|
|
(each, a "Fund" and
collectively "the Funds")
each listed on Cboe BZX Exchange, Inc.
|
STATEMENT OF ADDITIONAL
INFORMATION
This Statement of Additional
Information ("SAI") is not a prospectus and should be read together with the Prospectuses for the Funds,
each a series of Corgi ETF Trust I (the "Trust"), dated June 5, 2026, as they may be supplemented from
time to time (each, a "Prospectus"). Unless noted otherwise, capitalized terms used in this SAI have the
same meanings as in the applicable Prospectus. A copy of a Prospectus may be obtained without charge by
email to contact@corgifunds.com, visiting www.corgifunds.com, or writing to the Trust, c/o 425 Bush St,
Suite 500, San Francisco, CA 94104.
The Funds' audited financial
statements for the most recent fiscal year, when available, will be incorporated into this SAI by
reference to the Funds' most recent annual report on Form N-CSR. You can obtain a copy of the Certified
Shareholder Report free of charge by contacting the Fund at the mailing address or email listed above.
GENERAL INFORMATION ABOUT THE
TRUST
The Trust is an open-end
management investment company with multiple series, including the Funds. This SAI relates to the Funds.
The Trust is a Delaware statutory trust formed on July 15, 2025. The Trust is registered with the U.S.
Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended (together
with the rules and regulations thereunder, the "1940 Act"), as an open-end management investment company,
and the offering of shares of beneficial interest ("Shares") is registered under the Securities Act of
1933, as amended (the "Securities Act"). The Trust is governed by its Board of Trustees (the "Board"). The
funds seek daily investment results, before fees and expenses, that correspond to 2x the daily performance
of its Underlying Security. The Funds are leveraged ETFs that seek 2x the daily performance of its
respective Underlying Security. Corgi Strategies, LLC (the "Adviser") will serve as investment adviser to
the Funds.
The Funds seek daily investment
results, before fees and expenses, that correspond to two times (2x) the daily performance of their
Underlying Security. Each Fund resets its exposure each trading day to target approximately two times its
Underlying Security's daily move and should not be expected to provide 2x the return of its Underlying
Security for periods longer than a single day. Because of daily compounding, Underlying Security
volatility, financing costs, and expenses, each Fund's results over periods longer than a day will usually
differ in amount, and may differ in direction, from its Underlying Security's multi-day return. Each Fund
expects to obtain leveraged exposure primarily through derivatives (for example, total return swaps and
futures) and to rebalance exposure daily. It is possible to lose the full value of an investment in a Fund
in a single day.
Each Fund offers and issues
Shares at their net asset value ("NAV") only in aggregations of a specified number of Shares (each, a
"Creation Unit"). A Fund generally issues and redeems Creation Units in exchange for a basket of
securities ("Deposit Securities") together with a specified cash payment (the "Cash Component"). The Trust
may permit or require the substitution of a cash amount ("Deposit Cash") in lieu of some or all Deposit
Securities. Shares are expected to be listed on the Exchange and trade on the Exchange at market prices,
which may differ from NAV. Shares are redeemable only in Creation Unit aggregations and, in general, in
exchange for portfolio securities and a specified cash payment, or instead, entirely for cash. As a
practical matter, mostly only institutions or large investors, known as "Authorized Participants" or
"APs," purchase or redeem Creation Units. Except when aggregated in Creation Units, Shares are not
individually redeemable.
Because each Fund expects to
achieve its objective primarily through derivatives, the Trust generally anticipates effecting creations
and redemptions for each Fund in cash rather than in-kind. The Trust may impose transaction fees on cash
creations and redemptions designed to cover the Fund's estimated costs, which may include costs of
entering into, maintaining, or unwinding derivatives positions and related financing and hedging costs.
Shares may be issued in advance
of receipt of some or all Deposit Securities, subject to conditions set forth in the participant agreement
among the AP, the distributor, and the transfer agent (the "Participant Agreement"), including a
requirement to maintain with the Trust cash at least equal to a specified percentage of the value of any
missing Deposit Securities. The Trust may impose a transaction fee on each creation or redemption. In all
cases, such fees will be limited in accordance with SEC requirements applicable to management investment
companies offering redeemable securities. As with other publicly traded securities, brokers' commissions
on secondary-market transactions are negotiated with your broker at customary rates.
Use of derivatives by each Fund
is subject to Rule 18f-4 under the 1940 Act. The Trust has adopted a derivatives risk management program,
appointed a Derivatives Risk Manager approved by the Board, and manages the Funds' derivatives exposure
using value-at-risk (VaR) testing. Under Rule 18f-4, a Fund's VaR must not exceed 200% of the VaR of a
designated reference portfolio (generally the Underlying Security) under the relative VaR test or, if a
reference portfolio is not appropriate, 20% of the Fund's net assets under the absolute VaR test. Each
Fund intends to use its Underlying Security as its designated reference portfolio for the relative VaR
test under Rule 18f-4 and monitor compliance accordingly. The Derivatives Risk Manager provides regular
reports to the Board regarding the program's implementation and each Fund's compliance.
ADDITIONAL INFORMATION ABOUT
INVESTMENT OBJECTIVES, POLICIES, AND RELATED RISKS
The Funds' investment objectives
and principal investment strategies are described in the Prospectuses under "Investment Objective" and
"Principal Investment Strategies," respectively. The information below supplements, and should be read
together with, the Prospectuses. For a description of certain permitted investments, see "Description of
Permitted Investments" in this SAI.
With respect to the Funds'
investments, unless otherwise noted, if a percentage limitation is satisfied at the time of investment or
contract, a subsequent increase or decrease due to market movements or redemptions will not, by itself,
result in a violation of that limitation.
Each Fund is classified as
non-diversified under the 1940 Act. As a result, a Fund is not limited by the 1940 Act with respect to the
percentage of its assets that may be invested in the securities of a single issuer. A Fund therefore may
invest a larger portion of its assets in the securities of a single issuer or a smaller number of issuers
than a diversified fund. Those issuers may represent a greater portion of the Fund's portfolio, which can
adversely affect performance or subject Shares to greater price volatility than more diversified
investment companies. While each Fund is "non-diversified" under the 1940 Act, to qualify as a RIC the
Fund must satisfy Subchapter M diversification tests. Accordingly, with respect to at least 50% of total
assets, the Fund will not hold more than 10% of the outstanding voting securities of any one issuer or
invest more than 5% of total assets in any one issuer.
Although each Fund is
non-diversified for purposes of the 1940 Act, each intends to maintain the diversification required under
the Code and otherwise operate so as to qualify as a regulated investment company ("RIC") for federal
income tax purposes, thereby generally avoiding fund-level federal income tax on income and gains
distributed to shareholders. Compliance with the Code's diversification and other requirements may limit
investment flexibility and could make it less likely that a Fund will meet its investment objective. See
"Federal Income Taxes" in this SAI for further discussion.
Special Considerations for the
Funds
Daily Objective and
Compounding.
Each Fund seeks 2x the daily
performance of its Underlying Security and resets exposure each trading day. Over periods longer than a
day, a Fund's results reflect the compounding of daily returns and the path of daily Underlying Security
moves and will usually differ from 2x the Underlying Security's return for the same period.
Generally, higher day-to-day
volatility in an Underlying Security increases the divergence between a Fund's multi-day results and 2x
the Underlying Security's multi-day return. In trending, lower-volatility markets, multi-day results may
be closer to or greater than 2x; in choppy or range-bound markets, they are often less than 2x.
Correlation and Rebalancing.
A Fund may not achieve perfect
correlation to 2x the daily performance of its Underlying Security for reasons that include derivative
pricing and liquidity, intraday Underlying Security movements (including near the close), timing and size
of rebalancing, market closures or trading halts, financing costs, and Fund expenses.
Financing and Cash Management.
A Fund's use of swaps, futures,
and other instruments involves financing or implied financing charges that reduce returns. A Fund may hold
cash and cash equivalents (for example, U.S. Treasury bills, money market instruments, or repurchase
agreements) for margin and collateral, which can affect exposure and results.
Counterparty and Clearinghouse
Exposure.
A Fund is exposed to the credit
of derivatives counterparties, futures commission merchants, and clearinghouses. Defaults or operational
disruptions could cause losses, delays in recovery of collateral or margin, or both.
Use of Instrument-Linked
Swaps.
To the extent a Fund obtains
exposure through swaps referencing instruments that track or are designed to replicate the performance of
the Underlying Security, differences between those instruments and the Underlying Security may introduce
additional correlation risk.
Not a Buy-and-Hold Substitute.
Each Fund is intended for
knowledgeable investors who intend to monitor positions frequently. It is possible to lose the entire
investment in a single day.
The value of a Fund's portfolio
securities may fluctuate with changes in an issuer's or counterparty's financial condition, with
issuer-specific or industry-specific developments, and with broader economic or political conditions. An
investor in a Fund could lose money over short or long periods.
There is no assurance that a
liquid market will exist for all securities held by a Fund. Market liquidity may depend on whether dealers
are willing to make markets in particular securities. There can be no assurance that a market will be made
or maintained, or that any such market will remain liquid. The price at which securities may be sold, and
the value of Shares, can be adversely affected if trading markets for a Fund's portfolio securities are
limited or absent, or if bid/ask spreads are wide.
Financial markets, domestic and
foreign, have at times experienced unusually high volatility. Continuing events and market turbulence may
adversely affect Fund performance.
Investment companies and their
service providers face operational and information-security risks from cyber incidents. Cyber events
include, among other things, data theft or corruption, denial-of-service attacks, unauthorized release of
confidential information, and other breaches. Cyber incidents affecting a Fund or the Adviser, custodian,
transfer agent, intermediaries, or other third-party service providers may, among other effects, disrupt
the processing of shareholder transactions, impair a Fund's ability to calculate its NAV, cause the
release of private shareholder or issuer information, impede trading, result in regulatory fines or
financial losses, and damage reputation. A Fund may also incur additional costs for cybersecurity risk
management. Similar risks affect issuers in which a Fund invests and could have material adverse
consequences for such issuers, potentially reducing the value of the Fund's investments.
DESCRIPTION OF PERMITTED
INVESTMENTS
The following describes the
investments and techniques each Fund may use, and the related risks. A Fund will employ any investment or
practice below only if it is consistent with the Fund's investment objective and permitted by the Fund's
stated policies. Some items discussed in this SAI are not principal strategies, as disclosed in the
Prospectus; while a Fund is permitted to use them, it is not required to do so.
Although the Funds do not expect
to borrow, each may do so to the extent allowed by the 1940 Act. Under the 1940 Act, a Fund may borrow up
to one-third (1/3) of its total assets. Any borrowing is expected to be for short-term or emergency
purposes, not for investment, and would be repaid promptly. Borrowing magnifies the effect on NAV of
changes in the market value of the Fund's holdings. Amounts borrowed bear interest (which may or may not
be offset by earnings on purchased securities), and maintaining a credit facility may involve minimum
balances, commitment fees, or other costs that increase the effective cost of borrowing.
For each Fund, leverage is
expected to come primarily from derivatives (for example, total return swaps and futures) rather than from
cash borrowings. If a Fund borrows, the Fund will maintain asset coverage of at least 300% of all
borrowings as required by Section 18 of the 1940 Act. Short-term borrowings, if any, may include custodial
overdrafts or borrowings under a credit facility for settlement, liquidity, or other administrative
purposes, and will be repaid promptly.
Equity securities (for example,
common stock) are subject to stock-market risk and may fluctuate significantly as market conditions,
investor sentiment, or an issuer's financial position change. Declines in the value of equity holdings may
cause a Fund's Shares to fall in value.
An investment in a Fund entails
the risks inherent in equity ownership, including the risk that issuer fundamentals deteriorate or that
broad market conditions weaken, either of which can reduce the value of portfolio securities and, in turn,
the value of Shares. Equity prices can be volatile as investor expectations shift with respect to
government, economic, monetary, and fiscal policies; inflation and interest rates; business cycles; and
global or regional political, economic, or banking stresses. With respect to each Fund, equity exposure is
typically obtained indirectly through derivatives that reference the applicable Underlying Security rather
than through direct holdings.
Types of Equity Securities:
Common stock represents an
ownership interest in an issuer, typically with voting rights and the potential to receive dividends.
Unlike preferred stock, dividends on common stock are not fixed and are declared at the discretion of the
issuer's board of directors.
Holders of common stock
generally take on more risk than holders of preferred stock or debt because common shareholders stand
behind creditors and preferred shareholders in the issuer's capital structure. Common stock has neither a
stated principal amount nor a maturity date and remains subject to market fluctuations as long as it is
outstanding.
Preferred stock represents an
ownership interest that typically has priority over common stock for dividends and liquidation proceeds,
but is junior to the issuer's liabilities. Preferred stock generally has no voting rights. Varieties
include adjustable-rate, fixed-dividend, perpetual, and sinking-fund preferred stock.
In general, market values of
fixed-rate, non-convertible preferred stock move inversely with interest rates and with changes in
perceived credit quality.
Derivatives Used by the Funds
Each Fund seeks daily investment
results, before fees and expenses, that correspond to 2x the daily performance of its Underlying Security.
To pursue these objectives, each Fund expects to obtain leveraged exposure primarily through the
derivatives set out below and to rebalance its exposure on each Business Day. Daily rebalancing and
compounding can cause a Fund's return for periods longer than one day to differ, and potentially differ
significantly, from 2x the return of its Underlying Security for the same period. Market volatility,
holding period, and the path of returns will affect the degree of such divergence.
A Fund may enter into total
return swaps and other swap contracts that reference its Underlying Security or an exchange-traded fund
designed to track the Underlying Security (or a similar index or asset). Swaps typically require a Fund to
exchange periodic payments based on the performance of the Underlying Security for financing and/or fee
payments. Swaps may be traded bilaterally (subject to counterparty credit risk and collateral
arrangements) or, in some cases, cleared through a central clearinghouse (introducing clearinghouse and
futures commission merchant risk). Total return swaps are expected to be a primary tool for obtaining
leveraged exposure. Under normal market conditions, a Fund expects the aggregate notional amount of its
swap positions, together with other derivatives, to be approximately 200% of the Fund's net assets, before
taking into account any cash or cash equivalents held for margin and collateral. Swaps are typically
documented under an ISDA Master Agreement with a credit support annex that requires posting and collection
of variation margin (and, where applicable, initial margin). Swap exposures may be reset or rebalanced
daily to help a Fund maintain its target exposure.
Swap Counterparty Information.
Each Fund expects to use one or
more of the following entities as its swap counterparties: CF Secured LLC, Marex Securities Products Inc.,
and Clear Street LLC. Each is a registered security-based swap dealer with the Securities and Exchange
Commission. CF Secured LLC is a subsidiary of Cantor Fitzgerald, L.P., a privately held limited
partnership. Clear Street LLC is a subsidiary of Clear Street Group Inc., a privately held Delaware
corporation. As privately held entities, Cantor Fitzgerald, L.P. and Clear Street Group Inc. do not file
periodic reports with the SEC; however, CF Secured LLC and Clear Street LLC each file annual financial
reports (Form X-17A-5) with the SEC as registered broker-dealers. Marex Securities Products Inc. is a
subsidiary of Marex Group plc, whose ordinary shares are listed on the Nasdaq Stock Market under the
symbol "MRX." Marex Group plc is subject to the informational requirements of the Securities Exchange Act
of 1934 and files annual reports on Form 20-F and current reports on Form 6-K with the SEC. Reports and
other information concerning Marex Group plc can be inspected at the SEC and at the Nasdaq Stock Market.
Debts of Marex Securities Products Inc. as they may relate to a Fund are not guaranteed by Marex Group
plc. Debts of CF Secured LLC and Clear Street LLC as they may relate to a Fund are not guaranteed by any
publicly traded parent entity.
A Fund may use exchange-traded
futures on equity indexes or exchange-traded funds that are correlated with its Underlying Security or
with the markets in which the Underlying Security trades to manage liquidity, equitize cash, facilitate
daily rebalancing, or otherwise assist in implementing its investment strategy. Futures are not expected
to be a primary means of obtaining leveraged exposure to the Underlying Security. Futures require initial
and variation margin and are marked to market daily. Positions are subject to exchange and clearinghouse
margin requirements and may also be subject to exchange or regulatory position limits. A Fund may increase
or reduce futures exposure intraday or at the close in connection with its daily rebalance.
A Fund may use options on
futures, indexes, or exchange-traded funds for exposure or to manage risk. Option values can be highly
sensitive to changes in the price and volatility of the Underlying Security and to time decay. A Fund
expects to use options opportunistically for exposure or risk management and does not expect options to be
a primary source of the Fund's leverage.
Money Market Instruments and
Short-Term Investments.
A Fund may hold cash, U.S.
government securities, repurchase agreements, and interests in money market funds to meet margin and
collateral needs, to manage liquidity, or pending investment. To the extent a Fund invests in a money
market fund, shareholders bear their proportionate share of the money market fund's fees in addition to
the Fund's expenses. Cash and cash equivalents may serve as collateral for the Fund's derivatives and to
meet margin calls. Holding cash or cash equivalents may reduce the Fund's ability to maintain its target
level of leveraged exposure and may contribute to tracking differences.
See Securities Lending below
for a fuller discussion. If a Fund engages in lending, it will do so pursuant to Board-approved
guidelines; lending involves counterparty, collateral investment, and operational risks.
Daily Rebalancing and
Compounding.
To seek 2x of its Underlying
Security's daily return, a Fund will generally rebalance its derivatives exposure each Business Day.
Because of compounding, the Fund's return over periods longer than one day is likely to differ from 2x the
return of its Underlying Security for the same period. The degree of divergence can be positive or
negative and depends on factors including volatility, fees and expenses, and the timing and magnitude of
Underlying Security moves.
Derivatives Risk Management
and Rule 18f-4.
A Fund expects to rely on Rule
18f-4 under the 1940 Act for its derivatives and certain financing transactions. Among other things, a
Fund will operate a derivatives risk management program administered by a designated derivatives risk
manager, and a Fund will be subject to a value-at-risk (VaR) limit. Generally, a Fund will satisfy the
limit if the VaR of its portfolio (including derivatives) does not exceed 200% of the VaR of a designated
reference portfolio (the Relative VaR test) or, if that test is not appropriate, 20% of the Fund's net
assets (the Absolute VaR test).
Commodity Interests and CFTC
Matters.
To the extent a Fund invests in
commodity interests (for example, futures, options on futures, or swaps), the Adviser intends to claim an
exclusion from the definition of "commodity pool operator" with respect to the Fund, such that the Adviser
would not be required to register with the CFTC as a commodity pool operator for the Fund.
Rights give existing
shareholders the privilege to subscribe to a new issue of common stock, usually for a short period (often
two to four weeks) at a discount to the public offering price; rights are typically transferable. Warrants
are long-dated options, often issued with debt or preferred stock, that allow the holder to purchase
common shares at a specified price; warrants are usually transferable and may trade on exchanges.
Rights and warrants may involve
greater risk than direct investment in the underlying securities. They typically do not convey voting
rights, dividends, or ownership in the issuer's assets; their values may not track the underlying
securities; and they can expire worthless if not exercised by their expiration dates. Using rights or
warrants can increase potential gains and losses compared to investing the same amount directly in the
Underlying Security.
A when-issued security has
defined terms and an active market but has not yet been issued. In such transactions a Fund relies on the
counterparty to deliver. If delivery does not occur, a Fund may miss an opportunity to acquire the
security at an attractive price or yield.
Purchasing when-issued
securities exposes a Fund to ownership-like risks prior to settlement, including price and yield changes.
By settlement, the market value may be higher or lower than the agreed purchase price, and prevailing
yields may differ from those available when the trade was executed. Because payment is deferred until
delivery, these risks are in addition to the risks of the Fund's other investments.
