borrowing may be zero at any time. Consistent with
applicable regulations, the Fund will maintain an asset coverage ratio
(i.e.,
the
value of the Fund’s assets over the Fund’s borrowings) of 300% or
higher.
The
Fund is considered to be non-diversified, which means that it may invest more of
its assets in the securities of a single issuer or a lesser number of issuers
than if it were a diversified fund. The SPACs in which the Fund invests will
generally be small or mid-capitalization companies.
Investment
Sub-Adviser’s Process. The
Fund is actively managed using a strategy designed around the unique
characteristics of Pre-Combination SPAC securities. The Fund seeks to protect
capital at all times via its ability to redeem its shares in SPACs for Treasury
bill collateral held in trust, while seeking to generate incremental return via
actively trading SPAC securities to extract value from both the underlying
collateral and the embedded optionality inherent in the securities. That is,
SPAC securities have equity options embedded in them both explicitly
(i.e.,
warrants and rights that are part of a SPAC unit which can be detached and
traded separately from the common stock after a minimum holding period) and
implicitly (i.e.,
if the common stock trades above the SPAC redemption value). The Sub-Adviser evaluates potential SPAC investments by seeking to
identify those it believes are more likely to: (i) complete a merger, (ii)
complete a merger in a short period of time; and (iii) generate above-average
performance. The Sub-Adviser considers a variety of factors,
including a SPAC’s history and relationships, area of focus, and its management
team’s ability to raise outside capital. Potential SPAC investments are also
analyzed using a proprietary framework that estimates the potential return of
each security taking into account (i) the stated return to trust value and (ii)
the estimated value of the embedded options. The Sub-Adviser
will make a determination as to whether to continue to hold an individual SPAC
security beyond the initial time period within which the SPAC has to complete a
Combination if such time frame is extended because the SPAC has not yet
completed a Combination. In such cases, the Sub-Adviser will
consider similar criteria, including any additional capital invested in the SPAC
and the estimated return from the embedded options. In implementing the Fund’s
strategy, the Sub-Adviser seeks to:
•harvest
return on deals that trade above collateral value;
•monetize
the value of warrants and rights embedded in SPAC units it buys at or below
collateral value;
•buy
issues at a discount to collateral value to lock in embedded
return;
•add
overall exposure as SPACs get cheaper relative to their collateral value and
reduce overall exposure as SPACs get more expensive relative to their collateral
value;
•generally
recycle capital by selling the Fund’s investment in individual SPACs that are
trading above collateral value and reinvesting the proceeds into SPACs trading
at or below collateral value; and
•adjust
the portfolio at advantageous prices by placing buy orders on the bid or worse,
and placing sell orders on the offer or better, in order to earn the spread
between the bid and offer.
Principal Investment Risks
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return and/or ability to meet its
objective. The following risks could affect the value of your investment in
the Fund:
•Associated
Risks of Pre-Combination SPACs. The
Fund invests in equity securities, warrants and rights of SPACs, which raise
funds to seek potential Combination opportunities. Unless and until a
Combination is completed, a SPAC generally invests its assets in U.S. government
securities, money market securities, and cash. If a Combination that meets the
requirements for the SPAC is not completed within a pre-established period of
time (e.g.,
18-24 months), the invested funds are generally returned to the entity’s
shareholders (less any applicable taxes, fees, and administrative expenses);
however, in certain cases, the SPAC may extend its period of operations beyond
the initial pre-established period of time. If this occurs, a fund investing in
the SPAC may have difficulty redeeming its holdings, or may not be able to do so
at a desirable time. Because SPACs have no operating history or ongoing business
other than seeking Combinations, the value of their securities is particularly
dependent on the ability of the entity’s management to identify and complete a
profitable Combination. There is no guarantee that the SPACs in which the Fund
invests will complete a Combination or that any Combination that is completed
will be profitable. Public stockholders of SPACs may not be afforded a
meaningful opportunity to vote on a proposed initial Combination because certain
stockholders, including stockholders affiliated with the management or the
sponsor of the SPAC, may have sufficient voting power, and a financial
incentive,
to approve such a transaction without support from public stockholders. As a
result, a SPAC may complete a Combination even though a majority of its public
stockholders do not support such a Combination. Although redemption rights are
generally granted to all public shareholders regardless of how they vote,
exchange rules may only oblige SPACs to offer redemption rights to shareholders
that vote against a Combination. Some SPACs may pursue Combinations only within
certain industries or regions, which may increase the volatility of their
prices. Additionally, SPAC securities, which are typically traded in the
over-the-counter market, may be considered illiquid and/or be subject to
restrictions on resale or redemption, which may have the effect of discouraging
shareholders from accumulating large blocks of SPAC holdings.
•Borrowing
and Leverage Risk.
