|
Notes
to Financial Statements
July
31, 2026 |
|
|
1.
Organization
ARK
ETF Trust (“Trust”) is an open-end management investment company registered under the Investment
Company Act of 1940, as amended (“1940 Act”) and applies the specialized accounting and reporting guidance
in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The Trust was organized as a Delaware statutory trust on June 7,
2013. The Trust consists of thirteen (13) investment portfolios: ARK Genomic Revolution ETF, ARK Autonomous Technology &
Robotics ETF, ARK Innovation ETF, ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF), ARK Blockchain &
Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF), ARK Space & Defense Innovation ETF (formerly, ARK Space Exploration
& Innovation ETF), The 3D Printing ETF, ARK Israel Innovative Technology ETF, ARK DIET Q1 Buffer ETF, ARK DIET Q2 Buffer ETF, ARK
DIET Q3 Buffer ETF, ARK DIET Q4 Buffer ETF and ARK Active Autocallable Income ETF.
These
financial statements relate solely to ARK Genomic Revolution ETF, ARK Autonomous Technology & Robotics ETF, ARK Innovation
ETF, ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF), ARK Blockchain & Fintech Innovation ETF
(formerly, ARK Fintech Innovation ETF), ARK Space & Defense Innovation ETF (formerly, ARK Space Exploration & Innovation
ETF), The 3D Printing ETF, and ARK Israel Innovative Technology ETF (each, a “Fund” and collectively, the “Funds”),
each a series of the Trust. Each Fund is classified as a non-diversified management investment company under
the 1940 Act. The ARK DIET Q4 Buffer ETF commenced operations on October 1, 2025, the ARK DIET Q1 Buffer
ETF commenced operations on January 2, 2026, the ARK DIET Q2 Buffer ETF commenced operations on April
1, 2026, the ARK DIET Q3 Buffer ETF commenced operations on July 1, 2026 and the ARK Active Autocallable
Income ETF commenced operations August 19, 2026. The ARK DIET Buffer ETF funds are not presented in this
report.
The
investment objective of the ARK Genomic Revolution ETF, ARK Autonomous Technology & Robotics ETF, ARK Innovation ETF, ARK Next
Generation Technology ETF (formerly, ARK Next Generation Internet ETF), ARK Blockchain & Fintech Innovation ETF (formerly,
ARK Fintech Innovation ETF), and ARK Space & Defense Innovation ETF (formerly, ARK Space Exploration & Innovation ETF)
is long-term growth of capital. The 3D Printing ETF seeks to provide investment results that closely correspond,
before fees and expenses, to the performance of the Total 3D-Printing Index. The ARK Israel Innovative Technology
ETF seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the ARK Israel Innovation
Index. There can be no assurance that the Funds will achieve their respective investment objectives.
The
Trust’s fiscal and tax reporting year ends July 31.
Capitalized
terms used but not defined herein shall have the meaning ascribed to such terms in the Funds’ prospectuses.
2.
Significant Accounting Policies
These
financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”),
which require management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of
contingent liabilities at the date of the financial statements, and the reported amount of increase and decrease in net assets from operations
during the fiscal period. Actual amounts could differ from these estimates. The Trust is an investment company and follows the investment
company accounting standards and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification
(“ASC”) Topic 946, “Financial Services — Investment Companies”. Rules and interpretive
releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative
guidance for SEC registrants. The following summarizes the significant accounting policies of the Funds:
Investment
Valuation
The
values of each Fund’s securities that are traded on a securities market are based on such securities’ closing prices on
the principal market on which the securities are traded. Such valuations would typically be categorized as Level 1 in the fair value hierarchy.
If a security’s market price is not readily available or does not otherwise accurately reflect the market value of such security,
the security will be fair valued by ARK Investment Management LLC (the “Adviser”) which was selected by the Board of Trustees
of the Trust (“Board of Trustees”) as valuation designee, to provide such fair values in accordance with the Adviser’s
valuation policies and procedures that were reviewed by, and subject to the oversight of, the Board of Trustees. Each Fund may use fair
value pricing in a variety of circumstances, including but not limited to, situations when the value of a Fund’s security has been
materially affected by events occurring after the close of the market on which such security is principally traded (such as a corporate
action or other news that may materially affect the price of such security) or trading in such security has been suspended or halted.
Such valuations would typically be categorized as Level 2 or Level 3 in the fair value hierarchy. Fair value pricing involves subjective
judgments and it is possible that a fair value determination for a security could be materially different than the value that could be
realized upon the sale of such security. Investments in money market funds are valued at their NAV as of the close of each business day.
Exchange-traded funds are valued at their last sale or official closing price on the principal market.
36
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
Investment
Transactions
Investment
transactions are accounted for on the trade date. Realized gains and losses on sales of investment securities are calculated using the
identified cost method. Dividend income is recognized on the ex-dividend date, except for certain foreign
dividends that may be recorded as soon as such information becomes available. Interest income and expenses are recognized on an accrual
basis.