SEC Rule 18f-4 under the 1940
Act (the "Derivatives Rule") permits investments on a when-issued, forward-settling, or non-standard
settlement basis notwithstanding Section 18's senior-security restrictions, provided a Fund intends to
physically settle and settlement will occur within 35 days of the trade date (the "Delayed-Settlement
Securities" provision). Transactions that do not meet that provision are treated as derivatives under Rule
18f-4.
A Fund may engage in short sales
of securities it does not own (and, in some cases, short sales against-the-box, i.e., short sales of
stocks it does own). In a short sale, a Fund borrows the security, sells it, and later seeks to purchase
the same security to return to the lender. Short sales involve the risk that the borrowed security
increases in price before the position is closed, which would result in a loss. A Fund can also be
required to close a short position earlier than desired (for example, if the lender recalls the security
or borrowing costs rise), which may cause a loss. Because the price of the borrowed security may increase
indefinitely, such losses are theoretically uncapped.
Short sales require a Fund to
pledge liquid assets and to post margin with the broker. While the short position is open, a Fund
generally will pay borrowing fees and any amounts equal to dividends or interest that accrue on the
borrowed security. These amounts reduce the return on the position and can create a negative cost of
carry. Any payments in lieu of dividends on short positions generally are not qualified dividend income.
For purposes of Rule 18f-4 under
the 1940 Act, short sales are treated as derivatives transactions and are subject to the Fund's
derivatives risk management program and value-at-risk limits. Short sales also involve counterparty,
liquidity, and operational risks, including the risk of buy-in if the broker cannot continue to borrow the
security.
ACM Research, Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with ACM
Research, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Any adverse developments affecting
ACM Research, Inc. could materially and adversely affect the value of the Underlying Security and, as a
result, the Fund.
Advanced Micro Devices, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Advanced
Micro Devices, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than
the market generally or to perform differently from the market as a whole. Advanced Micro Devices, Inc.
faces risks associated with, among other things, changes in market demand, product development and
innovation, competition, supply chain conditions, regulatory developments, operational performance,
cybersecurity incidents, and other factors affecting its business, financial condition, or market value.
Any adverse development affecting Advanced Micro Devices, Inc. could materially and adversely affect the
value of the Underlying Security and, as a result, the Fund.
Aerospace and Space Technology
Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with aerospace and space-technology
companies, including development risk, launch failures, regulatory approvals, capital intensity,
technological uncertainty, and reliance on government contracts. These businesses may face long
development timelines, complex engineering challenges, and significant research and testing costs before
commercialization. Launch or mission failures, delays, or performance issues may result in customer loss,
contractual penalties, increased insurance and remediation costs, or reputational harm. Regulatory
approvals and licensing may be time-consuming and may restrict operations in certain jurisdictions. Any
such developments could materially and adversely affect the value of the Underlying Security and, as a
result, each Fund.
Alibaba Group Holding Limited
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Alibaba
Group Holding Limited. Issuer-specific attributes may cause the Underlying Security to be more volatile
than the market generally or to perform differently from the market as a whole. Alibaba Group Holding
Limited faces risks associated with, among other things, changes in market demand, product development and
innovation, competition, supply chain conditions, regulatory developments, operational performance,
cybersecurity incidents, and other factors affecting its business, financial condition, or market value.
Any adverse development affecting Alibaba Group Holding Limited could materially and adversely affect the
value of the Underlying Security and, as a result, the Fund.
Alphabet Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Alphabet
Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Alphabet Inc. faces risks associated with,
among other things, changes in market demand, product development and innovation, competition, supply
chain conditions, regulatory developments, operational performance, cybersecurity incidents, and other
factors affecting its business, financial condition, or market value. Any adverse development affecting
Alphabet Inc. could materially and adversely affect the value of the Underlying Security and, as a result,
the Fund.
Amazon.com, Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with
Amazon.com, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Amazon.com, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Amazon.com, Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
American Depositary Receipt
Risk.
The Underlying Security of each
Fund is traded in the form of an American depositary receipt or other similar depositary security that
represents equity securities of a foreign issuer. Depositary securities are subject to many of the risks
of investing in foreign securities, including risks related to political, economic, regulatory, and market
conditions abroad, differences in accounting, auditing, and reporting standards, and currency
exchange-rate fluctuations. The terms of a depositary arrangement may provide holders with different
rights than those of holders of the underlying foreign shares, and the depositary may charge fees or take
actions (including suspending or terminating the depositary arrangement) that could adversely affect the
price or liquidity of the Underlying Security. Depositary securities may trade at a premium or discount to
the underlying foreign shares and may be less liquid than the underlying foreign shares. Because each Fund
seeks daily leveraged exposure to a single Underlying Security, the effects of these risks on a Fund's
returns may be magnified.
Amkor Technology, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Amkor
Technology, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Any adverse developments affecting
Amkor Technology, Inc. could materially and adversely affect the value of the Underlying Security and, as
a result, the Fund.
Apple Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Apple
Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Apple Inc. faces risks associated with,
among other things, changes in market demand, product development and innovation, competition, supply
chain conditions, regulatory developments, operational performance, cybersecurity incidents, and other
factors affecting its business, financial condition, or market value. Any adverse development affecting
Apple Inc. could materially and adversely affect the value of the Underlying Security and, as a result,
the Fund.
Applied Materials, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Applied
Materials, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Any adverse developments affecting
Applied Materials, Inc. could materially and adversely affect the value of the Underlying Security and, as
a result, the Fund.
AppLovin Corporation Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with AppLovin
Corporation. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. AppLovin Corporation faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting AppLovin Corporation could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Archer Aviation Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Archer
Aviation Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Archer Aviation Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Archer Aviation Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Arm Holdings plc Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Arm
Holdings plc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Arm Holdings plc faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Arm Holdings plc could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
ASML Holding N.V. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with ASML
Holding N.V. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. ASML Holding N.V. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting ASML Holding N.V. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
AST SpaceMobile, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with AST
SpaceMobile, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than
the market generally or to perform differently from the market as a whole. AST SpaceMobile, Inc. faces
risks associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting AST SpaceMobile, Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Astera Labs, Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Astera
Labs, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Astera Labs, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Astera Labs, Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Axcelis Technologies, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Axcelis
Technologies, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than
the market generally or to perform differently from the market as a whole. Any adverse developments
affecting Axcelis Technologies, Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
AXT, Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with AXT,
Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Any adverse developments affecting AXT,
Inc. could materially and adversely affect the value of the Underlying Security and, as a result, the
Fund.
Berkshire Hathaway Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with
Berkshire Hathaway Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile
than the market generally or to perform differently from the market as a whole. Berkshire Hathaway Inc.
faces risks associated with, among other things, changes in market demand, product development and
innovation, competition, supply chain conditions, regulatory developments, operational performance,
cybersecurity incidents, and other factors affecting its business, financial condition, or market value.
Any adverse development affecting Berkshire Hathaway Inc. could materially and adversely affect the value
of the Underlying Security and, as a result, the Fund.
Biotechnology and
Pharmaceutical Industry Risk.
Through its exposure to the
Underlying Security, the Fund is subject to risks associated with pharmaceutical and biotechnology
companies, including clinical trial outcomes, regulatory approvals, patent protection, pricing pressures,
and product liability exposure.
BitMine Immersion
Technologies, Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with BitMine
Immersion Technologies, Inc. Issuer-specific attributes may cause the Underlying Security to be more
volatile than the market generally or to perform differently from the market as a whole. BitMine Immersion
Technologies, Inc. faces risks associated with, among other things, changes in market demand, product
development and innovation, competition, supply chain conditions, regulatory developments, operational
performance, cybersecurity incidents, and other factors affecting its business, financial condition, or
market value. Any adverse development affecting BitMine Immersion Technologies, Inc. could materially and
adversely affect the value of the Underlying Security and, as a result, the Fund.
Bloom Energy Corporation
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Bloom
Energy Corporation. Issuer-specific attributes may cause the Underlying Security to be more volatile than
the market generally or to perform differently from the market as a whole. Bloom Energy Corporation faces
risks associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Bloom Energy Corporation could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Broadcom Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Broadcom
Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Broadcom Inc. faces risks associated with,
among other things, changes in market demand, product development and innovation, competition, supply
chain conditions, regulatory developments, operational performance, cybersecurity incidents, and other
factors affecting its business, financial condition, or market value. Any adverse development affecting
Broadcom Inc. could materially and adversely affect the value of the Underlying Security and, as a result,
the Fund.
Brokerage Commissions and
Bid-Ask Spread Risk.
Investors who buy or sell shares
of a Fund pay brokerage commissions and other trading costs and bear the bid-ask spread between the price
at which shares are purchased and sold. These costs may widen or increase when markets are volatile, when
the shares trade in lower volumes, when market makers reduce activity, or when there is limited liquidity
in the instruments used to support a Fund's exposure. Higher transaction costs may materially reduce
investment results for shareholders, particularly for investors who trade frequently, invest small
amounts, or trade at times of heightened volatility or reduced liquidity.
Camtek Ltd. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Camtek
Ltd. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Any adverse developments affecting Camtek
Ltd. could materially and adversely affect the value of the Underlying Security and, as a result, the
Fund.
Capital and Financing Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with capital requirements, access to
financing, leverage levels, refinancing risk, dilution, and sensitivity to interest rates. The issuer may
depend on external financing to fund operations, growth initiatives, capital expenditures, or
acquisitions, and financing may become more expensive or unavailable during periods of market stress or
rising interest rates. Higher leverage or covenant constraints may reduce financial flexibility and
increase vulnerability to earnings volatility. Equity issuances, convertible securities, or other capital
raises may dilute existing shareholders. Any adverse financing developments could materially and adversely
affect the value of the Underlying Security and, as a result, each Fund.
Cash Transactions and Tax
Efficiency Risk.
If a Fund uses cash creations or
redemptions, it may need to buy or sell portfolio securities and derivatives (or adjust financing and
derivatives exposures), which can increase transaction costs and market-impact costs. Cash activity may
cause a Fund to realize taxable gains (including short-term gains) when positions are sold or unwound,
which may reduce tax efficiency relative to ETFs that rely more heavily on in-kind creation and redemption
activity. In addition, cash transactions may require a Fund to transact at times that are less favorable
(including during periods of volatility or reduced liquidity), and those effects may reduce returns to
shareholders.
Cipher Digital Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Cipher
Digital Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Cipher Digital Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Cipher Digital Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Circle Internet Group, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Circle
Internet Group, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than
the market generally or to perform differently from the market as a whole. Any adverse developments
affecting Circle Internet Group, Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Cirrus Logic, Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Cirrus
Logic, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Any adverse developments affecting
Cirrus Logic, Inc. could materially and adversely affect the value of the Underlying Security and, as a
result, the Fund.
Coherent Corp. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Coherent
Corp. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Any adverse developments affecting
Coherent Corp. could materially and adversely affect the value of the Underlying Security and, as a
result, the Fund.
Coinbase Global, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Coinbase
Global, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Coinbase Global, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Coinbase Global, Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Commodity and Input Cost Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with volatility in raw-material, energy, or
component costs. Input costs may fluctuate due to supply disruptions, geopolitical events, transportation
constraints, labor shortages, changes in supplier pricing, or broader inflationary pressures. If the
issuer cannot pass higher costs on to customers through pricing or contract adjustments, margins may
compress and profitability may decline. Sudden cost increases may also require operational changes,
alternative sourcing, or redesigns that create additional expense or delay. Any such developments could
materially and adversely affect the value of the Underlying Security and, as a result, each Fund.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with intense competition, pricing pressure,
technological displacement, market-share loss, and new market entrants. Competitors may offer products or
services that are more attractive, lower cost, or faster to market, which can reduce demand, compress
margins, and increase customer acquisition and retention costs. Competitive pressures may force increased
spending on research and development, marketing, or pricing concessions, potentially reducing
profitability and cash flow. Any sustained deterioration in competitive position could materially and
adversely affect the value of the Underlying Security and, as a result, each Fund.
Compounding and Daily
Rebalancing Risk.
Each Fund has a single day
investment objective, and each Fund's performance for any other period is the result of its return for
each day compounded over the period. Each Fund resets its exposure each trading day to target
approximately 2x the daily move of its Underlying Security. As a result, the performance of a Fund for
periods longer than a single day will very likely differ in amount, and possibly even direction, from two
times (2x) the return of the Fund's Underlying Security for the same period, before accounting for fees
and expenses. In general, when Underlying Security volatility is higher, the impact of compounding and
daily rebalancing will be more pronounced and a Fund's multi-day results will tend to be less than 2x the
Underlying Security's return for the same period; when volatility is lower, multi-day results may be
closer to or greater than 2x. If an Underlying Security is flat over time, the applicable Fund will likely
lose value due to the effects of daily resetting, compounding, financing costs, and expenses. An investor
could lose the full principal value of an investment in a Fund within a single day. Deviations can occur
over periods as short as one day when measured intraday rather than NAV to NAV.
The chart below provides
examples of how Underlying Security volatility could affect the Fund's performance. Fund performance for
periods greater than one single day can be estimated given any set of assumptions for the following
factors: a) Underlying Security volatility; b) Underlying Security performance; c) period of time; d)
financing rates associated with leveraged exposure; e) other Fund expenses; and f) the Underlying
Security's dividends. The chart below illustrates the impact of two principal factors, Underlying Security
volatility and performance, on Fund performance. The chart shows estimated Fund returns for a number of
combinations of Underlying Security volatility and performance over a one-year period. Performance shown
in the chart assumes that (i) there were no Fund expenses; and (ii) borrowing rates (needed to obtain a
leveraged long exposure) of 0%. If Fund expenses and/or actual borrowing/lending rates were reflected, the
estimated returns would be lower than those shown. Particularly during periods of higher Underlying
Security volatility, compounding will cause results for periods longer than a trading day to vary from the
performance of the Underlying Security.
As shown in the chart below, the
Fund would be expected to lose 6.0% if the Underlying Security provided no return over a one-year period
during which the Underlying Security experienced annualized volatility of 25%. At higher ranges of
volatility, there is a chance of a significant loss of value in the Fund, even if the Underlying Security
return is flat. For instance, if the Underlying Security annualized volatility is 100%, the Fund would be
expected to lose 63.3% of its value, even if the cumulative Underlying Security return for the year was
0%. Areas shaded red represent those scenarios where the Fund can be expected to return less than 200% of
the performance of the Underlying Security and those shaded green represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying Security. The Fund's actual
returns may be significantly better or worse than the returns shown below as a result of any of the
factors discussed above or in "Compounding and Daily Rebalancing Risk" above.
One
Year
Performance of
the Underlying
Security
|
200%
of
One Year
Performance
|
Volatility of the Underlying Security (annualized)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with reliance on a limited number of
customers, suppliers, products, or markets. Concentration may increase sensitivity to the loss of a
significant customer, changes in customer purchasing patterns, contract renewals, pricing negotiations, or
the financial condition of key counterparties. Supplier or manufacturing concentration may increase
exposure to shortages, delays, quality issues, or adverse terms from a limited set of providers. Product
or market concentration may increase vulnerability to demand shifts, competitive pressures, regulatory
changes, or technological disruption affecting a particular segment. Any such developments could
materially and adversely affect the value of the Underlying Security and, as a result, each Fund.
CoreWeave, Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with
CoreWeave, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. CoreWeave, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting CoreWeave, Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Each Fund seeks approximately 2x
the daily performance of its Underlying Security, before fees and expenses, but may not achieve its 2x
Daily Objective. Fees and expenses; transaction and financing costs; the use, pricing, and liquidity of
derivatives; market volatility or disruptions (including trading halts); corporate actions or changes
affecting an Underlying Security; and limits on, or timing differences in, rebalancing may cause a Fund's
performance to deviate from 2x the Underlying Security's daily return.
Each Fund expects to obtain
exposure to its Underlying Security primarily through derivatives, including swaps and futures. Each Fund
is exposed to the risk that a derivatives counterparty or a clearinghouse or futures commission merchant
will be unwilling or unable to honor its obligations. A Fund could lose margin or collateral it has
posted, experience delays in recovery, or recover less than the full amount owed. Concentration of
clearing services among a small number of firms and clearinghouses may increase this risk. Contractual
provisions or resolution regimes could delay, limit, or eliminate a Fund's ability to exercise remedies.
Credo Technology Group Holding
Ltd. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Credo
Technology Group Holding Ltd. Issuer-specific attributes may cause the Underlying Security to be more
volatile than the market generally or to perform differently from the market as a whole. Credo Technology
Group Holding Ltd. faces risks associated with, among other things, changes in market demand, product
development and innovation, competition, supply chain conditions, regulatory developments, operational
performance, cybersecurity incidents, and other factors affecting its business, financial condition, or
market value. Any adverse development affecting Credo Technology Group Holding Ltd. could materially and
adversely affect the value of the Underlying Security and, as a result, the Fund.
CrowdStrike Holdings, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with
CrowdStrike Holdings, Inc. Issuer-specific attributes may cause the Underlying Security to be more
volatile than the market generally or to perform differently from the market as a whole. CrowdStrike
Holdings, Inc. faces risks associated with, among other things, changes in market demand, product
development and innovation, competition, supply chain conditions, regulatory developments, operational
performance, cybersecurity incidents, and other factors affecting its business, financial condition, or
market value. Any adverse development affecting CrowdStrike Holdings, Inc. could materially and adversely
affect the value of the Underlying Security and, as a result, the Fund.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with industry or economic cycles, including
periods of expansion and contraction in demand, pricing, or capital spending. In cyclical downturns,
customers may reduce purchases, delay upgrades, lower capital expenditures, or renegotiate contract terms,
which may reduce revenue and profitability. Cycles may also lead to inventory corrections, capacity
adjustments, pricing volatility, and changes in competitive dynamics. Because cyclical conditions can
change rapidly, the Underlying Security's valuation may be volatile. Any cyclical downturn could
materially and adversely affect the value of the Underlying Security and, as a result, each Fund.
D-Wave Quantum Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with D-Wave
Quantum Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. D-Wave Quantum Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting D-Wave Quantum Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with fluctuations in customer demand,
purchasing behavior, enterprise spending, consumer preferences, and end-market conditions. Demand may be
affected by macroeconomic conditions, interest rates, budget constraints, competitive offerings, product
cycles, and shifts in customer priorities. Reduced demand can lead to lower revenue, weaker operating
leverage, excess inventory or underutilized capacity, and changes in pricing power. Any material
deterioration in demand could adversely affect the value of the Underlying Security and, as a result, each
Fund.
Each Fund may use derivatives
such as total return swaps, futures contracts, options, and similar instruments to pursue its 2x daily
objective. Derivatives can be volatile and may involve risks different from, and sometimes greater than,
investing directly in the Underlying Security. Such risks include leverage, imperfect correlation with the
Underlying Security, pricing and liquidity constraints, valuation complexity, and the potential that the
cost to maintain a position exceeds its return. Limited initial margin may magnify losses relative to the
amount of margin posted and may require a Fund to post additional margin or collateral.
Digital Asset Industry Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with digital asset markets, including
extreme volatility, regulatory uncertainty, technological vulnerabilities, cybersecurity risks, market
manipulation concerns, and changes in investor sentiment. Digital asset prices and related business
activity may experience sharp and sudden movements due to market structure, liquidity conditions,
macroeconomic factors, and shifts in risk appetite. Regulatory developments may restrict certain
activities, increase compliance obligations, or affect market participation and access to banking or
payment rails. Technology failures, hacks, custody incidents, or operational disruptions at key market
participants may impair confidence and reduce activity. Any such developments could materially and
adversely affect the value of the Underlying Security and, as a result, each Fund.
Electric Vehicle and
Automotive Industry Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with automotive manufacturers, including
production scaling challenges, battery supply constraints, commodity cost volatility, regulatory
standards, technological competition, and changing consumer adoption trends. Automotive manufacturing is
operationally complex, and execution issues in production ramp, quality control, recalls, or warranty
costs may adversely affect financial results and brand perception. Demand may be influenced by interest
rates, incentives, charging infrastructure, fuel prices, and consumer preferences, which can change
rapidly. Battery and component supply constraints, as well as volatility in commodity inputs, may increase
costs or limit production volumes. Any such developments could materially and adversely affect the value
of the Underlying Security and, as a result, each Fund.