Borrowing magnifies the potential for gain or loss by the Fund and, therefore,
increases the possibility of fluctuation in the Fund’s NAV. This is the
speculative factor known as leverage. Because the Fund’s investments will
fluctuate in value, while the interest on borrowed amounts may be fixed, the
Fund’s NAV may tend to increase more as the value of its investments increases,
or to decrease more as the value of its investments decreases, during times of
borrowing. Unless profits on investments acquired with borrowed funds exceed the
costs of borrowing, the use of borrowing will cause the Fund’s investment
performance to decrease. Borrowing also may cause the Fund to liquidate
positions under adverse market conditions to satisfy its repayment obligations.
Borrowing increases the risk of loss and may increase the volatility of the
Fund.
•Equity
Market Risk. The
equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, sectors or companies in which the Fund invests.
Common stock, warrants, and rights are generally exposed to greater risk than
other types of securities, such as preferred stocks and debt obligations,
because common stockholders generally have inferior rights to receive payment
from issuers.
•ETF
Risks.
The Fund is an ETF, and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as Authorized
Participants (“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 listed exchange is open, the Fund is likely to experience
premiums or discounts greater than those of domestic ETFs.
◦Trading. Although
Shares are listed for trading on the NYSE Arca, Inc. (the “Exchange”) and may be
traded on U.S. exchanges other than the Exchange, there can be no assurance that
Shares will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of Shares may begin to mirror the liquidity of
the Fund’s underlying portfolio holdings, which can be significantly less liquid
than Shares.
•Illiquidity
Risk.
Illiquidity risk exists when particular investments are difficult to purchase or
sell, possibly preventing the Fund from selling these illiquid investments at an
advantageous price or at the time desired. A lack of liquidity may also cause
the value of investments to decline. Illiquid investments may also be difficult
to value.
•Management
Risk. The
Sub-Adviser continuously evaluates the Fund’s holdings,
purchases and sales with a view to achieving the Fund’s investment objective.
However, achievement of the stated investment objective cannot be guaranteed.
The Sub-Adviser’s judgment about the markets, the economy,
or companies may not anticipate actual market movements, economic conditions or
company performance, and these factors may affect the return on your
investment.
•Market
Capitalization Risk.
◦Mid-Capitalization
Investing.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large capitalization stocks or the stock market
as a whole.
◦Small-Capitalization
Investing.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the coronavirus (COVID-19) pandemic and
related public health issues, growth concerns in the U.S. and overseas,
uncertainties regarding interest rates, trade tensions and the threat of tariffs
imposed by the U.S. and other countries. These developments as well as other
events could result in further market volatility and negatively affect financial
asset prices, the liquidity of certain securities and the normal operations of
securities exchanges and other markets. It is unknown how long circumstances
related to the pandemic will persist, whether they will reoccur in the future,
whether efforts to support the economy and financial markets will be successful,
and what additional implications may follow from the pandemic. The impact of
these events and other epidemics or pandemics in the future could adversely
affect Fund performance.
•New
Fund Risk. The
Fund is a recently organized investment company with no operating history. As a
result, prospective investors have no track record or history on which to base
their investment decision.
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for shareholders.
•Rights
and Warrants Risk. The
Fund may purchase rights and warrants and rights to purchase equity securities.
Investments in warrants or rights are pure speculation in that they have no
voting rights, pay no dividends and have no rights with respect to the assets of
the corporation issuing them. They do not represent ownership of the securities,
but only the right to buy them. Warrants and rights and warrants involve the
risk that the Fund could lose the purchase value of the warrant or right if the
warrant or right is not exercised or sold prior to its expiration.
◦Post-Combination
SPAC Warrants.
Although the Fund generally will not hold the common stock of a Post-Combination
SPAC, the Fund may hold warrants to buy the stock of companies that are derived
from a SPAC. Post-Combination SPACs may be unseasoned and lack a trading
history, a track record of reporting to investors, and widely available research
coverage. Post-Combination SPACs are thus often subject to extreme price
volatility and speculative trading. The stocks underlying the warrants may have
above average price appreciation that may not continue and the performance of
these stocks may not replicate the performance exhibited in the past, which
could adversely affect the value of the warrants the Fund holds.
•Tax
Risk. The
investment in equity securities of SPACs introduces complexities beyond typical
equity investments and may introduce tax risks to the Fund. In particular,
certain non-U.S. SPACs may be treated as “passive foreign investment companies”
(“PFICs”) under the Code, thereby causing the Fund to be subject to special tax
rules. If a SPAC is classified as a PFIC, the Fund may be subject to U.S.
federal income tax on a portion of any “excess distribution” or gain from the
disposition of shares in the PFIC even if such income is distributed as a
taxable dividend by the Fund to its shareholders. Additional charges in the
nature of interest may be imposed on a Fund in respect of deferred taxes arising
from such distributions or gains unless the Fund makes certain elections. See
“Federal Income Taxes—Foreign Investments” in the SAI for additional
information.
Performance
The Fund is new and therefore does not have a
performance history for a full calendar year. In the future,
performance information for the Fund will be presented in this section. Updated
performance information is available on the Fund’s website at www.csh-etf.com.
