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CHAI
|
Defiance Israel Bond
ETF |
| |
Listed
on NYSE Arca, Inc.
PROSPECTUS
December
11, 2023
The
U.S. Securities and Exchange Commission (“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.
Investment
Objective
The
Defiance Israel Bond ETF (the “Fund” or the “Israel Bond ETF”) seeks to track
the total return performance, before fees and expenses, of the
MCM-BlueStar®
Israel
Bonds Index (the “Index”).
Fees and Expenses of the
Fund
The
following table describes the fees and expenses 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) |
Management
Fees |
0.48% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses1 |
0.00% |
| |
Total
Annual Fund Operating Expenses |
0.48% |
1
Estimated for
the current fiscal year.
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 continue
to hold or 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. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. Because the
Fund is newly organized, portfolio turnover information is not yet
available.
Principal Investment
Strategies
The
Fund uses a “passive management” (or indexing) approach to track the total
return performance, before fees and expenses, of the Index. The Index is
comprised of global Israeli companies, across all sectors of the economy,
irrespective of their listing venue.
The
Fund’s Investment Strategy
The
Fund will generally use a “replication” strategy to achieve its investment
objective, meaning the Fund will generally invest in all of the component
securities of the Index in the same approximate proportions as in 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 sub-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).
Under
normal circumstances, the Fund invests at least 80% of its net assets (plus
borrowings for investment purposes) in Israeli Shekel (“ILS”)- and United States
dollar (“USD”)-denominated debt, specifically bonds, issued by (i) the Israeli
government, (ii) Israeli government-related entities or agencies, or (iii)
Israeli companies (collectively, the “Israel Bonds”). The Fund defines “Israeli
companies” as companies that are (a) domiciled in Israel or included in the
BlueStar®
Israel
Global Index universe (generally, companies that derive a majority of their
revenue from Israel); and (b) incorporated in Israel, the United States, the
United Kingdom, or Jersey and Guernsey, Channel Islands.
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 considered to be non-diversified, which means that it may invest more of
its assets in the securities of a single issuer or a smaller number of issuers
than if it were a diversified fund.
MCM-BlueStar®
Israel
Bonds Index
Securities
must meet the following eligibility criteria to qualify for inclusion in the
Index:
•ILS-denominated
bonds must be listed on the Tel Aviv Stock Exchange
•at
least 18 months to final maturity at the time of issuance
•at
least six months remaining to final maturity (with the next call date used at
the maturity date for callable bonds)
•up
to 15 years remaining to maturity for corporate bonds or 30 years for government
bonds (with the next call date used at the maturity date for callable
bonds)
•a
minimum amount outstanding of at least $100 million for USD-denominated bonds or
$250 million for ILS-denominated bonds
•trade
in denominations of up to $10,000 USD (except for USD-denominated bonds of
issuers incorporated in the United States)
•ILS-denominated
corporate bonds must be rated as investment grade and USD-denominated corporate
bonds must be rated BB- or higher (including “junk bonds”) according to S&P
Global Ratings (“S&P”).
Securities
are selected to the Index, as discussed below, with a minimum of 15 issuers
represented in the Index, a maximum of 10 securities issued by the Israeli
government or government-related entities, and a maximum of 5 securities issued
by any one corporate issuer (based on the parent company). In the Index
methodology described below, “largest” refers to the market value of the
security.
•The
15 largest USD-denominated bonds, with a maximum of one bond per issuer, are
selected to the Index. If fewer than 15 issuers have eligible USD-denominated
bonds, the next largest ILS-denominated bonds are selected.
•The
next 4 largest bonds (selecting from USD-denominated bonds first) issued by the
Israeli government or government-related entities are selected.
•The
next largest bonds (selecting from USD-denominated bonds first) are selected
until a total of 35 bonds have been selected to the Index (subject to the issuer
limitations set forth above).
The
Index uses a modified market cap weighting methodology that caps a security’s
weight at 5%, caps the combined aggregate weight of securities issued by the
Israeli government and securities issued by Israeli government-related entities
at 25%, and caps the aggregate weight of securities issued by any single
corporate issuer at 7.5%. All securities selected to the Index are initially
weighted based on their market value, subject to the following
modifications:
•Step
1
- If the combined aggregate weight of securities issued by the Israeli
government and securities issued by Israeli government-related entities exceeds
25%, or securities issued by any corporate issuer exceeds 7.5%, the weight of
those securities will be reduced such that their aggregate weight equals 25% or
7.5%, respectively, with the remaining weight redistributed to all securities
from non-capped issuers in proportion to their market value. This step is
repeated until the aggregate weight of all securities from any single corporate
issuer is less than or equal to 7.5%.
•Step
2
- If the weight of any single security exceeds 5%, the weight of that security
is reduced to 5% with the remaining weight redistributed to all remaining
uncapped securities from uncapped issuers. If the 5% security cap causes the
aggregate weight of securities issued by the Israeli government or
government-related entities to fall below 25%, or the aggregate weight of
securities issued by any single corporate issuer to fall below 7.5%, those
issuers will now be considered uncapped.
•Step
3
- Steps 2 and 3 are repeated until no security has a weight of more than 5%, the
aggregate weight of all securities issued by the Israeli government or
government-related entities is less than or equal to 25%, and the aggregate
weight of securities from any single corporate issuer is less than or equal to
7.5%.
The
Index is reviewed and rebalanced monthly. The Index was established in 2023 and
is owned and maintained by MarketVector Indexes GmbH (the “Index Provider”),
which owns the BlueStar®
trademark.
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 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 objectives. For more
information about the risks of investing in the Fund, see the section in the
Fund’s Prospectus titled “Additional Information About the Fund.”
•Associated
Risks of Israeli Investments.