Energy Fuels Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Energy
Fuels Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Energy Fuels Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Energy Fuels Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Eos Energy Enterprises, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Eos
Energy Enterprises, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile
than the market generally or to perform differently from the market as a whole. Eos Energy Enterprises,
Inc. faces risks associated with, among other things, changes in market demand, product development and
innovation, competition, supply chain conditions, regulatory developments, operational performance,
cybersecurity incidents, and other factors affecting its business, financial condition, or market value.
Any adverse development affecting Eos Energy Enterprises, Inc. could materially and adversely affect the
value of the Underlying Security and, as a result, the Fund.
Through their exposure to the
Underlying Security, the Funds are exposed to equity market risk. Equity securities may decline in value
due to broad market conditions, economic conditions, changes in investor sentiment, or issuer-specific
factors. Equity markets can be volatile and may be affected by changes in interest rates, inflation,
economic growth, corporate earnings, political developments, geopolitical events, and other factors, and
volatility may be heightened during periods of market stress. Because each Fund provides leveraged
exposure, declines in equity markets or in the Underlying Security may result in proportionally larger
declines in that Fund's NAV and market price, and the Funds may experience significant short-term
fluctuations.
Each Fund is an exchange-traded
fund ("ETF") and is subject to risks associated with ETF structure and secondary-market trading. These
include potential reliance on a limited number of market makers and Authorized Participants, the
possibility that Shares trade at prices different from NAV, and the trading and transaction-cost
considerations described below.
Authorized Participants,
Market Makers, and Liquidity Providers Concentration Risk.
Each Fund relies on a limited
number of financial institutions that are authorized to purchase and redeem Creation Units directly with
the Fund (each, an Authorized Participant or "AP"). There may also be a limited number of market makers
and other liquidity providers active in Shares. If (i) APs exit the business, become unable to process
creation and/or redemption orders, and no other APs step in, or (ii) market makers and/or other liquidity
providers leave the market or materially scale back their activity and no replacements emerge, Shares may
trade at a material discount to NAV and, in extreme cases, could face delisting.
Costs of Buying or Selling
Shares.
Investors who trade Shares in
the secondary market will pay brokerage commissions or other charges set by their broker. Commissions are
often fixed amounts and can be a significant proportional cost for investors transacting in small sizes.
Secondary-market investors also bear the bid-ask spread. The spread varies over time with trading volume
and market liquidity; generally narrower when trading volume and liquidity are higher and wider when they
are lower. A relatively small investor base, sizable asset flows into or out of a Fund, and/or periods of
elevated market volatility may widen spreads. Because commissions and spreads add to trading costs,
frequent trading of Shares can materially reduce returns and may be inadvisable for investors who expect
to make regular, small purchases or sales.
Shares May Trade at Prices
Other Than NAV.
As with all ETFs, Shares trade
on an exchange at market prices that may differ from a Fund's NAV. At times, Shares may trade at an
intraday premium (above NAV) or discount (below NAV) due to supply and demand for Shares or during
volatile markets. This risk can be heightened in periods of market stress, sharp market declines, or when
secondary-market trading activity in Shares is limited, in which case premiums or discounts may be
significant.
Trading. Although Shares are
listed for trading on Cboe BZX Exchange, Inc. (the "Exchange") and may trade on other U.S. exchanges,
there is no assurance that Shares will trade with active volume, or trade at all, on any exchange. In
stressed market conditions, the liquidity of Shares and the liquidity of a Fund's portfolio holdings may
deteriorate.
Execution and Scaling Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with execution of business strategy, scaling
production, launching new products, integrating acquisitions, or expanding into new markets. Strategic
initiatives may require substantial capital, operational changes, and coordination across personnel,
suppliers, or partners, and may not be completed on time or within budget. Scaling challenges may result
in quality issues, service disruptions, production delays, cost overruns, or failure to meet customer
expectations. Integration of acquisitions or expansion into new markets may introduce additional
operational, regulatory, cultural, or financial risks. Any such execution failures could materially and
adversely affect the value of the Underlying Security and, as a result, each Fund.
Financial Technology and
Brokerage Industry Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with financial technology companies,
including regulatory oversight, customer acquisition costs, credit risk, market sensitivity, and
cybersecurity threats. These companies may be subject to complex and evolving rules relating to
broker-dealer activities, lending, payments, data privacy, and consumer protection, which may increase
compliance costs or restrict operations. Competition may increase customer acquisition and retention
costs, while changes in market conditions may reduce trading activity, asset values, or fee-based revenue.
If the issuer engages in lending or credit exposure, losses may increase during economic downturns or
periods of elevated delinquencies. Any such developments could materially and adversely affect the value
of the Underlying Security and, as a result, each Fund.
Financing, Margin, and
Interest Rate Risk.
Each Fund's use of derivatives
and leverage requires the posting of margin and the maintenance of collateral, which may require a Fund to
hold significant amounts of cash and short-term instruments. Increases in margin requirements or
collateral demands from counterparties or clearinghouses may require a Fund to sell assets at unfavorable
times or reduce leveraged exposure, which could adversely affect performance. Rising interest rates may
increase a Fund's financing costs, reduce the return on cash and short-term instruments, and adversely
affect equity market valuations.
Galaxy Digital Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Galaxy
Digital Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Galaxy Digital Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Galaxy Digital Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
GameStop Corp. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with GameStop
Corp. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. GameStop Corp. faces risks associated
with, among other things, changes in market demand, product development and innovation, competition,
supply chain conditions, regulatory developments, operational performance, cybersecurity incidents, and
other factors affecting its business, financial condition, or market value. Any adverse development
affecting GameStop Corp. could materially and adversely affect the value of the Underlying Security and,
as a result, the Fund.
GE Vernova Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with GE
Vernova Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. GE Vernova Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting GE Vernova Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Geopolitical and Trade Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with geopolitical developments,
international trade policy, export controls, tariffs, sanctions, and cross-border regulatory regimes.
Geopolitical tensions, armed conflict, political instability, or diplomatic disputes may disrupt
operations, reduce demand, or create sudden changes in legal and regulatory requirements. Export controls,
tariffs, and sanctions may restrict sales, limit access to critical inputs or technology, alter customer
behavior, or increase compliance and operational costs. Cross-border rules may also affect the issuer's
ability to source components, manufacture products, or serve customers in certain jurisdictions. Any such
events could materially and adversely affect the value of the Underlying Security and, as a result, each
Fund.
Hims & Hers Health, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Hims
& Hers Health, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile
than the market generally or to perform differently from the market as a whole. Any adverse developments
affecting Hims & Hers Health, Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Indirect Investment Risk.
The issuer of each Underlying
Security is not affiliated with the Trust, the Adviser, or any affiliates thereof and is not involved with
this offering in any way, and has no obligation to consider any Fund in taking any corporate actions that
might affect the value of Shares. Investors in Shares will not have voting rights or rights to receive
dividends or other distributions or any other rights with respect to shares of an Underlying Security. The
Funds have no control over the Underlying Securities and rely solely on publicly available information
about the Underlying Securities.
Internet Platform and Digital
Advertising Industry Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with internet platform companies, including
advertising demand volatility, regulatory scrutiny, content moderation issues, platform competition, and
data-privacy requirements. Advertising and user engagement may be sensitive to macroeconomic conditions,
changes in marketing budgets, shifts in consumer behavior, and competitive offerings. Regulatory scrutiny
and data-privacy requirements may limit data collection or targeting capabilities, increase compliance
costs, or result in fines and operational restrictions. Content moderation and platform integrity issues
may lead to reputational harm, advertiser boycotts, user attrition, or increased operating costs. Any such
developments could materially and adversely affect the value of the Underlying Security and, as a result,
each Fund.
Intel Corporation Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Intel
Corporation. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Intel Corporation faces risks
associated with, among other things, execution of its foundry services and manufacturing transformation
strategy; competition in processors, accelerators, and data center products; loss of market share in PC
and server CPUs; the capital intensity and timeline of advanced process node development; changes in
customer demand; dependence on government subsidies and incentives; export controls and geopolitical
developments affecting semiconductor trade; product defects or delays; the ability to attract and retain
key personnel; cybersecurity incidents; fluctuations in operating results; and other factors affecting its
business, financial condition, or market value. Any adverse development affecting Intel Corporation could
materially and adversely affect the value of the Underlying Security and, as a result, the Fund.
IonQ, Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with IonQ,
Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. IonQ, Inc. faces risks associated with,
among other things, changes in market demand, product development and innovation, competition, supply
chain conditions, regulatory developments, operational performance, cybersecurity incidents, and other
factors affecting its business, financial condition, or market value. Any adverse development affecting
IonQ, Inc. could materially and adversely affect the value of the Underlying Security and, as a result,
the Fund.
IREN Limited Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Iris
Energy Limited. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. IREN Limited faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting IREN Limited could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Joby Aviation, Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Joby
Aviation, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Joby Aviation, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Joby Aviation, Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Keysight Technologies, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Keysight
Technologies, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than
the market generally or to perform differently from the market as a whole. Any adverse developments
affecting Keysight Technologies, Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Lam Research Corporation
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Lam
Research Corporation. Issuer-specific attributes may cause the Underlying Security to be more volatile
than the market generally or to perform differently from the market as a whole. Any adverse developments
affecting Lam Research Corporation could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
By design, each Fund uses
leverage to target 2x the daily performance of its Underlying Security. Leverage magnifies both gains and
losses. As a result, small changes in an Underlying Security may produce larger changes in a Fund's NAV,
and losses may be substantial. Leverage also increases the sensitivity of each Fund to financing costs,
market volatility, and liquidity conditions. In adverse market conditions, a Fund may be required to
reduce exposure rapidly or may be unable to maintain its targeted leverage.
Litigation and Legal Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with litigation, investigations, contractual
disputes, intellectual-property claims, or other legal proceedings. Legal proceedings may be costly and
time-consuming, even when the issuer ultimately prevails, and may divert management attention and
resources. Adverse outcomes may result in damages, settlements, fines, injunctions, changes to business
practices, loss of key rights or licenses, or reputational harm that negatively affects customer and
partner relationships. Any such developments could materially and adversely affect the value of the
Underlying Security and, as a result, each Fund.
Lumentum Holdings Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Lumentum
Holdings Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Lumentum Holdings Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Lumentum Holdings Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with reliance on key executives, founders,
or specialized personnel. The issuer's performance may depend on the leadership, vision, and execution
capabilities of a limited number of individuals and teams. Loss of key personnel, difficulty attracting or
retaining talent, or inadequate succession planning may impair strategic execution, product development,
operations, or customer relationships. Any failure of management to execute strategy effectively could
materially and adversely affect the value of the Underlying Security and, as a result, each Fund.
Maplebear Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with
Maplebear Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Any adverse developments affecting
Maplebear Inc. could materially and adversely affect the value of the Underlying Security and, as a
result, the Fund.
MARA Holdings,
Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Marathon
Digital Holdings, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile
than the market generally or to perform differently from the market as a whole. MARA Holdings,
Inc. faces risks associated with, among other things, changes in market demand, product development and
innovation, competition, supply chain conditions, regulatory developments, operational performance,
cybersecurity incidents, and other factors affecting its business, financial condition, or market value.
Any adverse development affecting MARA Holdings, Inc. could materially and adversely affect
the value of the Underlying Security and, as a result, the Fund.
Marvell Technology, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Marvell
Technology, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Any adverse developments affecting
Marvell Technology, Inc. could materially and adversely affect the value of the Underlying Security and,
as a result, the Fund.
Meta Platforms, Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Meta
Platforms, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Meta Platforms, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Meta Platforms, Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Micron Technology, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Micron
Technology, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Micron Technology, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Micron Technology, Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Microsoft Corporation
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with
Microsoft Corporation. Issuer-specific attributes may cause the Underlying Security to be more volatile
than the market generally or to perform differently from the market as a whole. Microsoft Corporation
faces risks associated with, among other things, changes in market demand, product development and
innovation, competition, supply chain conditions, regulatory developments, operational performance,
cybersecurity incidents, and other factors affecting its business, financial condition, or market value.
Any adverse development affecting Microsoft Corporation could materially and adversely affect the value of
the Underlying Security and, as a result, the Fund.
Monolithic Power Systems, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with
Monolithic Power Systems, Inc. Issuer-specific attributes may cause the Underlying Security to be more
volatile than the market generally or to perform differently from the market as a whole. Any adverse
developments affecting Monolithic Power Systems, Inc. could materially and adversely affect the value of
the Underlying Security and, as a result, the Fund.
Monster Beverage Corporation
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Monster
Beverage Corporation. Issuer-specific attributes may cause the Underlying Security to be more volatile
than the market generally or to perform differently from the market as a whole. Any adverse developments
affecting Monster Beverage Corporation could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Motorola Solutions, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Motorola
Solutions, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Any adverse developments affecting
Motorola Solutions, Inc. could materially and adversely affect the value of the Underlying Security and,
as a result, the Fund.
Navitas Semiconductor
Corporation Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Navitas
Semiconductor Corporation. Issuer-specific attributes may cause the Underlying Security to be more
volatile than the market generally or to perform differently from the market as a whole. Navitas
Semiconductor Corporation faces risks associated with, among other things, changes in market demand,
product development and innovation, competition, supply chain conditions, regulatory developments,
operational performance, cybersecurity incidents, and other factors affecting its business, financial
condition, or market value. Any adverse development affecting Navitas Semiconductor Corporation could
materially and adversely affect the value of the Underlying Security and, as a result, the Fund.
Nebius Group N.V. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Nebius
Group N.V. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Nebius Group N.V. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Nebius Group N.V. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Netflix, Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Netflix,
Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Netflix, Inc. faces risks associated with,
among other things, changes in market demand, product development and innovation, competition, supply
chain conditions, regulatory developments, operational performance, cybersecurity incidents, and other
factors affecting its business, financial condition, or market value. Any adverse development affecting
Netflix, Inc. could materially and adversely affect the value of the Underlying Security and, as a result,
the Fund.
The Adviser is a newly
registered investment adviser and has limited operating history. There can be no assurance that the
Adviser will be successful in implementing each Fund's investment strategy or managing the Funds,
including with respect to the use of derivatives, financing arrangements, portfolio rebalancing, and
operational processes. A new adviser may have limited experience establishing and coordinating
service-provider relationships, managing portfolio operations under varying market conditions, and
maintaining risk-management, compliance, and internal controls appropriate for the Funds' strategies. Any
failure by the Adviser to implement the Funds' strategies effectively or to manage operational and
regulatory requirements could adversely affect the Funds' performance.
Absence of Active Market Risk.
Although Shares are listed for
trading on a stock exchange, there is no assurance that an active trading market for them will develop or
be maintained. In the absence of an active trading market for Shares, they will likely trade with a wider
bid/ask spread and at a greater premium or discount to net asset value.
Each Fund is newly organized
and has limited operating history. As new funds, the Funds may not attract sufficient assets to achieve
and maintain an economically viable size, and they may be more likely to liquidate or reorganize than
funds with longer operating histories and larger asset bases. Limited assets may also contribute to wider
bid-ask spreads, lower secondary-market trading volumes, and reduced efficiency in portfolio management
and operating expense coverage. Any liquidation or reorganization may occur at a time that is
disadvantageous to shareholders, may result in the realization of taxable gains, and may cause
shareholders to incur transaction costs.
nLIGHT, Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with nLIGHT,
Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Any adverse developments affecting nLIGHT,
Inc. could materially and adversely affect the value of the Underlying Security and, as a result, the
Fund.
Non-Diversified Fund Risk.
Each Fund is non-diversified,
which means it may invest a larger percentage of its assets in the securities of a smaller number of
issuers or obtain exposure through a smaller number of counterparties than a diversified fund. As a
result, a Fund may be more susceptible to a single economic, market, political, or regulatory occurrence,
or to a decline in the financial condition of an issuer or counterparty, and such an event may have a
disproportionately negative impact on the Fund.
Novo Nordisk A/S Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Novo
Nordisk A/S. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Novo Nordisk A/S faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Novo Nordisk A/S could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Nuclear and Advanced Energy
Industry Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with nuclear or advanced energy companies,
including regulatory approvals, licensing requirements, public acceptance, construction risk, and
technological feasibility. These businesses may be subject to extensive regulation, permitting,
inspections, and oversight, and delays or denials of approvals may materially affect timelines and
economics. Projects may require substantial upfront capital and may face cost overruns, supply
constraints, contractor performance issues, and schedule delays. Public acceptance and political
considerations may affect siting, permitting, and long-term operating assumptions. Any such developments
could materially and adversely affect the value of the Underlying Security and, as a result, each Fund.
NuScale Power Corporation
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with NuScale
Power Corporation. Issuer-specific attributes may cause the Underlying Security to be more volatile than
the market generally or to perform differently from the market as a whole. NuScale Power Corporation faces
risks associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting NuScale Power Corporation could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
NVIDIA Corporation Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with NVIDIA
Corporation. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. NVIDIA Corporation faces risks
associated with, among other things, its ability to meet the evolving needs of its markets, including data
center, artificial intelligence, gaming, professional visualization, and automotive sectors; competition;
technological change; changes in customer demand; supply chain constraints; manufacturing delays;
dependence on third parties to manufacture, assemble, test, or package its products; mismatches between
supply and demand resulting in shortages or excess inventory; product defects; reliance on a limited
number of customers or partners; international operations and economic conditions; regulatory
developments; protection of intellectual property; cybersecurity incidents; the availability of key
personnel; fluctuations in operating results; and other factors affecting its business, financial
condition, or market value. Any adverse development affecting NVIDIA Corporation could materially and
adversely affect the value of the Underlying Security and, as a result, the Fund.
Oklo Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Oklo
Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Oklo Inc. faces risks associated with,
among other things, changes in market demand, product development and innovation, competition, supply
chain conditions, regulatory developments, operational performance, cybersecurity incidents, and other
factors affecting its business, financial condition, or market value. Any adverse development affecting
Oklo Inc. could materially and adversely affect the value of the Underlying Security and, as a result, the
Fund.
Ondas Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Ondas
Holdings Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Ondas Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Ondas Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Onto Innovation Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Onto
Innovation Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Any adverse developments affecting
Onto Innovation Inc. could materially and adversely affect the value of the Underlying Security and, as a
result, the Fund.
Oracle Corporation Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Oracle
Corporation. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Oracle Corporation faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Oracle Corporation could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Palantir Technologies Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Palantir
Technologies Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than
the market generally or to perform differently from the market as a whole. Palantir Technologies Inc.
faces risks associated with, among other things, changes in market demand, product development and
innovation, competition, supply chain conditions, regulatory developments, operational performance,
cybersecurity incidents, and other factors affecting its business, financial condition, or market value.
Any adverse development affecting Palantir Technologies Inc. could materially and adversely affect the
value of the Underlying Security and, as a result, the Fund.
Rambus Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Rambus
Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Any adverse developments affecting Rambus
Inc. could materially and adversely affect the value of the Underlying Security and, as a result, the
Fund.
Reddit, Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Reddit,
Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Reddit, Inc. faces risks associated with,
among other things, changes in market demand, product development and innovation, competition, supply
chain conditions, regulatory developments, operational performance, cybersecurity incidents, and other
factors affecting its business, financial condition, or market value. Any adverse development affecting
Reddit, Inc. could materially and adversely affect the value of the Underlying Security and, as a result,
the Fund.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with regulatory oversight, licensing
requirements, governmental approvals, investigations, enforcement actions, and changes in laws, rules, or
policies. Regulatory changes may impose new compliance obligations, require costly operational
adjustments, restrict products or services, limit market access, or delay strategic initiatives.
Investigations or enforcement actions may result in fines, settlements, injunctions, reputational harm, or
ongoing monitoring that increases expenses and management distraction. Any such developments could
materially and adversely affect the value of the Underlying Security and, as a result, each Fund.
