ck0001683471-20211231
PROSPECTUS
RiverNorth Enhanced Pre-Merger SPAC
ETF
(
SPCZ
)
Listed
on NYSE Arca, Inc.
June 30,
2022
The
U.S. Securities and Exchange Commission (the “SEC”) has not approved or
disapproved of these securities or passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal
offense.
TABLE
OF CONTENTS
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RIVERNORTH
ENHANCED PRE-MERGER SPAC ETF - FUND SUMMARY |
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Principal
Investment Strategies |
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Sub-Adviser |
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Portfolio
Managers |
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Other
Service Providers |
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Net
Investment Income Tax |
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Foreign
Investments by the Fund |
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RIVERNORTH
ENHANCED PRE-MERGER SPAC ETF - FUND SUMMARY
Investment Objective
The RiverNorth Enhanced
Pre-Merger SPAC ETF (the “Fund”) seeks to preserve capital and provide
incremental total return.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
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Management
Fee |
0.89% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses1 |
0.00% |
Total
Annual Fund Operating Expenses |
0.89% |
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1
Estimated for the current
fiscal year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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1
Year: |
$91 |
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3
Years: |
$232 |
Portfolio Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in the Total Annual Fund Operating Expenses
or in the Example, affect the Fund’s performance. Because the Fund is newly
organized, portfolio turnover information is not yet
available.
Principal Investment Strategies
The
Fund is actively managed using a strategy designed around the unique
characteristics of “Pre-Combination” (defined below) SPAC securities. Under
normal market conditions, the Fund seeks to achieve its investment objective by
investing primarily in units made up of common stock, warrants and rights of
U.S.-listed special purpose acquisition companies (“SPACs”). A warrant is a
derivative that gives the holder the right, but not the obligation, to buy or
sell a security at a certain price prior to the expiration of the
warrant.
A
right is a privilege granted to existing holders of a company’s stock to receive
additional shares of common stock before it is offered to the
public.
A
SPAC is a “blank check” company with no commercial operations that is designed
to raise capital via an initial public offering (“IPO”) for the purpose of
engaging in a merger, acquisition, reorganization, or similar business
combination (a “Combination”) with one or more operating companies. Sponsors of
SPACs typically pay the SPAC’s offering costs and underwriting fees and
contribute all or a portion of its working capital in exchange for participation
in the common stock and derivatives (such as warrants and rights) of the SPAC. A
SPAC IPO typically involves the sale of units consisting of one share of common
stock and a warrant or right (or portion of a warrant or right) to purchase
common stock at a fixed price upon or after the consummation of a Combination.
The capital raised in the IPO is typically placed into a trust. The proceeds of
the IPO may be used only to consummate a Combination and for other limited
purposes such as paying taxes owed by the SPAC. “Pre-Combination” SPACs (also
referred to herein as “Pre-Merger” SPACs) are SPACs that are either seeking a
target for a Combination or have not yet completed a Combination with an
identified target. Pre-Combination SPACs often have predetermined time frames
within which to consummate a Combination (typically two years) or the SPAC will
seek to extend the time frame or liquidate.
RiverNorth
Capital Management, LLC (the “Sub-Adviser”), the Fund’s investment sub-adviser,
is responsible for the day-to-day management of the Fund, subject to the
oversight of TrueMark Investments, LLC (the “Adviser”), the Fund’s investment
adviser. The investment universe for the Fund will be all Pre-Combination SPACs
and their rights and warrants. Such SPACs may be formed, operated and listed in
the U.S. or outside of the U.S. The Sub-Adviser will apply quantitative and
qualitative analyses, including
fundamental
and technical analyses, to assess the relative risk/reward potential of the
SPACs in the investment universe and select those SPACs with the greatest
risk/reward potential for investment by the Fund. The Sub-Adviser will also
evaluate the sponsors of the SPACs as they are crucial to the success of a SPAC
acquisition. SPAC sponsors will be evaluated based on the team’s strategy,
experience, deal flow, and demonstrated track record in building enterprise
value, which is a measure of the value of an operating business determined by
calculating the company’s market cap plus total debt minus cash and cash
equivalents. If management has any history of growing operating businesses, the
Sub-Adviser will take into account their history. Additionally, the Sub-Adviser
will evaluate a SPAC’s market value relative to the value of the Fund’s share of
the SPAC to realize additional value for shareholders.
Weightings
in the Fund will be determined by the Sub-Adviser based on its evaluation of the
opportunities in the market. The Fund expects to participate in IPOs of SPACs,
secondary market transactions, private placement in public equities and
investments in vehicles formed by SPAC sponsors to hold founder shares, which
are private rights and other interests issued by a SPAC.
In
seeking to achieve the Fund’s investment objective, the Sub-Adviser will monitor
the Fund’s portfolio and adjust positions based on changes in expectations of
the investments or the availability of better alternatives. The Fund generally
will not hold a SPAC’s common stock past the date on which it no longer has the
ability to redeem the stock for its share of the underlying collateral held in
trust. Instead, prior to the completion of a Combination, the Sub-Adviser
intends to sell the SPAC’s shares if they are trading at a premium relative to
the trust collateral or tender out of the shares using the Fund’s redemption
rights. Warrants acquired during the SPAC lifecycle may be held by the Fund for
as long as the Sub-Adviser believes they offer appropriate value for the Fund
and its shareholders, even after a Combination has been completed.
In
addition, to the extent permitted by the Investment Company Act of 1940 (the
“1940 Act”), the Fund may use swaps to seek to leverage the returns of the
Fund’s portfolio. The use of leverage could magnify the Fund’s gains or losses.
Under
normal circumstances, at least 80% of the Fund’s net assets, plus borrowings for
investment purposes, will be invested in Pre-Merger SPACs (along with the
warrants or rights issued in connection with the IPOs of
SPACs).
The Fund is considered to be
non-diversified, which means that it may invest more of its assets in the
securities of a single issuer or a lesser number of issuers than if it were a
diversified fund. The SPACs in which the Fund invests will generally be small or
mid-capitalization companies.
Principal Investment Risks
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return and/or ability to meet its
objective. The following risks could affect the value of your investment in
the Fund:
•Associated
Risks of Pre-Combination SPACs.
The Fund invests in equity securities, warrants and rights of SPACs, which raise
funds to seek potential Combination opportunities. Unless and until a
Combination is completed, a SPAC generally invests its assets in U.S. government
securities, money market securities, and cash. Because SPACs have no operating
history or ongoing business other than seeking Combinations, the value of their
securities is particularly dependent on the ability of the entity’s management
to identify and complete a profitable Combination. There is no guarantee that
the SPACs in which the Fund invests will complete a Combination or that any
Combination that is completed will be profitable. Public stockholders of SPACs
may not be afforded a meaningful opportunity to vote on a proposed initial
Combination because certain stockholders, including stockholders affiliated with
the management of the SPAC, may have sufficient voting power, and a financial
incentive, to approve such a transaction without support from public
stockholders. As a result, a SPAC may complete a Combination even though a
majority of its public stockholders do not support such a Combination. Some
SPACs may pursue Combinations only within certain industries or regions, which
may increase the volatility of their prices. In addition, the Fund may invest in
vehicles formed by SPAC sponsors to hold founder shares, which may be subject to
forfeiture or expire worthless and which generally have more limited liquidity
than SPAC shares issued in an IPO. In addition, the Fund may invest in vehicles
formed by SPAC sponsors to hold founder shares, which may be subject to
forfeiture or expire worthless and which generally have more limited liquidity
than SPAC shares issued in an IPO.