Securities
Lending Income
Securities
lending income, net of fees paid to The Bank of New York Mellon (“BNY”) is recognized as earned and reported as a separate
line item in the Fund's Statement of Operations.
Dividend
Distributions
Distributions
to shareholders are recorded on the ex-dividend date and are determined in accordance with federal income
tax regulations, which may differ from U.S. GAAP. Each Fund distributes all or substantially all of its net investment income
to shareholders in the form of dividends.
Net
realized capital gains are distributed to shareholders as capital gain distributions. Net investment income, if any, and net capital gains,
if any, are typically distributed to shareholders at least annually. Dividends may be declared and paid more frequently to improve index
tracking or to comply with the distribution requirements of the Internal Revenue Code.
Currency
Translation
Assets
and liabilities, including investment securities, denominated in currencies other than U.S. dollars are translated into U.S. dollars
at the exchange rates supplied by one or more pricing vendors on the valuation date. Purchases and sales of investment securities and
income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions.
The
effects of changes in exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation
or depreciation on investments in each Fund’s statement of operations. The realized gain or loss and unrealized appreciation or
depreciation resulting from all other transactions denominated in currencies other than U.S. dollars are disclosed separately.
Wholly-owned
Subsidiary
ARK
Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF) and ARK Blockchain & Fintech Innovation ETF (formerly,
ARK Fintech Innovation ETF) gain exposure to cryptocurrency through investments in wholly-owned subsidiaries
ARK Next Generation Internet (Cayman) Fund and ARK Blockchain & Fintech Innovation (Cayman) Fund, respectively (the “Subsidiaries”).
The Subsidiaries are organized under the laws of the Cayman Islands. The Subsidiaries are advised by the Adviser, and have the same investment
objective as their respective parent Fund. All intercompany transactions and balances have been eliminated in consolidation.
Segment
Reporting
The
officers of the Fund acts as the Fund's chief operating decision maker (“CODM”). The Fund operates as a single operating
segment, reflecting the CODM's oversight of long-term strategic asset allocation in accordance with the Trust's
prospectus and investment strategy. The CODM evaluates performance and allocates resources using the Trust's portfolio composition, total
returns, expense ratios, and changes in net assets — measures consistent with the amounts presented in the Trust's
financial statements. Segment assets are presented as “total assets” on the Statement of Assets and Liabilities, and segment
revenues and expenses are presented on the Statement of Operations.
3.
Management and Other Agreements
Management
The
ARK Genomic Revolution ETF, ARK Autonomous Technology & Robotics ETF, ARK Innovation ETF, ARK Next Generation Technology ETF
(formerly, ARK Next Generation Internet ETF), ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF),
and ARK Space & Defense Innovation ETF (formerly, ARK Space Exploration & Innovation ETF), each pay the Adviser a fee calculated
daily and payable monthly at an annual rate (stated as a percentage of the average daily net assets of the Fund) of 0.75% (“Management
Fee”) in return for providing investment management and supervisory services under a comprehensive unitary structure. The 3D Printing
ETF pays the Adviser a Management Fee of 0.65% in return for providing investment management and supervisory services
37
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
under
a comprehensive unitary structure. The ARK Israel Innovative Technology ETF pays the Adviser a Management Fee of 0.48% in return for providing
investment management and supervisory services under a comprehensive unitary structure. Subject to the oversight of the Board, the Adviser
provides investment management services to each Fund and provides, or causes to be furnished, all supervisory and other services reasonably
necessary for the operation of each Fund and also bears the costs of trustee fees and various third-party
services required by the Funds, including administration, certain custody, audit, legal, transfer agency, and printing costs. In addition
to the Management Fee, each Fund bears other fees and expenses, such as taxes and governmental fees, brokerage fees, commissions and other
transaction expenses, certain foreign custodial fees and expenses, costs of borrowing money, including interest expenses, and extraordinary
expenses (such as litigation and indemnification expenses).
The
Adviser has agreed to reduce its Management Fee for the ARK Space & Defense Innovation ETF (formerly, ARK Space Exploration
& Innovation ETF) as a result of investing in The 3D Printing ETF. As such, the Management Fees in the Statement of Operations
have been reduced by $7,409. The Adviser has also agreed to waive or credit a portion of the Management Fee in an amount equal to any
net profit received by the Adviser for the ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF) and ARK Blockchain &
Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF) as a result of investing in ARK 21Shares Bitcoin ETF. The Adviser
has not received any net profit for the year ended July 31, 2026.
Administrator,
Custodian, Transfer Agent and Accounting Agent
The
Bank of New York Mellon is the administrator for the Funds, the custodian of the Funds’ assets and also provides transfer
agency, fund accounting and various administrative services to the Funds (in each capacity, “Administrator,” “Custodian,”
“Transfer Agent” or “Accounting Agent”). The Bank of New York Mellon is a subsidiary of The Bank of
New York Mellon Corporation, a financial holding company.