Rigetti Computing, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Rigetti
Computing, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Rigetti Computing, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Rigetti Computing, Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Rivian Automotive, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Rivian
Automotive, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Rivian Automotive, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Rivian Automotive, Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Robinhood Markets, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with
Robinhood Markets, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile
than the market generally or to perform differently from the market as a whole. Robinhood Markets, Inc.
faces risks associated with, among other things, changes in market demand, product development and
innovation, competition, supply chain conditions, regulatory developments, operational performance,
cybersecurity incidents, and other factors affecting its business, financial condition, or market value.
Any adverse development affecting Robinhood Markets, Inc. could materially and adversely affect the value
of the Underlying Security and, as a result, the Fund.
Rocket Lab USA, Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Rocket
Lab USA, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Rocket Lab USA, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Rocket Lab USA, Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
SanDisk Corporation Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with SanDisk
Corporation. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. SanDisk Corporation faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting SanDisk Corporation could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Semiconductor Industry Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with companies in the semiconductor
industry, including rapid technological change, product obsolescence, capital intensity, supply-demand
imbalances, reliance on complex manufacturing processes, geopolitical trade restrictions, and cyclical
industry conditions. Semiconductor markets are often characterized by long lead times, rapid product
cycles, and periodic shortages or oversupply, which can create significant volatility in pricing and
profitability. The industry typically requires substantial capital investment in tooling, equipment, or
process development, and delays or execution issues may adversely affect competitiveness and margins. Many
semiconductor-related businesses depend on specialized suppliers, foundries, or manufacturing partners,
which may create additional operational and geopolitical sensitivities. Any such factors could materially
and adversely affect the value of the Underlying Security and, as a result, each Fund.
ServiceNow, Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with
ServiceNow, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. ServiceNow, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting ServiceNow, Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Silicon Motion Technology
Corporation Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Silicon
Motion Technology Corporation. Issuer-specific attributes may cause the Underlying Security to be more
volatile than the market generally or to perform differently from the market as a whole. Any adverse
developments affecting Silicon Motion Technology Corporation could materially and adversely affect the
value of the Underlying Security and, as a result, the Fund.
Each Fund's exposure is
concentrated in the securities of a single issuer. As a result, each Fund is particularly sensitive to
factors that affect the Underlying Security, including issuer-specific risks, earnings announcements or
guidance, product developments, competitive dynamics, management decisions, regulatory actions,
supply-chain disruptions, geopolitical events, and market sentiment. Adverse developments affecting the
issuer may cause the Underlying Security to be more volatile than the market generally and may lead to
substantial declines in value. Because the Funds do not seek exposure to a diversified group of issuers,
each Fund may be more volatile and may experience larger drawdowns than funds that track a diversified
index or basket of securities.
SoFi Technologies, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with SoFi
Technologies, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than
the market generally or to perform differently from the market as a whole. SoFi Technologies, Inc. faces
risks associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting SoFi Technologies, Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Strategy, Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with
Strategy, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Strategy, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Strategy, Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Stride, Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Stride,
Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Any adverse developments affecting Stride,
Inc. could materially and adversely affect the value of the Underlying Security and, as a result, the
Fund.
Super Micro Computer, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Super
Micro Computer, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than
the market generally or to perform differently from the market as a whole. Super Micro Computer, Inc.
faces risks associated with, among other things, changes in market demand, product development and
innovation, competition, supply chain conditions, regulatory developments, operational performance,
cybersecurity incidents, and other factors affecting its business, financial condition, or market value.
Any adverse development affecting Super Micro Computer, Inc. could materially and adversely affect the
value of the Underlying Security and, as a result, the Fund.
Supply Chain and Manufacturing
Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with supply chain disruptions, supplier
concentration, manufacturing constraints, component shortages, production delays, logistics interruptions,
and reliance on third-party manufacturers or foundries. Supply chain or manufacturing disruptions may
arise from natural disasters, labor disputes, capacity constraints, quality issues, cyber incidents,
transportation bottlenecks, or geopolitical events. Reliance on a limited number of suppliers or
manufacturing partners may reduce flexibility and increase exposure to adverse terms, delays, or
shortages. Production or logistics interruptions may prevent the issuer from meeting demand, cause
shipment delays, increase costs, or lead to lost customers and reputational harm. Any such disruptions
could materially and adversely affect the value of the Underlying Security and, as a result, each Fund.
Taiwan Semiconductor
Manufacturing Company Limited Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Taiwan
Semiconductor Manufacturing Company Limited. Issuer-specific attributes may cause the Underlying Security
to be more volatile than the market generally or to perform differently from the market as a whole. Taiwan
Semiconductor Manufacturing Company Limited faces risks associated with, among other things, changes in
market demand, product development and innovation, competition, supply chain conditions, regulatory
developments, operational performance, cybersecurity incidents, and other factors affecting its business,
financial condition, or market value. Any adverse development affecting Taiwan Semiconductor Manufacturing
Company Limited could materially and adversely affect the value of the Underlying Security and, as a
result, the Fund.
Technology and Innovation
Risk.
Through its exposure to the
Underlying Security, each Fund is subject to risks associated with rapid technological change, product
obsolescence, platform disruption, software failures, research and development uncertainty, and innovation
cycles. The issuer may be required to make significant and ongoing investments in research and development
to remain competitive, and such investments may not result in commercially successful products or
services. Products may become obsolete due to competing technologies, changing customer requirements, or
shifts in industry standards, and product defects or reliability issues may lead to delays, recalls,
warranty costs, or reputational harm. Failure to successfully develop, integrate, or commercialize new
technologies could materially and adversely affect the value of the Underlying Security and, as a result,
each Fund.
Tempus AI, Inc. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Tempus
AI, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Tempus AI, Inc. faces risks associated
with, among other things, changes in market demand, product development and innovation, competition,
supply chain conditions, regulatory developments, operational performance, cybersecurity incidents, and
other factors affecting its business, financial condition, or market value. Any adverse development
affecting Tempus AI, Inc. could materially and adversely affect the value of the Underlying Security and,
as a result, the Fund.
Teradyne, Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with
Teradyne, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Any adverse developments affecting
Teradyne, Inc. could materially and adversely affect the value of the Underlying Security and, as a
result, the Fund.
Tesla, Inc. Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Tesla,
Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the market
generally or to perform differently from the market as a whole. Tesla, Inc. faces risks associated with,
among other things, changes in market demand, product development and innovation, competition, supply
chain conditions, regulatory developments, operational performance, cybersecurity incidents, and other
factors affecting its business, financial condition, or market value. Any adverse development affecting
Tesla, Inc. could materially and adversely affect the value of the Underlying Security and, as a result,
the Fund.
Texas Pacific Land Corporation
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Texas
Pacific Land Corporation. Issuer-specific attributes may cause the Underlying Security to be more volatile
than the market generally or to perform differently from the market as a whole. Any adverse developments
affecting Texas Pacific Land Corporation could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Trading Halt Risk (Applicable
to all Funds).
Trading in the Underlying
Security or a Fund's shares may be halted due to market conditions, exchange rules, regulatory actions,
extraordinary volatility, or disruptions affecting trading venues or market participants. Trading halts
may prevent a Fund from entering into, adjusting, or closing positions and may impair a Fund's ability to
rebalance its portfolio or maintain target exposure. When trading is halted or otherwise disrupted,
pricing and liquidity may deteriorate, and a Fund may incur increased transaction costs when trading
resumes. In such circumstances, a Fund may be unable to achieve its investment objective and its shares
may trade at increased premiums or discounts to net asset value.
Ultra Clean Holdings, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Ultra
Clean Holdings, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than
the market generally or to perform differently from the market as a whole. Any adverse developments
affecting Ultra Clean Holdings, Inc. could materially and adversely affect the value of the Underlying
Security and, as a result, the Fund.
Underlying Security Liquidity
Risk (Applicable to all Funds).
The liquidity of the Underlying
Security may be limited, particularly during periods of market stress, reduced trading activity, or
heightened volatility. If trading volume declines or market participants withdraw, it may be more
difficult for a Fund to obtain, increase, reduce, or rebalance exposure at desired prices, or to do so
efficiently. Limited liquidity may increase the volatility of the Underlying Security and may cause a
Fund's net asset value and market price to fluctuate more significantly, including through wider bid-ask
spreads and premiums or discounts to NAV. Because each Fund seeks leveraged daily investment results,
reduced liquidity in the Underlying Security or related markets may increase tracking error, amplify
losses, and increase volatility.
United Microelectronics
Corporation Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with United
Microelectronics Corporation. Issuer-specific attributes may cause the Underlying Security to be more
volatile than the market generally or to perform differently from the market as a whole. Any adverse
developments affecting United Microelectronics Corporation could materially and adversely affect the value
of the Underlying Security and, as a result, the Fund.
UnitedHealth Group
Incorporated Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with
UnitedHealth Group Incorporated. Issuer-specific attributes may cause the Underlying Security to be more
volatile than the market generally or to perform differently from the market as a whole. UnitedHealth
Group Incorporated faces risks associated with, among other things, changes in market demand, product
development and innovation, competition, supply chain conditions, regulatory developments, operational
performance, cybersecurity incidents, and other factors affecting its business, financial condition, or
market value. Any adverse development affecting UnitedHealth Group Incorporated could materially and
adversely affect the value of the Underlying Security and, as a result, the Fund.
Upstart Holdings, Inc.
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Upstart
Holdings, Inc. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Upstart Holdings, Inc. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Upstart Holdings, Inc. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Valuation and Fair Value
Pricing Risk.
Each Fund's investments may be
valued using market quotations, pricing services, or, when market prices are not readily available or are
deemed unreliable, fair valuation methodologies approved by the Trust. Market prices may not be readily
available or may be deemed unreliable during periods of market stress, trading halts, disrupted market
functioning, or other events affecting the Underlying Security or the instruments used to provide a Fund's
exposure; in such circumstances, a Fund may use fair value methodologies, and the value of the Fund's
derivatives may move materially while market quotations are not readily available. Fair valuation
determinations involve judgment and may require the Trust to estimate the value of instruments for which
market quotations are not readily available, and those estimates may be incorrect. A Fund's fair values
may differ from values that would be realized upon sale, particularly during periods of market stress,
trading halts, disrupted market functioning, or local-market disruptions. These valuation effects may
contribute to wider premiums or discounts to NAV, increased tracking error, and increased volatility of a
Fund's market price.
Vertiv Holdings Co. Investing
Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Vertiv
Holdings Co. Issuer-specific attributes may cause the Underlying Security to be more volatile than the
market generally or to perform differently from the market as a whole. Vertiv Holdings Co. faces risks
associated with, among other things, changes in market demand, product development and innovation,
competition, supply chain conditions, regulatory developments, operational performance, cybersecurity
incidents, and other factors affecting its business, financial condition, or market value. Any adverse
development affecting Vertiv Holdings Co. could materially and adversely affect the value of the
Underlying Security and, as a result, the Fund.
Western Digital Corporation
Investing Risk.
The performance of the
Underlying Security, and consequently the Fund's performance, is subject to risks associated with Western
Digital Corporation. Issuer-specific attributes may cause the Underlying Security to be more volatile than
the market generally or to perform differently from the market as a whole. Western Digital Corporation
faces risks associated with, among other things, changes in market demand, product development and
innovation, competition, supply chain conditions, regulatory developments, operational performance,
cybersecurity incidents, and other factors affecting its business, financial condition, or market value.
Any adverse development affecting Western Digital Corporation could materially and adversely affect the
value of the Underlying Security and, as a result, the Fund.
Illiquid Investments and
Restricted Securities
Under Rule 22e-4, the Fund may
not acquire any illiquid investment if, immediately after purchase, more than 15% of its net assets would
be invested in illiquid investments that are assets. An "illiquid investment" is one the Fund reasonably
expects it cannot sell or dispose of, under current market conditions, within seven calendar days without
materially affecting the investment's market value. The Fund maintains a liquidity risk management program
and procedures to identify illiquid investments pursuant to Rule 22e-4. The 15% limit is observed on an
ongoing basis. If the Fund's holdings of illiquid investments exceed 15% of net assets because of market
activity, liquidity changes, or other factors, the Fund will report the occurrence to the Board and will
make determinations and take steps, consistent with Rule 22e-4 and Board-approved procedures, to reduce
illiquid investments to or below 15% of net assets within a reasonable period.
The Fund may purchase restricted
securities that may be resold to institutional investors and that, under the Fund's liquidity program, may
be determined not to be illiquid. Many such securities trade in the institutional market under Rule 144A
of the Securities Act and are referred to as Rule 144A securities.
Illiquid investments generally
involve more risk than comparable, readily marketable securities. They may trade at a discount, may be
harder to sell at a fair price or in a timely manner, and may prevent the Fund from taking advantage of
market opportunities. Risks are most acute when the Fund needs cash (for example, during periods of net
redemptions), potentially necessitating borrowing or sales at unfavorable prices.
Illiquid investments are often
privately placed and may not be listed or traded on established markets. They may not be freely
transferable under applicable law or due to contractual resale restrictions. If privately placed
securities can only be sold through private negotiations, the realized price may be below the Fund's
purchase price or below fair value. Issuers that are not public may be subject to less stringent
disclosure and investor-protection requirements. If registration is required before resale, the Fund may
bear those costs. Private placements may involve smaller, less seasoned issuers with limited product
lines, markets, financial resources, or management depth, and the Fund may receive material non-public
information that can restrict trading.
Investment Company Securities
The Funds may invest in other
investment companies, including money market funds and ETFs, subject to Section 12(d)(1) of the 1940 Act
and related rules. Investing through another pooled vehicle exposes the Funds to that vehicle's risks.
Fund shareholders will indirectly bear their proportionate share of the acquired fund's fees and expenses
(including advisory fees), in addition to fees and expenses the Funds bear directly.
Under Section 12(d)(1),
immediately after purchase the Funds may not: (1) own more than 3% of the acquired company's outstanding
voting stock; (2) invest in the acquired company's securities with an aggregate value exceeding 5% of the
Fund's total assets; or (3) invest in the securities of the acquired company and all other investment
companies in excess of 10% of the Fund's total assets. To the extent permitted by law or regulation, the
Funds may invest in money market funds beyond these limits.
Registered funds may invest in
other investment companies beyond Section 12(d)(1) limits if certain conditions are met. The Funds may
rely on Rule 12d1-4, which provides an exemption allowing investments in other registered funds, including
ETFs, subject to conditions (for example, the Funds and its advisory group may not control, individually
or in the aggregate, an acquired fund, generally meaning ownership of no more than 25% of the voting
securities of a registered open-end fund).
The Funds may also rely on
Section 12(d)(1)(F) and Rule 12d1-3, which provide an exemption permitting investment in other registered
funds (including ETFs) if, among other conditions: (1) the Fund, together with its affiliates, acquires no
more than 3% of the outstanding voting stock of any acquired fund; and (2) sales loads on Shares do not
exceed FINRA Rule 2830 limits.
The Funds may invest in
exchange-traded funds to obtain exposure to its Underlying Security or to securities or instruments
correlated with the Underlying Security, including for cash equitization, to facilitate daily rebalancing,
or during portfolio transitions. Such use may increase tracking error and costs relative to holding
derivatives or the Underlying Security directly.
The Funds may invest in
underlying money market funds that seek to maintain a stable $1 NAV ("stable NAV" funds) or whose share
prices fluctuate ("variable NAV" funds). Investments in stable NAV funds can still lose value. Variable
NAV funds can be worth more or less than the Funds paid when sold. Neither type is designed to provide
capital appreciation. Money market funds may impose liquidity fees or temporarily suspend redemptions if
liquidity falls below required thresholds. Shares of money market funds are not insured or guaranteed by
the U.S. government or any government agency, and there is no assurance that a money market fund will
maintain a stable price.
Other Short-Term Instruments
For liquidity or other purposes,
the Funds may hold short-term instruments on an ongoing basis, including but not limited to: (1) shares of
money market funds; (2) obligations of the U.S. government, its agencies, or instrumentalities (including
government-sponsored enterprises); (3) negotiable certificates of deposit ("CDs"), bankers' acceptances,
fixed time deposits, and other obligations of U.S. and non-U.S. banks (including foreign branches) and any
similar institutions; (4) commercial paper rated Prime-1 by Moody's Investors Service or A-1 by S&P
Global Ratings, or of comparable quality if unrated as determined by the Adviser; (5) non-convertible
corporate debt with remaining maturities of 397 days or less that meets Rule 2a-7 rating criteria; and (6)
short-term, U.S. dollar-denominated obligations of non-U.S. banks (including their U.S. branches) that, in
the Adviser's opinion, are of comparable quality to eligible U.S. bank obligations. Such instruments may
be purchased on a current or forward-settled basis. Time deposits are non-negotiable bank deposits for a
stated period and rate. Bankers' acceptances are time drafts drawn on banks, typically in international
trade.
Forward-settling short-term
instruments that do not settle within 35 days, or that otherwise use a non-standard settlement cycle, may
be treated as derivatives under Rule 18f-4.
If approved by the Board, the
Funds may lend portfolio securities to qualified borrowers. Borrowers must provide collateral at least
equal to the current value of the loaned securities and maintain such collateral while the loan is
outstanding. The Funds may recall a securities loan at any time and recall the securities. The Funds will
receive the value of any interest or cash/non-cash distributions on loaned securities; substitute payments
in lieu of dividends generally do not qualify as qualified dividend income.
For cash-collateralized loans,
the borrower typically receives a fee based on the cash collateral; the Funds seek to earn more on
reinvested cash collateral than they pay to the borrower. For non-cash collateral, the borrower pays the
Funds a fee based on the value of securities on loan. Cash collateral may be reinvested in short-term
instruments, either directly or through joint accounts or money market funds, which may be managed by the
Adviser.
The Funds may share a portion of
lending income with borrowers as described above and with one or more lending agents approved by the
Board. Lending agents administer the program under Board-approved guidelines, including delivering and
recalling securities, obtaining and maintaining collateral, monitoring collateral and loan values daily,
requesting collateral adjustments, and providing recordkeeping and accounting.
While securities are on loan,
the Funds generally do not have the right to vote those securities. The Funds may recall securities on
loan in order to vote if the Adviser determines that a particular vote is expected to have a material
effect on the Funds and that recalling the securities is in the best interests of shareholders.
Securities lending involves
risks, including operational risk (settlement or accounting issues), "gap" risk (a mismatch between
returns on collateral reinvestment and fees owed to the borrower), and credit, legal, counterparty, and
market risks. If a borrower fails to return securities, the Funds could incur a loss if collateral
liquidation proceeds do not at least equal the value of the loaned securities plus costs to purchase
replacements.
You should consider the tax
treatment of an investment in Shares. The tax information in the Prospectus and this SAI is general in
nature. Consult your tax adviser about the federal, state, local, and non-U.S. tax consequences of
investing in Shares.
Unless Shares are held through a
tax-deferred or other tax-advantaged account (such as an individual retirement account), you should
consider potential tax consequences when the Funds make distributions or when you sell Shares.
Use of derivatives and
short-term instruments may affect the timing, amount, and character of the Fund's income and gains.
Certain derivatives may be subject to special tax rules (including, without limitation, the mark-to-market
rules for section 1256 contracts, the straddle rules, and wash sale rules). These rules can cause income
to be recognized without a corresponding receipt of cash, can accelerate or defer recognition of income or
loss, and can convert long-term capital gains into short-term capital gains. The Funds intend to monitor
their investments and to structure its activities to qualify each taxable year as a regulated investment
company under Subchapter M of the Internal Revenue Code.
Temporary Defensive Strategies
Under normal market conditions,
the Funds seek to remain fully invested in accordance with their principal strategies. In adverse market,
economic, political, or other conditions, a Fund may, for temporary defensive purposes, invest up to 100%
of its assets in cash or cash equivalents, such as U.S. government obligations, investment-grade debt, and
other money market instruments. Taking a defensive position may prevent the Funds from achieving their
investment objectives. During any such defensive period, a Fund will not seek to achieve a daily 2x return
and may hold a substantial portion of its assets in cash or cash equivalents.