Investments in Israeli issuers may subject the Fund to legal, security,
regulatory, political, and economic risk specific to Israel. Israel’s economy is
dependent upon external trade with other economies, notably the United States,
China, Japan, Canada, the United Kingdom, and European Union countries. As a
result, economic conditions of Israel may be particularly affected by changes in
the economy of or political relations between Israel and its key trading
partners. Israel’s access to credit in the international capital markets is
affected by regional and international political and economic conditions,
including interest rates in financial markets outside Israel, the impact of
changes in the credit rating of Israel, the
global,
regional and Israeli security situations, the economic growth and stability of
Israel’s major trading partners and the global high-tech market. As a result,
political, economic or market factors, which may be outside Israel’s control,
may impact the debt dynamics of Israel and could adversely affect Israel’s cost
of funds in the international capital markets and the liquidity of and demand
for Israel’s debt securities. In addition, any negative change in the credit
rating of Israel could adversely affect the trading price of Israel’s debt
securities. Israel has experienced a history of hostile relations with several
countries in the Middle East region. Israel and its citizens have also been the
target of periodic acts of terrorism, including from U.S.-designated terrorist
groups that are committed to violence against Israel, such as Hezbollah, the
“Islamic State”, and Hamas, each of which operate in close proximity to Israel’s
borders and frequently threaten Israel with attack. Attacks or threats from
these groups have the potential to disrupt economic activity in Israel. Most
recently, Hamas militants launched a brutal terror attack against southern
Israel on October 7, 2023, and, in response, Israel declared war on Hamas and
Israeli Defense Forces invaded the Gaza Strip. Actual hostilities, such as the
Israel-Hamas war, or the threat of future hostilities may cause significant
volatility in the share price of companies based in or having significant
operations in Israel. Israel is located in a part of the world that has
historically been prone to natural disasters such as earthquakes and droughts,
and Israel is economically sensitive to environmental events. Any such event may
adversely impact Israel’s economy or business operations of companies in Israel,
causing an adverse impact on the value of the
Fund.
•Concentration
Risk.
The Fund’s investments will be concentrated in an industry or group of
industries to the extent that the Index is so concentrated. In such event, the
value of the Shares may rise and fall more than the value of shares of a fund
that invests in securities of companies in a broader range of
industries.
•Currency
Exchange Rate Risk. The
Fund may invest in ILS-denominated instruments. Changes in currency exchange
rates and the relative value of non-U.S. currencies may affect the value of such
investments and the value of your Shares. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the value of an
investment in the Fund may change quickly and without warning and you may lose
money.
•ETF
Risks.
The
Fund is an ETF, and, as a result of an ETF’s 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.
◦Cash
Redemption Risk. The Fund’s investment strategy may require it to redeem shares for
cash or to otherwise include cash as part of its redemption proceeds. The Fund
may be required to sell or unwind portfolio investments to obtain the cash
needed to distribute redemption proceeds. This may cause the Fund to recognize a
capital gain that it might not have recognized if it had made a redemption
in-kind. As a result, the Fund may pay out higher annual capital gain
distributions than if the in-kind redemption process was used.
◦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 domestic
ETFs.
◦Trading. Although
Shares are listed for trading on 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, and this could lead to differences between the market price of the
Shares and the underlying value of those Shares.
•Fixed
Income Securities Risk. The value of investments in fixed income securities fluctuates with
changes in interest rates. Typically, a rise in interest rates causes a decline
in the value of fixed income securities owned indirectly by the Fund. On the
other hand, if rates fall, the value of the fixed income securities generally
increases. Below are several specific risks associated with investments in fixed
income securities.
◦Credit
Risk. Credit risk refers to the possibility that the issuer of a security
will not be able to make payments of interest and principal when due. Changes in
an issuer’s credit rating or the market’s perception of an issuer’s
creditworthiness may also affect the value of an investment in that
issuer.
◦Duration
Risk. Prices
of fixed income securities with longer durations are more sensitive to interest
rate changes than those with shorter durations.
◦Event
Risk. Event risk is the risk that corporate issuers may undergo
restructurings, such as mergers, leveraged buyouts, takeovers, or similar events
financed by increased debt. As a result of the added debt, the credit quality
and market value of a company’s bonds and/or other debt securities may decline
significantly.
◦Extension
Risk. When interest rates rise, certain obligations will be paid off by the
obligor more slowly than anticipated, causing the value of these securities to
fall.
◦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.
◦Maturity
Risk. The value of fixed income investments is also dependent on their
maturity. Generally, the longer the maturity of a fixed income security, the
greater its sensitivity to changes in interest rates.
◦Prepayment
Risk.
When interest rates fall, certain obligations will be paid off by the obligor
more quickly than originally anticipated and the proceeds may have to be
invested in securities with lower yields.
◦Variable
and Floating Rate Instrument Risk.
Floating or variable rate securities pay interest at rates that adjust in
response to changes in a specified interest rate or reset at predetermined dates
(such as the end of a calendar quarter). Securities with floating or variable
interest rates are generally less sensitive to interest rate changes than
securities with fixed interest rates, but may decline in value if their interest
rates do not rise as much, or as quickly, as comparable market interest rates.
Although floating or variable rate securities are generally less sensitive to
interest rate risk than fixed rate securities, they are subject to credit,
liquidity and default risk and may be subject to legal or contractual
restrictions on resale, which could impair their
value.
•Foreign
Securities Risk.
Investments in non-U.S. securities involve certain risks that may not be present
with investments in U.S. securities. For example, investments in non-U.S.
securities may be subject to risk of loss due to foreign currency fluctuations
or to political or economic instability. Investments in non-U.S. securities also
may be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. These and other factors
can make investments in the Fund more volatile and potentially less liquid than
other types of investments.
•High-Yield
Securities Risk.
High-yield securities (also known as “junk bonds”) carry a greater degree of
risk and are considered speculative by the major credit rating agencies.
High-yield securities may be issued by companies that are restructuring, are
smaller and less creditworthy, or are more highly indebted than other companies.
This means that they may have more difficulty making scheduled payments of
principal and interest. Changes in the value of high-yield securities are
influenced more by changes in the financial and business position of the issuing
company than by changes in interest rates when compared to investment grade
securities. High-yield securities have greater volatility because there is less
certainty that principal and interest payments will be made as scheduled.
High-yield securities may experience reduced liquidity and sudden and
substantial decreases in price.
•Index
Provider Risk. There
is no assurance that the Index Provider, or any agents that act on its behalf,
will compile the Index accurately, or that the Index will be determined,
maintained, constructed, reconstituted, rebalanced, composed, calculated or
disseminated accurately. The investment adviser relies upon the Index Provider
and its agents to compile, determine, maintain, construct, reconstitute,
rebalance, compose, calculate (or arrange for an agent to calculate), and
disseminate the Index accurately. Any losses or costs associated with errors
made by the Index Provider or its agents generally will be borne by the Fund and
its shareholders.
•Liquidity
Risk.
Liquidity risk exists when particular investments are difficult to purchase or
sell. This can reduce the Fund’s returns because the Fund may be unable to
transact at advantageous times or prices.
•Market
Risk.
The
trading prices of debt securities and other instruments fluctuate in response to
a variety of factors. The Fund’s NAV and market price 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. In addition, local,
regional or global events such as war, including Russia’s invasion of Ukraine,
the Hamas terrorist attacks, spread of infectious diseases or other public
health issues (such as the global pandemic caused by the COVID-19 virus),
recessions, rising inflation, or other events could have a significant negative
impact on the Fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others.