Distribution
Foreside
Fund Services, LLC serves as the Funds’ distributor (“Distributor”). The Trust has adopted a distribution and service
plan (“Rule 12b-1 Plan”) pursuant to Rule 12b-1
under the 1940 Act. Under the Rule 12b-1 Plan, each Fund is authorized to pay distribution fees in
connection with the sale and distribution of its shares and pay service fees in connection with the provision of ongoing services to shareholders.
To date, the Rule 12b-1 Plan has not been implemented for the Funds and there is no current intention
to implement the Rule 12b-1 Plan.
Board
of Trustees
Effective
January 1, 2026, each Independent Trustee receives an annual retainer fee of $275,000 for services provided as a Trustee of the
Trust, plus out-of-pocket expenses related to attendance at Board and Committee Meetings. Prior to this date,
the annual retainer fee was $230,000. In addition, the Chairs of the Board and of the Audit Committee each also receive an additional
annual retainer fee of $60,000 and $20,000, respectively, for their service as such. Annual Trustee fees may be reviewed periodically
and changed by the Trust’s Board.
4.
Creation and Redemption Transactions
As
of July 31, 2026, there were an unlimited number of shares of beneficial interest without par value authorized by the Trust. Individual
shares of a Fund may only be purchased and sold at market prices on a national securities exchange through a broker-dealer.
Such transactions may be subject to customary commission rates imposed by the broker-dealer, and market prices
for a Fund’s shares may be at, above or below its net asset value (“NAV”) depending on the premium or discount at
which the Fund’s shares trade.
Each
Fund issues and redeems shares at its NAV only in a large specified number of shares each called a “Creation Unit,” or multiples
thereof, and only with “authorized participants” who have entered into contractual arrangements with the Distributor. A
Creation Unit consists of 50,000 shares (25,000 shares with respect to the ARK
Israel Innovative Technology ETF). Except when aggregated in Creation Units, shares of each Fund are not redeemable. Transactions in shares
for each Fund are disclosed in detail in the Statements of Changes in Net Assets. The consideration for a purchase of Creation Units generally
consists of the in-kind deposit of specified securities and an amount of cash or, as permitted or required
by a Fund, of cash. A fixed transaction fee is imposed on each creation and redemption transaction. In addition, a variable charge for
certain creation and redemption transactions may be imposed.
38
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
5.
Investment Transactions
The
cost of purchases and the proceeds from sales of investment securities (excluding in-kind subscriptions and
redemptions and short-term investments) for the year ended July 31, 2026 were as follows:
|
Fund
|
Purchases
|
Sales
|
|
ARK
Genomic Revolution ETF |
$ 438,773,277
|
$ 421,521,537
|
|
ARK
Autonomous Technology & Robotics ETF |
712,598,322
|
772,897,379
|
|
ARK
Innovation ETF |
4,340,311,730
|
3,827,732,829
|
|
ARK
Next Generation Technology ETF* |
917,365,024
|
880,320,248
|
|
ARK
Blockchain & Fintech Innovation ETF** |
380,367,947
|
334,095,447
|
|
ARK
Space & Defense Innovation ETF*** |
334,998,556
|
358,865,023
|
|
The
3D Printing ETF |
27,535,818
|
25,929,433
|
|
ARK
Israel Innovative Technology ETF |
81,141,156
|
83,303,879
|
For
the year ended July 31, 2026, the cost of in-kind subscriptions and the proceeds from in-kind
redemptions were as follows:
|
|
In-Kind
|
|
Fund
|
Subscriptions
|
Redemptions
|
|
ARK
Genomic Revolution ETF |
$ 2,050,368,345
|
$ 2,079,863,370
|
|
ARK
Autonomous Technology & Robotics ETF |
4,685,607,053
|
4,223,860,464
|
|
ARK
Innovation ETF |
37,495,269,595
|
40,307,988,695
|
|
ARK
Next Generation Technology ETF* |
3,094,545,715
|
3,787,257,223
|
|
ARK
Blockchain & Fintech Innovation ETF** |
1,334,393,125
|
1,750,480,049
|
|
ARK
Space & Defense Innovation ETF*** |
1,456,844,549
|
1,127,704,282
|
|
The
3D Printing ETF |
—
|
22,443,180
|
|
ARK
Israel Innovative Technology ETF |
15,010,384
|
4,150,671
|
6.
Securities Lending
The
Fund participates in a securities lending program offered by The Bank of New York Mellon (“BNY”) (the “Program”),
which provides for the lending of securities to qualified brokers. The Fund has selected Morgan Stanley & Co. LLC as its exclusive
borrower in connection with the Program. Pursuant to a securities lending agreement dated October 27, 2025,
between the Investment Adviser and Morgan Stanley & Co. LLC, the borrowing counterparty was granted the exclusive right to
borrow equity securities for a term commencing November 1, 2025 and ending December
31, 2026. In consideration for the exclusive borrowing rights and the administrative, monitoring, and oversight services in connection
with the securities lending program, the borrowing counterparty paid a one-time upfront fee to the Investment
Adviser.