•Borrowing
and Leverage Risk.
Borrowing magnifies the potential for gain or loss by the Fund and, therefore,
increases the possibility of fluctuation in the Fund’s NAV. This is the
speculative factor known as leverage. Because the Fund’s investments will
fluctuate in value, while the interest on borrowed amounts may be fixed, the
Fund’s NAV may tend to increase more as the value of its investments increases,
or to decrease more as the value of its investments decreases, during times of
borrowing. Unless profits on investments acquired with borrowed funds exceed the
costs of borrowing, the use of borrowing will cause the Fund’s investment
performance to decrease. Borrowing also may cause the Fund to liquidate
positions under adverse market conditions to satisfy its repayment obligations.
Borrowing increases the risk of loss and may increase the volatility of the
Fund.
•Counterparty
Risk.
Counterparty risk is the risk that a counterparty to Fund transactions
(e.g.,
prime brokerage or securities lending arrangement or derivatives transaction)
will be unable or unwilling to perform its contractual obligation to the Fund.
Counterparty risk is the risk that a counterparty to Fund transactions
(e.g.,
prime brokerage or securities lending arrangement or derivatives transaction)
will be unable or unwilling to perform its contractual obligation to the Fund.
The Fund may use swap agreements to gain exposure to a particular group of
securities, index, asset class or other reference asset without actually
purchasing those securities or investments, to hedge a position, or for other
investment purposes. Through these investments and related arrangements
(e.g.,
prime brokerage or securities lending arrangements or derivatives transactions),
the Fund is exposed to credit risks that the counterparty may be unwilling or
unable to make timely payments or otherwise to meet its contractual obligations.
If the counterparty becomes bankrupt or defaults on (or otherwise becomes unable
or unwilling to perform) its payment or other obligations to the Fund, the Fund
may not receive the full amount that it is entitled to receive or may experience
delays in recovering the collateral or other assets held by, or on behalf of,
the counterparty. If this occurs, the value of your shares in the Fund will
decrease.
•Cybersecurity
Risk.
With the increased use of technologies such as the Internet and the dependence
on computer systems to perform business and operational functions, funds (such
as the Fund) and their service providers may be prone to operational and
information security risks resulting from cyberattacks and/or technological
malfunctions. In general, cyberattacks are deliberate, but unintentional events
may have similar effects. Cyberattacks include, among others, stealing or
corrupting data maintained online or digitally, preventing legitimate users from
accessing information or services on a website, releasing confidential
information without authorization, and causing operational disruption.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”) or the issuers of securities in which the Fund
invests have the ability to cause disruptions and negatively impact the Fund’s
business operations, potentially resulting in financial losses to the Fund and
its shareholders. For instance, cyberattacks or technical malfunctions may
interfere with the processing of shareholder or other transactions, affect the
Fund's ability to calculate its NAV, cause the release of private shareholder
information or confidential Fund information, impede trading, cause reputational
damage, and subject the Fund to regulatory fines, penalties or financial losses,
reimbursement or other compensation costs, and additional compliance costs.
Cyberattacks or technical malfunctions may render records of Fund assets and
transactions, shareholder ownership of Fund Shares, and other data integral to
the functioning of the Fund inaccessible or inaccurate or incomplete. The Fund
may also incur substantial costs for cybersecurity risk management in order to
prevent cyber incidents in the future. The Fund and its shareholders could be
negatively impacted as a result.
•Derivatives
Risk.
Derivatives are financial instruments that have a value which depends upon, or
is derived from, a reference asset, such as one or more underlying securities,
pools of securities, indexes, rates or currencies. Derivatives may result in
investment exposures that are greater than their cost would suggest; in other
words, a small investment in a derivative may have a large impact on Fund
performance. The successful use of derivatives generally depends on the ability
to predict market movements. The use of these instruments requires special
skills and knowledge of investment techniques that are different than those
normally required for purchasing and selling securities. If the Sub-Adviser uses
a derivative instrument at the wrong time or judges market conditions
incorrectly, or if the derivative instrument does not perform as expected, these
strategies may significantly reduce the Fund’s return. The Fund could also
experience losses if it is unable to close out a position because the market for
an instrument or position is or becomes illiquid.
◦Swap
Agreements Risk.
Swap agreements are contracts among the Fund and a counterparty to exchange the
return of the pre-determined underlying investment (such as the rate of return
of the underlying index). Swap agreements may be negotiated bilaterally and
traded OTC between two parties or, for certain standardized swaps, must be
exchange-traded through a futures commission merchant and/or cleared through a
clearinghouse that serves as a central counterparty. Risks associated with the
use of swap agreements are different from those associated with ordinary
portfolio securities transactions, due in part to the fact they could be
considered illiquid and many swaps trade on the OTC market. Swaps are
particularly subject to counterparty credit, correlation, valuation, liquidity
and leveraging risks. While exchange trading and central clearing are intended
to reduce counterparty credit risk and increase liquidity, they do not make swap
transactions risk-free. Additionally, applicable regulators have adopted rules
imposing certain margin requirements, including minimums, on OTC swaps, which
may result in the Fund and its counterparties posting higher margin amounts for
OTC swaps, which could increase the cost of swap transactions to the Fund and
impose added operational complexity.
•Equity
Market Risk. The
equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, sectors or companies in which the Fund invests.
Common stock, warrants, and rights are generally exposed to greater risk than
other types of securities, such as preferred stocks and debt obligations,
because common stockholders generally have inferior rights to receive payment
from issuers.
•ETF
Risks.
The Fund is an ETF, and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to NAV and possibly face
delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the
business or significantly reduce their business activities and no other entities
step forward to perform their functions.
◦Costs
of Buying or Selling Shares.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading. Although
Shares are listed for trading on the NYSE Arca, Inc. (the “Exchange”) and may be
traded on U.S. exchanges other than the Exchange, there can be no assurance that
Shares will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of Shares may begin to mirror the liquidity of
the Fund’s underlying portfolio holdings, which can be significantly less liquid
than Shares.
•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.
•Illiquidity
Risk.
Illiquidity risk exists when particular investments are difficult to purchase or
sell, possibly preventing the Fund from selling these illiquid investments at an
advantageous price or at the time desired. A lack of liquidity may also cause
the value of investments to decline. Illiquid investments may also be difficult
to value.