Such events could adversely affect the prices and liquidity of the Fund’s
portfolio securities or other instruments and could result in disruptions in the
trading markets.
•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.
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 smaller number of issuers
than if it were 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
smaller number of issuers than a fund that invests more widely. This may
increase the Fund’s volatility and cause the performance of a relatively smaller
number of issuers to have a greater impact on the Fund’s performance. However,
the Fund intends to satisfy the diversification requirements for qualifying as a
RIC under Subchapter M of the Code.
•Passive
Investment Risk.
The Fund is not actively managed, and its sub-adviser would not sell a security
held by the Fund due to current or projected underperformance of the security,
industry, or sector, unless that security is removed from the Index or the
selling of that security is otherwise required upon a reconstitution or
rebalancing of the Index in accordance with the Index
methodology.
•Rating
Agencies Risk. Ratings
are not an absolute standard of quality. Ratings are general indicators that
reflect only the view of the originating rating agencies from which an
explanation of the significance of such ratings may be obtained. There is no
assurance that a particular rating will continue for any given period of time or
that any such rating will not be revised downward or withdrawn entirely. Such
changes may negatively affect the liquidity or market price of the securities in
which the Fund invests. The ratings of securitized assets may not adequately
reflect the credit risk of those assets due to their
structure.
•Tax
Risk. To qualify for the favorable tax treatment generally available to a
RIC, the Fund must satisfy, among other requirements described in the SAI,
certain diversification requirements. Given the concentration of the Index in a
relatively small number of issuers, it may not always be possible for the Fund
to fully implement a replication strategy or a representative sampling strategy
while satisfying these diversification requirements. The Fund’s efforts to
replicate or represent the Index may cause it inadvertently to fail to satisfy
the diversification requirements. If the Fund were to fail to satisfy the
diversification requirements, it could be eligible for relief provisions if the
failure is due to reasonable cause and not willful neglect and if a penalty tax
is paid with respect to each failure to satisfy the applicable requirements.
Additionally, relief is provided for certain de minimis failures of the
diversification requirements where the Fund corrects the failure within a
specified period. If the Fund were to fail to qualify as a RIC for a tax year,
and the relief provisions are not available, it would be taxed in the same
manner as an ordinary corporation, and distributions to its shareholders would
not be deductible by the Fund in computing its taxable income. In such case, its
shareholders would be taxed as if they received ordinary dividends, although
corporate shareholders could be eligible for the dividends received deduction
(subject to certain limitations) and individuals may be able to benefit from the
lower tax rates available to qualified dividend income. In addition, the Fund
could be required to recognize unrealized gains, pay substantial taxes and
interest, and make substantial distributions before requalifying as a
RIC.
•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.
•Valuation
Risk. The
prices provided by the Fund’s pricing services or independent dealers or the
fair value determinations made by the Adviser may be different from the prices
used by other investment companies or from the prices at which debt obligations
are actually bought and sold. The prices of certain debt obligations provided by
pricing services may be subject to frequent and significant change and will vary
depending on the information that is available.
Performance
Performance information for the Fund is not
included because the Fund did not have a full calendar year of performance prior
to the date of this Prospectus. In the future, performance
information for the Fund will be presented in this section. Updated performance
information will be available on the Fund’s website at www.defianceetfs.com.
Portfolio
Management
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Adviser |
Defiance
ETFs, LLC (the “Adviser”) |
Sub-Adviser |
Vident
Asset Management (“Vident” or the “Sub-Adviser”) |
Portfolio
Managers |
Jeff
Kernagis, CFA, Senior Portfolio Manager for Vident and Jim Iredale, CFA,
Senior Portfolio Manager for Vident, are responsible for the day-to-day
management of the Fund. Each has served as a portfolio manager of the Fund
since its inception in 2023. |
Purchase
and Sale of Shares
Shares
are listed on 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).
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its NAV, market price, premiums and discounts, and bid-ask spreads is
available on the Fund’s website at www.defianceetfs.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 Fund’s investment adviser, 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
INDEX
The
Index is calculated by an independent third-party calculation agent that is not
affiliated with the Fund or its Adviser, Sub-Adviser, distributor, Index
Provider, or any of their affiliates. The Fund’s Index Provider is not
affiliated with the Fund’s Adviser, Sub-Adviser, administrator, or distributor.
The
Index defines “investment grade” debt securities as those rated “BBB-” or better
by S&P, a nationally recognized statistical ratings organization, and
securities rated below “BBB-” as non-investment grade (also known as “junk
bonds”).
The
average weighted maturity of bonds in the Index may change significantly over
time.
Callable
bonds, original issue zero coupon bonds, 144A securities (with and without
registration rights), and pay-in-kind securities (including toggle notes) are
eligible for inclusion in the Index.
Only
one bond per series is eligible for inclusion in the Index, and the bond with no
selling restrictions, if available, is always selected first — in cases where a
series only has bonds that are flagged 144A or Regulation S, the 144A bond will
be eligible for inclusion in the Index.
The
following securities are not eligible for inclusion in the Index:
•inflation-linked
bonds, fixed-to-floating, and floating rate bonds
•convertible
bonds and contingent capital convertible bonds
•repackaged
securities linked to a security, a basket of securities or an index
•swaps
•ETFs
•preferred
securities
•convertible
securities
•bearer
bonds
•dual
currency bonds
•asset-backed
•other
structured securities
ADDITIONAL
INFORMATION
ABOUT
THE
FUND
Investment
Objectives
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 Risks
This
section provides additional information regarding the principal risks described
in the Fund Summary. As in the Fund Summary, the principal risks below are
presented in alphabetical order to facilitate finding particular risks and
comparing them with other funds. Each risk described below is considered a
“principal risk” of investing in the Fund, regardless of the order in which it
appears. Each of the factors below could have a negative impact on the Fund’s
performance and trading prices.
•Associated
Risks of Israeli Investments.
Investments in Israeli issuers may subject the Fund to legal, security,
regulatory, political, and economic risk specific to Israel. Among other things,
Israel’s economy depends on imports of certain key items, such as crude oil,
natural gas, grains, raw materials, and military equipment.