Securities
lending income includes earnings on the temporary investment of cash collateral, plus or minus any rebate paid to the borrower. Each of
BNY and the Fund receive a fee in connection with lending agent and administrative services provided relating to the Program based on
Fund's lending volume returns under the Program.
Collateral
on all securities loaned is accepted in the form of cash and non-cash and is maintained at a minimum level
of 102% (105% in the case of certain foreign securities) of the market value of the securities on loan, plus interest, if applicable.
It is the Fund's policy to obtain additional collateral from, or return excess collateral to, the borrower by the end of the next business
day following the valuation date of the securities loaned. As a result, the value of the collateral held may be temporarily less than
the value of the securities on loan.
Lending
securities entails the risk of loss to the Fund if, and to the extent that, the market value of the securities loaned increases, the borrower
fails to increase the collateral accordingly, and the borrower does not return the securities. Under the terms of the Program, the Fund
is indemnified for such losses by BNY.
39
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
Cash
collateral, if applicable, is held in a separate account managed by BNY, which is authorized to exclusively invest such collateral in
money market instruments and overnight repurchase agreements collateralized at 102% with securities issued or fully guaranteed by the
U.S. Treasury, U.S. Government, or any agency, instrumentality, or authority of the U.S. Government. Securities purchased with cash collateral
received are reflected in the Schedule of Investments. BNY bears the risk of any deficiency in the amount of cash collateral available
for return to the borrower due to losses on the collateral investments.
The
value of loaned securities outstanding, and the related collateral for the securities on loan, at July 31,
2026, is shown on the Schedule of Investments. Non-cash collateral received by the Fund, if any, may not
be sold or re-pledged except to satisfy a borrower default.
7.
Federal Income Tax
Each
Fund intends to continue to qualify as a “regulated investment company” under Subchapter M of the Internal Revenue Code
of 1986, as amended. If so qualified, a Fund will not be subject to U.S. federal income tax on the portion of its taxable investment income
and capital gains that it distributes to its shareholders. U.S. GAAP provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements, and requires the evaluation of tax positions taken or expected
to be taken in the course of preparing a Fund’s tax returns to determine whether the tax positions are “more-likely-than-not”
to be sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not
threshold would be recorded as a tax benefit or expense in the current year. Interest and penalties related to income taxes would be recorded
as income tax expense. The Funds record a foreign tax reclaim receivable on the ex-dividend date if the tax
reclaim is “more likely than not” to be sustained assuming examination by tax authorities. This determination is based on,
among other things, a jurisdiction’s legal obligation to pay reclaims as well as payment history and market convention. The management
of the Funds is required to analyze all open tax years (2022 – 2026), as defined by IRS statute of limitations,
for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of July 31, 2026, the Funds
did not have a liability for any unrecognized tax benefits. The Funds have no examinations in progress and are not aware of any tax positions
for which it is reasonably possible that the amounts of unrecognized tax benefits will significantly change in the next twelve months.
The
Funds adopted FASB Accounting Standards Update 2023-09, Income Taxes (Topic 740) — Improvements
to Income Tax Disclosures (ASU 2023-09), which enhances income tax disclosures, including disclosure
of income taxes paid disaggregated by jurisdiction. Adoption of the new standard impacted financial statement disclosures only and did
not affect any Fund’s financial position or the results of its operations. At July 31, 2026, there were no disclosures necessary.
At
July 31, 2026, the approximate cost of investments and net unrealized appreciation (depreciation) for federal income tax purposes
was as follows:
|
Fund
|
Cost
|
Gross
Unrealized
Appreciation
|
Gross
Unrealized
Depreciation
|
Net
Unrealized
Appreciation
(Depreciation) |
|
|
ARK
Genomic Revolution ETF |
$2,731,280,084
|
$159,829,283
|
$(1,336,850,436)
|
$(1,177,021,153
|
)
|
|
ARK
Autonomous Technology & Robotics ETF |
2,351,520,617
|
7,453,625
|
(501,711,613)
|
(494,257,988
|
)
|
|
ARK
Innovation ETF |
9,248,579,176
|
89,252,484
|
(3,767,736,854)
|
(3,678,484,370
|
)
|
|
ARK
Next Generation Technology ETF* |
1,984,032,666
|
131,774,234
|
(508,491,728)
|
(376,717,494
|
)
|
|
ARK
Blockchain & Fintech Innovation ETF** |
1,020,343,879
|
43,652,897
|
(361,944,657)
|
(318,291,760
|
)
|
|
ARK
Space & Defense Innovation ETF*** |
935,474,623
|
38,295,267
|
(214,594,141)
|
(176,298,874
|
)
|
|
The
3D Printing ETF |
69,127,361
|
8,995,209
|
(19,711,459)
|
(10,716,250
|
)
|
|
ARK
Israel Innovative Technology ETF |
117,956,895
|
36,570,844
|
(19,869,801)
|
16,701,043
|
|
The
differences between book-basis and tax-basis components of net assets are primarily
attributable to tax deferral of losses on wash sales, non-REIT income and basis adjustments, in-kind
creation and redemption transactions, net operating losses, foreign currency gains and losses, passive foreign investment companies, grantor
trust adjustments, wholly owned subsidiary inclusions, and late year ordinary loss deferrals. Certain capital accounts in the financial
statements have been adjusted for permanent book-tax differences. These adjustments have no impact on net
asset values.