Portfolio
Management
|
|
|
|
|
|
Adviser |
Morgan
Creek Capital Management, LLC |
Sub-Adviser |
Exos
Asset Management, LLC |
Portfolio
Manager |
Dewey
Tucker Partner and Portfolio Manager of the Sub-Adviser, has been the portfolio manager of the Fund
since its inception in January
2022. |
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 the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.csh-etf.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an
individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUND
Investment
Objective
The
Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed without shareholder approval upon written notice to
shareholders.
Principal
Investment Strategies
The
following information is in addition to, and should be read along with, the
description of the Fund’s principal investment strategies in the section titled
“Fund Summary—Principal Investment Strategies” above.
In
accordance with Rule 35d-1 under the Investment Company Act of 1940 (the “1940
Act”), the Fund has adopted a non-fundamental investment policy to invest, under
normal circumstances, at least 80% of its net assets (plus the amount of any
borrowing for investment purposes) in Pre-Combination SPACs. Such policy may be
changed without shareholder approval upon 60 days’ written notice to the Fund’s
shareholders.
Temporary
Defensive Positions.
For temporary defensive purposes during adverse market, economic, political or
other conditions, the Fund may invest in cash or cash equivalents or short-term
instruments such as commercial paper, money market mutual funds, or short-term
U.S. government securities. Taking a temporary defensive position may result in
the Fund not achieving its investment objective.
Principal
Investment Risks
An
investment in the Fund entails risks. The Fund could lose money, or its
performance could trail that of other investment alternatives. The following
provides additional information about the Fund’s principal risks. It is
important that investors closely review and understand these risks before making
an investment decision. Just as in the Fund’s summary section, the principal
risks are presented in alphabetical order to facilitate finding particular risks
and comparing them with those of other funds. Each risk summarized below is
considered a “principal risk” of investing in the Fund, regardless of the order
in which it appears.
•Associated
Risks of Pre-Combination SPACs. The
Fund invests in equity securities, warrants and rights of SPACs, which raise
funds to seek potential Combination opportunities. Unless and until a
Combination is completed, a SPAC generally invests its assets in U.S. government
securities, money market securities, and cash. If a Combination that meets the
requirements for the SPAC is not completed within a pre-established period of
time (e.g.,
18-24 months), the invested funds are generally returned to the entity’s
shareholders (less any applicable taxes, fees, and administrative expenses);
however, in certain cases, the SPAC may extend its period of operations beyond
the initial pre-established period of time. If this occurs, a fund investing in
the SPAC may have difficulty redeeming its holdings, or may not be able to do so
at a desirable time.Because SPACs have no operating history or ongoing business
other than seeking Combinations, the value of their securities is particularly
dependent on the ability of the entity’s management to identify and complete a
profitable Combination. There is no guarantee that the SPACs in which the Fund
invests will complete a Combination or that any Combination that is completed
will be profitable. Public stockholders of SPACs may not be afforded a
meaningful opportunity to vote on a proposed initial Combination because certain
stockholders, including stockholders affiliated with the management or the
sponsor of the SPAC, may have sufficient voting power, and a financial
incentive, to approve such a transaction without support from public
stockholders. As a result, a SPAC may complete a Combination even though a
majority of its public stockholders do not support such a Combination. Although
redemption rights are generally granted to all public shareholders regardless of
how they vote, exchange rules may only oblige SPACs to offer redemption rights
to shareholders that vote against a Combination.Some SPACs may pursue
Combinations only within certain industries or regions, which may increase the
volatility of their prices. Additionally, SPAC securities, which are typically
traded in the over-the-counter market, may be considered illiquid and/or be
subject to restrictions on resale or redemption, which may have the effect of
discouraging shareholders from accumulating large blocks of SPAC
holdings.
•Borrowing
and Leverage Risk. Borrowing
magnifies the potential for gain or loss by the Fund and, therefore, increases
the possibility of fluctuation in the Fund’s net asset values. This is the
speculative factor known as leverage. Because the Fund’s investments will
fluctuate in value, while the interest on borrowed amounts may be fixed, the
Fund’s net asset value may tend to increase more as the value of its investments
increases, or to decrease more as the value of its investments decreases, during
times of borrowing. Unless profits on investments acquired with borrowed funds
exceed the costs of borrowing, the use of borrowing will cause the Fund’s
investment performance to decrease.
•Equity
Market Risk. Common
stocks, warrants and rights are susceptible to general stock market fluctuations
and to volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. These investor perceptions are based on
various and unpredictable factors including: expectations regarding government,
economic, monetary and fiscal policies; inflation and interest rates; economic
expansion or contraction; and global or regional political, economic and banking
crises. If you held common stock, or common stock equivalents, of any given
issuer, you would generally be exposed to greater risk than if you held
preferred stocks and debt obligations of the issuer because common stockholders,
or holders of equivalent interests, generally have inferior rights to receive
payments from issuers in comparison with the rights of preferred stockholders,
bondholders, and other creditors of such issuers..