Israel
has experienced a history of hostile relations with several countries in the
Middle East region. Israel and its citizens have also been the target of
periodic acts of terrorism, including from U.S.-designated terrorist groups that
are committed to violence against Israel, such as Hezbollah, the “Islamic
State”, and Hamas, each of which operate in close proximity to Israel’s borders
and frequently threaten Israel with attack. Attacks or threats from these groups
have the potential to disrupt economic activity in Israel. Most recently, Hamas
militants launched a brutal terror attack against southern Israel on October 7,
2023, and, in response, Israel declared war on Hamas and Israeli Defense Forces
invaded the Gaza Strip. Israel’s relations with Palestinians and its neighboring
countries Lebanon, Syria, and Iran, among others, have at times been strained
due to territorial disputes, historical animosities or defense concerns. The
establishment of fundamentalist Islamic regimes or governments that are hostile
to Israel could have serious consequences for the peace and stability of the
region, place additional political, economic, and military constraints upon
Israel, materially adversely affect the operations of Israeli issuers and limit
such issuers’ ability to sell products abroad. Actual hostilities, such as the
Israel-Hamas war described above, or the threat of future hostilities may cause
significant volatility in the share price of companies based in or having
significant operations in Israel. The extent and duration of Israel’s military
actions in Gaza and the repercussions of such actions are impossible to predict
but could result in significant market disruptions. These and any related events
could significantly impact the Fund’s performance and the value of an investment
in the Fund.
Israel’s
economy is dependent upon external trade with other economies, notably the
United States, China, Japan, Canada, the United Kingdom, and European Union
countries. The U.S. is a significant, and in some cases the most significant,
trading partner of, or foreign investor in, Israel. As a result, economic
conditions of Israel may be particularly affected by changes in the U.S. economy
or political relations between the countries. A decrease in U.S. imports or
exports, new trade and financial regulations or tariffs, changes in the U.S.
dollar exchange rate or an economic slowdown in the U.S. may have a material
adverse effect on the economic conditions of Israel and, as a result, securities
to which the Fund has exposure. Any reduction in trade flows may have an adverse
impact on the Fund’s investments. The government of Israel may change the way in
which Israeli companies are taxed or may impose taxes on foreign investment.
Such actions could have a negative impact on the overall market for Israeli
securities and on the Fund.
Israel
is located in a part of the world that has historically been prone to natural
disasters such as earthquakes and droughts, and Israel is economically sensitive
to environmental events. Any such event may adversely impact Israel's economy or
business operations of companies in Israel, causing an adverse impact on the
value of the Fund.
•Concentration
Risk.
The
Fund’s investments will be concentrated in an industry or group of industries to
the extent that the Index is so concentrated. In such event, the value of the
Shares may rise and fall more than the value of shares of a fund that invests in
securities of companies in a broader range of industries.
•Currency
Exchange Rate Risk.
Changes
in currency exchange rates and the relative value of non-U.S. currencies
will affect the value of the Fund’s ILS-denominated investments and the value of
your Shares. Because the Fund’s NAV is determined on the basis of U.S. dollars,
the U.S. dollar value of your investment in the Fund may go down if the value of
the local currency of the non-U.S. markets in which the Fund invests depreciates
against the U.S. dollar. This is true even if the local currency value of
securities held by the Fund goes up. Conversely, the dollar value of your
investment in the Fund may go up if the value of the local currency appreciates
against the U.S. dollar. The value of the U.S. dollar measured against other
currencies is influenced by a variety of factors. These factors include:
national debt levels and trade deficits, changes in balances of payments and
trade, domestic and foreign interest and inflation rates, global or regional
political, economic or financial events, monetary policies of governments,
actual or potential government intervention, and global energy prices. Political
instability, the possibility of government intervention and restrictive or
opaque business and investment policies may also reduce the value of a country’s
currency. Government monetary policies and the buying or selling of currency by
a country’s government may also influence exchange rates. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the value of an investment in the Fund may change quickly and without
warning, and you may lose money.
•ETF
Risks.
The
Fund is an ETF, and, as a result of an ETF’s structure, it is exposed to the
following risks:
◦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.
◦Cash
Redemption Risk.
When
the Fund’s investment strategy requires it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds, it may be required to
sell or unwind portfolio investments in order to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have recognized if it had made a redemption in-kind
(i.e.,
distribute securities as payment of redemption proceeds). As a result, the Fund
may pay out higher annual capital gain distributions than if the in-kind
redemption process was used.
◦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 the spread 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. The market price of Fund 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 Fund shares. In times of severe market disruption, the bid-ask spread
can increase significantly. At those times, Fund shares are most likely to be
traded at a discount to NAV, and the discount is likely to be greatest when the
price of Fund shares is falling fastest, which may be the time that you most
want to sell your Fund 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, and this
could lead to differences between the market price of the Shares and the
underlying value of those Shares.
•Fixed
Income Securities Risk. Fixed
income securities, such as bonds and certain asset-backed securities, involve
certain risks, which include:
Credit
Risk. Credit
risk refers to the possibility that the issuer of a security will not be able to
make principal and interest payments when due. Changes in an issuer’s credit
rating or the market’s perception of an issuer’s creditworthiness may also
affect the value of an investment in that issuer. The degree of credit risk
depends on both the financial condition of the issuer and the terms of the
obligation.
Duration
Risk. Prices
of fixed income securities with longer durations are more sensitive to interest
rate changes than those with shorter durations.
Event
Risk. Event
risk is the risk that corporate issuers may undergo restructurings, such as
mergers, leveraged buyouts, takeovers, or similar events financed by increased
debt. As a result of the added debt, the credit quality and market value of a
company’s bonds and/or other debt securities may decline
significantly.
Extension
Risk. When
interest rates rise, certain obligations will be paid off by the obligor more
slowly than anticipated, causing the value of these securities to fall. Rising
interest rates tend to extend the duration of securities, making them more
sensitive to future changes in interest rates. The value of longer-term
securities generally changes more in response to changes in interest rates than
the value of shorter-term securities. As a result, in a period of rising
interest rates, securities may exhibit additional volatility and may lose
value.
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. The Fund may take steps
to attempt to reduce the exposure of its portfolio to interest rate changes;
however, there can be no guarantee that the Fund will take such actions or that
the Fund will be successful in reducing the impact of interest rate changes on
the portfolio. Changes in government intervention may have adverse effects on
investments, volatility, and illiquidity in debt markets.
Maturity
Risk. The
value of fixed income investments is also dependent on their maturity.
Generally, the longer the maturity of a fixed income security, the greater its
sensitivity to changes in interest rates.
Prepayment
Risk. When
interest rates fall, certain obligations will be paid off by the obligor more
quickly than originally anticipated, and the Fund may have to invest the
proceeds in securities with lower yields. In periods of falling interest rates,
the rate of prepayments tends to increase (as does price fluctuation) as
borrowers are motivated to pay off debt and refinance at new lower rates. During
such periods, reinvestment of the prepayment proceeds by the management team
will generally be at lower rates of return than the return on the assets that
were prepaid. Prepayment reduces the yield to maturity and the average life of
the security.