The Trust has adopted the
following investment restrictions as fundamental policies with respect to each Fund. These restrictions
cannot be changed for a Fund without the approval of the holders of a majority of the Fund's outstanding
voting securities. For purposes of the 1940 Act, a "majority of the outstanding voting securities" means
the lesser of: (1) 67% or more of the voting securities present (if holders of more than 50% of the
outstanding voting securities are present or represented by proxy); or (2) more than 50% of the
outstanding voting securities of the Fund.
Except with the approval of a
majority of the outstanding voting securities, a Fund may not:
Borrow money or issue senior
securities, as that term is defined in the 1940 Act, except to the extent permitted by the 1940 Act.
Make loans, except to the extent
permitted under the 1940 Act.
Purchase or sell real estate,
except when obtained through ownership of securities or other instruments and only to the extent allowed
by the 1940 Act. This does not prevent the Funds from investing in securities or other instruments backed
by real estate, real estate investment trusts ("REITs"), or securities of companies engaged in the real
estate business.
Purchase or sell commodities,
except when exposure arises incidentally through other instruments and only as permitted by the 1940 Act.
This does not prevent the Funds from purchasing or selling options and futures contracts or from investing
in securities or other instruments backed by physical commodities.
Underwrite securities issued by
other persons, except to the extent permitted under the 1940 Act.
Concentrate its investments
(that is, invest more than 25% of total assets) in any one industry or group of related industries, except
that each Fund shall concentrate its investments in the industry assigned to the issuer of its respective
Underlying Security. For this test, U.S. government securities (and agencies/instrumentalities),
repurchase agreements backed by U.S. government securities, investment companies, and municipal securities
are not treated as belonging to any industry.
In determining compliance with
its concentration policy, each Fund will treat exposure obtained through derivatives referencing its
Underlying Security as exposure to the industry or industries of the issuer of that Underlying Security.
The Fund does not intend to rely on "look-through" treatment to investment companies except to the limited
extent it may invest in such instruments for collateral, liquidity, or cash management purposes.
For purposes of applying the
concentration policy, the Fund may classify issuers by industry using any reasonable industry
classification system, including SIC, NAICS, GICS, ICB, or a classification system developed by the
Adviser. For derivatives referencing an Underlying Security, the Fund will generally assign industry
exposure based on the classification of the issuer of the Underlying Security.
For each Fund, exposure obtained
through derivatives referencing its respective Underlying Security will generally be treated as exposure
to the industry or industries of the issuer of that Underlying Security, typically in proportion to the
notional exposure of such derivatives.
If a percentage limitation is
satisfied at the time of investment or contract, a subsequent increase or decrease resulting from any
change in value or in total or net assets will not, by itself, result in a violation of such restriction,
except that the percentage limits on borrowing and on illiquid investments are monitored on a continuous
basis.
EXCHANGE LISTING AND TRADING
Shares are listed for trading
and trade throughout the day on the Exchange.
The Exchange may halt trading in
the Shares for reasons that, in the judgment of the Exchange, make trading inadvisable, including without
limitation extraordinary market volatility; trading halts in securities, instruments, or financial indexes
underlying the Fund's portfolio; or the unavailability of key information such as an intraday indicative
value.
There can be no assurance that
the Funds will continue to meet the Exchange's requirements necessary to maintain the listing of Shares.
The Exchange may, but is not required to, remove Shares of the Funds from listing under any of the
following circumstances: (1) the Exchange becomes aware that the Funds are no longer eligible to operate
in reliance on Rule 6c-11 under the 1940 Act; (2) the Funds no longer comply with the Exchange's
requirements for Shares; or (3) such other event or condition exists that, in the opinion of the Exchange,
makes continued listing imprudent. The Exchange will also delist the Shares upon the Fund's termination.
The Trust reserves the right to
adjust the price levels of Shares in the future to help maintain convenient trading ranges for investors.
Any such changes would be implemented via stock splits or reverse stock splits.
The Board oversees the
management and operations of the Trust. As with other mutual funds and ETFs, the day-to-day management and
operations of the Trust are carried out by service providers to the Trust, including the Adviser, the
Distributor, the Administrator, the Custodian, and the Transfer Agent, each of which is discussed
elsewhere in this SAI. The Board has appointed certain senior personnel of the Administrator as officers
of the Trust, with responsibility to monitor the Trust's operations and report to the Board. In carrying
out its oversight, the Board receives regular reports from these officers and from the Trust's service
providers. For example, the Treasurer reports on financial reporting matters and the President reports on
operational matters. In addition, the Adviser provides regular reports regarding the investment strategy
and performance of the Funds. The Board has appointed a Chief Compliance Officer who administers the
Trust's compliance program and reports regularly to the Board on compliance matters. These reports are
provided as part of formal Board meetings, typically held quarterly and often in person, during which the
Board reviews recent operations. Between formal meetings, members of the Board may also meet with
management in less formal settings to discuss Trust matters. The role of the Board, and of each Trustee,
is one of oversight rather than day-to-day management; this oversight role does not make the Board a
guarantor of the Trust's investments, operations, or activities.
As part of its oversight
function, the Board receives and reviews a variety of different risk management reports and discusses risk
matters with appropriate management and other personnel. Because risk management encompasses many elements
(for example, investment risk, issuer and counterparty risk, compliance risk, operational and business
continuity risks), oversight of different categories of risk is handled in different ways. The Board meets
regularly with the Chief Compliance Officer to discuss compliance and operational risks, and the Audit
Committee meets with the Trust's independent registered public accounting firm regarding, among other
things, the internal control structure of the Trust's financial reporting function.
The full Board also receives
reports from the Adviser regarding the Funds' investment risks. From time to time, the Board receives
additional reports from the Administrator and the Adviser regarding enterprise risk management.
The Board recognizes that not
all risks that may affect the Funds can be identified or quantified; that it may not be practical or
cost-effective to eliminate or mitigate certain risks; that certain risks (such as investment risk) may be
necessary to achieve the Funds' goals; and that the processes and controls used to address risks have
inherent limitations. Moreover, the risk reports provided to the Board are typically summaries. Most of
the Funds' investment management and business affairs are conducted by or through the Adviser and other
service providers, each operating under its own risk management policies and practices, which may differ
from those of the Trust or from one another in priorities, resources, and control effectiveness. For these
and other reasons, the Board's ability to monitor and manage risk, as a practical matter, has limitations.
The Board is composed of five
members, three of whom are not "interested persons" of the Trust, as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act") (the "Independent Trustees"). Nicolas S. Laqua
serves as Chair of the Board and is an interested person of the Trust. The Board includes a majority (60%)
of Independent Trustees.
The Board believes its current
leadership structure is appropriate for the Trust. A Lead Independent Trustee acts as the primary liaison
between the Independent Trustees and management; Conor M. Murray currently serves as Lead Independent
Trustee. The Board further believes this structure supports effective oversight and facilitates the
efficient flow of information from Fund management to the Independent Trustees.
Additional information about
each Trustee appears below. Unless otherwise noted, the address of each Trustee is c/o Corgi ETF Trust I,
425 Bush St, Suite 500, San Francisco, CA 94104.
|
|
|
Position
Held
with the Trust
|
|
Term of
Office and Length of Time Served (1)
|
|
Number of
Portfolios in Fund Complex Overseen by Trustee (2)
|
|
Principal
Occupation(s)
During Past 5 Years
|
|
|
|
|
|
|
|
Conor M.
Murray
(Born: 1983)
|
|
|
|
Indefinite
term;
since 2025
|
|
|
|
Co-founder
and Chief Executive Officer, OpenInvest (a J.P. Morgan company) (2015 to present).
|
|
|
|
|
|
|
|
|
|
|
|
|
Bryant C.
Lee
(Born: 1984)
|
|
|
|
Indefinite
term;
since 2025
|
|
|
|
Chief
Executive Officer and Co-founder, Vaero (Nov. 2022 to present); Co-founder and Strategic Advisor,
Cognition IP (Sep. 2020 to Oct. 2022); Chief Executive Officer, Cognition IP (Jan. 2018 to Aug.
2020).
|
|
|
|
|
|
|
|
|
|
|
|
|
Jennifer X.
Benson
(Born: 1998)
|
|
|
|
Indefinite
term;
since 2025
|
|
|
|
Partner,
Leonis Capital (2022 to present); Researcher, OpenAI (2021 to 2022); Researcher, Epoch AI (2021);
Research Fellow, Future of Humanity Institute, University of Oxford (2020).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicolas S.
Laqua
(Born: 2000)
|
|
Chair;
Interested Trustee
|
|
Indefinite
term;
since 2025
|
|
|
|
Chief
Executive Officer and Director, Corgi Insurance Services, Inc., an insurance agency (since 2024);
Chief Executive Officer and Director, Basket Entertainment, Inc., a software and entertainment
company (2021 to 2025); Director, Bangers Snacks, Inc., a food and beverage company (since 2024).
|
|
|
|
|
|
|
|
|
|
|
|
|
Emily Z.
Yuan
(Born: 2001)
|
|
|
|
Indefinite
term;
since 2025
|
|
|
|
Chief
Operations Officer and Director, Corgi Insurance Services, Inc., an insurance agency (since 2024);
Chief Operations Officer and Director, Basket Entertainment, Inc., a software and entertainment
company (2021 to 2025); Director, Bangers Snacks, Inc., a food and beverage company (since 2024).
|
|
|
|
|
Each Trustee
holds office for an indefinite term until his or her successor is duly elected and qualified, or
until his or her earlier death, resignation, removal, or retirement in accordance with Board policy.
The Trustees have adopted a retirement policy of retirement at age 75.
|
|
|
|
"Fund
Complex" refers to the series of Corgi ETF Trust I and any other registered investment companies
advised by Corgi Strategies, LLC or its affiliates (together, the "Fund Complex").
|
|
|
|
"Independent
Trustees" are Trustees who are not "interested persons" of the Trust under the 1940 Act.
|
|
|
|
Nicolas S.
Laqua and Emily Z. Yuan are "interested persons" of the Trust due to their positions with the Trust
and/or their affiliations with Corgi Strategies, LLC (the "Adviser").
|
Individual Trustee
Qualifications.
The Board has determined that
each Trustee brings skills, experience, and attributes that, in the aggregate, are appropriate for service
on the Board given the Trust's business and structure. Among other things, the Trustees collectively bring
experience in technology and data systems, corporate finance and capital markets, and venture formation
and growth investing, as well as risk oversight and investment management oversight. The Board conducts an
annual self-assessment of its effectiveness and that of its committees.
In addition, the Board has
concluded that each Trustee serve based on the following, among other factors:
|
|
|
The Board has concluded
that Mr. Murray should serve as a Trustee because of his leadership founding and operating an
investment-technology firm and his prior work building systematic investing, risk-control, and
portfolio-analytics platforms. In roles including Co-founder and Chief Executive Officer of
OpenInvest (a J.P. Morgan company), Technology Associate at Bridgewater Associates, and Analyst in
Morgan Stanley's Financial Sponsors M&A Group, he developed expertise in capital markets,
portfolio construction and trading systems, data and enterprise technology, and operational
oversight. The Board believes Mr. Murray's experience, qualifications, attributes, and skills, on an
individual basis and in combination with those of the other Trustees, equip him to oversee
investment and operational risk, valuation and fair-value processes, financial reporting and
disclosure controls, information security and business continuity, and service-provider oversight
with respect to the Trust.
|
|
|
|
The Board has concluded
that Mr. Lee should serve as a Trustee because of his operational, legal, and governance experience
leading technology-enabled businesses and advising growth companies. As Chief Executive Officer and
Co-founder of Vaero and previously as Co-founder/Chief Executive Officer and later Strategic Advisor
at Cognition IP, with earlier service as a patent litigation attorney at Covington & Burling
LLP, Mr. Lee brings experience in capital raising and budgeting, contract negotiation,
intellectual-property strategy, regulatory and compliance oversight, and service-provider
management. The Board believes Mr. Lee's experience, qualifications, attributes, and skills, on an
individual basis and in combination with those of the other Trustees, equip him to oversee risk
management, financial and operational controls, disclosure and governance practices, and third-party
service-provider oversight with respect to the Trust.
|
|
|
|
The Board has concluded
that Ms. Benson should serve as a Trustee because of her investment and research experience in
artificial intelligence and economics, including capital allocation and due diligence for
early-stage technology companies. Ms. Benson serves as a Partner at Leonis Capital and previously
conducted research at OpenAI and Epoch AI and served as a Research Fellow at the Future of Humanity
Institute (Oxford); she has doctoral-level training at Columbia University focused on AI/ML and
economics. The Board believes Ms. Benson's experience, qualifications, attributes, and skills, on an
individual basis and in combination with those of the other Trustees, equip her to oversee
valuation, risk assessment, technology and data considerations, and strategic planning with respect
to the Trust.
|
|
|
|
The Board has concluded
that Mr. Laqua should serve as a Trustee because of his executive leadership and oversight in
acquisitions, capital markets, insurance distribution, and software businesses. This includes
service as Chief Executive Officer and Director at Corgi Insurance Services, Inc. and Basket
Entertainment, Inc., and as a Director at Bangers Snacks, Inc., together with practical familiarity
with regulated insurance operations as a director and chief executive of an insurance agency. The
Board believes Mr. Laqua's experience, qualifications, attributes, and skills, on an individual
basis and in combination with those of the other Trustees, equip him to oversee financial reporting
and disclosure controls, valuation, capital allocation and financing considerations, risk
management, and service provider oversight with respect to the Trust.
|
|
|
|
The Board has concluded
that Ms. Yuan should serve as a Trustee because of her operational leadership and oversight in
acquisitions, capital markets, insurance, and software companies. This includes service as Chief
Operations Officer and Director at Corgi Insurance Services, Inc. and Basket Entertainment, Inc.,
and as a Director at Bangers Snacks, Inc., together with technical training in computer science at
Stanford University and her familiarity with regulatory requirements as a director of an insurance
agency. The Board believes Ms. Yuan's experience, qualifications, attributes, and skills, on an
individual basis and in combination with those of the other Trustees, demonstrate the requisite
capabilities to carry out oversight responsibilities with respect to the Trust.
|
The information above is not
exhaustive; many Trustee attributes involve qualitative elements such as integrity, diligence, judgment,
the ability to work collaboratively, and a demonstrated commitment to shareholder interests.
The Board has established the
following standing committees, each composed solely of Independent Trustees and operating under a
Board-approved written charter.
The Audit Committee is composed
of Bryant C. Lee (Chair), Conor M. Murray, and Jennifer X. Benson. The Audit Committee oversees the
Trust's accounting, financial reporting, and internal control processes; the quality and integrity of the
Trust's financial statements; and the qualifications, independence, and performance of the Trust's
independent registered public accounting firm. Among other responsibilities, the Audit Committee
pre-approves audit and permissible non-audit services for the Trust, reviews audit plans and results, and
serves as a forum for communications among the independent auditors, management, and the Board regarding
accounting and financial reporting matters. As of the date of this SAI, the Audit Committee met one time
with respect to the Trust.
Qualified Legal Compliance
Committee ("QLCC").
The Audit Committee also serves
as the Trust's QLCC for purposes of the SEC's attorney conduct rules (17 C.F.R. Secs. 205.2(k), 205.3(c)).
An attorney representing the Trust who becomes aware of evidence of a material violation by the Trust or
by an officer, director, employee, or agent of the Trust may report such evidence to the QLCC as an
alternative to the reporting process described in 17 C.F.R. Sec. 205.3(b). As of the date of this SAI, the
QLCC has met one time with respect to the Trust.
Nominating and Governance
Committee.
The Nominating and Governance
Committee is composed of Jennifer X. Benson (Chair), Conor M. Murray, and Bryant C. Lee. The Committee
identifies, evaluates, and recommends candidates for nomination to the Board as needed; oversees the
Board's annual self-assessment; and reviews Trustee compensation. The Committee considers whether or not
to consider shareholder-recommended nominees. The Committee meets as necessary, but at least annually.
Because the Funds have not yet commenced operations, the Committee has not yet met as of the date of this
SAI.
Principal Officers of the
Trust
The officers of the Trust manage
its day-to-day operations subject to Board oversight. Unless otherwise noted, the address of each officer
is c/o Corgi ETF Trust I, 425 Bush St, Suite 500, San Francisco, CA 94104.
|
|
|
Position(s) Held
with the Trust
|
|
Term of
Office and
Length of Time Served
|
|
Principal
Occupation(s)
During Past 5 Years
|
Emily Z.
Yuan
(Born: 2001)
|
|
President
and Principal Executive Officer, Chief Compliance Officer; Secretary; Anti-Money Laundering Officer
|
|
Indefinite
term;
since 2025
|
|
Chief
Operations Officer and Director, Corgi Insurance Services, Inc., an insurance agency (since 2024);
Director, Bangers Snacks, Inc., a food and beverage company (since 2024); Chief Operations Officer
and Director, Basket Entertainment, Inc., a software and entertainment company (2021 to 2025);
|
|
|
Nicolas S.
Laqua
(Born: 2000)
|
|
Principal
Financial Officer; Principal Accounting Officer (Treasurer)
|
|
Indefinite
term;
since 2025
|
|
Chief
Executive Officer, Corgi Insurance Services, Inc. (since 2024); Director, Bangers Snacks, Inc. a
food and beverage company (since 2024); Chief Executive Officer and Director, Basket Entertainment,
Inc., a software and entertainment company (2021 to 2025);
|
Trustee Ownership of Shares.
The Funds are required to show
the dollar-amount ranges of each Trustee's beneficial ownership of Shares of each Fund and of the Trust's
other series as of the end of the most recently completed calendar year. "Beneficial ownership" is
determined in accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended.
As of the date of this SAI, the
Fund has not commenced operations.
|
|
|
Dollar Range
of
Equity
Securities in
the Trust
|
|
Aggregate
Dollar
Range of Equity
Securities in All
Registered Investment
Companies
Overseen
by Trustee in Family of
Investment Companies
|
|
|
|
|
|
|
Conor M. Murray, Lead
Independent Trustee
|
|
|
|
|
|
|
|
|
|
|
Jennifer X. Benson,
Trustee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2025, none of
the Independent Trustees or members of their immediate families owned securities, beneficially or of
record, in the Adviser, the Distributor, or any of their affiliates. Accordingly, none of the Independent
Trustees or their immediate family members had any direct or indirect interest, the value of which exceeds
$120,000, in the Adviser, the Distributor, or any of their affiliates. In addition, during the two most
recently completed calendar years, none of the Independent Trustees or their immediate family members
engaged in any transaction(s) in an amount exceeding $120,000 in which the Adviser, the Distributor, or
any affiliate thereof was a party.
Trustees will be reimbursed for
reasonable travel and other out-of-pocket expenses incurred in connection with attending meetings. The
Trust has no pension or retirement plan. The table below details the amount of compensation the Interested
Trustees and Independent Trustees indirectly received from the Fund and Fund Complex through the Adviser
during the fiscal year ended December 31, 2026. Amounts exclude any expense reimbursements.
|
|
|
Estimated
Aggregate
Compensation From the Funds
|
|
Estimated
Total Compensation From Fund Complex Paid to Trustees (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation is based on
estimated amounts for the fiscal year ending December 31, 2026. Expense reimbursements, if any, are
not included.
|
PRINCIPAL SHAREHOLDERS,
CONTROL PERSONS AND MANAGEMENT OWNERSHIP
A "principal shareholder" means
any person that owns, of record or beneficially, 5% or more of the outstanding Shares of a Fund. A
"control person" means any shareholder that beneficially owns, directly or through controlled entities,
more than 25% of the voting securities of a company, or otherwise acknowledges the existence of control.
Shareholders with more than 25% of a Fund's voting securities may be able to determine the outcome of
matters presented for shareholder vote.