Beginning
in the first quarter of 2020, financial markets in the United States and around
the world experienced extreme and in many cases unprecedented volatility and
severe losses due to the global pandemic caused by COVID‑19, a novel
coronavirus. The pandemic has resulted in a wide range of social and economic
disruptions, including closed borders, voluntary or compelled quarantines of
large populations, stressed healthcare systems, reduced or prohibited domestic
or international travel, supply chain disruptions, and so-called “stay-at-home”
orders throughout much of the United States and many other countries. The
fall-out from these disruptions has included the rapid closure of businesses
deemed “non-essential” by federal, state, or local governments and rapidly
increasing unemployment, as well as greatly reduced liquidity for certain
instruments at times. Some sectors of the economy and individual issuers have
experienced particularly large losses. Such disruptions may continue for an
extended period of time or reoccur in the future to a similar or greater extent.
In response, the U.S. government and the Federal Reserve have taken
extraordinary actions to support the domestic economy and financial markets,
resulting in very low interest rates and in some cases negative yields. It is
unknown how long circumstances related to the pandemic will persist, whether
they will reoccur in the future, whether efforts to support the economy and
financial markets will be successful, and what additional implications may
follow from the pandemic. The impact of these events and other epidemics or
pandemics in the future could adversely affect Fund performance.
•ETF
Risks.
The Fund is an ETF, and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk.
The Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. 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 difference between the price at which an investor is willing to buy Shares
(the “bid” price) and the price at which an investor is willing to sell Shares
(the “ask” price). This difference in bid and ask prices is often referred to as
the “spread” or “bid/ask spread.” The bid/ask spread varies over time for Shares
based on trading volume and market liquidity, and is generally lower if Shares
have more trading volume and market liquidity and higher if Shares have little
trading volume and market liquidity. Further, a relatively small investor base
in the Fund, asset swings in the Fund and/or increased market volatility may
cause increased bid/ask spreads. Due to the costs of buying or selling Shares,
including bid/ask spreads, frequent trading of Shares may significantly reduce
investment results and an investment in Shares may not be advisable for
investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility or periods of
steep market declines and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant. The market price of Shares during the trading day, like the price
of any exchange-traded security, includes a “bid/ask” spread charged by the
exchange specialist, market makers or other participants that trade Shares. In
times of severe market disruption, the bid/ask spread can increase
significantly. At those times, Shares are most likely to be traded at a discount
to NAV, and the discount is likely to be greatest when the price of Shares is
falling fastest, which may be the time that you most want to sell your Shares.
The Adviser believes that, under normal market conditions, large market price
discounts or premiums to NAV will not be sustained because of arbitrage
opportunities.
◦Trading.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can
be no assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 500 Index during a single day reaches certain thresholds (e.g.,
7%, 13%, and 20%). Additional rules applicable to the Exchange may halt trading
in Shares when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance that Shares will trade with
any volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than Shares.
•Illiquidity
Risk.
Illiquidity risk exists when particular investments are difficult to purchase or
sell, possibly preventing the Fund from selling these illiquid investments at an
advantageous price or at the time desired. A lack of liquidity may also cause
the value of investments to decline. Illiquid investments may also be difficult
to value.
•Management
Risk. The
Sub-Adviser continuously evaluates the Fund’s holdings,
purchases and sales with a view to achieving the Fund’s investment objective.
However, achievement of the stated investment objective cannot be guaranteed.
The Sub-Adviser’s judgment about the markets, the economy,
or companies may not anticipate actual market movements, economic conditions or
company performance, and these factors may affect the return on your investment.
In fact, no matter how good a job the Sub-Adviser does, you
could lose money on your investment in the Fund, just as you could with other
investments. If the Sub-Adviser is incorrect in its
assessment of the income, growth or price realization potential of the Fund’s
holdings or incorrect in its assessment of general market or economic
conditions, then the value of the Fund’s shares may decline.
•Market
Capitalization Risk.
◦Mid-Capitalization
Investing.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large capitalization stocks or the stock market
as a whole.
◦Small-Capitalization
Investing.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
economic, political and global macro factors, including public health issues,
growth concerns in the U.S. and overseas, uncertainties regarding interest
rates, trade tensions and the threat of tariffs imposed by the U.S. and other
countries. These developments as well as other events could result in further
market volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets, which could have an adverse effect on the Fund.
The
respiratory illness COVID-19 caused by a novel coronavirus has resulted in a
pandemic and major disruption to economies and markets around the world,
including the United States. The pandemic has resulted in a wide range of social
and economic disruptions, including closed borders, voluntary or compelled
quarantines of large populations, stressed healthcare systems, reduced or
prohibited domestic or international travel, supply chain disruptions, and
so-called “stay-at-home” orders throughout much of the United States and many
other countries. Financial markets have experienced extreme volatility and
severe losses, and trading in many instruments has been disrupted. Some sectors
of the economy and individual issuers have experienced particularly large
losses. Such disruptions may continue for an extended period of time or reoccur
in the future to a similar or greater extent. Liquidity for many instruments has
been greatly reduced for periods of time. In response to these disruptions, the
U.S. government and the Federal Reserve have taken extraordinary actions to
support the domestic economy and financial markets, resulting in very low
interest rates and in some cases negative yields. It is unknown how long
circumstances related to the pandemic will persist, whether they will reoccur in
the future, whether efforts to support the economy and financial markets will be
successful, and what additional implications may follow from the pandemic. The
impact of these events and other epidemics or pandemics in the future could
adversely affect Fund performance.