40
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
At
July 31, 2026, the components of distributable earnings (loss) on a tax basis were as follows:
|
Fund
|
Undistributed
Income |
Undistributed
Long-term
Capital Gains |
Accumulated
Capital
Gains/(Losses) |
Post-October
Loss and Late
Year Loss |
Net
Unrealized
Appreciation
(Depreciation) |
Total Earnings
(Losses) |
|
ARK
Genomic Revolution ETF |
$ —
|
$ —
|
$(3,027,670,327)
|
(7,701,917)
|
$(1,177,021,153)
|
$ (4,212,393,397)
|
|
ARK
Autonomous Technology & Robotics ETF |
—
|
—
|
(596,119,686)
|
(10,660,153)
|
(494,257,988)
|
(1,101,037,827)
|
|
ARK
Innovation ETF |
—
|
—
|
(7,309,160,528)
|
(24,830,524)
|
(3,678,484,371)
|
(11,012,475,423)
|
|
ARK
Next Generation Technology ETF* |
—
|
—
|
(1,992,023,244)
|
(7,500,367)
|
(376,717,494)
|
(2,376,241,105)
|
|
ARK
Blockchain & Fintech Innovation ETF** |
—
|
—
|
(1,511,503,579)
|
(5,341,920)
|
(318,290,464)
|
(1,835,135,963)
|
|
ARK
Space & Defense Innovation ETF*** |
—
|
—
|
(65,862,702)
|
(1,292,475)
|
(176,306,881)
|
(243,462,058)
|
|
The
3D Printing ETF |
260,666
|
—
|
(246,237,460)
|
—
|
(10,700,504)
|
(256,677,298)
|
|
ARK
Israel Innovative Technology ETF |
967,004
|
—
|
(111,155,013)
|
—
|
16,701,043
|
(93,486,966)
|
At
July 31, 2026, the effect of permanent book/tax reclassifications resulted in increase/(decrease) to the components of net assets
as follows:
|
Fund
|
Total
Distributable
Earnings |
Paid-in Capital
|
|
ARK
Genomic Revolution ETF |
$ (14,632,603)
|
$ 14,632,603
|
|
ARK
Autonomous Technology & Robotics ETF |
(984,472,362)
|
984,472,362
|
|
ARK
Innovation ETF |
(1,949,210,620)
|
1,949,210,620
|
|
ARK
Next Generation Technology ETF* |
(981,013,929)
|
981,013,929
|
|
ARK
Blockchain & Fintech Innovation ETF** |
(459,043,623)
|
459,043,623
|
|
ARK
Space & Defense Innovation ETF*** |
(296,973,646)
|
296,973,646
|
|
The
3D Printing ETF |
(2,740,241)
|
2,740,241
|
|
ARK
Israel Innovative Technology ETF |
(1,293,494)
|
1,293,494
|
The
tax character of distributions paid during the year indicated was as follows:
|
|
Year
Ended July 31, 2026 |
|
Fund
|
Ordinary
Income* |
Long-Term
Capital Gain |
Return
of Capital |
|
ARK
Genomic Revolution ETF |
$ —
|
$ —
|
$ —
|
|
ARK
Autonomous Technology & Robotics ETF |
4,619,543
|
—
|
—
|
|
ARK
Innovation ETF |
—
|
—
|
—
|
|
ARK
Next Generation Technology ETF** |
33,510,300
|
—
|
—
|
|
ARK
Blockchain & Fintech Innovation ETF*** |
993,300
|
—
|
—
|
|
ARK
Space & Defense Innovation ETF**** |
—
|
—
|
—
|
|
The
3D Printing ETF |
550,809
|
—
|
—
|
|
ARK
Israel Innovative Technology ETF |
3,391,981
|
—
|
—
|
41
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
Under
current tax regulations, capital losses on securities transactions realized after October 31 (“Post-October
Losses”) and ordinary losses incurred after December 31 (“Late Year Ordinary Losses”) may be deferred and
treated as occurring on the first business day of the following fiscal year. For the year ended July 31, 2026, the Funds
incurred and elected to defer to August 1, 2026 Post-October Losses and Late Year Ordinary Losses
as follows:
|
Fund
|
Late
Year
Ordinary
Deferral |
Capital
Post-October
Loss
|
|
ARK
Genomic Revolution ETF |
7,701,917
|
—
|
|
ARK
Autonomous Technology & Robotics ETF |
10,660,153
|
—
|
|
ARK
Innovation ETF |
24,830,524
|
—
|
|
ARK
Next Generation Technology ETF* |
7,500,367
|
—
|
|
ARK
Blockchain & Fintech Innovation ETF** |
5,341,920
|
—
|
|
ARK
Space & Defense Innovation ETF*** |
1,292,475
|
—
|
|
The
3D Printing ETF |
—
|
—
|
|
ARK
Israel Innovative Technology ETF |
—
|
—
|
At
July 31, 2026, for Federal income tax purposes, the Funds have capital loss carryforwards available as shown in the table below,
to the extent provided by regulations, to offset future capital gains for an unlimited period. To the extent that these capital loss carryforwards
are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders.