•Management
Risk. The
Sub-Adviser continuously evaluates the Fund’s holdings, purchases and sales with
a view to achieving the Fund’s investment objective. However, achievement of the
stated investment objective cannot be guaranteed. The Sub-Adviser’s judgment
about the markets, the economy, or companies may not anticipate actual market
movements, economic conditions or company performance, and these factors may
affect the return on your investment.
•Market
Capitalization Risk.
◦Mid-Capitalization
Investing.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large capitalization stocks or the stock market
as a whole.
◦Small-Capitalization
Investing.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the coronavirus (COVID-19) pandemic and
related public health issues, growth concerns in the U.S. and overseas,
uncertainties regarding interest rates, trade tensions and the threat of tariffs
imposed by the U.S. and other countries. These developments as well as other
events could result in further market volatility and negatively affect financial
asset prices, the liquidity of certain securities and the normal operations of
securities exchanges and other markets. It is unknown how long circumstances
related to the pandemic will persist, whether they will reoccur in the future,
whether efforts to support the economy and financial markets will be successful,
and what additional implications may follow from the pandemic. The impact of
these events and other epidemics or pandemics in the future could adversely
affect Fund performance.
•New
Fund Risk. The
Fund is a recently organized investment company with no operating history. As a
result, prospective investors have no track record or history on which to base
their investment decision.
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a lesser number of issuers than if it was a diversified fund. As a result,
the Fund may be more exposed to the risks associated with and developments
affecting an individual issuer or a lesser number of issuers than a fund that
invests more widely. This may increase the Fund’s volatility and cause the
performance of a relatively small number of issuers to have a greater impact on
the Fund’s performance.
•Rights
and Warrants Risk. The
Fund may purchase rights and warrants and rights to purchase equity securities.
Investments in warrants or rights are pure speculation in that they have no
voting rights, pay no dividends and have no rights with respect to the assets of
the corporation issuing them. They do not represent ownership of the securities,
but only the right to buy them. Warrants and rights and warrants involve the
risk that the Fund could lose the purchase value of the warrant or right if the
warrant or right is not exercised or sold prior to its expiration.
◦Post-Combination
SPAC Warrants.
Although the Fund generally will not hold the common stock of a Post-Combination
SPAC, the Fund may hold warrants to buy the stock of companies that are derived
from a SPAC. Post-Combination SPACs may be unseasoned and lack a trading
history, a track record of reporting to investors, and widely available research
coverage. Post-Combination SPACs are thus often subject to extreme price
volatility and speculative trading. The stocks underlying the warrants may have
above average price appreciation that may not continue and the performance of
these stocks may not replicate the performance exhibited in the past, which
could adversely affect the value of the warrants the Fund holds.
•Transactions
in Cash Risk. Paying
redemption proceeds in cash rather than through in-kind delivery of portfolio
securities may require the Fund to dispose of or sell portfolio investments at
an inopportune time to obtain the cash needed to pay redemption proceeds. This
may cause the Fund to incur certain costs, such as brokerage costs, and to
recognize gains or losses that it might not have incurred if it had paid
redemption proceeds in kind. As a result, the Fund may pay out higher or lower
annual capital gains distributions than an ETF that redeems in kind. In
addition, the costs imposed on the Fund will decrease the Fund’s NAV unless such
costs are offset by a transaction fee payable by an
AP.
Performance
The Fund is new and therefore does not have a
performance history for a full calendar year. In the future,
performance information for the Fund will be presented in this section. Updated
performance information is available on the Fund’s website at www.true-shares.com.
Portfolio
Management
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Adviser |
TrueMark
Investments, LLC |
Sub-Adviser |
RiverNorth
Capital Management, LLC |
Portfolio
Managers |
Patrick
W. Galley, CFA®,
Eric Pestrue, CFA®
and Jordan C. Waldrep, CFA®
have been the portfolio managers of the Fund since its inception in June,
2022 |
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a deposit of
cash totaling the NAV of the Creation Units.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
in an individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUND
Investment
Objective
The
Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed without shareholder approval upon written notice to
shareholders.
Principal
Investment Strategies
The
following information is in addition to, and should be read along with, the
description of the Fund’s principal investment strategies in the section titled
“Fund Summary—Principal Investment Strategies” above.
In
accordance with Rule 35d-1 under the 1940 Act, the Fund has adopted a
non-fundamental investment policy to invest, under normal circumstances, at
least 80% of its net assets (plus the amount of any borrowing for investment
purposes) in Pre-Merger SPACs (along with the warrants or rights issued in
connection with the IPOs of SPACs). Such policy may be changed without
shareholder approval upon 60 days’ written notice to the Fund’s
shareholders.
Temporary
Defensive Positions.
For temporary defensive purposes during adverse market, economic, political or
other conditions, the Fund may invest in cash or cash equivalents or short-term
instruments such as commercial paper, money market mutual funds, or short-term
U.S. government securities. Taking a temporary defensive position may result in
the Fund not achieving its investment objective.
Principal
Investment Risks
An
investment in the Fund entails risks. The Fund could lose money, or its
performance could trail that of other investment alternatives. The following
provides additional information about the Fund’s principal risks. It is
important that investors closely review and understand these risks before making
an investment decision. Just as in the Fund’s summary section, the principal
risks are presented in alphabetical order to facilitate finding particular risks
and comparing them with those of other funds. Each risk summarized below is
considered a “principal risk” of investing in the Fund, regardless of the order
in which it appears.
•Associated
Risks of Pre-Combination SPACs. The
Fund invests in equity securities and warrants and rights of SPACs, which raise
assets to seek potential Combination opportunities. Unless and until a
Combination is completed, a SPAC generally invests its assets in U.S. government
securities, money market securities, and cash. If a Combination that meets the
requirements for the SPAC is not completed within a pre-established period of
time (e.g.,
18-24 months), the invested funds are returned to the entity’s shareholders.
Because SPACs have no operating history or ongoing business other than seeking
Combinations, the value of their securities is particularly dependent on the
ability of the entity’s management to identify and complete a profitable
Combination. Public stockholders of SPACs may not be afforded a meaningful
opportunity to vote on a proposed initial Combination because certain
stockholders, including stockholders affiliated with the management of the SPAC,
may have sufficient voting power, and a financial incentive, to approve such a
transaction without support from public stockholders. As a result, a
Pre-Combination SPAC may complete a Combination even though a majority of its
public stockholders do not support such a Combination. There is no guarantee
that the SPACs in which the Fund invests will complete a Combination or that any
Combinations that are completed will be profitable. Some SPACs may pursue
Combinations only within certain industries or regions, which may increase the
volatility of their prices. In addition, these securities, which are typically
traded in the over-the-counter market, may be considered illiquid and/or be
subject to restrictions on resale. SPACs may also encounter intense competition
from other entities having a similar business objective, such as private
investors or investment vehicles and other SPACs, competing for the same
Combination opportunities, which could make completing an attractive Combination
more difficult. In certain circumstances, the Fund may continue to hold the
warrants and rights of companies that were issued by a SPAC after the relevant
Combination occurs. In addition, the Fund may invest in vehicles formed by SPAC
sponsors to hold founder shares, which may be subject to forfeiture or expire
worthless and which generally have more limited liquidity than SPAC shares
issued in an IPO.