•New
Fund Risk. The
Fund is a recently organized investment company with no operating history. As a
result, prospective investors have no track record or history on which to base
their investment decision. Moreover, investors will not be able to evaluate the
Fund against one or more comparable funds on the basis of relative performance
until the Fund has established a track record.
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may invest a greater percentage of its
assets in the securities of a single issuer or a lesser number of issuers than
if it was a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
lesser number of issuers than a fund that invests more widely. This may increase
the Fund’s volatility and cause the performance of a relatively small number of
issuers to have a greater impact on the Fund’s performance.
•Portfolio
Turnover Risk.
Because
the Fund may “turn over” some or all of its positions as frequently as monthly,
the Fund may incur high levels of transaction costs from commissions or mark-ups
in the bid/offer spread. Higher portfolio turnover may result in the Fund paying
higher levels of transaction costs and generating greater tax liabilities for
shareholders. Portfolio turnover risk may cause the Fund’s performance to be
less than you expect. While the turnover of the warrants and rights is not
deemed “portfolio turnover” for accounting purposes, the economic impact to the
Fund is similar to what could occur if the Fund experienced high portfolio
turnover (e.g.,
in excess of 100% per year).
•Rights
and Warrants Risk. The
Fund may purchase warrants and rights to purchase equity securities. Investments
in warrants and rights are pure speculation in that they have no voting rights,
pay no dividends and have no rights with respect to the assets of the
corporation issuing them. They do not represent ownership of the securities, but
only the right to buy them. The prices of warrants and rights (if traded
independently) and warrants do not necessarily move parallel to the prices of
the underlying securities. Warrants and rights involve the risk that the Fund
could lose the purchase value of the warrant or right if the warrant or right is
not exercised prior to its expiration. They also involve the risk that the
effective price paid for the warrant or rights added to the subscription price
of the related security may be greater than the value of the subscribed
security’s market price.
◦Post-Combination
SPAC Warrants.
Although the Fund generally will not hold the common stock of a Post-Combination
SPAC, the Fund may hold warrants to buy the stock of companies that are derived
from a SPAC. Post-Combination SPACs may be unseasoned and lack a trading
history, a track record of reporting to investors, and widely available research
coverage. Post-Combination SPACs are thus often subject to extreme price
volatility and speculative trading. The stocks underlying the warrants may have
above average price appreciation that may not continue and the performance of
these stocks may not replicate the performance exhibited in the past, which
could adversely affect the value of the warrants the Fund holds.
•Tax
Risk. The
investment in equity securities of SPACs introduces complexities beyond typical
equity investments and may introduce tax risks to the Fund. In particular,
certain non-U.S. SPACs may be treated as “passive foreign investment companies”
(“PFICs”) under the Code, thereby causing the Fund to be subject to special tax
rules. If a SPAC is classified as a PFIC, the Fund may be subject to U.S.
federal income tax on a portion of any “excess distribution” or gain from the
disposition of shares in the PFIC even if such income is distributed as a
taxable dividend by the Fund to its shareholders. Additional charges in the
nature of interest may be imposed on a Fund in respect of deferred taxes arising
from such distributions or gains unless the Fund makes certain elections. See
“Federal Income Taxes—Foreign Investments” in the SAI for additional
information.
PORTFOLIO
HOLDINGS INFORMATION
Information
about the Fund’s daily portfolio holdings is available at www.csh-etf.com. A
complete description of the Fund’s policies and procedures with respect to the
disclosure of the Fund’s portfolio holdings is available in the Fund’s Statement
of Additional Information (“SAI”).
MANAGEMENT
Investment
Adviser
Morgan
Creek Capital Management, LLC, located at 301 W. Barbee Chapel Road, Suite 200,
Chapel Hill, North Carolina 27517, serves as the investment adviser for the
Fund. The Adviser, subject to the oversight of the Board, provides investment
management and operational oversight of the Sub-Adviser.
The Adviser also arranges for transfer agency, custody, fund administration,
distribution and all other services necessary for the Fund to operate. The
Adviser is an SEC-registered investment adviser that provides investment
advisory services to separately managed accounts and sub-advisory services to
institutional clients, in addition to providing investment advisory services to
the Fund. As of December 31, 2021, the Adviser had approximately $2.2 billion in
assets under management.