As of the date of this SAI,
Corgi Strategies, LLC, located at 425 Bush St, Suite 500, San Francisco, CA 94104, owned 100% of the
outstanding Shares of the Funds and therefore may be deemed to be a "control person" of the Funds for
purposes of the 1940 Act.
The Trust and Corgi Strategies,
LLC (the "Adviser") have each adopted Codes of Ethics (the "Codes") pursuant to Rule 17j-1 under the
Investment Company Act of 1940 (the "1940 Act"). The Codes are intended to prevent affiliated persons of
the Trust and the Adviser from engaging in fraudulent, deceptive or manipulative conduct in connection
with securities held or to be acquired by a Fund (which may also be held by persons subject to the Codes).
Subject to preclearance and
other restrictions, each Code permits personal securities transactions by personnel, including
transactions in securities that may also be purchased or held by a Fund. The distributor (the
"Distributor") expects to rely on the principal underwriter exception in Rule 17j-1(c)(3) to the extent
applicable (including where the Distributor is not affiliated with the Trust or the Adviser and no
officer, director or general partner of the Distributor serves in such capacity with the Trust or the
Adviser).
There can be no assurance that
the Codes will prevent all such conduct. Copies of the Codes may be reviewed at the SEC's website,
www.sec.gov.
The Board has delegated
responsibility for voting proxies for portfolio securities to the Adviser, subject to Board oversight.
Proxies are to be voted in the best interests of each Fund and its shareholders and in compliance with
applicable law. The Adviser has adopted proxy voting policies and guidelines (the "Proxy Voting
Policies"), which the Trust has approved for use when voting proxies on behalf of the Funds.
Generally, absent a conflict of
interest, the Adviser will vote for routine matters (for example, the election of directors, ratification
of auditors, and conforming amendments to organizational documents), and will evaluate non-routine and
contested matters case-by-case. The Proxy Voting Policies address the identification of, and response to,
material conflicts of interest.
The Trust's Chief Compliance
Officer monitors the effectiveness of the Proxy Voting Policies.
When available, information
regarding how a Fund voted proxies during the most recent 12-month period ended June 30 will be available
(1) without charge upon request by email to contact@corgifunds.com, (2) on the Funds' website at
www.corgifunds.com and (3) on the SEC's website at www.sec.gov.
Corgi Strategies, LLC, a
Delaware limited liability company with its principal office at 425 Bush St, Suite 500, San Francisco, CA
94104, serves as investment adviser to the Funds and is responsible for overall management of the Funds'
business and day-to-day portfolio management, subject to the oversight of the Board. Corgi Strategies, LLC
is registered as an Adviser with the SEC under the Investment Advisers Act of 1940.
Under an investment advisory
agreement between the Trust, on behalf of each Fund, and the Adviser (the "Advisory Agreement"), the
Adviser provides investment advice and portfolio management and arranges for necessary operational
services, including, without limitation, transfer agency, custody, fund administration and fund
accounting, and other services reasonably required for Fund operations. In exchange for a single unitary
advisory fee, the Adviser has agreed to pay, from the fee, substantially all ordinary operating expenses
of each Fund, except for the "Excluded Expenses" described in the Prospectus. Each Fund pays the Adviser
an annual unitary advisory fee, calculated daily and paid monthly based on the Fund's average daily net
assets. The fee rates for each Fund are set forth in Schedule A to the Advisory Agreement and may be
amended from time to time to add or remove Funds and/or adjust a Fund's fee, in each case upon approval in
the manner required by Article 8 of the Advisory Agreement.
The Advisory Agreement will
continue in effect for an initial two-year term for each Fund and, thereafter, from year to year if such
continuance is approved at least annually (1) by a majority of the Trustees who are not "interested
persons" of the Trust or the Adviser, and (2) by either the Board or a vote of a majority of the
outstanding Shares of the relevant Fund. The Advisory Agreement will terminate automatically in the event
of its assignment and may be terminated by the Trust or the Adviser upon 60 days' written notice.
The Adviser and its affiliates
will not be liable to the Trust or any shareholder for any error of judgment or mistake of law or for any
loss suffered by the Trust or a Fund in connection with the performance of the Advisory Agreement, except
for losses resulting from willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties.
Each Fund is new and, as of the
date of this SAI, no advisory fees have been paid.
Each Fund is managed by Isaac
Hargett, Anthony Crinieri, and Miles Braden, each a portfolio manager of the Adviser (each, a "Portfolio
Manager").
Portfolio Manager Fund
Ownership.
The SEC requires disclosure of
the dollar range of each Portfolio Manager's beneficial ownership of Shares of each Fund as of the end of
the most recently completed fiscal year, using prescribed ranges. As of the date of this SAI, no Shares
were owned by the Portfolio Managers.
Portfolio Manager
Compensation.
Portfolio managers receive a
fixed base salary and an annual discretionary bonus. Bonus determinations consider the Adviser's overall
revenues and profitability, the portfolio managers' responsibilities and contributions to the investment
process, teamwork, risk management and compliance. Compensation is not based on the investment performance
of any particular account, including the Funds. Portfolio managers may also be eligible for long-term
incentive awards (e.g., membership units or profit interests) that vest over 4 years.
Managing multiple accounts
(including other registered funds and separate accounts) may create potential conflicts of interest. For
example, a Portfolio Manager may have an incentive to favor an account that pays a performance-based fee
or a higher advisory fee; knowledge of Fund trades could be used for the benefit of other accounts; or
investment opportunities could be allocated among accounts. The Adviser has policies and procedures
designed to identify and mitigate such conflicts, including trade aggregation and allocation procedures
intended to provide fair and equitable treatment over time.
The Trust has entered into a
distribution agreement (the "Distribution Agreement") with Paralel Distributors LLC (the "Distributor"),
under which the Distributor will act as principal underwriter for the Funds and will distribute shares of
the Funds ("Shares") on a best efforts basis. Shares are offered for sale by the Distributor only in
Creation Units. The Distributor will not distribute Shares in amounts smaller than a Creation Unit and
does not maintain a secondary market in Shares. The principal business address of the Distributor is 1700
Broadway, Suite 2100, Denver, CO 80290.
Acting as agent for the Trust,
the Distributor will review and transmit orders for the purchase and redemption of Creation Units. Any
subscription or order will not be binding on a Fund until accepted by the Trust or its designee. The
Distributor is, or will be, a broker-dealer registered under the Securities Exchange Act of 1934 and a
member of FINRA.
The Distributor may enter into
arrangements with securities dealers and other firms ("Soliciting Dealers") to solicit orders for Creation
Units of Shares. Such Soliciting Dealers may also be Authorized Participants (as described in "Procedures
for Purchase and Redemption of Creation Units" below) or participants in DTC.
The Distribution Agreement will
remain in effect for an initial two-year term from its effective date and may continue from year to year
thereafter if such continuance is approved annually (1) by the Board of Trustees (the "Board") or by a
vote of a majority of the outstanding voting securities of the applicable Fund and (2) by a majority of
the Independent Trustees who have no direct or indirect financial interest in the Distribution Agreement
or any related agreement, cast in person or as otherwise permitted by the Investment Company Act of 1940,
as amended (the "1940 Act"). The Distribution Agreement may be terminated without penalty by the Trust on
60 days' written notice, when authorized either by a majority vote of the outstanding voting securities of
the applicable Fund or by a vote of a majority of the Board (including a majority of the Independent
Trustees), or by the Distributor on 60 days' written notice, and will terminate automatically in the event
of its assignment. The Distribution Agreement limits the Distributor's liability to losses resulting from
the Distributor's willful misfeasance, bad faith, gross negligence, or reckless disregard of its
obligations thereunder.
The Funds are newly organized.
As of the date of this SAI, no underwriting commissions have been incurred and the Distributor has not
retained any amounts.
Intermediary Compensation.
From its own resources and not
from Fund assets, the Adviser or its affiliates may make payments to broker-dealers, banks, and other
financial intermediaries ("Intermediaries") in connection with activities related to the Funds, including
marketing, education, and training support (for example, conferences, webinars, or printed materials).
These arrangements are not financed by the Funds, are not included in the fee and expense information in
the Prospectus, and do not affect the price investors pay to buy Shares or the proceeds investors receive
when selling Shares. Such payments may be significant to an Intermediary and may create conflicts of
interest by incentivizing the Intermediary or its financial professionals to recommend the Funds over
other investments. Investors should contact their advisers or other financial professionals for more
information about any such compensation. Intermediary information is current only as of the date of this
SAI. Any payments made by the Adviser or its affiliates may create an incentive for an Intermediary to
encourage customers to purchase Shares.
Such compensation may be
provided to Intermediaries that offer services to the Fund, including marketing and educational support
(for example, through conferences, webinars, or printed materials). The Adviser will periodically review
whether to continue these payments. Compensation to an Intermediary may be significant, and amounts that
Intermediaries pay to your adviser, broker, or other investment professional, if any, may also be
significant to them. Because Intermediaries may determine which investment options to make available or
recommend, and what services to provide in connection with various products, based on the payments they
receive or are eligible to receive, these arrangements create conflicts of interest between the
Intermediary and its clients. For instance, such financial incentives may lead an Intermediary to
recommend the Funds over other investments. The same conflict of interest may arise with respect to your
adviser, broker, or other investment professional if they receive similar payments from their Intermediary
firm.
Distribution (Rule 12b-1)
Plan.
The Trust has adopted a
Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan") for each Fund. No
payments under the Plan are expected to be made during the twelve (12) months from the date of this SAI.
Fees under the Plan may be imposed only after approval by the Board, including a majority of the
Independent Trustees.
Continuance of the Plan must be
approved annually by a majority of the Trustees of the Trust and by a majority of the Trustees who are not
interested persons (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial
interest in the Plan or in any related agreements (the "Independent Trustees"). The Plan may be continued
from year to year only if, at least annually, the Board, including a majority of the Independent Trustees,
concludes that continuation of the Plan is likely to benefit shareholders. The Plan may be terminated at
any time by a vote of the Board or by a vote of a majority of the outstanding voting securities of the
applicable Fund.
The Plan requires quarterly
written reports to be provided to the Board of the amounts expended under the Plan and the purposes for
which such expenditures were made. The Plan may not be amended to increase materially the amount that may
be spent thereunder without approval by a majority of the outstanding voting securities of the applicable
Fund. All material amendments of the Plan require approval by a majority of the Trustees of the Trust and
a majority of the Independent Trustees.
Under the Plan, each Fund may
pay the Distributor an annual fee of up to 0.25% of the Fund's average daily net assets. The Plan is
characterized as a compensation plan because any distribution and/or shareholder servicing fee will be
paid to the Distributor without regard to the Distributor's actual distribution expenses or payments to
other financial intermediaries. The Trust intends to administer the Plan, if implemented, in accordance
with its terms and applicable FINRA rules concerning sales charges.
Subject to applicable law and
regulation, payments under the Plan may be used to finance any activity that is primarily intended to
result in the sale of Creation Units of a Fund or to provide, or arrange for others to provide,
shareholder services and the maintenance of shareholder accounts. Such activities may include, but are not
limited to: (1) delivering current Prospectuses, reports, notices, and similar materials to prospective
purchasers of Creation Units; (2) advertising and other marketing or promotional services; (3)
compensating others, including Authorized Participants with whom the Distributor has written agreements,
for providing shareholder servicing on behalf of a Fund; (4) compensating certain Authorized Participants
for assistance in distributing Creation Units, including related travel and communication expenses and the
salaries and/or commissions of sales personnel; (5) payments to financial institutions and intermediaries
such as banks, savings and loan associations, insurance companies, investment advisers, broker-dealers,
mutual fund supermarkets, and affiliates of the Trust's service providers as compensation for services or
reimbursement of expenses related to distribution assistance; (6) facilitating communications with
beneficial owners of Shares, including the cost of providing, or paying others to provide, services to
such beneficial owners (for example, responding to inquiries related to shareholder accounts); and (7)
such other services and obligations as may be set forth in the Distribution Agreement.
U.S. Bancorp Fund Services, LLC,
doing business as U.S. Bank Global Fund Services (the "Administrator") serves as administrator and fund
accountant to the Trust and the Funds. The Administrator is located at 777 E. Wisconsin Ave, Milwaukee,
Wisconsin 53202. Under an administration agreement between the Trust and the Administrator, the
Administrator provides administrative, accounting, and related services to the Trust and the Funds, which
may include calculation of net asset value, preparation of financial statements and other regulatory
filings, tax and financial reporting support, compliance and governance support, and coordination of
service providers. Subject to Board oversight, the Administrator may provide individuals to serve as
officers of the Trust.
As compensation for its
services, the Administrator is entitled to fees as set forth in the administration agreement, as well as
reimbursement of reasonable out-of-pocket expenses. The Funds are new, and the Administrator has not
received any fees from the Funds as of the date of this SAI.
TRANSFER AGENT AND ETF ORDER
MANAGEMENT
U.S. Bancorp Fund Services, LLC,
doing business as U.S. Bank Global Fund Services (the "Transfer Agent") serves as transfer agent, dividend
disbursing agent, and ETF order-taking agent for the Funds. The Transfer Agent is located at 777 E.
Wisconsin Ave., Milwaukee, Wisconsin 53202. The Transfer Agent maintains the records of Creation Unit
holders, processes orders for the purchase and redemption of Creation Units, and performs certain other
related services. The Transfer Agent is entitled to fees and reimbursement of certain out-of-pocket
expenses as set forth in its agreement with the Trust. In this capacity, the Transfer Agent does not have
responsibility for the management of any Fund, the determination of investment policy, or any matter
relating to the distribution of Shares.
Pursuant to a custody agreement,
U.S. Bank National Association (the "Custodian"), located at 5065 Wooster Rd., Cincinnati, Ohio 45226,
serves as custodian of the Funds' assets. The Custodian holds the assets of the Funds, maintains asset
records, collects income, and performs other customary custodial services. The Custodian may appoint
domestic and foreign sub-custodians as permitted by applicable law. The Custodian is entitled to fees
based on the Funds' assets and to reimbursement of certain out-of-pocket expenses, including settlement
charges.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Tait, Weller & Baker LLP,
located at 50 South 16th Street, Suite 2900, Philadelphia, Pennsylvania 19102, serves as the independent
registered public accounting firm for the Trust and the Funds.
PORTFOLIO HOLDINGS DISCLOSURE
POLICIES AND PROCEDURES
The Board has approved written
policies and procedures governing the disclosure of information about each Fund's portfolio holdings (the
"Holdings Disclosure Policy"). For each Business Day on which a Fund is open for business, the Fund's full
portfolio holdings are made publicly available through financial reporting and news services, including on
publicly available internet websites, and/or on the Trust's website at www.corgifunds.com. In addition,
the composition of the Deposit Securities applicable to purchases and redemptions of Creation Units is
generally disseminated prior to the opening of trading on the Exchange (as defined in the Prospectus)
through the National Securities Clearing Corporation ("NSCC").
For the avoidance of doubt, each
Fund intends to make complete, daily portfolio information available, subject to applicable law and
Exchange requirements. For each Fund, daily disclosure includes derivatives and financing positions (for
example, total return swaps) and any associated cash and collateral holdings.
The Holdings Disclosure Policy
permits disclosure of portfolio information to the Trust's service providers and other parties that have a
legitimate business need for the information to provide services to the Trust, including the
administrator, custodian, transfer agent and ETF order management agent, distributor, pricing and data
vendors, auditors, legal counsel, index calculation agents, and other similar providers (collectively,
"Service Providers"). Any such disclosure is made under conditions of confidentiality and solely for the
purpose of providing services to the Trust. No Fund, the Adviser, or any affiliate receives compensation
or other consideration in connection with the disclosure of non-public portfolio holdings information,
other than fees paid to Service Providers for services rendered.
The Trust's Chief Compliance
Officer ("CCO") administers the Holdings Disclosure Policy, including maintaining a list of Service
Providers and other parties that receive non-public holdings information and the timing of such
disclosures, and reports to the Board at least annually regarding the operation of the policy and any
material issues that have arisen.
Subject to the Holdings
Disclosure Policy, the CCO may authorize immaterial exceptions when the CCO determines that a disclosure
serves a legitimate business purpose, is in the best interests of shareholders, and is subject to
appropriate confidentiality protections. Any such exceptions will be documented and reported to the Board.
The Agreement and Declaration of
Trust (the "Declaration of Trust") of Corgi ETF Trust I (the "Trust") authorizes the issuance of an
unlimited number of shares of beneficial interest, no par value per share, in one or more series and
classes. Each Fund is a separate series of the Trust. Each share of a Fund represents an equal
proportionate interest in the assets of that Fund and is entitled to dividends and distributions, when and
if declared by the Board, and to a pro rata share of the Fund's net assets upon liquidation. Shares are
fully paid and non-assessable when issued, and shareholders have no preemptive or cumulative voting
rights. Each Share entitles its holder to one vote. The Trustees may establish additional series or
classes and may divide or combine shares into a greater or lesser number without shareholder approval, as
permitted by the Declaration of Trust. All consideration received for Shares of a particular series, and
all assets in which such consideration is invested, belong to that series and are subject to its
liabilities.
Shares are issued only in
book-entry form. The Trust does not issue share certificates. Shares are registered in the name of The
Depository Trust Company ("DTC") or its nominee and are held in the account of DTC Participants (or
Indirect Participants). Beneficial ownership of Shares is reflected on the records of DTC and its
participants, and transfers of ownership are effected only through those records. The Trust, the Funds,
and their transfer agent do not have responsibility for the records of beneficial ownership maintained by
DTC or its participants.
Shares of all series of the
Trust vote together as a single class, except that (i) if a matter affects only one series, that series
votes separately, and (ii) if a matter affects a series differently from other series, that series votes
separately on that matter. As a Delaware statutory trust, the Trust is neither required nor intends to
hold annual shareholder meetings. The Trust will hold meetings of shareholders to elect Trustees or for
other purposes as required by the Investment Company Act of 1940, as amended (the "1940 Act"), or as
otherwise determined by the Board. The Trust will call a meeting of shareholders to consider the removal
of one or more Trustees and certain other matters upon the written request of shareholders holding at
least 10% of the outstanding Shares of the Trust entitled to vote at such meeting.
Under the Declaration of Trust,
the Board has the authority to liquidate a Fund without shareholder approval. While the Board has no
present intention to exercise this authority, the Board may do so if a Fund fails to achieve a viable size
within a reasonable period or for such other reasons as the Board determines to be in the best interests
of the Funds and their shareholders.
LIMITATION OF TRUSTEES'
LIABILITY
The Declaration of Trust
provides that a Trustee is liable only for losses resulting from the Trustee's own willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of the office of
Trustee. A Trustee is not liable for errors in judgment or mistakes of fact or law made in good faith.
The Declaration of Trust
provides for indemnification of Trustees and officers (and, upon due approval of the Trustees, other
covered persons) for claims and expenses arising in connection with their service, except to the extent
resulting from willful misfeasance, bad faith, gross negligence, or reckless disregard of duties.
Nothing in this section protects
or indemnifies any person against liability to which they would otherwise be subject under the federal
securities laws.
The Adviser, or any subadviser
it engages with Board approval, is responsible for executing portfolio transactions for the Funds and for
allocating brokerage among eligible broker-dealers, subject to the supervision of the Adviser (if a
subadviser is engaged) and the Board. In carrying out portfolio transactions, the Adviser or any
subadviser seeks the most favorable execution for the Funds, taking into account factors such as price,
applicable commissions or dealer spreads, the size and difficulty of the order, market impact, the quality
of execution and settlement, and the operational capabilities of the broker-dealer. The lowest available
commission is not necessarily the most favorable overall result.
Generally, equity securities,
whether listed or over the counter, are bought and sold through brokerage transactions for which
commissions are payable. Purchases from underwriters will include the underwriting commission or
concession, and purchases from dealers acting as market makers will include the dealers markup or reflect
a markdown. Money market and other debt securities are usually bought directly from the issuer, an
underwriter, or a market maker, and the Funds generally will not pay brokerage commissions for those
purchases. When the Funds effect transactions in the over the counter market, it will generally deal with
primary market makers unless more favorable prices are otherwise obtainable.