•Borrowing
and Leverage Risk. Borrowing
magnifies the potential for gain or loss by the Fund and, therefore, increases
the possibility of fluctuation in the Fund’s net asset values. This is the
speculative factor known as leverage. Because the Fund’s investments will
fluctuate in value, while the interest on borrowed amounts may be fixed, the
Fund’s net asset value may tend to increase more as the value of its investments
increases, or to decrease more as the value of its investments decreases, during
times of borrowing. Unless profits on investments acquired with borrowed funds
exceed the costs of borrowing, the use of borrowing will cause the Fund’s
investment performance to decrease.
•Counterparty
Risk.
Counterparty risk is the risk that a counterparty to Fund transactions
(e.g.,
prime brokerage or securities lending arrangement or derivatives transaction)
will be unable or unwilling to perform its contractual obligation to the Fund.
Counterparty risk is the risk that a counterparty to Fund transactions
(e.g.,
prime brokerage or securities lending arrangement or derivatives transaction)
will be unable or unwilling to perform its contractual obligation to the Fund.
The Fund may use swap agreements to gain exposure to a particular group of
securities, index, asset class or other reference asset without actually
purchasing those securities or investments, to hedge a position, or for other
investment purposes. Through these investments and related arrangements
(e.g.,
prime brokerage or securities lending arrangements or derivatives transactions),
the Fund is exposed to credit risks that the counterparty may be unwilling or
unable to make timely payments or otherwise to meet its contractual obligations.
If the counterparty becomes bankrupt or defaults on (or otherwise becomes unable
or unwilling to perform) its
payment
or other obligations to the Fund, the Fund may not receive the full amount that
it is entitled to receive or may experience delays in recovering the collateral
or other assets held by, or on behalf of, the counterparty. If this occurs, the
value of your shares in the Fund will decrease.
•Cybersecurity
Risk. The
Fund and its service providers, as well as exchanges and market participants
through or with which the Fund trades and other infrastructures and services on
which the Fund or its service providers rely, are susceptible to ongoing risks
related to cyber incidents and the risks associated with financial, economic,
health, labor and other global market developments and disruptions. Cyber
incidents, which can be perpetrated by a variety of means, may result in actual
or potential adverse consequences for critical information and communications
technology, systems and networks that are vital to the operations of the Fund
and/or its service providers. A cyber incident or sudden market disruption could
adversely affect the Fund, including its operation or investments, its service
providers or its shareholders by, among other things, interfering with the
processing of shareholder transactions or other operational functionality,
adversely affecting the Fund’s ability to calculate its NAV or other data,
causing the release of private or confidential information, impeding trading,
causing reputational damage, and subjecting the Fund to fines, penalties or
financial losses or otherwise adversely affecting the operations, systems and
activities of the Fund, its service providers and market intermediaries. These
types of adverse consequences also could result from other operational
disruptions or failures arising from, for example, processing errors, human
errors, and other technological issues. In each case, the Fund’s ability to
calculate its NAV correctly in a timely manner or process trades or Fund or
shareholder transactions may be adversely affected, including over a potentially
extended period.
•Derivatives
Risk.
Derivatives are financial instruments that have a value which depends upon, or
is derived from, a reference asset, such as one or more underlying securities,
pools of securities, indexes, rates or currencies. Derivatives may result in
investment exposures that are greater than their cost would suggest; in other
words, a small investment in a derivative may have a large impact on Fund
performance. The successful use of derivatives generally depends on the ability
to predict market movements. The use of these instruments requires special
skills and knowledge of investment techniques that are different than those
normally required for purchasing and selling securities. If the Sub-Adviser uses
a derivative instrument at the wrong time or judges market conditions
incorrectly, or if the derivative instrument does not perform as expected, these
strategies may significantly reduce the Fund’s return. The Fund could also
experience losses if it is unable to close out a position because the market for
an instrument or position is or becomes illiquid.
◦Swap
Agreements Risk.
Swap agreements are contracts among the Fund and a counterparty to exchange the
return of the pre-determined underlying investment (such as the rate of return
of the underlying index). Swap agreements may be negotiated bilaterally and
traded OTC between two parties or, for certain standardized swaps, must be
exchange-traded through a futures commission merchant and/or cleared through a
clearinghouse that serves as a central counterparty. Risks associated with the
use of swap agreements are different from those associated with ordinary
portfolio securities transactions, due in part to the fact they could be
considered illiquid and many swaps trade on the OTC market. Swaps are
particularly subject to counterparty credit, correlation, valuation, liquidity
and leveraging risks. While exchange trading and central clearing are intended
to reduce counterparty credit risk and increase liquidity, they do not make swap
transactions risk-free. Additionally, applicable regulators have adopted rules
imposing certain margin requirements, including minimums, on OTC swaps, which
may result in the Fund and its counterparties posting higher margin amounts for
OTC swaps, which could increase the cost of swap transactions to the Fund and
impose added operational complexity.
•Equity
Market Risk. Common
stocks, warrants and rights are susceptible to general stock market fluctuations
and to volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. These investor perceptions are based on
various and unpredictable factors including: expectations regarding government,
economic, monetary and fiscal policies; inflation and interest rates; economic
expansion or contraction; and global or regional political, economic and banking
crises. If you held common stock, or common stock equivalents, of any given
issuer, you would generally be exposed to greater risk than if you held
preferred stocks and debt obligations of the issuer because common stockholders,
or holders of equivalent interests, generally have inferior rights to receive
payments from issuers in comparison with the rights of preferred stockholders,
bondholders, and other creditors of such issuers..
Beginning
in the first quarter of 2020, financial markets in the United States and around
the world experienced extreme and in many cases unprecedented volatility and
severe losses due to the global pandemic caused by COVID‑19, a novel
coronavirus. The pandemic has resulted in a wide range of social and economic
disruptions, including closed borders, voluntary or compelled quarantines of
large populations, stressed healthcare systems, reduced or prohibited domestic
or international travel, supply chain disruptions, and so-called “stay-at-home”
orders throughout much of the United States and many other countries. The
fall-out from these disruptions has included the rapid closure of businesses
deemed “non-essential” by federal, state, or local governments and rapidly
increasing unemployment, as well as greatly reduced liquidity for certain
instruments at times. Some sectors of the economy and individual issuers have
experienced particularly large losses. Such disruptions may continue for an
extended period of time or reoccur in the future to a similar or greater extent.
In response, the U.S. government and the Federal Reserve have taken
extraordinary actions to support the domestic economy and financial markets,
resulting in very low interest rates and in some cases negative yields. It is
unknown how long circumstances related to the pandemic will persist, whether
they will reoccur in the future, whether efforts to support the economy and
financial markets will be successful, and what additional implications may
follow
from the pandemic. The impact of these events and other epidemics or pandemics
in the future could adversely affect Fund performance.
•ETF
Risks.
The Fund is an ETF, and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk.
The Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to NAV and possibly face
delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
◦Costs
of Buying or Selling Shares.
Investors buying or selling Shares in the secondary market will pay brokerage
commissions or other charges imposed by brokers, as determined by that broker.
Brokerage commissions are often a fixed amount and may be a significant
proportional cost for investors seeking to buy or sell relatively small amounts
of Shares. In addition, secondary market investors will also incur the cost of
the difference between the price at which an investor is willing to buy Shares
(the “bid” price) and the price at which an investor is willing to sell Shares
(the “ask” price). This difference in bid and ask prices is often referred to as
the “spread” or “bid/ask spread.” The bid/ask spread varies over time for Shares
based on trading volume and market liquidity, and is generally lower if Shares
have more trading volume and market liquidity and higher if Shares have little
trading volume and market liquidity. Further, a relatively small investor base
in the Fund, asset swings in the Fund and/or increased market volatility may
cause increased bid/ask spreads. Due to the costs of buying or selling Shares,
including bid/ask spreads, frequent trading of Shares may significantly reduce
investment results and an investment in Shares may not be advisable for
investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility or periods of
steep market declines and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant. The market price of Shares during the trading day, like the price
of any exchange-traded security, includes a “bid/ask” spread charged by the
exchange specialist, market makers or other participants that trade Shares. In
times of severe market disruption, the bid/ask spread can increase
significantly. At those times, Shares are most likely to be traded at a discount
to NAV, and the discount is likely to be greatest when the price of Shares is
falling fastest, which may be the time that you most want to sell your Shares.
The Adviser believes that, under normal market conditions, large market price
discounts or premiums to NAV will not be sustained because of arbitrage
opportunities.
◦Trading.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can
be no assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 500 Index during a single day reaches certain thresholds (e.g.,
7%, 13%, and 20%). Additional rules applicable to the Exchange may halt trading
in Shares when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance that Shares will trade with
any volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than Shares.
•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
Fund’s shares. Conversely, Shares may trade on days when foreign exchanges are
close. Each of these factors can make investments in the Fund more volatile and
potentially less liquid than other types of investments.
•Illiquidity
Risk.
Illiquidity risk exists when particular investments are difficult to purchase or
sell, possibly preventing the Fund from selling these illiquid investments at an
advantageous price or at the time desired. A lack of liquidity may also cause
the value of investments to decline. Illiquid investments may also be difficult
to value.
•Management
Risk. The
Sub-Adviser continuously evaluates the Fund’s holdings, purchases and sales with
a view to achieving the Fund’s investment objective. However, achievement of the
stated investment objective cannot be guaranteed. The Sub-Adviser’s judgment
about the markets, the economy, or companies may not anticipate actual market
movements, economic conditions or company performance, and these factors may
affect the return on your investment. In fact, no matter how good a job the
Sub-Adviser does, you could lose money on your investment in the Fund, just as
you could with other investments. If the Sub-Adviser is incorrect in its
assessment of the income, growth or price realization potential of the Fund’s
holdings or incorrect in its assessment of general market or economic
conditions, then the value of the Fund’s shares may decline.
•Market
Capitalization Risk.
◦Mid-Capitalization
Investing.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large capitalization stocks or the stock market
as a whole.
◦Small-Capitalization
Investing.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
economic, political and global macro factors, including public health issues,
growth concerns in the U.S. and overseas, uncertainties regarding interest
rates, trade tensions and the threat of tariffs imposed by the U.S. and other
countries. These developments as well as other events could result in further
market volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets, which could have an adverse effect on the Fund.
COVID-19
has resulted in a pandemic and major disruption to economies and markets around
the world, including the United States. The pandemic has resulted in a wide
range of social and economic disruptions, including closed borders, voluntary or
compelled quarantines of large populations, stressed healthcare systems, reduced
or prohibited domestic or international travel, supply chain disruptions, and
so-called “stay-at-home” orders throughout much of the United States and many
other countries. Financial markets have experienced extreme volatility and
severe losses, and trading in many instruments has been disrupted. Some sectors
of the economy and individual issuers have experienced particularly large
losses. Such disruptions may continue for an extended period of time or reoccur
in the future to a similar or greater extent. Liquidity for many instruments has
been greatly reduced for periods of time. In response to these disruptions, the
U.S. government and the Federal Reserve have taken extraordinary actions to
support the domestic economy and financial markets, resulting in very low
interest rates and in some cases negative yields. It is unknown how long
circumstances related to the pandemic will persist, whether they will reoccur in
the future, whether efforts to support the economy and financial markets will be
successful, and what additional implications may follow from the pandemic. The
impact of these events and other epidemics or pandemics in the future could
adversely affect Fund performance.
•New
Fund Risk. The
Fund is a recently organized investment company with no operating history. As a
result, prospective investors have no track record or history on which to base
their investment decision. Moreover, investors will not be able to evaluate the
Fund against one or more comparable funds on the basis of relative performance
until the Fund has established a track record.
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may invest a greater percentage of its
assets in the securities of a single issuer or a lesser number of issuers than
if it was a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
lesser number of issuers than a fund that invests more widely. This may increase
the Fund’s volatility and cause the performance of a relatively small number of
issuers to have a greater impact on the Fund’s performance.
•Rights
and Warrants Risk. The
Fund may purchase warrants and rights to purchase equity securities. Investments
in warrants and rights are pure speculation in that they have no voting rights,
pay no dividends and have no rights with respect to the assets of the
corporation issuing them. They do not represent ownership of the securities, but
only the right to buy them. The prices of warrants and rights (if traded
independently) and warrants do not necessarily move parallel to the prices of
the underlying securities. Warrants and rights involve the risk that the Fund
could lose the purchase value of the warrant or right if the warrant or right is
not exercised prior to its expiration. They also involve the risk that the
effective price paid for the warrant or rights added to the subscription price
of the related security may be greater than the value of the subscribed
security’s market price.
◦Post-Combination
SPAC Warrants.
Although the Fund generally will not hold the common stock of a Post-Combination
SPAC, the Fund may hold warrants to buy the stock of companies that are derived
from a SPAC. Post-Combination SPACs may be unseasoned and lack a trading
history, a track record of reporting to investors, and widely available research
coverage. Post-Combination SPACs are thus often subject to extreme price
volatility and speculative trading. The stocks underlying the warrants may have
above average price appreciation that may not continue and the performance of
these stocks may not replicate the performance exhibited in the past, which
could adversely affect the value of the warrants the Fund holds.
•Transactions
in Cash Risk. Paying
redemption proceeds in cash rather than through in-kind delivery of portfolio
securities may require the Fund to dispose of or sell portfolio investments at
an inopportune time to obtain the cash needed to pay redemption proceeds. This
may cause the Fund to incur certain costs, such as brokerage costs, and to
recognize gains or losses that it might not have incurred if it had paid
redemption proceeds in kind. As a result, the Fund may pay out higher or lower
annual capital gains distributions than an ETF that redeems in kind. In
addition, the costs imposed on the Fund will decrease the Fund’s NAV unless such
costs are offset by a transaction fee payable by an AP.