For
the services it provides to the Fund, the Adviser is entitled to a unified
management fee, which is calculated daily and paid monthly, at an annual rate
based on the Fund’s average daily net assets as set forth in the table
below.
|
|
|
|
|
|
Fund
|
Management
Fee |
Morgan
Creek-Exos Active SPAC Arbitrage ETF |
1.25% |
Pursuant
to an investment advisory agreement between the Trust, on behalf of the Fund,
and the Adviser (the “Advisory Agreement”), the Adviser has agreed to pay all
expenses of the Fund except the fee paid to the Adviser under the Advisory
Agreement, interest charges on any borrowings, dividends, and other expenses on
securities sold short, taxes, brokerage commissions and other expenses incurred
in placing orders for the purchase and sale of securities and other investment
instruments, acquired fund fees and expenses, accrued deferred tax liability,
extraordinary expenses, and distribution (12b-1) fees and expenses (if any). The
Adviser, in turn, compensates the Sub-Adviser from the
management fee it receives.
The
basis for the Board’s approval of the Advisory Agreement will be available in
the Fund’s first Annual or Semi-Annual Report to Shareholders.
Exos
Asset Management, LLC, a Delaware limited liability company located at 1370
Broadway, Suite 1450, New York, New York 10018, serves as sub-adviser to the
Fund. An SEC-registered investment adviser formed in 2019, the Sub-Adviser is
majority owned by Exos TFP Holdngs LLC. As of December 31, 2021, the Sub-Adviser
had approximately $679.5 million in assets under management.
Pursuant
to a sub-advisory agreement between the Trust, on behalf of the Fund, the
Adviser and the Sub-Adviser (the “Sub-Advisory Agreement”),
subject to the oversight of the Adviser and the Board, the Sub-Adviser is responsible for the day-to-day investment
management
and operations of the Fund’s portfolio, including selecting broker-dealers to
execute purchase and sale transactions. For its services, the Sub-Adviser is entitled to a fee paid by the Adviser, which
fee is calculated daily and paid monthly, at a rate of 0.75% of the Adviser’s
management fee, net of Fund expenses paid by the Adviser and expenses paid by
the Adviser related to the statutory distributor.
The
basis for the Board’s approval of the Sub-Advisory Agreement will be available
in the Fund’s first Annual or Semi-Annual Report to Shareholders.
Dewey
Tucker is the Fund’s Portfolio Manager and is responsible for day-to-day
management of the Fund’s portfolio.
Mr.
Tucker has over 14 years of experience in financial markets. In October 2017, he
joined the Sub-Adviser as Partner, Head of Trading
Strategies. Mr. Tucker began his career at Knight Capital Group in January 2005,
developing trading strategies for the automated equities market making business.
He later transitioned to managing a variety of proprietary trading strategies at
Knight Capital Americas, LLC and then KCG Americas LLC, specifically focused on
equities, futures, and fixed income market making. Mr. Tucker has a Ph.D.
from MIT in Electrical Engineering, specializing in statistical signal
processing and probabilistic modeling.
The
Fund’s SAI provides additional information about the Portfolio Manager’s
compensation structure, other accounts managed by the Portfolio Manager, and the
Portfolio Manager’s ownership of Shares.
Foreside
Fund Services, LLC (the “Distributor”), is the principal underwriter and
distributor of the Fund’s shares. The Distributor’s principal address is Three
Canal Plaza, Suite 100, Portland, Maine 04101. The Distributor will not
distribute shares in less than whole Creation Units, and it does not maintain a
secondary market in the shares. The Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934 and a member of the Financial Industry
Regulatory Authority, Inc. (“FINRA”). The Distributor has no role in determining
the policies of the Fund or the securities that are purchased or sold by the
Fund and is not affiliated with the Adviser, Sub-Adviser,
or any of their affiliates.
U.S.
Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services,
located at 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as the
administrator and transfer agent for the Fund.
U.S.
Bank National Association, located at 1555 N. Rivercenter Drive, Suite 302,
Milwaukee, Wisconsin 53212, serves as the custodian for the Fund.
Morgan,
Lewis & Bockius LLP, located at 1111 Pennsylvania Avenue, N.W., Washington,
D.C. 20004, serves as legal counsel to the Trust.
Cohen
& Company, Ltd., located at 1350 Euclid Avenue, Suite 800, Cleveland, Ohio
44115, serves as the Fund’s independent registered public accounting firm. The
independent registered public accounting firm is responsible for auditing the
annual financial statements of the Fund.
HOW
TO BUY AND SELL SHARES
The
Fund issues and redeems Shares only in Creation Units at the NAV per share next
determined after receipt of an order from an AP. Only APs may acquire Shares
directly from the Fund, and only APs may tender their Shares for redemption
directly to the Fund, at NAV. APs must be a member or participant of a clearing
agency registered with the SEC and must execute a Participant Agreement that has
been agreed to by the Distributor, and that has been accepted by the Fund’s
transfer agent, with respect to purchases and redemptions of Creation Units.
Once created, Shares trade in the secondary market in quantities less than a
Creation Unit.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Individual Shares are listed for trading on the secondary market on the Exchange
and can be bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the
bid and the offer price in the secondary market on each leg of a round trip
(purchase and sale) transaction. In addition, because secondary market
transactions occur at market prices, you may pay more than NAV when you buy
Shares, and receive less than NAV when you sell those Shares.