Rule
144A Securities Risk. The
Fund may purchase Rule 144A securities sold to institutional investors without
registration under the 1933 Act and commercial paper issued in reliance upon the
exemption in Section 4(a)(2) of the 1933 Act, for which an institutional market
has developed. Investment in Rule 144A securities carries a risk that an
institutional market may not develop and the Fund may not be able to sell the
securities.
Variable
and Floating Rate Instrument Risk. Floating
or variable rate securities pay interest at rates that adjust in response to
changes in a specified interest rate or reset at predetermined dates (such as
the end of a calendar quarter). Securities with floating or variable interest
rates are generally less sensitive to interest rate changes than securities with
fixed interest rates, but may decline in value if their interest rates do not
rise as much, or as quickly, as comparable market interest rates. Conversely,
floating or variable rate securities will not generally increase in value if
interest rates decline. The impact of interest rate changes on floating or
variable rate securities is typically mitigated by the periodic interest rate
reset of the investments. Floating or variable rate securities can be rated
below investment grade or unrated; therefore, the Fund relies heavily on the
analytical ability of the Sub-Adviser. Floating or variable rate securities are
often subject to restrictions on resale, which can result in reduced
liquidity.
•Foreign
Securities Risk.
Investments in non-U.S. securities involve certain risks that may not be present
with investments in U.S. securities. For example, investments in non-U.S.
securities may be subject to risk of loss due to foreign currency fluctuations
or to political or economic instability. There may be less information publicly
available about a non-U.S. issuer than a U.S. issuer. Non-U.S. issuers may be
subject to different accounting, auditing, financial reporting and investor
protection standards than U.S. issuers. Investments in non-U.S. securities may
be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. With respect to certain
countries, there is the possibility of government intervention and expropriation
or nationalization of assets. Because legal systems differ, there is also the
possibility that it will be difficult to obtain or enforce legal judgments in
certain countries. Since foreign exchanges may be open on days when the Fund
does not price its Shares, the value of the securities in the Fund’s portfolio
may change on days when shareholders will not be able to purchase or sell the
Shares. Conversely, Shares may trade on days when foreign exchanges are closed.
Each of these factors can make investments in the Fund more volatile and
potentially less liquid than other types of investments.
•High-Yield
Securities Risk.
Unrated
or lower-rated fixed income securities and other instruments, sometimes referred
to as “high yield” or “junk” bonds, may include securities that have the lowest
rating or are in default. Investing in lower-rated or unrated securities
involves special risks in addition to the risks associated with investments in
higher-rated fixed income securities, including a high degree of credit risk.
Lower-rated or unrated securities may be regarded as predominately speculative
with respect to the issuer’s continuing ability to meet principal and interest
payments. Analysis of the creditworthiness of issuers/issues of lower-rated or
unrated securities may be more complex than for issuers/issues of higher quality
debt securities. Lower-rated or unrated securities may be more susceptible to
losses and real or perceived adverse economic and competitive industry
conditions than higher-grade securities. Securities that are in the lowest
rating category are considered to have extremely poor prospects of ever
attaining any real investment standing, to have a current identifiable
vulnerability to default, and to be unlikely to have the
capacity
to pay interest and repay principal. The secondary markets on which lower-rated
or unrated securities are traded may be less liquid than the market for
higher-grade securities. Less liquidity in the secondary trading markets could
adversely affect and cause large fluctuations in the value of such investments.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of lower-rated or unrated
securities, especially in a thinly traded market. It is possible that a major
economic recession could disrupt severely the market for such securities and may
have an adverse impact on the value of such securities. In addition, it is
possible that any such economic downturn could adversely affect the ability of
the issuers of such securities to repay principal and pay interest thereon and
increase the incidence of default of such securities.
•Index
Provider Risk. There
is no assurance that the Index Provider, or any agents that act on its behalf,
will compile the Index accurately, or that the Index will be determined,
maintained, constructed, reconstituted, rebalanced, composed, calculated or
disseminated accurately. The Adviser relies upon the Index Provider and its
agents to compile, determine, maintain, construct, reconstitute, rebalance,
compose, calculate (or arrange for an agent to calculate), and disseminate the
Index accurately. Any losses or costs associated with errors made by the Index
Provider or its agents generally will be borne by the Fund and its shareholders.
To correct any such error, the Index Provider or its agents may carry out an
unscheduled rebalance of the Index or other modification of Index constituents
or weightings. When the Fund in turn rebalances its portfolio, any transaction
costs and market exposure arising from such portfolio rebalancing will be borne
by the Fund and its shareholders. Unscheduled rebalances also expose the Fund to
additional tracking error risk. Errors in respect of the quality, accuracy, and
completeness of the data used to compile the Index may occur from time to time
and may not be identified and corrected by the Index Provider for a period of
time or at all, particularly where the Index is less commonly used as a
benchmark by funds or advisors. For example, during a period where the Index
contains incorrect constituents, the Fund tracking the Index would have market
exposure to such constituents and would be underexposed to the Index’s other
constituents. Such errors may negatively impact the Fund and its shareholders.
The Index Provider and its agents rely on various sources of information to
assess the criteria of issuers included in the Index, including information that
may be based on assumptions and estimates. Neither the Fund nor the Adviser can
offer assurances that the Index’s calculation methodology or sources of
information will provide an accurate assessment of included
issuers.
•Liquidity
Risk.
Liquidity
risk exists when particular investments are difficult to purchase or sell. To
the extent the Fund invests in illiquid securities or securities that become
less liquid, such investments may have a negative effect on the returns of the
Fund because the Fund may be unable to sell the illiquid securities at an
advantageous time or price. To the extent that the Fund’s principal investment
strategies involve investing in securities with substantial market and/or credit
risk, the Fund will tend to have the greatest exposure to liquidity risk. Liquid
investments may become illiquid after purchase by the Fund, particularly during
periods of market turmoil. Illiquid investments may be harder to value,
especially in changing markets, and if the Fund is forced to sell these
investments to meet redemption requests or for other cash needs, the Fund may
suffer a loss. There can be no assurance that a security that is deemed to be
liquid when purchased will continue to be liquid for as long as it is held by
the Fund.
•Market
Risk.
The
trading prices of debt securities and other instruments fluctuate in response to
a variety of factors. The Fund’s NAV and market price 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.
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 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, and supply chain disruptions affecting the United
States and many other countries. Some sectors of the economy and individual
issuers experienced particularly large losses as a result of these disruptions.
Although the immediate effects of the COVID-19 pandemic have begun to dissipate,
global markets and economies continue to contend with the ongoing and long-term
impact of the COVID-19 pandemic and the resultant market volatility and economic
disruptions. 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.