|
|
Short-Term
|
Long-Term
|
Total
Amount |
|
ARK
Genomic Revolution ETF |
$238,817,991
|
$2,788,852,336
|
$3,027,670,327
|
|
ARK
Autonomous Technology & Robotics ETF |
—
|
596,119,686
|
596,119,686
|
|
ARK
Innovation ETF |
861,165,738
|
6,447,994,790
|
7,309,160,528
|
|
ARK
Next Generation Technology ETF* |
149,637,729
|
1,842,385,515
|
1,992,023,244
|
|
ARK
Blockchain & Fintech Innovation ETF** |
521,095,212
|
990,408,367
|
1,511,503,579
|
|
ARK
Space & Defense Innovation ETF*** |
—
|
65,862,702
|
65,862,702
|
|
The
3D Printing ETF |
93,784,943
|
152,452,517
|
246,237,460
|
|
ARK
Israel Innovative Technology ETF |
56,999,090
|
54,155,923
|
111,155,013
|
During
the year ended July 31, 2026, the following funds utilized capital loss carryforwards:
|
|
Utilized
capital loss
carryforwards |
|
ARK
Genomic Revolution ETF |
$ 5,678,187
|
|
ARK
Autonomous Technology & Robotics ETF |
76,394,207
|
|
ARK
Innovation ETF |
—
|
|
ARK
Next Generation Technology ETF* |
—
|
|
ARK
Blockchain & Fintech Innovation ETF** |
—
|
|
ARK
Space & Defense Innovation ETF*** |
31,930,241
|
|
The
3D Printing ETF |
—
|
|
ARK
Israel Innovative Technology ETF |
11,479,578
|
42
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
8.
Indemnification Obligations
The
Funds have a variety of indemnification obligations under contracts with their service providers. The Funds’ maximum exposure under
these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk
of loss to be remote.
9.
Investment Risks
Concentration
Risk: The ARK Autonomous Technology & Robotics ETF is concentrated in securities of issuers having their principal business
activities in groups of industries in the industrials and information technology sectors, although it will not concentrate in any specific
industry. The ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF) is concentrated in securities
of issuers having their principal business activities in the communication, technology and financials group of industries. The ARK Genomic
Revolution ETF is concentrated in securities of issuers having their principal business activities in any industry or group of industries
in the health care sector, including issuers having their principal business activities in the biotechnology industry. The ARK Next Generation
Technology ETF (formerly, ARK Next Generation Internet ETF) is concentrated in securities of issuers having their principal business activities
in the internet information provider and catalog and mail order house industry. The ARK Space & Defense Innovation ETF (formerly,
ARK Space Exploration & Innovation ETF) is concentrated in securities of issuers having their principal business activities in groups
of industries in the (i) industrials sector and (ii) information technology sector. The 3D Printing ETF and the ARK Israel
Innovative Technology ETF may each invest 25% or more of the value of its respective net assets in securities of issuers in any one industry
or group of industries if their respective indices, The Total 3-D Printing Index and The ARK Israeli Innovation
Index, concentrate in such industry or group of industries. This concentration limit does not apply to securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities. The ARK Innovation ETF is not concentrated in any industry.
As
of July 31, 2026, the ARK Genomic Revolution ETF had more than 25% of its assets invested in the biotechnology industry, the ARK
Autonomous Technology & Robotics ETF had more than 22.3% of its assets invested in the aerospace & defense industry,
the ARK Space & Defense Innovation ETF (formerly, ARK Space Exploration & Innovation ETF) had more than 25% of its assets
invested in the aerospace & defense industry, and the ARK Israel Innovative Technology ETF had more than 18.3% of its assets
invested in the software industry. To the extent a Fund’s holdings are concentrated in a particular industry or group of industries,
adverse market conditions affecting those industries may have a more significant impact on the Fund than they would on a Fund investing
in a broader range of securities and the value of the Fund’s shares may fluctuate more than shares of a fund investing in a broader
range of securities.