PORTFOLIO
HOLDINGS INFORMATION
Information
about the Fund’s daily portfolio holdings is available at www.true-shares.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
TrueMark
Investments, LLC, a Delaware limited liability company located at 433 West Van
Buren Street, 1150-E, Chicago, Illinois 60607, serves as the investment adviser
for the Fund. The Adviser oversees the day-to-day operations of the Fund,
subject to the general supervision and oversight of the Board of Trustees (the
“Board”) and the officers of Listed Funds Trust (the “Trust”). The Adviser also
arranges for sub-advisory, transfer agency, custody, fund administration,
distribution and all other services necessary for the Fund to operate. The
Adviser is an SEC-registered investment adviser. As of February 28, 2022, the
Adviser had approximately $204 million in assets under management.
The
Adviser continuously reviews, supervises, and administers the Fund’s investment
program. In particular, the Adviser provides investment and operational
oversight of the Sub-Adviser. The Board supervises the Adviser and establishes
policies that the Adviser must follow in its day-to-day management activities.
For
the services it provides to the Fund, the Adviser is entitled to a unified
management fee, which is calculated daily and paid monthly, at an annual rate
based on the Fund’s average daily net assets as set forth in the table
below.
|
|
|
|
|
|
Fund
|
Management
Fee |
RiverNorth
Enhanced Pre-Merger SPAC ETF |
0.65% |
Pursuant
to an investment advisory agreement between the Trust, on behalf of the Fund,
and the Adviser (the “Advisory Agreement”), the Adviser has agreed to pay all
expenses of the Fund except the fee payable to the Adviser under the Advisory
Agreement, interest charges on any borrowings, dividends, and other expenses on
securities sold short, taxes, brokerage commissions and other expenses incurred
in placing orders for the purchase and sale of securities and other investment
instruments, acquired fund fees and expenses, accrued deferred tax liability,
extraordinary expenses, and distribution (12b-1) fees and expenses (if any). The
Adviser, in turn, compensates the Sub-Adviser from the management fee it
receives.
The
basis for the Board’s approval of the Advisory Agreement will be included in the
Fund’s first Annual or Semi-Annual Report to Shareholders following commencement
of operations.
Sub-Adviser
Pursuant
to a sub-advisory agreement between the Adviser and the Sub-Adviser (the
“Sub-Advisory Agreement”), RiverNorth Capital Management, LLC, a Delaware
limited liability company located at 360 South Rosemary Avenue, Suite 1420, West
Palm Beach, Florida 33401, manages the day-to-day investment of the Fund’s
assets. An SEC-registered investment adviser formed in 2000, the Sub-Adviser is
majority owned by RiverNorth Financial Holdings, LLC. As of February 28, 2022,
the Sub-Adviser had approximately $5.8 billion under management.
The
Sub-Adviser is responsible for trading portfolio securities for the Fund,
including selecting broker-dealers to execute purchase and sale transactions of
the Fund, subject to the supervision of the Adviser and the Board. For its
services, the Sub-Adviser is entitled to a fee paid by the Adviser, which fee is
calculated daily based on the daily net assets of the Fund in an amount of
0.65%.
The
basis for the Board’s approval of the Sub-Advisory Agreement will be included in
the Fund’s first Annual or Semi-Annual Report to Shareholders following
commencement of operations.
Portfolio
Managers
The
below individuals are jointly and primarily responsible for day-to-day
management of the Fund’s portfolio.
Patrick
W. Galley, CFA®
Mr.
Galley joined the Sub-Adviser in 2004 and serves as Chief Executive Officer and
Chief Investment Officer. Prior to joining the Sub-Adviser, Mr. Galley was Vice
President at Bank of America in the Global Investment Bank's Portfolio
Management group where he specialized in analyzing and structuring corporate
transactions for investment management firms in addition to closed-end and
open-end funds, hedge funds, fund of funds, structured investment vehicles and
insurance/reinsurance companies. Mr. Galley graduated with honors from Rochester
Institute of Technology with a B.S. in Finance. Mr. Galley is a CFA
Charterholder and member of the CFA Institute and the CFA Society of
Chicago.
Eric
Pestrue, CFA®
Eric
Pestrue serves as Senior Investment Analyst for the Sub-Adviser. He is
responsible for assisting with research and trading. Prior to joining the
Sub-Adviser, Mr. Pestrue was a Project Manager in Morningstar’s Data division,
where he worked extensively on the closed-end fund database and led the creation
of the unit investment trust database. Prior to Morningstar, he was a
Quantitative Research Analyst with First Trust Portfolios where he helped
back-test quantitative investment strategies and select holdings for unit
investment trusts. Mr. Pestrue graduated from the University of Michigan with a
B.A. in Economics and earned his MBA, with honors, from the University of
Chicago Booth School Of Business. He is a CFA Charterholder and member of the
CFA Institute and the CFA Society of Chicago.
Jordan
C. Waldrep, CFA®
Mr.
Waldrep has been in the investment management industry for over 16 years. Prior
to joining the Adviser, Mr. Waldrep was most recently at USA Mutuals, working as
a portfolio manager for multiple funds. Prior to that, Mr. Waldrep was the
portfolio manager for a pair of long equity portfolios at Blackfin Capital and a
principal at Hourglass Capital providing research for a long-short hedge fund.
Mr. Waldrep received his MBA in Finance from the University of Texas, McCombs
School of Business in 2004 and his bachelor’s degree in Biology and History from
Texas A&M University in 1999. Mr. Waldrep is also a Chartered Financial
Analyst.
The
Fund’s SAI provides additional information about each Portfolio Manager’s
compensation structure, other accounts managed by the Portfolio Manager, and the
Portfolio Manager’s ownership of Shares.
Other
Service Providers
Foreside
Fund Services, LLC (the “Distributor”) serves as the principal underwriter and
distributor of the Fund’s shares. The Distributor’s principal address is Three
Canal Plaza, Suite 100, Portland, Maine 04101. The Distributor will not
distribute shares in less than whole Creation Units, and it does not maintain a
secondary market in the shares. The Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934 and a member of the Financial Industry
Regulatory Authority, Inc. (“FINRA”). The Distributor has no role in determining
the policies of the Fund or the securities that are purchased or sold by the
Fund and is not affiliated with the Adviser, Sub-Adviser, or any of their
respective affiliates.
U.S.
Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services,
located at 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as the
administrator and transfer agent for the Fund.
U.S.
Bank National Association, located at 1555 N. Rivercenter Drive, Suite 302,
Milwaukee, Wisconsin 53212, serves as the custodian for the Fund.
Morgan,
Lewis & Bockius LLP, located at 1111 Pennsylvania Avenue, N.W., Washington,
D.C. 20004, serves as legal counsel to the Trust.
Cohen
& Company, Ltd., located at 1350 Euclid Avenue, Suite 800, Cleveland, Ohio
44115, serves as the Fund’s independent registered public accounting firm. The
independent registered public accounting firm is responsible for auditing the
annual financial statements of the Fund.