Book
Entry
Shares
are held in book-entry form, which means that no stock certificates are issued.
The Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding Shares.
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
Fund imposes no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly with the Fund, are an essential part of the ETF process and help
keep Share trading prices in line with NAV. As such, the Fund accommodates
frequent purchases and redemptions by APs. However, frequent purchases and
redemptions for cash may increase tracking error and portfolio transaction costs
and may lead to the realization of capital gains. To minimize these potential
consequences of frequent purchases and redemptions, the Fund employs 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 Fund in effecting
trades. In addition, the Fund and the Adviser reserve the right to reject any
purchase order at any time.
Determination
of Net Asset Value
The
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 is calculated by dividing the Fund’s net
assets by its Shares outstanding.
In
calculating its NAV, the Fund generally values its assets on the basis of market
quotations, last sale prices, or estimates of value furnished by a pricing
service or brokers who make markets in such instruments. 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 the 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
de-listed 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 Fund 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 the Adviser or Sub-Adviser
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. Registered investment
companies are permitted to invest in the Fund beyond the limits set forth in
section 12(d)(1), subject to certain terms and conditions, including that such
investment companies enter into an agreement with the Fund.
DIVIDENDS,
DISTRIBUTIONS, AND TAXES
Dividends
and Distributions
The
Fund may pay out dividends, if any, and distribute any net realized capital
gains to its shareholders at least annually. The Fund will declare and pay
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 Fund. Your investment
in the Fund may have other tax implications. Please consult your tax adviser
about the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws.
The
Fund intends to qualify each year for treatment as a regulated investment
company (a “RIC”). If it meets certain minimum distribution requirements, a RIC
is not subject to tax at the fund level on income and gains from investments
that are timely distributed to shareholders. However, the Fund’s failure to
qualify as a RIC or to meet minimum distribution requirements would result (if
certain relief provisions were not available) in fund-level taxation and,
consequently, a reduction in income available for distribution to
shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA plan, you need to be aware of the possible tax
consequences when the Fund makes distributions, when you sell your Shares listed
on the Exchange, and when you purchase or redeem Creation Units (APs only).
Taxes
on Distributions
The
Fund intends to distribute, at least annually, substantially all of its net
investment income and net capital gains. For federal income tax purposes,
distributions of investment income are generally taxable as ordinary income or
qualified dividend income. Taxes on distributions of capital gains (if any) are
determined by how long the Fund owned the investments that generated them,
rather than how long a shareholder has owned his or her Shares. Sales of assets
held by the Fund for more than one year generally result in long-term capital
gains and losses, and sales of assets held by the Fund for one year or less
generally result in short-term capital gains and losses. Distributions of the
Fund’s net capital gain (the excess of net long-term capital gains over net
short-term capital losses) that are reported by the Fund as capital gain
dividends (“Capital Gain Dividends”) will be taxable as long-term capital gains,
which for non-corporate shareholders are subject to tax at reduced rates of up
to 20% (lower rates apply to individuals in lower tax brackets). Distributions
of short-term capital gain will generally be taxable as ordinary income.
Dividends and distributions are generally taxable to you whether you receive
them in cash or reinvest them in additional Shares.
Distributions
reported by the Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income derived from dividends paid by U.S. corporations or
certain foreign corporations that are either incorporated in a U.S. possession
or eligible for tax benefits under certain U.S. income tax treaties. In
addition, dividends that the Fund receives in respect of stock of certain
foreign corporations may be qualified dividend income if that stock is readily
tradable on an established U.S. securities market. Corporate shareholders may be
entitled to a dividends received deduction for the portion of dividends they
receive from the Fund that are attributable to dividends received by the Fund
from U.S. corporations, subject to certain limitations.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from the Fund.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable even if they are paid from income or gains earned by the Fund before
your investment (and thus were included in the Shares’ NAV when you purchased
your Shares).
You
may wish to avoid investing in the Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your
investment.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
the Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. Gains from the sale or other disposition of
your Shares from non-U.S. shareholders generally are not subject to U.S.
taxation, unless you are a nonresident alien individual who is physically
present in the U.S. for 183 days or more per year. The Fund may, under certain
circumstances, report all or a portion of a dividend as an “interest-related
dividend” or a “short-term capital gain dividend,” which would generally be
exempt from this 30% U.S. withholding tax, provided certain other requirements
are met. Different tax consequences may result if you are a foreign shareholder
engaged in a trade or business within the United States or if a tax treaty
applies.
Under
legislation generally known as “FATCA” (the Foreign Account Tax Compliance Act),
the Fund is required to withhold 30% of certain ordinary dividends it pays to
shareholders that are foreign entities and that fail to meet prescribed
information reporting or certification requirements.