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 smaller number of issuers
than if it were 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
smaller number of issuers than a fund that invests more widely. This may
increase the Fund’s volatility and cause the performance of a relatively smaller
number of issuers to have a greater impact on the Fund’s performance. However,
the Fund intends to satisfy the diversification requirements for qualifying as a
RIC under Subchapter M of the Code.
•Passive
Investment Risk.
The Fund invests in the securities included in, or representative of, the Index
regardless of their investment merit. The Fund does not attempt to outperform
the 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 the Index. The returns from the types of securities in
which the Fund invests may underperform returns from the various general
securities markets or different asset classes. This may cause the Fund to
underperform other investment vehicles that invest in different asset classes.
Different types of securities (for example, large-, mid- and
small-capitalization stocks) tend to go through cycles of doing better – or
worse – than the general securities markets. In the past, these periods have
lasted for as long as several years.
•Rating
Agencies Risk.
Rating
agencies may fail to make timely changes in credit ratings and an issuer’s
current financial condition may be better or worse than a rating indicates. In
addition, rating agencies are subject to an inherent conflict of interest
because they are often compensated by the same issuers whose securities they
grade.
•Tax
Risk.
To qualify for the favorable tax treatment generally available to RICs, the Fund
must satisfy, among other requirements described in the SAI, certain
diversification requirements. In particular, at the close of each quarter of the
Fund’s taxable year: (A) at least 50% of the value of its total assets must
be represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities, with such other securities limited, in respect
to any one issuer, to an amount not greater than 5% of the value of the Fund’s
total assets and that does not represent more than 10% of the outstanding voting
securities of such issuer, including the equity securities of a qualified
publicly traded partnership, and (B) not more than 25% of the value of its total
assets is invested, including through corporations in which the Fund owns a 20%
or more voting stock interest, in the securities (other than U.S. government
securities or securities of other RICs) of any one issuer or the securities
(other than the securities of another RIC) of two or more issuers that the Fund
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses, or the securities of one or more qualified
publicly traded partnerships. Given the concentration of the Index in a
relatively small number of issuers, it may not always be possible for the Fund
to fully implement a replication strategy or a representative sampling strategy
while satisfying these diversification requirements. The Fund’s efforts to
satisfy the diversification requirements may affect its execution of its
investment strategy and may cause the Fund’s return to deviate from that of the
Index, and the Fund’s efforts to replicate or represent the Index may cause it
inadvertently to fail to satisfy the diversification requirements. In addition,
the Internal Revenue Service (“IRS”) may not agree with the Fund’s determination
as to the identity of the issuer of certain of its holdings, which may result in
the Fund failing to satisfy the asset diversification requirements. If the Fund
were to fail to satisfy the diversification requirements, it could be eligible
for relief provisions if the failure is due to reasonable cause and not willful
neglect and if a penalty tax is paid with respect to each failure to satisfy the
applicable requirements. Additionally, relief is provided for certain
de
minimis
failures of the diversification requirements where the Fund corrects the failure
within a specified period. If the Fund were to fail to qualify as a RIC for a
tax year, and the relief provisions are not available, it would be taxed in the
same manner as an ordinary corporation, and distributions to its shareholders
would not be deductible by the Fund in computing its taxable income. In such
case, the Fund’s shareholders would be taxed as if they received ordinary
dividends to the extent of the Fund’s current and accumulated earnings and
profits, although corporate shareholders could be eligible for the dividends
received deduction (subject to certain limitations) and individuals may be able
to benefit from the lower tax rates available to qualified dividend income. In
addition, the Fund could be required to recognize unrealized gains, pay
substantial taxes and interest, and make substantial distributions before
requalifying as a RIC.
•Tracking
Error Risk.
As with all index funds, the performance of the Fund and the Index may vary
somewhat 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 Fund may use a
representative sampling strategy to achieve its investment objective, if the
Fund’s Sub-Adviser believes it is in the best interest of the Fund, which
generally can be expected to produce a greater non-correlation risk.
•Valuation
Risk.
It may be difficult for the Fund to purchase and sell particular investments
within a reasonable time at a fair price, or the price at which it has been
valued for purposes of the Fund’s net asset value, causing the Fund to be less
liquid and unable to sell securities for what the Sub-Adviser believes is the
appropriate price of the investment. Valuation of portfolio investments may be
difficult, such as during periods of market turmoil or reduced liquidity and for
investments that trade infrequently or irregularly. In these and other
circumstances, an investment may be valued using fair value methodologies, which
are inherently subjective, reflect good faith judgments based on available
information and may not accurately estimate the price at which the Fund could
sell the investment at that time. Based on its investment strategies, a
significant portion of the Fund’s investments can be difficult to value and
potentially less liquid and therefore particularly prone to these
risks.
PORTFOLIO
HOLDINGS
INFORMATION
Information
about the Fund’s daily portfolio holdings is available at www.defianceetfs.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
Defiance
ETFs, LLC serves as the investment adviser and has overall responsibility for
the general management and administration of the Fund. The Adviser is located at
78 SW 7th Street, 9th Floor, Miami, Florida 33130, and is an SEC-registered
investment adviser.
The
Adviser was founded in 2018 and arranges for sub-advisory, transfer agency,
custody, fund administration, and all other related services necessary for the
Fund to operate. The Adviser provides investment advisory services to ETFs,
including the Fund.
The
Adviser provides oversight of the Sub-Adviser, monitors the Sub-Adviser’s buying
and selling of securities for the Fund, and reviews the Sub-Adviser’s
performance.
For
the services it provides to the Fund, the Fund pays the Adviser 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.
|
|
|
|
| |
Name
of Fund |
Management
Fee |
| |
Defiance
Israel Bond ETF |
0.48% |
Under
the Investment Advisory Agreement (the “Advisory Agreement”), the Adviser has
agreed to pay all expenses of the 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. The Adviser, in turn, compensates the Sub-Adviser
from the management fee it receives.
The
basis for the Board of Trustees’ approval of the Advisory Agreement for the Fund
will be available in the Fund’s Annual Report to Shareholders for the fiscal
period ending December 31, 2023.