The Trust's policy for purchases
and sales of portfolio securities for each Fund is to seek the most favorable overall terms reasonably
available. Primary consideration is given to obtaining effective execution at competitive prices; this
does not require that the lowest available commission be paid in every case. A constant focus on the
lowest commission could, in some circumstances, impair effective portfolio management or the quality of
execution and related services.
In evaluating execution quality
for a particular transaction, the Adviser may consider a range of factors, including but not limited to:
price; commission or commission equivalents; spread; size and difficulty of the order; liquidity and
market impact; timing and speed; likelihood of execution and settlement; access to block trading and
willingness to commit capital; financial condition and operational capabilities of the broker; reliability
and accuracy of communications and clearing; the use of alternative trading systems (including electronic
crossing networks); and the value of research and brokerage services, if any, consistent with Section
28(e) of the Securities Exchange Act of 1934. The relative importance of these factors will vary depending
on the particular transaction.
The Trust has adopted policies
and procedures that prohibit considering the sale of Fund shares as a factor in selecting brokers or
dealers. The Adviser owes a fiduciary duty of best execution and selects the broker or dealer it believes
is most capable of providing the services necessary to obtain the most favorable execution under the
circumstances.
Subject to these policies,
brokers or dealers selected to execute the Funds' portfolio transactions may include Authorized
Participants or their affiliates (see "Purchase and Redemption of Shares in Creation Units"). An
Authorized Participant or its affiliate may be selected in connection with an all-cash creation or
redemption or with orders that include cash-in-lieu, provided such selection is consistent with best
execution and the Trust's policies.
For swaps and other bilateral
derivatives, the Adviser selects counterparties based on a range of factors, which may include pricing,
execution quality, creditworthiness, collateral terms, operational capabilities, and overall relationship.
These transactions are not executed through traditional brokerage in the same manner as equity trades, and
commissions may not be paid. For exchange-traded futures and options, the Funds incur exchange fees and
pay commissions or other charges to their futures commission merchants. The Adviser seeks best overall
terms reasonably available under the circumstances.
The Trust does not expect to
use any single broker-dealer exclusively. When one or more brokers are believed capable of providing the
best combination of price and execution, the Adviser (or any subadviser) may consider brokerage or
research services provided to the Adviser in selecting among such brokers, and may pay a higher commission
than might otherwise be available if it makes a good faith determination that the commission is reasonable
in relation to the value of the services provided.
Brokerage and Research
Services; Section 28(e).
Where permitted by law, the
Adviser may cause a Fund to pay a broker a commission in excess of that which another broker might have
charged in recognition of brokerage and research services provided, consistent with Section 28(e).
Research services may include, among other things, market data and analytics, portfolio analytics,
execution management and order handling tools that are directly related to investment research, and access
to company or industry information. The Adviser will not cause a Fund to pay a commission greater than is
reasonable in relation to the value of the brokerage and research services provided, viewed in terms of
either that particular transaction or the Adviser's overall responsibilities, in accordance with Section
28(e). The Adviser may also receive proprietary research that is bundled with execution services. The
Adviser may use research services obtained for the benefit of any account it manages, and not all such
services will necessarily be used in connection with the account that generated the commissions. This may
create an incentive to select or recommend brokers based on the research services they provide; the
Adviser monitors these arrangements and reports to the Board as part of the Trust's brokerage oversight
program. The Adviser does not currently use Fund assets for, or participate in, third party soft dollar
arrangements and does not receive proprietary research from full service brokers. The Adviser also does
not increase commissions to pay up for any such proprietary research. If, in the future, the Adviser (or
any subadviser) obtains brokerage or research services from broker-dealers, it would do so only in
arrangements consistent with Section 28(e) of the Securities Exchange Act of 1934.
Aggregation and Allocation.
When the Adviser considers
purchases or sales for a Fund at or about the same time as for other accounts it manages, transactions may
be aggregated to seek more favorable execution. Orders are allocated among participating accounts in a
manner the Adviser believes to be fair and equitable over time. Aggregation may, in some cases, adversely
affect the price or size of the position for a Fund; in other cases, it may be beneficial, for example, by
enabling participation in larger transactions or by reducing commissions. From time to time, the Adviser
may place a combined order for two or more accounts it manages, including the Funds, when it believes
combined execution is in the best interest of each participant and will result in best price and
execution. Although joint execution could adversely affect the price or volume obtained by a particular
account, in the Adviser's judgment, subject to Board oversight, the advantages of combined orders
generally outweigh the possible disadvantages.
Affiliated Brokerage;
Principal Transactions.
Each Fund may effect brokerage
transactions through registered broker-dealer affiliates of the Trust or the Adviser, to the extent
permitted by the Investment Company Act of 1940 (the "1940 Act"), the Exchange Act, and SEC rules,
including any applicable procedures adopted by the Board (including procedures consistent with Rule 17e-1
under the 1940 Act). Commissions paid to an affiliate will not exceed amounts that are reasonable and fair
compared to commissions charged by others for comparable transactions. Principal transactions with
affiliates are prohibited unless permitted by rule, regulation, or exemptive relief.
The Funds do not have any
practice of directing brokerage for the promotion or sale of Fund shares. The Funds are newly organized
and, as of the date of this SAI, have not paid commissions on brokerage transactions directed to brokers
pursuant to any arrangement for research or brokerage services.
Regular Brokers or Dealers.
Each Fund is required to
identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or
their parents held by the Funds as of the end of the most recent fiscal year. This information is not
provided because the Funds had not yet completed their first fiscal year of operations as of the date of
this SAI.
No brokerage commission
information is provided since the Funds had not yet completed their first fiscal year of operations as of
the date of this SAI.
The portfolio turnover rate is,
in general terms, the percentage obtained by dividing the lesser of a Fund's purchases or sales of
securities (excluding short-term instruments and securities received or delivered in-kind) by the average
value of the Funds during the period. A rate of 100% indicates that the equivalent of the Fund's entire
portfolio has been bought and sold during a year. Higher turnover may increase transaction costs and may
affect the amount, timing, and character of distributions for tax purposes. To the extent a Fund realizes
net short-term capital gains, distributions attributable to those gains will be treated as ordinary income
for federal income tax purposes.
Because the Funds rebalance
their exposure daily and primarily use derivatives, their portfolio turnover rate (as calculated pursuant
to SEC rules) may be higher than that of traditional index funds, and reported turnover may not fully
reflect the extent of derivatives activity. Periods of elevated market volatility typically increase
trading activity and costs.
Each Fund is new and does not
have a portfolio turnover rate to report as of the date of this SAI.
The Depository Trust Company
("DTC") acts as securities depository for the Shares. Shares are represented by securities registered in
the name of DTC or its nominee, Cede & Co., and are deposited with, or on behalf of, DTC. Certificates
will not be issued for Shares.
DTC is a limited-purpose trust
company and a member of the Federal Reserve System, a "clearing agency" registered with the SEC, and a
subsidiary of The Depository Trust & Clearing Corporation. DTC holds securities of its participants
("DTC Participants") and facilitates the clearance and settlement of securities transactions among DTC
Participants through electronic book-entry changes in accounts of DTC Participants, thereby eliminating
the need for physical movement of certificates. DTC Participants include broker-dealers, banks, trust
companies, clearing corporations, and other organizations. Access to the DTC system is also available to
others such as banks, brokers, and dealers that clear through or maintain a custodial relationship with a
DTC Participant, either directly or indirectly ("Indirect Participants").
Beneficial ownership of Shares
is limited to DTC Participants, Indirect Participants, and persons holding interests through DTC
Participants or Indirect Participants (collectively, "Beneficial Owners"). Ownership of beneficial
interests in Shares is shown on, and the transfer of ownership is effected only through, records
maintained by DTC (for DTC Participants) and by DTC Participants (for Indirect Participants and Beneficial
Owners). The Trust recognizes DTC or its nominee as the record owner of all Shares for all purposes.
Beneficial Owners are not entitled to have Shares registered in their names and will not receive physical
delivery of Share certificates. Beneficial Owners must rely on the procedures of DTC and the DTC
Participant or Indirect Participant through which they hold Shares to exercise rights of a holder of
Shares.
Notices, statements, and other
communications to Beneficial Owners will be transmitted through DTC and DTC Participants. Distributions of
dividends and other amounts with respect to Shares will be made to DTC or its nominee, which will credit
DTC Participants' accounts in proportion to their respective beneficial interests. Payments by DTC
Participants to Indirect Participants and to Beneficial Owners will be governed by standing instructions
and customary practices and are the responsibility of such DTC Participants and Indirect Participants, and
not of the Trust, the Funds, or their service providers.
DTC may discontinue providing
depository services with respect to Shares at any time by giving reasonable notice in accordance with its
procedures and applicable law. Under such circumstances, the Trust will seek a replacement for DTC to
perform its functions at a comparable cost; if a replacement is not available, the Trust may make other
arrangements, which may include issuing printed certificates, as permitted by applicable law (and, if
required, in a manner satisfactory to the Fund's listing exchange). The Trust, the Funds, and their
service providers have no responsibility for records, notices, or payments maintained or transmitted by
DTC, DTC Participants, or Indirect Participants.
PURCHASE AND REDEMPTION OF
SHARES IN CREATION UNITS
The Trust issues and redeems
shares of each Fund (the "Shares") only in aggregations of a specified number of Shares ("Creation Units")
on a continuous basis, without a sales load but subject to applicable transaction fees. Creation and
redemption orders are effected at the net asset value ("NAV") per Share next determined after an order is
received in proper form and accepted on a Business Day by the Trust through its transfer agent (the
"Transfer Agent") in accordance with an Authorized Participant Agreement (a "Participant Agreement"). Each
Fund's NAV is calculated on each Business Day as of the scheduled close of regular trading on the primary
listing exchange for the Shares (generally 4:00 p.m., Eastern Time). A "Business Day" is any day on which
the Exchange is open for regular trading. The Funds do not issue fractional Creation Units. Each Creation
Unit consists of 25,000 Shares (or such other amount as the Trust may determine and disclose).
The Trust generally expects to
permit or require cash creations and redemptions for each Fund in light of the Fund's use of derivatives
to achieve its objective. From time to time, a Fund may require all-cash creations and/or redemptions.
Cash transactions may cause a Fund to incur costs, including costs of entering into or unwinding
derivatives positions, which may be passed through to Authorized Participants via transaction fees
designed to approximate the Fund's costs.
The consideration for a
purchase of a Creation Unit (the "Fund Deposit") generally consists of (i) a designated basket of
securities (the "Deposit Securities") together with (ii) a cash amount (the "Cash Component"). The Cash
Component equals the difference between the NAV of a Creation Unit and the aggregate value of the Deposit
Securities, and may be a positive or negative amount. The Trust may permit or require the substitution of
cash in lieu of some or all Deposit Securities ("Deposit Cash"). When a Fund accepts cash (in whole or in
part), a Fund may incur costs associated with acquiring portfolio positions that would otherwise have been
delivered in kind; such costs may be borne by the Fund, by an Authorized Participant, or otherwise as set
forth in the Participant Agreement.
A Funds Deposit (Deposit
Securities or Deposit Cash, as applicable, plus the Cash Component) represents the minimum initial and
subsequent investment for a Creation Unit. Computation of the Cash Component excludes any stamp duties,
transfer taxes, or other similar charges associated with the transfer of beneficial ownership of Deposit
Securities, which are the responsibility of the Authorized Participant.
On each Business Day, prior to
the opening of regular trading on the Exchange (currently 9:30 a.m., Eastern Time), the names and required
quantities of Deposit Securities (or the required amount of Deposit Cash, as applicable) for each Fund,
together with the Cash Component, are disseminated via the National Securities Clearing Corporation
("NSCC") based on information as of the close of the prior Business Day. The composition of the Fund
Deposit is subject to change and may differ from a Fund's portfolio holdings for a variety of reasons (for
example, corporate actions, or operational considerations). Because each Fund may obtain exposure through
derivatives such as total return swaps, the Trust may from time to time require cash creations and/or cash
redemptions, in whole or in part, to reflect a Fund's investment strategy.
Each Fund may accept or deliver
"custom baskets" (i.e., baskets that are not a pro rata slice of the Fund's portfolio) consistent with
Rule 6c-11 under the Investment Company Act of 1940, as amended (the "1940 Act"). The Adviser has adopted
written policies and procedures governing the construction, acceptance, and oversight of custom baskets,
which are subject to Board of Trustees (the "Board") oversight.
Eligibility to Transact;
Authorized Participants.
Orders for Creation Units may
be placed only by entities that are (i) participants in the NSCC's Continuous Net Settlement system (each,
a "Participating Party") or (ii) participants in The Depository Trust Company ("DTC") (each, a "DTC
Participant") and, in each case, that have executed a Participant Agreement with respect to the relevant
Fund (each such entity, an "Authorized Participant"). An Authorized Participant agrees, among other
things, to pay the Cash Component, applicable creation transaction fees, and any taxes or other charges in
connection with an order.
An investor transacting through
a broker that is not an Authorized Participant must route orders through an Authorized Participant, and
such investor may incur additional charges. At any given time, only a limited number of broker-dealers may
have executed a Participant Agreement, and only a subset may support all order types or international
settlement capabilities.
Placing Purchase Orders;
Cut-Offs.
All orders to purchase Shares
directly from a Fund must be for one or more whole Creation Units and must be submitted in the manner and
by the deadline specified in the Participant Agreement and/or applicable order form. Unless otherwise
specified, the purchase order cut-off time is expected to be 4:00 p.m. Eastern Time and may be modified by
the Fund. The date on which a purchase order (or a redemption order, as described below) is received in
proper form and accepted is the "Order Placement Date." On days when the Exchange closes earlier than
normal, the Funds may require that orders be placed earlier. If a market on which a Fund's portfolio
investments principally trade is closed, the Fund generally will not accept orders on such day.
Delivery of the Fund Deposit;
Settlement; Additional Cash Deposit.
Fund Deposits must be delivered
by an Authorized Participant through DTC (for equity securities), through the Federal Reserve wire system
(for cash), and/or through other arrangements acceptable to the Trust or its agents. The cash portion must
be received by the custodian (the "Custodian") no later than the contractual settlement date. The typical
settlement cycle for each creation transaction is one Business Day after the trade date ("T+1"), unless
otherwise agreed by the Fund and the Authorized Participant or as permitted by Rule 15c6-1 under the
Securities Exchange Act of 1934 (the "Exchange Act").
The Funds may permit a creation
order to proceed before all Deposit Securities have been received. In such cases, the Authorized
Participant must deposit additional cash collateral (the "Additional Cash Deposit") by 4:00 p.m. Eastern
Time on the contractual settlement date (or such other time as specified). The Additional Cash Deposit is
held in a non-interest bearing account and is subject to increase or decrease until all missing Deposit
Securities are received. The Trust may purchase missing Deposit Securities at any time; the Authorized
Participant will be liable to the Trust for any costs of such purchases (including any difference between
the actual purchase price and the value used for Fund Deposit purposes, plus related transaction costs).
Any unused portion of the Additional Cash Deposit will be returned once all missing Deposit Securities
have been received or purchased and deposited into the Fund. If the Fund does not receive all required
components by the specified time, the order may be canceled; upon written notice to the Transfer Agent,
such canceled order may be resubmitted on the next Business Day using the then-current Fund Deposit.
Deemed Receipt; Proper Form.
An order is deemed received on
the Business Day it is placed only if it is in proper form prior to the applicable cut-off time and
federal funds in the appropriate amount are deposited with the Custodian on the contractual settlement
date by 4:00 p.m. Eastern Time (or such other time as specified). If proper form or funds are not timely
received, the order may be rejected and the Authorized Participant may be liable for any resulting losses.
Issuance of Creation Units.
Except as otherwise provided,
Creation Units will not be issued until (i) the Transfer Agent has verified receipt of the required
Deposit Securities or Deposit Cash, as applicable, (ii) the Custodian has received the Cash Component and
any required Additional Cash Deposit, and (iii) all other conditions to creation have been satisfied. Upon
confirmation, the Trust will issue and deliver the Creation Units, typically no later than the contractual
settlement date. The Authorized Participant is responsible for any losses resulting from untimely delivery
of required components.
Acceptance or Rejection of
Purchase Orders.
The Trust reserves the right to
reject any creation order, including if: (1) the order is not in proper form; (2) the Fund Deposit
(including the names or quantities of Deposit Securities or the amount of Deposit Cash) does not match the
information disseminated through NSCC for that date; (3) the investor(s), upon obtaining the Shares
ordered, would beneficially own 80% or more of the outstanding Shares of the Fund (the Trust reserves the
right to require information reasonably necessary to determine beneficial ownership for purposes of this
80% test); (4) acceptance of the Fund Deposit would, in the judgment of the Trust, be unlawful; (5)
acceptance or receipt of the order would, in the opinion of counsel to the Trust, be unlawful; or (6)
circumstances outside the control of the Trust, the Custodian, any sub-custodian, the Transfer Agent,
and/or the Adviser make it impracticable to process orders. Illustrative examples include natural
disasters; extreme weather; fires or floods; widespread utility or telecommunications outages; market-wide
trading halts; or systems failures affecting the Trust, the distributor, the Custodian or any
sub-custodian, the Transfer Agent, DTC, NSCC, the Federal Reserve System, or other participants. The
Transfer Agent will notify a prospective creator and/or its Authorized Participant of any rejection. The
Trust, the Transfer Agent, the Custodian, any sub-custodian, and the distributor have no duty to notify of
defects or irregularities in any Fund Deposit and shall not be liable for failure to give such notice. The
Trust will exercise any right to reject orders in a manner consistent with Rule 6c-11 and related SEC
guidance, including with respect to limited suspensions and extraordinary circumstances, and in a manner
designed not to impair the arbitrage mechanism.
All questions as to the
composition of the Fund Deposit, the number of shares of each Deposit Security, and the validity, form,
eligibility, and acceptance of any securities or cash tendered will be determined by the Trust, and the
Trust's determinations will be final and binding.
Creation Transaction Fees.
A fixed creation transaction
fee of $300 may be imposed to offset transfer and other transaction costs associated with processing
creation orders. The fixed fee is payable to the Custodian (or another service provider, as applicable)
and applies to each creation order regardless of the number of Creation Units purchased in that order. The
fixed fee may be changed from time to time and may be waived for certain orders if the Fund determines to
waive all or part of the costs, or if another party (such as the Adviser) agrees to pay such fee.
In addition, for cash creations,
partial cash creations, or non-standard orders, a variable fee payable to the Fund of up to 3.00%, which
may be charged in addition to the fixed transaction fee, may be charged to cover the Fund's trading costs,
taxes, and other expenses related to purchasing portfolio investments with cash. The Adviser may determine
not to impose a variable fee when it believes doing so is in the best interests of shareholders.
Investors who use the services
of a broker or other intermediary may be charged a fee for such services. Investors are responsible for
any costs of transferring securities to or from their accounts as part of the creation process.
Risks of Purchasing Creation
Units.
Purchases of Creation Units
directly from a Fund involve certain legal risks. Because Shares may be continuously offered, a
"distribution" could be occurring at any time. Depending on the facts and circumstances, activities of a
shareholder may cause the shareholder to be deemed a statutory underwriter under the Securities Act of
1933 (the "Securities Act") and subject to prospectus delivery and liability provisions. For example, a
shareholder may be deemed a statutory underwriter if it purchases Creation Units, breaks them into Shares,
and sells those Shares directly to customers, or combines the creation of new Shares with an active
selling effort. Whether a person is an underwriter depends on all facts and circumstances. Dealers
participating in a distribution and dealing with Shares as part of an "unsold allotment" within the
meaning of Section 4(a)(3)(C) of the Securities Act may be unable to rely on the prospectus delivery
exemption provided by Section 4(a)(3) of the Securities Act.