Market
Risk: The value of the Funds’ assets will fluctuate as the markets in which the Funds invest fluctuate. The value of the
Funds’ investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, such as
inflation (or expectations for inflation), deflation (or expectations for deflation), interest rates, global demand for particular products
or resources, market instability, debt crises and downgrades, embargoes, tariffs, sanctions and other trade barriers, regulatory events,
other governmental trade or market control programs and related geopolitical events. In addition, the value of the Funds’ investments
may be negatively affected by the occurrence of global events such as war, military conflicts, acts of terrorism, social unrest, environmental
disasters, natural disasters or events, recessions, supply chain disruptions, political instability, exchange trading suspensions and
closures (including exchanges of the Funds’ underlying securities), infectious disease outbreaks or pandemics. For example, an
outbreak of an infectious disease may negatively affect economies, markets and individual companies throughout the world, including those
in which the Funds invest. “The effects of this, or any future pandemic to public health and business and market conditions”,
including exchange trading suspensions and closures, may have a significant negative impact on the performance of a Fund’s investments,
increase a Fund’s volatility, negatively impact a Fund’s arbitrage and pricing mechanisms, exacerbate pre-existing
political, social and economic risks to a Fund and negatively impact broad segments of businesses and populations. A Fund’s operations
may be interrupted as a result, which may contribute to the negative impact on investment performance. In addition, governments, their
regulatory agencies, or self-regulatory organizations have taken or may take actions in response to a pandemic
that affect the instruments in which a Fund invests, or the issuers of such instruments, in ways that could have a significant negative
impact on the Fund’s investment performance. The ultimate impact of any pandemic and the extent to which the associated conditions
and governmental responses impact a Fund will also depend on future developments, which are highly uncertain, difficult to accurately
predict and subject to frequent changes.
Israel
Risk: Because ARK Israel Innovative Technology ETF invests in securities of Israeli Companies, ARK Israel Innovative Technology
ETF may be exposed to special risks and considerations. There may be less information concerning the securities of Israeli Companies available
to the public than the securities of U.S. companies. There is also potential difficulty in obtaining or enforcing a court judgment,
and the unique characteristics of securities of Israeli Companies and the Israel stock market may have a negative impact on ARK Israel
Innovative Technology ETF. Any major hostilities involving Israel, including hostilities with neighboring countries, or the interruption
or
43
|
Notes
to Financial Statements (concluded)
July
31, 2026 |
|
|
curtailment
of trade between Israel and its present trading partners, could have a negative impact on ARK Israel Innovative Technology ETF. Shares
and dividends of Israeli Companies are often Israeli new shekel (“ILS”) denominated. Changes in the relationship of the
ILS to the U.S. dollar and other currencies could have a negative impact on ARK Israel Innovative Technology ETF. The government
of Israel may change the way in which Israeli Companies are taxed, or may impose taxes on foreign investment. Such actions could have
an adverse impact on the overall market for securities of Israeli Companies and on ARK Israel Innovative Technology ETF.
Cryptocurrency
Investment Risk: ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF) and ARK Blockchain &
Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF) may have exposure to cryptocurrency, such as bitcoin and ether, indirectly
through an investment in ARK 21Shares Bitcoin ETF, ProShares Ether Strategy ETF, and ARK 21Shares Active Ethereum Futures Strategy ETF
that will experience any associated volatility of the underlying cryptocurrency. Additionally, the Funds may have exposure to cryptocurrency
indirectly through investments in public companies that are active in the cryptocurrency markets. The Funds’ exposure to cryptocurrencies
may change over time and, accordingly, such exposure may not always be present in the Funds’ portfolios. Cryptocurrencies such
as bitcoin are not “fiat” currencies of any central bank or government and currently are not subject to the authority of
any central bank or government authority and are therefore not backed by any government, and regulatory and tax treatment of cryptocurrencies
continues to develop.
10.
New Accounting Pronouncement
In
December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09, Income
Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which enhances the
transparency and decision usefulness of income tax disclosures. The amendments are effective for annual periods beginning after December
15, 2024. The Fund has adopted ASU 2023-09, which did not have a material impact on the Fund's financial
statements or disclosures.
On
September 9, 2026, the FASB issued ASU 2026-03, Fair Value Measurement (Topic
820): Investment companies with Equity Securities Subject to Contractual Sale Restrictions, that requires investment companies to incorporate
the effect of any contractual sale restriction when measuring the fair value of an equity security. ASU 2026-03
also requires investment companies to disclose the amount of any discount(s) attributable to contractual sale restrictions included in
the fair value measurement of equity securities. The new standard must be applied prospectively to all equity securities upon adoption
with any changes in fair value recorded as an adjustment to earnings. ASU 2026-03 is effective for annual
reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting
periods, with early adoption permitted. At this time, management is still evaluating the potential impact of adopting the amendments and
has not yet determined the impact, if any, on the Fund's financial statement disclosures.
11.