Sub-Adviser
The
Adviser has retained Vident Asset Management to serve as sub-adviser for the
Fund. Vident is responsible for the day-to-day management of the Fund. Vident, a
registered investment adviser, is owned by Vident Capital Holdings, LLC. Vident
Capital Holdings, LLC is controlled by MM VAM, LLC which is owned by Casey
Crawford. Its principal office is located at 1125 Sanctuary Parkway, Suite 515,
Alpharetta, Georgia 30009. Vident was formed in 2016 and provides investment
advisory services to ETFs, including the Fund. The Sub-Adviser is responsible
for trading portfolio securities for the Fund, including selecting
broker-dealers to execute purchase and sale transactions or in connection with
any rebalancing or reconstitution of the Index, subject to the supervision of
the Adviser and the Board. For its services, the Sub-Adviser is paid a fee by
the Adviser, which fee 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.
|
|
|
|
|
|
|
| |
Name
of Fund |
Minimum
Fee |
Rate |
Defiance
Israel Bond ETF |
$60,000 |
0.065%
on the first $250,000,000 0.06% on the next $250,000,000 0.03% on
net assets in excess of $500,000,000 |
The
basis for the Board of Trustees’ approval of the Sub-Advisory Agreement for the
Fund will be available in the Fund’s Annual Report to Shareholders for the
fiscal period ending December 31, 2023.
Portfolio
Managers
The
below individuals are the Fund’s Portfolio Managers and are jointly and
primarily responsible for the day-to-day management of the Fund’s
portfolio.
Jeff
Kernagis, CFA, is a portfolio manager for the Fund. Mr. Kernagis has 34 years of
investment experience. Prior to joining Vident in 2022, Mr. Kernagis was a
Senior Vice President at Northern Trust Asset Management. Before that, Mr.
Kernagis spent almost 14 years at Invesco/PowerShares, whereas Senior Portfolio
Manager he directed the fixed income ETF PM team and helped grow assets to $40
billion in bond ETFs globally. Mr. Kernagis was also a PM at Claymore
(Guggenheim) Securities where he managed both equity ETFs and bond Unit
Investment Trusts. In addition, he was a senior bond trader at Mid-States
(Alloya) Corporate Federal Credit Union. Prior to working in investment
management, Mr. Kernagis held institutional derivative sales positions at ABN
Amro, Bear Stearns, and Prudential Securities. Mr. Kernagis earned a BBA degree
from the University of Notre Dame and an MBA from DePaul University. He also
holds the CFA designation.
Jim
Iredale, CFA, is a portfolio manager for the Fund. Mr. Iredale became a Senior
Portfolio Manager at Vident in 2015 and has over 15 years of experience managing
fixed income products. Prior to joining Vident, Mr. Iredale was a Manager –
Fixed Income with Ronald Blue & Co., one of the largest independent wealth
management firms in the U.S., where he started in 1999. Mr. Iredale graduated
with a BBA from the University of Georgia, Terry College of Business and
obtained his JD from the University of Georgia School of Law. He holds the
Chartered Financial Analyst designation.
The
Fund’s SAI provides additional information about the Portfolio Managers’
compensation structure, other accounts managed by the Portfolio Managers, and
the Portfolio Managers’ ownership of shares in the Fund.
HOW
TO
BUY
AND
SELL
SHARES
The
Fund issues and redeems Shares at NAV only in Creation Units. 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
(defined below), 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.
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, 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 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. If such information is
not available for a security held by the Fund or is determined to be unreliable,
the security will be valued by the Adviser at fair value pursuant to procedures
established by the Adviser and approved by the Board (as described below).
Fair
Value Pricing
The
Adviser has been designated by the Board as the valuation designee for the Fund
pursuant to Rule 2a-5 under the 1940 Act. In its capacity as valuation designee,
the Adviser has adopted procedures and methodologies to fair value Fund
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. The Board has appointed the Adviser as
the Fund’s valuation designee to perform all fair valuations of the Fund’s
portfolio investments, subject to the Board’s oversight. Accordingly, the
Adviser has established procedures for its fair valuation of the Fund’s
portfolio investments. Generally, when fair valuing a security held by the Fund,
the Adviser will take into account all reasonably available information that may
be relevant to a particular valuation including, but not limited to, fundamental
analytical data regarding the issuer, information relating to the issuer’s
business, recent trades or offers of the 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 established by the Adviser. Due to the
subjective and variable nature of determining the fair value of a security or
other investment, there can be no assurance that the Adviser’s fair value will
match or closely correlate to any market quotation that subsequently becomes
available or the price quoted or
published
by other sources. In addition, the Fund may not be able to obtain the fair value
assigned to the security upon the sale of such security.
Delivery
of Shareholder Documents – Householding
Householding
is an option available to certain investors of the Fund. 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 Fund 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.
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 Fund beyond the limits set
forth in section 12(d)(1) subject to certain terms and conditions set forth in
Rule 12d1-4 under the 1940 Act, including that such investment companies enter
into an agreement with the Fund.
DIVIDENDS,
DISTRIBUTIONS,
AND
TAXES
Dividends
and Distributions
The
Fund intends to 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 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 certain important U.S. federal income tax
considerations generally applicable to investments in the Fund. Your investment
in the Fund may have other tax implications. Please consult your tax advisor
about the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws. This summary does not apply
to Shares held in an IRA or other tax-qualified plans, which are generally not
subject to current tax. Transactions relating to Shares held in such accounts
may, however, be taxable at some time in the future. This summary is based on
current tax laws, which may change.
The
Fund intends to elect and qualify each year for treatment as a RIC under the
Code. If it meets certain minimum distribution requirements, a RIC is not
subject to tax at the fund level on income and gains from investments that are
timely distributed to shareholders. However, the Fund’s failure to qualify as a
RIC or to meet minimum distribution requirements would result (if certain relief
provisions were not available) in fund-level taxation and, consequently, a
reduction in income available for distribution to shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA, you need to be aware of the possible tax consequences
when the Fund makes distributions, when you sell your Shares listed on the
Exchange, and when you purchase or redeem Creation Units (APs only).
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 received 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. Because the Fund’s income is
derived primarily from interest income, it is not expected that the Fund will
distribute qualified dividend income or income that would qualify for the
dividends received deduction for corporate shareholders.
A
RIC that receives business interest income may pass through its net business
interest income for purposes of the tax rules applicable to the interest expense
limitations under Section 163(j) of the Code. A RIC’s total “Section 163(j)
Interest Dividend” for a tax year is limited to the excess of the RIC’s business
interest income over the sum of its business interest expense and its other
deductions properly allocable to its business interest income. A RIC may, in its
discretion, designate all or a portion of ordinary dividends as Section 163(j)
Interest Dividends, which would allow the recipient shareholder to treat the
designated portion of such dividends as interest income for purposes of
determining such shareholder’s interest expense deduction limitation under
Section 163(j). This can potentially increase the amount of a shareholder’s
interest expense deductible under Section 163(j). Such treatment of Section
163(j) Interest Dividends by a shareholder is generally subject to holding
period requirements and other potential limitations, although the holding period
requirements are generally not applicable to dividends declared by money market
funds and certain other funds that declare dividends daily and pay such
dividends on a monthly or more frequent basis. Section 163(j) Interest
Dividends, if so designated by the Fund, will be reported to your financial
intermediary or otherwise in accordance with the requirements specified by the
IRS.