Shares may be redeemed only in
Creation Units at the NAV next determined after a redemption request in proper form is received and
accepted by the Fund through the Transfer Agent on a Business Day. Except upon liquidation of a Fund, the
Trust does not redeem Shares in amounts less than a Creation Unit. Investors who are not Authorized
Participants must accumulate sufficient Shares in the secondary market to constitute a Creation Unit to
redeem. There can be no assurance that secondary-market liquidity will always permit assembly of a
Creation Unit; investors should expect to incur brokerage and other costs in connection with aggregating
Shares.
Prior to the opening of regular
trading on the Exchange on each Business Day, the Custodian, through NSCC, makes available the list of
names and quantities of portfolio securities (the "Fund Securities") and the cash amount, if any, that
will be applicable to redemption requests received that day in proper form. Fund Securities received upon
redemption may differ from the Deposit Securities applicable to creations.
Redemption proceeds are paid in
kind, in cash, or a combination thereof, as determined by the Trust in its discretion. For in-kind
redemptions, redemption proceeds for a Creation Unit generally consist of the Fund Securities announced
for that day, plus or minus a cash amount equal to the difference between the NAV of the Shares being
redeemed and the value of the Fund Securities (the "Cash Redemption Amount"), less applicable fees. When
the value of the Fund Securities exceeds the NAV of the Shares being redeemed, the redeeming shareholder
will be required to pay the difference in cash through its Authorized Participant. The Trust may, in its
discretion, substitute cash for any Fund Security.
The typical settlement cycle for
each redemption transaction is T+1, unless otherwise agreed by the Fund and the Authorized Participant or
as permitted by Rule 15c6-1 under the Exchange Act. In certain cases (for example, due to local market
holidays or other market conditions), settlement of redemption proceeds may occur later.
Redemption Transaction Fees.
A fixed redemption transaction
fee of $300 may be imposed to offset transfer and other transaction costs associated with processing
redemption orders. The fixed fee is payable to the Custodian (or another service provider, as applicable)
and applies to each redemption order, regardless of the number of Creation Units redeemed. The fixed fee
may be changed from time to time and may be waived for certain orders if the Fund determines to waive all
or part of the costs, or if another party (such as the Adviser) agrees to pay such fee.
In addition, for cash
redemptions, partial cash redemptions, or non-standard orders, a variable fee payable to the Fund of up to
3.00%, which may be charged in addition to the fixed transaction fee, may be charged to cover the Fund's
trading costs, taxes, and other expenses related to selling portfolio investments to raise cash. The
Adviser may determine not to impose a variable fee when it believes doing so is in the best interests of
shareholders.
Investors who use the services
of a broker or other intermediary may be charged a fee for such services. Investors are responsible for
any costs of transferring Fund Securities from the Trust to their account or as otherwise directed.
Procedures for Redemption of
Creation Units; Cut-Offs.
Redemption orders must be
submitted in proper form to the Transfer Agent by an Authorized Participant prior to 4:00 p.m. Eastern
Time (or such other time as specified in the Participant Agreement and/or applicable order form). A
redemption request is in proper form if: (i) the Authorized Participant has transferred, or caused to be
transferred, the Creation Unit(s) being redeemed through DTC to the account of the Transfer Agent by the
time specified; and (ii) the Transfer Agent has received an acceptable redemption request from the
Authorized Participant within the time periods specified. If Shares are not received through DTC's
facilities by the required time, or the request otherwise is not in proper form, the redemption request
will be rejected.
Additional Redemption
Procedures.
A redeeming shareholder or an
Authorized Participant acting on its behalf must maintain appropriate custody arrangements to receive Fund
Securities. The Trust may, in its discretion, require or permit cash redemptions. In either case, the
redeeming investor will receive a cash amount equal to the NAV of the Shares next determined after receipt
of a redemption request in proper form, less applicable fees and charges (including any variable fee for
cash redemptions). Upon request, the Trust may deliver a basket of securities that differs from the
announced Fund Securities but does not differ in NAV.
Redemptions in kind are subject
to applicable federal and state securities laws. The Trust reserves the right to redeem Creation Units for
cash to the extent it could not lawfully deliver specific Fund Securities or could not do so without first
registering such securities. An Authorized Participant or an investor for which it is acting that is
subject to a legal restriction with respect to a particular Fund Security may receive an equivalent amount
of cash. An Authorized Participant that is not a "qualified institutional buyer" ("QIB") as defined in
Rule 144A under the Securities Act will be unable to receive Fund Securities that are restricted
securities eligible for resale under Rule 144A; the Trust may require written confirmation of QIB status
as a condition to delivery of such securities.
Suspension of Redemptions.
The right of redemption may be
suspended or the date of payment postponed: (1) for any period when the Exchange is closed (other than
customary weekend and holiday closings); (2) for any period when trading on the Exchange is suspended or
restricted; (3) for any period when an emergency exists that makes it not reasonably practicable to
dispose of Shares or determine NAV; or (4) in such other circumstances as are permitted by the SEC. The
Trust will administer any suspension in a manner consistent with Rule 6c-11 and related SEC guidance and
in a manner designed not to impair the arbitrage mechanism.
DETERMINATION OF NET ASSET
VALUE
NAV per Share for each Fund is
computed by dividing the value of the Fund's net assets (the value of total assets minus total
liabilities) by the total number of Shares outstanding, rounded to the nearest cent. Expenses and fees
(including any management fees) accrue daily and are reflected in the determination of NAV.
The NAV of each Fund is
calculated by the Administrator as of the scheduled close of regular trading on the Fund's primary listing
exchange (generally 4:00 p.m., Eastern Time) on each day that the exchange is open for regular trading. If
market closures or early closes affect particular asset classes (for example, an early close for certain
fixed-income markets announced by the Securities Industry and Financial Markets Association, "SIFMA"),
valuations for those holdings may reflect the earlier close on such day.
In valuing portfolio
investments, each Fund generally uses market-based valuations. Prices may be obtained from one or more
pricing services, directly from an exchange or trading venue, from quotations of major market makers or
dealers, or, where appropriate, using amortized cost for short-term instruments. For investments that
trade on an exchange, a market valuation generally refers to the last reported sale price or official
closing price. Investments and other assets (and liabilities) denominated in currencies other than U.S.
dollars are converted to U.S. dollars at current market rates as quoted by one or more sources on the
valuation date.
When market quotations are not
"readily available" or are deemed unreliable, the Fund will determine a fair value in accordance with Rule
2a-5 under the Investment Company Act of 1940. The Board has adopted valuation policies and procedures and
has designated the Adviser as the Fund's valuation designee (the "Valuation Designee") pursuant to Rule
2a-5 to perform fair value determinations, subject to Board oversight. Fair value methodologies may
consider, among other things, evaluated prices from pricing services, model inputs, observable market
data, corporate actions, trading halts, significant events occurring after market close, and, for
derivatives, counterparty quotations and collateral. The use of fair value prices may result in values
that differ from quoted or published prices and may cause the Fund's NAV to differ from the value of an
index at a point in time.
Derivatives used to obtain
leveraged exposure (for example, swaps, futures, and options) are valued pursuant to the Fund's valuation
procedures. Depending on the instrument, valuation inputs may include exchange settlement prices,
quotations from one or more dealers or pricing services, models that reference observable market data,
and, when appropriate, values of related instruments such as an exchange-traded fund designed to track the
Fund's relevant Underlying Security or benchmark (particularly if that benchmark level is not computed as
of the U.S. market close). When market quotations are not readily available or are deemed unreliable, such
instruments are valued at fair value in good faith under the Fund's Rule 2a-5 procedures.
DIVIDENDS AND DISTRIBUTIONS
The following supplements, and
should be read with, the Prospectus section titled "Dividends, Distributions, and Taxes."
Each Fund intends to distribute
substantially all of its net investment income, if any, at least annually, and to distribute any net
realized capital gains to shareholders at least annually. The Funds may make additional distributions as
necessary to meet distribution requirements under the Internal Revenue Code of 1986, as amended (the
"Code"), in a manner consistent with the Investment Company Act of 1940 and to minimize federal excise
taxes.
Distributions of income and
capital gains, if any, are declared and paid in cash. Dividends and other distributions on Shares are made
on a pro rata basis to beneficial owners of record through Depository Trust Company ("DTC") participants
and indirect participants, with proceeds transmitted by the Trust to DTC for allocation to DTC
participants and then to beneficial owners.
The Trust may declare special
dividends or other distributions if, in its reasonable discretion, such action is necessary or advisable
to maintain a Fund's status as a regulated investment company ("RIC") or to avoid Fund-level income or
excise taxes on undistributed amounts. Each Fund intends to make distributions in amounts and at times
intended to avoid the 4% federal excise tax described under "Federal Income Taxes" below.
Use of derivatives may cause
each Fund to recognize income, gain, or loss for tax and accounting purposes without a corresponding
receipt or payment of cash in the same period. As a result, the Fund may be required to sell investments,
including derivatives, at times it would not otherwise do so in order to meet distribution requirements.
Dividend reinvestment service.
The Trust does not offer a DTC
book-entry dividend reinvestment service. However, certain broker-dealers may offer a dividend
reinvestment service for beneficial owners through DTC participants. Investors should contact their
brokers to determine availability, applicable procedures, and any deadlines. If such a service is used,
distributions will be reinvested in additional whole Shares at the then-current NAV, and such reinvested
amounts will be taxable to the same extent as if received in cash.
The following is a summary of
certain U.S. federal income tax considerations generally affecting the Funds and their shareholders. It
supplements the Prospectus and is not a complete discussion of all tax matters that may be relevant. This
summary is based on current provisions of the Code, Treasury regulations, judicial decisions, and
administrative rulings and guidance, all of which are subject to change (possibly with retroactive
effect). Investors should consult their own tax advisers about federal, state, local, and foreign tax
consequences to them in light of their particular circumstances.
Each Fund intends to elect and
qualify each year for treatment as a RIC under the Code. If a Fund qualifies as a RIC and distributes its
income and gains in a timely manner to shareholders, the Fund generally will not be subject to U.S.
federal income tax on the income and gains it distributes. To qualify as a RIC, among other requirements,
a Fund must (1) distribute in each taxable year at least 90% of its "investment company taxable income"
and 90% of its net tax-exempt income, if any (the "Distribution Requirement"); (2) derive at least 90% of
its gross income each taxable year from certain qualifying sources such as dividends, interest, gains from
the sale or other disposition of stock, securities, or foreign currencies, or income derived with respect
to its business of investing in such stock, securities, or currencies (the "Qualifying Income
Requirement"); and (3) satisfy certain asset diversification tests at the end of each quarter (the
"Diversification Requirement").
To the extent a Fund invests in
instruments that may generate income that is not qualifying income (which can include certain
derivatives), the Fund intends to monitor and limit such investments so that its non-qualifying income
does not exceed 10% of gross income. If a Fund were to fail the Qualifying Income Requirement or the
Diversification Requirement, relief provisions may be available in limited circumstances if the failure is
due to reasonable cause and not willful neglect and the Fund pays a penalty tax and/or takes corrective
action. If relief were not available and a Fund failed to qualify for RIC treatment for a taxable year,
the Fund would be subject to tax at the Fund level on all of its taxable income at corporate rates, and
distributions from earnings and profits (including distributions of net capital gain) would be taxable to
shareholders as ordinary income. The Fund could be required to recognize and distribute earnings and
profits as a condition to requalifying as a RIC in a subsequent year.
A Fund may elect to treat part
or all of certain "late-year losses" as incurred in the following taxable year for purposes of determining
its taxable income and distributions. Net capital losses (capital losses in excess of capital gains)
generally may be carried forward indefinitely by a RIC to offset future capital gains, subject to
limitations. The carryover of losses may be limited following certain ownership changes.
Each Fund may be subject to a 4%
nondeductible federal excise tax on certain undistributed amounts if it does not distribute during each
calendar year at least (i) 98% of its ordinary income for the calendar year and (ii) 98.2% of its capital
gain net income for the one-year period ending on October 31 (or, if the Fund makes an election, for its
fiscal year), plus any shortfalls from the prior year. The Funds intend to make distributions in amounts
and at times intended to minimize excise tax, but there can be no assurance that all such liability will
be eliminated.
If a Fund retains net capital
gain, it may designate the retained amount as "undistributed capital gains" in a notice to shareholders.
In that case, shareholders would (i) be required to include their share of such undistributed amount in
income as long-term capital gain, (ii) be entitled to a credit for their share of the tax paid by the Fund
on such undistributed amount, and (iii) increase their tax basis in Shares by the excess of the amount
included in income over the tax deemed paid.
Taxation of shareholders -
distributions.
Distributions of a Fund's
"investment company taxable income" (computed without regard to the dividends-paid deduction) are taxable
to shareholders as ordinary income, whether paid in cash or reinvested. Distributions of a Fund's net
capital gain (net long-term capital gains in excess of net short-term capital losses) are taxable as
long-term capital gains, regardless of how long a shareholder has held Shares. A portion of ordinary
income dividends paid to non-corporate shareholders may be eligible to be taxed at the reduced rates
applicable to "qualified dividend income" if certain holding period and other requirements are met by both
the Fund and the shareholder. To the extent properly reported, certain dividends received by corporate
shareholders may be eligible for the dividends-received deduction, subject to holding period and other
limitations.
Distributions are generally
taxable when paid; however, any dividend declared in October, November, or December with a record date in
such month and paid in January is treated for U.S. federal income tax purposes as received on December 31
of the year declared. Distributions may also be subject to state and local taxes.
If a Fund's distributions exceed
its current and accumulated earnings and profits, all or a portion of such excess will be treated as a
return of capital to shareholders, reducing each shareholder's tax basis in Shares (and, after such basis
is reduced to zero, resulting in capital gain).
Taxation of shareholders -
sale or exchange of Shares.
A sale or other taxable
disposition of Shares generally will result in a capital gain or loss equal to the difference between the
amount realized and the shareholder's adjusted tax basis in the Shares. The gain or loss will be long-term
if the Shares were held for more than one year, and short-term otherwise. Any loss realized on a
disposition of Shares held for six months or less will be treated as long-term capital loss to the extent
of any amounts treated as long-term capital gain that were distributed (or deemed distributed) with
respect to such Shares. Losses may be disallowed under the "wash sale" rules if substantially identical
Shares are acquired within 30 days before or after the disposition. Shareholders should consult their
brokers regarding available cost-basis reporting methods and elections.
Special and Complex Rules
Applicable to Derivatives.
Each Fund's investments in
derivatives are subject to special and complex U.S. federal income tax rules that can affect the
character, timing, and amount of the Fund's income, gains, losses, and distributions.
Certain exchange-traded futures
and options may be treated as "Section 1256 contracts" and are required to be marked to market at year
end. Gains or losses on Section 1256 contracts generally are treated as 60% long-term and 40% short-term
capital gain or loss, regardless of holding period, and may be required to be recognized for tax purposes
even if no corresponding cash is received.
Payments (or accruals) under
swap agreements and other non-Section 1256 derivatives generally are treated as ordinary income or loss.
The "straddle," "wash sale," and "constructive sale" rules may defer losses, accelerate recognition of
gains, or otherwise affect the character of the Fund's income and gains. The Fund's use of derivatives
could also affect whether the Fund has made sufficient distributions to maintain its qualification as a
regulated investment company and to avoid fund-level tax. Shareholders should consult their tax advisers
regarding how these rules may affect their own tax situation. See Federal Income Taxes in this SAI for
additional details.
Creations and redemptions by
Authorized Participants.
An Authorized Participant that
exchanges securities for Creation Units generally will recognize gain or loss equal to the difference
between the market value of the Creation Units at the time and the sum of the Authorized Participant's
aggregate basis in the securities surrendered plus the cash paid, if any. An Authorized Participant that
redeems Creation Units generally will recognize gain or loss equal to the difference between the
Authorized Participant's basis in the Creation Units and the sum of the aggregate market value of any
securities received plus the cash received, if any. The Internal Revenue Service may take the position
that a loss realized upon an exchange of securities for Creation Units may be disallowed under the wash
sale rules (for an exchanger that does not mark-to-market) or on the basis that there has been no
significant change in economic position. If, after a creation, a purchaser (or group) would own 80% or
more of a Fund's outstanding Shares and Section 351 of the Code otherwise would apply, the Fund may reject
the order and may require beneficial ownership information reasonably necessary to evaluate the
application of Section 351. If the Fund nonetheless issues Creation Units in such circumstances, the
Authorized Participant may not recognize gain or loss on the exchange. Authorized Participants should
consult their own tax advisers.
Taxation of Fund investments.
Certain investments (including,
without limitation, derivatives, foreign currency contracts, and transactions subject to the "straddle,"
"constructive sale," or "mark-to-market" rules) may be subject to complex provisions of the Code that,
among other things, could affect the character of gains and losses realized by a Fund, accelerate the
recognition of income to a Fund, defer losses, or affect whether income is qualifying income for RIC
purposes. These rules may also require a Fund to recognize income or gains without a corresponding receipt
of cash, potentially requiring the Fund to sell securities to meet the Distribution Requirement. Each Fund
intends to monitor transactions, make appropriate elections, and maintain books and records as required to
mitigate adverse tax consequences and preserve RIC status.
Backup withholding and
reporting.
A Fund may be required to
withhold federal income tax ("backup withholding") from dividends, capital gain distributions, and
redemption proceeds payable to shareholders who fail to provide a correct taxpayer identification number,
who are subject to backup withholding due to under-reporting, who fail to certify that they are not
subject to backup withholding, or who fail to certify their U.S. status. Backup withholding is not an
additional tax and amounts withheld may be credited against a shareholder's federal income tax liability.
Net investment income tax.
Certain individuals, trusts,
and estates are subject to a 3.8% tax on their "net investment income," (the "NII tax") which generally
includes distributions from a Fund and net gains from the sale or other disposition of Shares.
Distributions to non-U.S.
shareholders generally will be subject to U.S. withholding tax at the rate of 30% (or a lower applicable
treaty rate) to the extent derived from ordinary income. Subject to certain requirements, a Fund may
report a portion of its distributions as "interest-related dividends" or "short-term capital gain
dividends," which generally are exempt from such withholding for non-U.S. shareholders; special rules and
exceptions apply, including for individuals present in the United States for 183 days or more during the
year. Gains realized by non-U.S. shareholders on the sale of Shares generally are not subject to U.S.
federal income tax, subject to certain exceptions. Non-U.S. shareholders may be subject to backup
withholding if they fail to provide required certifications.
Under the Foreign Account Tax
Compliance Act ("FATCA"), a Fund may be required to withhold 30% on ordinary income distributions paid to
certain foreign financial institutions and non-financial foreign entities that fail to satisfy
documentation, reporting, or other requirements. FATCA may also affect a Fund's returns on certain
investments. Investors should consult their tax advisers regarding FATCA.
Tax-exempt investors (including
retirement plans and IRAs) are generally exempt from federal income tax on Fund distributions and gains,
except to the extent that such amounts constitute unrelated business taxable income ("UBTI"). In certain
circumstances, investments by a Fund (for example, in residual interests of real estate mortgage
investment conduits or certain real estate investment trusts) could generate UBTI to tax-exempt
shareholders. Tax-exempt investors should consult their tax advisers.
Shareholders may be required to
file IRS Form 8886 if they recognize a loss on a disposition of Shares that exceeds applicable thresholds.
Significant penalties may apply for failure to comply with reporting requirements. The fact that a loss is
reportable does not affect whether the treatment of the loss is proper.
The tax information provided
here is only a summary of certain considerations. Prospective investors should consult their own tax
advisers regarding the U.S. federal, state, local, and foreign tax consequences of an investment in the
Funds.
The Funds have not yet commenced
investment operations and, therefore, have not produced financial statements. Once produced, you can
obtain copies of the Annual Report without charge by calling the Fund at (855) 552-6744 or visiting the
SEC's website at www.sec.gov.