HOW
TO BUY AND SELL SHARES
The
Fund issues and redeems Shares only in Creation Units at the NAV per share next
determined after receipt of an order from an AP. Only APs may acquire Shares
directly from the Fund, and only APs may tender their Shares for redemption
directly to the Fund, at NAV. APs must be a member or participant of a clearing
agency registered with the SEC and must execute a Participant Agreement that has
been agreed to by the Distributor, and that has been accepted by the Fund’s
transfer agent, with respect to purchases and redemptions of Creation Units.
Once created, Shares trade in the secondary market in quantities less than a
Creation Unit.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Individual Shares are listed for trading on the secondary market on the Exchange
and can be bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the
bid and the offer price in the secondary market on each leg of a round trip
(purchase and sale) transaction. In addition, because secondary market
transactions occur at market prices, you may pay more than NAV when you buy
Shares, and receive less than NAV when you sell those Shares.
Book
Entry
Shares
are held in book-entry form, which means that no stock certificates are issued.
The Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding Shares.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares. DTC’s
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other institutions that directly or indirectly
maintain a custodial relationship with DTC. As a beneficial owner of Shares, you
are not entitled to receive physical delivery of stock certificates or to have
Shares registered in your name, and you are not considered a registered owner of
Shares. Therefore, to exercise any right as an owner of Shares, you must rely
upon the procedures of DTC and its participants. These procedures are the same
as those that apply to any other securities that you hold in book entry or
“street name” through your brokerage account.
Frequent
Purchases and Redemptions of Shares
The
Fund imposes no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly with the Fund, are an essential part of the ETF process and help
keep Share trading prices in line with NAV. As such, the Fund accommodates
frequent purchases and redemptions by APs. However, frequent purchases and
redemptions for cash may increase tracking error and portfolio transaction costs
and may lead to the realization of capital gains. To minimize these potential
consequences of frequent purchases and redemptions, the Fund employs fair value
pricing and may impose transaction fees on purchases and redemptions of Creation
Units to cover the custodial and other costs incurred by the Fund in effecting
trades. In addition, the Fund and the Adviser reserve the right to reject any
purchase order at their discretion.
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 (the “NYSE”), generally 4:00 p.m. Eastern time, each day the
NYSE is open for business. The NAV is calculated by dividing the Fund’s net
assets by its Shares outstanding.
In
calculating its NAV, the Fund generally values its assets on the basis of market
quotations, last sale prices, or estimates of value furnished by a pricing
service or brokers who make markets in such instruments. The values of non-U.S.
dollar denominated securities are converted to U.S. dollars using foreign
currency exchange rates generally determined as of 4:00 p.m., London time. If
such information is not available for a security held by the Fund or is
determined to be unreliable, the security will be valued at fair value estimates
under guidelines established by the Board (as described below).
Fair
Value Pricing
The
Board has adopted procedures and methodologies to fair value Fund securities
whose market prices are not “readily available” or are deemed to be unreliable.
For example, such circumstances may arise when: (i) a security has been
de-listed or has had its trading halted or suspended; (ii) a security’s primary
pricing source is unable or unwilling to provide a price; (iii) a security’s
primary trading market is closed during regular market hours; or (iv) a
security’s value is materially affected by events occurring after the close of
the security’s primary trading market. Generally, when fair valuing a security,
the Fund will take into account all reasonably available information that may be
relevant to a particular valuation including, but not limited to, fundamental
analytical data regarding the issuer, information relating to the issuer’s
business, recent trades or offers of the security, general and/or specific
market conditions and the specific facts giving rise to the need to fair value
the security. Fair value determinations are made in good faith and in accordance
with the fair value methodologies included in the Board-adopted valuation
procedures. Due to the subjective and variable nature of fair value pricing,
there can be no assurance that the Adviser or Sub-Adviser will be able to obtain
the fair value assigned to the security upon the sale of such security.
DIVIDENDS,
DISTRIBUTIONS, AND TAXES
Dividends
and Distributions
The
Fund may pay out dividends, if any, and distribute any net realized capital
gains to its shareholders at least annually. The Fund will declare and pay
capital gain distributions, if any, in cash. Distributions in cash may be
reinvested automatically in additional whole Shares only if the broker through
whom you purchased Shares makes such option available. Your broker is
responsible for distributing the income and capital gain distributions to you.
Taxes
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Fund. Your investment
in the Fund may have other tax implications. Please consult your tax adviser
about the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws.
The
Fund intends to elect and to qualify each year for treatment as a regulated
investment company (a “RIC”). If it meets certain minimum distribution
requirements, a RIC is not subject to tax at the fund level on income and gains
from investments that are timely distributed to shareholders. However, the
Fund’s failure to qualify as a RIC or to meet minimum distribution requirements
would result (if certain relief provisions were not available) in fund-level
taxation and, consequently, a reduction in income available for distribution to
shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA plan, you need to be aware of the possible tax
consequences when the Fund makes distributions, when you sell your Shares listed
on the Exchange, and when you purchase or redeem Creation Units (APs only).
Taxes
on Distributions
The
Fund intends to distribute, at least annually, substantially all of its net
investment income and net capital gains. For federal income tax purposes,
distributions of investment income are generally taxable as ordinary income or
qualified dividend income. Taxes on distributions of capital gains (if any) are
determined by how long the Fund owned the investments that generated them,
rather than how long a shareholder has owned his or her Shares. Sales of assets
held by the Fund for more than one year generally result in long-term capital
gains and losses, and sales of assets held by the Fund for one year or less
generally result in short-term capital gains and losses. Distributions of the
Fund’s net capital gain (the excess of net long-term capital gains over net
short-term capital losses) that are reported by the Fund as capital gain
dividends (“Capital Gain Dividends”) will be taxable as long-term capital gains,
which for non-corporate shareholders are subject to tax at reduced rates of up
to 20% (lower rates apply to individuals in lower tax brackets). Distributions
of short-term capital gain will generally be taxable as ordinary income.
Dividends and distributions are generally taxable to you whether you receive
them in cash or reinvest them in additional Shares.
Distributions
reported by the Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income derived from dividends paid by U.S. corporations or
certain foreign corporations that are either incorporated in a U.S. possession
or eligible for tax benefits under certain U.S. income tax treaties. In
addition, dividends that the Fund receives in respect of stock of certain
foreign corporations may be qualified dividend income if that stock is readily
tradable on an established U.S. securities market. Corporate shareholders may be
entitled to a dividends received deduction for the portion of dividends they
receive from the Fund that are attributable to dividends received by the Fund
from U.S. corporations, subject to certain limitations.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from the Fund.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable even if they are paid from income or gains earned by the Fund before
your investment (and thus were included in the Shares’ NAV when you purchased
your Shares).