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
Shares by non-U.S. shareholders generally are not subject to U.S. taxation,
unless you are a nonresident alien individual who is physically present in the
U.S. for 183 days or more per year. The Fund may, under certain circumstances,
report all or a portion of a dividend as an “interest-related dividend” or a
“short-term capital gain dividend,” which would generally be exempt from this
30% U.S. withholding tax, provided certain other requirements are met.
Different tax consequences may result if you are a foreign shareholder engaged
in a trade or business within the United States or if a tax treaty applies.
The
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage (currently 24%) of the taxable distributions and sale proceeds paid
to any shareholder who fails to properly furnish a correct taxpayer
identification number, who has underreported dividend or interest income, or who
fails to certify that the shareholder is not subject to such withholding.
Taxes
When Shares are Sold on the Exchange
Provided
that a shareholder holds Shares as capital assets, any capital gain or loss
realized upon a sale 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 Code. The difference between the
selling price and the cost basis of Shares generally determines the amount of
the capital gain or loss realized on the sale or exchange of Shares. Contact the
broker through whom you purchased your Shares to obtain information with respect
to the available cost basis reporting methods and elections for your account.
Taxes
on Purchases and Redemptions of Creation Units
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered, plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The IRS may
assert, however, that a loss that is realized upon an exchange of securities for
Creation Units may not be currently deducted under the rules governing “wash
sales” (for an AP who does not mark-to-market its holdings), or on the basis
that there has been no significant change in economic position. APs exchanging
securities should consult their own tax advisor with respect to whether the wash
sales rule applies and when a loss might be deductible.
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
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.
Foreign
Investments by the Fund
Interest
and other income received by the Fund with respect to foreign securities may
give rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If as of the close of a taxable year more than 50% of the
value of the Fund’s assets consists of certain foreign stock or securities, the
Fund will be eligible to elect to “pass through” to investors the amount of
foreign income and similar taxes (including withholding taxes) paid by the Fund
during that taxable year. This means that investors would be considered to have
received as additional income their respective Shares of such foreign taxes, but
investors may be entitled to either a corresponding tax deduction in calculating
taxable income, or, subject to certain limitations, a credit in calculating
federal income tax. If the Fund does not so elect, the Fund will be entitled to
claim a deduction for certain foreign taxes incurred by the Fund. The 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 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 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
The
Distributor, Foreside Fund Services, LLC, a wholly-owned subsidiary of Foreside
Financial Group, LLC (d/b/a ACA Group), is a broker-dealer registered with the
SEC. The Distributor distributes Creation Units for the Fund on an agency basis
and does not maintain a secondary market in Shares. The Distributor has no role
in determining the policies of the Fund or the securities that are purchased or
sold by the Fund. The Distributor’s principal address is Three Canal Plaza,
Suite 100, Portland, Maine 04101.
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 the Fund’s 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
will be available, free of charge, on the Fund’s website at
www.defianceetfs.com.
ADDITIONAL
NOTICES
Shares
are not sponsored, endorsed, or promoted by the Exchange. The Exchange makes no
representation or warranty, express or implied, to the owners of Shares or any
member of the public regarding the ability of the Fund to track the total return
performance of the Index or the ability of the Index identified herein to track
the performance of its constituent securities. The Exchange is not responsible
for, nor has it participated in, the determination of the compilation or the
calculation of the Index, nor 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 the Shares.
The
Exchange does not guarantee the accuracy and/or the completeness of the Index or
the data included therein. The Exchange makes no warranty, express or implied,
as to results to be obtained by the Fund, owners of Shares, or any other person
or entity from the use of the Index or the data included therein. The Exchange
makes no express or implied warranties, and hereby expressly disclaims all
warranties of merchantability or fitness for a particular purpose with respect
to the Index or the data included therein. 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, the Index Provider, the Exchange, 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 or the ability of the Index to track
general stock market performance. The Index Provider has no obligation to take
the needs of the Fund or the owners of Shares into consideration in determining,
composing, or calculating the Index. The Index Provider is not responsible for,
and has not participated in, the determination of the timing of, prices of, or
quantities of Shares to be issued or in the determination or calculation of the
equation by which Shares are redeemable. The Fund, the Adviser, and the
Sub-Adviser do not guarantee the accuracy, completeness, or performance of the
Index or the data included therein and shall have no liability in connection
with the Index or Index calculation. The Index Calculation Agent maintains and
calculates the Index used by the Fund. The Index Calculation Agent shall have no
liability for any errors or omissions in calculating an Index.
FINANCIAL
HIGHLIGHTS
Financial
information is not available because the Fund had not commenced operations prior
to the date of this Prospectus.
DEFIANCE
ETFS
|
|
|
|
|
|
|
|
|
|
| |
Adviser |
Defiance
ETFs, LLC
78
SW 7th Street, 9th Floor
Miami,
Florida 33130 |
Sub-Adviser |
Vident
Asset Management
1125
Sanctuary Parkway, Suite 515
Alpharetta,
Georgia 30009 |
Index
Provider |
MV
Index Solutions GmbH
Kreuznacher
Str. 30
60486
Frankfurt am Main, Germany |
Transfer
Agent,
Index
Receipt
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 |
Distributor |
Foreside
Fund Services, LLC
Three
Canal Plaza
Portland,
Maine 04101 |
Custodian |
U.S.
Bank National Association
1555
N. Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212 |
Independent
Registered
Public
Accounting
Firm |
Cohen
& Company, Ltd.
342
North Water Street, Suite 830
Milwaukee,
Wisconsin 53202 |
Legal
Counsel |
Morgan,
Lewis & Bockius LLP
1111
Pennsylvania Avenue, NW
Washington,
DC 20004-2541 |
Investors
may find more information about the Fund in the following documents:
Statement
of Additional Information: The
Fund’s SAI provides additional details about the investments of the Fund and
certain other additional information. A current SAI dated December
11, 2023, 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 the investments for the Fund will be available in the Fund’s
annual report and semi-annual reports. In the annual report you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund’s performance.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Fund by contacting the Fund at Defiance ETFs, c/o
U.S. Bank Global Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or
calling 1-833-333-9383.
Shareholder
reports and other information about the Fund are 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 Fund’s Internet website at www.defianceetfs.com;
or
(SEC
Investment Company Act File No. 811-22668)