Under
the “backup withholding” provisions of the Internal Revenue Code of 1986, as
amended (the “Internal Revenue Code”), the Fund (or a financial intermediary,
such as a broker, through which a shareholder owns Shares) generally is required
to withhold and remit to the U.S. Treasury a percentage (currently 24%) 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 he, she
or it is not subject to such withholding.
Backup
withholding is not an additional tax. Any amounts withheld under the backup
withholding rules may be allowed as a refund or a credit against a holder’s U.S.
federal income tax liability, provided the required information is timely
furnished to the Internal Revenue Service.
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 the Fund are acquired, including through
reinvestment
of dividends, within a 61-day period beginning 30 days before and ending 30 days
after the disposition of Shares. The ability to deduct capital losses may be
limited.
The
cost basis of Shares of the Fund acquired by purchase will generally be based on
the amount paid for the Shares and then may be subsequently adjusted for other
applicable transactions as required by the Internal Revenue Code. The difference
between the selling price and the cost basis of Shares generally determines the
amount of the capital gain or loss realized on the sale or exchange of Shares.
Contact the broker through whom you purchased your Shares to obtain information
with respect to the available cost basis reporting methods and elections for
your account.
Taxes
on Purchases and Redemptions of Creation Units
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered, plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The
Internal Revenue Service may assert, however, that a loss that is realized upon
an exchange of securities for Creation Units may not be currently deducted under
the rules governing “wash sales” (for an AP who does not mark-to-market its
holdings) or on the basis that there has been no significant change in economic
position. APs exchanging securities should consult their own tax adviser with
respect to whether wash sale rules apply and when a loss might be
deductible.
The
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. The Fund may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause the Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in kind. As a result, the Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Net
Investment Income Tax
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8% tax
on all or a portion of their “net investment income,” which includes interest,
dividends, and certain capital gains (generally including capital gains
distributions and capital gains realized on the sale of Shares). This 3.8% tax
also applies to all or a portion of the undistributed net investment income of
certain shareholders that are estates and trusts.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in the Fund. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Fund
distributions and sales of Shares. Consult your personal tax adviser about the
potential tax consequences of an investment in Shares under all applicable tax
laws. For more information, please see the section entitled “Federal Income
Taxes” in the SAI.
DISTRIBUTION
PLAN
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, the Fund is authorized to
pay an amount up to 0.25% of its average daily net assets each year for certain
distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no plans to impose
these fees. However, in the event Rule 12b-1 fees are charged in the future,
because the fees are paid out of Fund assets, over time these fees will increase
the cost of your investment and may cost you more than certain other types of
sales charges.
PREMIUM/DISCOUNT
INFORMATION
Information
regarding how often Shares traded on the Exchange at a price above (i.e.,
at a premium) or below (i.e.,
at a discount) the NAV per share is available on the Fund’s website at
www.csh-etf.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 the Fund make no
representation or warranty, express or implied, to the owners of Shares or any
member of the public regarding the advisability of investing in securities
generally or in the Fund particularly.
FINANCIAL
HIGHLIGHTS
Financial
information is not available because the Fund had not commenced operations prior
to the date of this Prospectus.
Morgan
Creek-Exos Active SPAC Arbitrage ETF
|
|
|
|
|
|
|
|
|
|
|
|
Adviser |
Morgan
Creek Capital Management, LLC
301
W. Barbee Chapel Road, Suite 200
Chapel
Hill, North Carolina 27517
|
Sub-Adviser |
Exos
Asset Management, LLC
1370
Broadway - Suite 1450
New
York, New York 10018 |
Distributor |
Foreside
Fund Services, LLC
Three
Canal Plaza, Suite 100,
Portland,
Maine 04101 |
Transfer
Agent and Administrator |
U.S.
Bancorp Fund Services, LLC
d/b/a
U.S. Bank Global Fund Services
615
East Michigan Street
Milwaukee,
Wisconsin 53202
|
Legal
Counsel |
Morgan,
Lewis & Bockius LLP
1111
Pennsylvania Avenue, NW
Washington,
DC 20004-2541
|
Custodian |
U.S.
Bank National Association
1555
North Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212 |
Independent
Registered Public Accounting Firm |
Cohen
& Company, Ltd.
1350
Euclid Avenue, Suite 800
Cleveland,
Ohio 44115 |
|
|
Investors
may find more information about the Fund in the following
documents:
Statement
of Additional Information: The
Fund’s SAI provides additional details about the investments of the Fund and
certain other additional information. A current SAI is on file with the SEC and
is herein incorporated by reference into this Prospectus. It is legally
considered a part of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about the Fund’s investments will be available in the Fund’s annual
and semi-annual reports to shareholders. In the annual report, when available,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund’s performance after the first fiscal year
the Fund is in operation.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Fund by contacting the Fund at c/o U.S. Bank Global
Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or by calling
1-855-857-2677.
Shareholder
reports and other information about the Fund are also available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov;
•Free
of charge from the Fund’s Internet web site at www.csh-etf.com; or
•For
a fee, by e-mail request to publicinfo@sec.gov.
(SEC
Investment Company Act File No. 811-23226)