You
may wish to avoid investing in the Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your
investment.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
the Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. Gains from the sale or other disposition of
your Shares from non-U.S. shareholders generally are not subject to U.S.
taxation, unless you are a nonresident alien individual who is physically
present in the U.S. for 183 days or more per year. The Fund may, under certain
circumstances, report all or a portion of a dividend as an “interest-related
dividend” or a “short-term capital gain dividend,” which would generally be
exempt from this 30% U.S. withholding tax, provided certain other requirements
are met. Different tax consequences may result if you are a foreign shareholder
engaged in a trade or business within the United States or if a tax treaty
applies.
Under
legislation generally known as “FATCA” (the Foreign Account Tax Compliance Act),
the Fund is required to withhold 30% of certain ordinary dividends it pays to
shareholders that are foreign entities and that fail to meet prescribed
information reporting or certification requirements.
Under
the “backup withholding” provisions of the Code, the Fund (or a financial
intermediary, such as a broker, through which a shareholder owns Shares)
generally is required to withhold and remit to the U.S. Treasury a percentage
(currently 24%) of the taxable distributions and sale or redemption proceeds
paid to any shareholder who fails to properly furnish a correct taxpayer
identification number, who has underreported dividend or interest income, or who
fails to certify that he, she or it is not subject to such
withholding.
Backup
withholding is not an additional tax. Any amounts withheld under the backup
withholding rules may be allowed as a refund or a credit against a holder’s U.S.
federal income tax liability, provided the required information is timely
furnished to the Internal Revenue Service.
Taxes
When Shares Are Sold on the Exchange
Any
capital gain or loss realized upon a sale of Shares generally is treated as a
long-term capital gain or loss if Shares have been held for more than one year
and as a short-term capital gain or loss if Shares have been held for one year
or less. However, any capital loss on a sale of Shares held for six months or
less is treated as long-term capital loss to the extent of Capital Gain
Dividends paid with respect to such Shares. Any loss realized on a sale will be
disallowed to the extent Shares of the Fund are acquired, including through
reinvestment of dividends, within a 61-day period beginning 30 days before and
ending 30 days after the disposition of Shares. The ability to deduct capital
losses may be limited.
The
cost basis of Shares of the Fund acquired by purchase will generally be based on
the amount paid for the Shares and then may be subsequently adjusted for other
applicable transactions as required by the Code. The difference between the
selling price and the cost basis of Shares generally determines the amount of
the capital gain or loss realized on the sale or exchange of Shares. Contact the
broker through whom you purchased your Shares to obtain information with respect
to the available cost basis reporting methods and elections for your account.
Taxes
on Purchases and Redemptions of Creation Units
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered, plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The
Internal Revenue Service may assert, however, that a loss that is realized upon
an exchange of securities for Creation Units may not be currently deducted under
the rules governing “wash sales” (for an AP who does not mark-to-market its
holdings) or on the basis that there has been no significant change in economic
position. APs exchanging securities should consult their own tax adviser with
respect to whether wash sale rules apply and when a loss might be
deductible.
Any
gain or loss realized upon a creation or redemption of Creation Units is treated
as capital gain or loss or ordinary gain or loss depending on the circumstances.
Any capital gain or loss realized upon a creation or redemption of Creation
Units is generally treated as long-term capital gain or loss if the Shares
comprising the Creation Units have been held for more than one year and as a
short-term capital gain or loss if such Shares have been held for one year or
less.
The
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. The Fund may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause the Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in kind. As a result, the Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Net
Investment Income Tax
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8% tax
on all or a portion of their “net investment income,” which includes interest,
dividends, and certain capital gains (generally including capital gains
distributions and capital gains realized on the sale of Shares). This 3.8% tax
also applies to all or a portion of the undistributed net investment income of
certain shareholders that are estates and trusts.
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.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in the Fund. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Fund
distributions and sales of Shares. Consult your personal tax adviser about the
potential tax consequences of an investment in Shares under all applicable tax
laws. For more information, please see the section entitled “Federal Income
Taxes” in the SAI.
DISTRIBUTION
PLAN
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, the Fund is authorized to
pay an amount up to 0.25% of its average daily net assets each year for certain
distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no plans to impose
these fees. However, in the event Rule 12b-1 fees are charged in the future,
because the fees are paid out of Fund assets, over time these fees will increase
the cost of your investment and may cost you more than certain other types of
sales charges.
PREMIUM/DISCOUNT
INFORMATION
Information
regarding how often Shares traded on the Exchange at a price above (i.e.,
at a premium) or below (i.e.,
at a discount) the NAV per share is available on the Fund’s website at
www.true-shares.com.
ADDITIONAL
NOTICES
Shares
are not sponsored, endorsed, or promoted by the Exchange. The Exchange is not
responsible for, nor has it participated in the determination of, the timing,
prices, or quantities of Shares to be issued, nor in the determination or
calculation of the equation by which Shares are redeemable. The Exchange has no
obligation or liability to owners of Shares in connection with the
administration, marketing, or trading of Shares.
Without
limiting any of the foregoing, in no event shall the Exchange have any liability
for any lost profits or indirect, punitive, special, or consequential damages
even if notified of the possibility thereof.
The
Adviser, the Sub-Adviser, and the Fund make no representation or warranty,
express or implied, to the owners of Shares or any member of the public
regarding the advisability of investing in securities generally or in the Fund
particularly.
FINANCIAL
HIGHLIGHTS
Financial
information is not available because the Fund had not commenced operations prior
to the date of this Prospectus.
RiverNorth
Enhanced Pre-Merger SPAC ETF
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Adviser |
TrueMark
Investments, LLC
433
West Van Buren Street, 1150-E
Chicago,
Illinois 60607 |
Sub-Adviser |
RiverNorth
Capital Management, LLC
360
South Rosemary Avenue, Suite 1420
West
Palm Beach, Florida 33401
|
Distributor |
Foreside
Fund Services, LLC
Three
Canal Plaza, Suite 100
Portland,
Maine 04101 |
Transfer
Agent and Administrator |
U.S.
Bancorp Fund Services, LLC
d/b/a
U.S. Bank Global Fund Services
615
East Michigan Street
Milwaukee,
Wisconsin 53202
|
Legal
Counsel |
Morgan,
Lewis & Bockius LLP
1111
Pennsylvania Avenue, NW
Washington,
DC 20004-2541 |
Custodian |
U.S.
Bank National Association
1555
North Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212
|
Independent
Registered Public Accounting Firm |
Cohen
& Company, Ltd.
1350
Euclid Avenue, Suite 800
Cleveland,
Ohio 44115 |
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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. The SAI is on file with the SEC and is
herein incorporated by reference into this Prospectus. It is legally considered
a part of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about the Fund’s investments will be available in the Fund’s annual
and semi-annual reports to shareholders. In the annual report, when available,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund’s performance after the first fiscal year
the Fund is in operation.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Fund by contacting the Fund at c/o U.S. Bank Global
Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or by calling
1-800-617-0004.
Shareholder
reports and other information about the Fund are also available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov;
•Free
of charge from the Fund’s Internet web site at www.true-shares.com;
or
(SEC
Investment Company Act File No. 811-23226)