Subsequent Events
Upon
the recommendation of ARK Investment Management LLC (the “Adviser”), the Board of Trustees of the Trust recently approved
changes to the ARK Next Generation Internet ETF’s name and non-fundamental policy to invest under
normal circumstances primarily (at least 80% of its assets) in domestic and foreign equity securities of companies that are relevant to
the Fund’s investment theme of next generation internet (“80% Policy”). The Fund’s name changed to the “ARK
Next Generation Technology ETF.” The Fund’s 80% Policy has been revised to reflect that the Fund will invest under normal
circumstances primarily (at least 80% of its assets) in domestic and foreign equity securities of companies that are relevant to the Fund’s
investment theme of next generation technology. These changes were effective on September 7, 2026 (the “Effective
Date”). These changes will not materially impact (i) the way in which the Fund is managed, (ii) the portfolio holdings of the Fund
or (iii) the Fund’s investment objective.
Subsequent
events occurring after July 31, 2026 have been evaluated for potential impact to this Report through the
date the Report was issued, and it has been determined that no other events have occurred that require disclosure.
44
|
Report
of Independent Registered Public Accounting Firm |
|
|
To
the Shareholders of ARK Next Generation Technology ETF, ARK Blockchain & Fintech Innovation ETF, ARK Genomic Revolution ETF, ARK Autonomous
Technology & Robotics ETF, ARK Innovation ETF, ARK Space & Defense Innovation ETF, The 3D Printing ETF and ARK Israel Innovative
Technology ETF and the Board of Trustees of ARK ETF Trust.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated statements of assets and liabilities of ARK Next Generation Technology ETF (formerly, ARK Next
Generation Internet ETF) and ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF) (two of the funds
constituting ARK ETF Trust (the “Trust”)), including the consolidated schedules of investments, as of July
31, 2026, and the related consolidated statements of operations for the year then ended, the consolidated statements of changes
in net assets for each of the two years in the period then ended, the consolidated financial highlights for each of the five years in
the period then ended and the related notes (collectively referred to as the “consolidated financial statements”). We also
have audited the accompanying statements of assets and liabilities of ARK Genomic Revolution ETF, ARK Autonomous Technology & Robotics
ETF, ARK Innovation ETF, ARK Space & Defense Innovation ETF (formerly, ARK Space Exploration & Innovation ETF), The 3D
Printing ETF, and ARK Israel Innovative Technology ETF (collectively, together with ARK Next Generation Technology ETF and ARK Blockchain
& Fintech Innovation ETF, referred to as the “Funds”) (six of the funds constituting the “Trust”), including
the schedules of investments, as of July 31, 2026, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of
the five years in the period then ended and the related notes (collectively, together with the consolidated financial statements, referred
to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of each of the Funds (eight of the funds constituting ARK ETF Trust) at July 31, 2026,
and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then
ended and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting
principles.
Basis
for Opinion
These
financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the
Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust
is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As
part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no
such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July
31, 2026, by correspondence with the custodian, brokers and others; when replies were not received from brokers or others, we performed
other auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
/s/
Ernst & Young LLP
We
have served as the auditor of one or more ARK Invest investment companies since 2022.
New
York, New York
September 25, 2026
45
|
Supplemental
Information (Unaudited)
|
|
|
Quarterly
Portfolio Schedule. The ARK ETF Trust files with the Securities and Exchange Commission on Form N-PORT the
complete schedule of portfolio holdings for each ARK ETF for the first and third quarters of each fiscal year. The ARK ETF Trust’s
Forms N-PORT are available on the Securities and Exchange Commission’s website at www.sec.gov.
Copies of the filings are available without charge, upon request, by calling (727) 810-8160. In addition,
each ARK ETF’s current portfolio holdings are updated daily and are available on our website, www.ark-funds.com.
Proxy
Voting Policies and Procedures. A description of ARK Investment Management LLC’s proxy voting policies and procedures, which
are applicable to the ARK ETFs, is available without charge, upon request, by calling (727) 810-8160 collect
or visiting our website at www.ark-funds.com or the Securities and Exchange
Commission’s website at www.sec.gov.
Proxy
Voting Record. The ARK ETFs file with the Securities and Exchange Commission their proxy voting records on Form
N-PX for each 12 month period ending June 30. Form N-PX must
be filed each year by August 31. The most recent Form N-PX or voting
record information is available without charge, upon request, by calling (727) 810-8160 collect,
visiting our website at https://www.ark-funds.com/download-fund-materials/,
or visiting the Securities and Exchange Commission’s website at www.sec.gov.
Premium/Discount
Information. Information about the difference between daily market prices on the secondary market for shares of each ARK ETF and
the ARK ETF’s net asset value can be found on our website, www.ark-funds.com.
Tax
Information
Form 1099-DIV and
other year-end tax information provide shareholders with actual calendar year amounts that should
be included in their tax returns. Shareholders should consult their tax advisors. Each Fund designates the following amounts or, if subsequently
determined to be different, the maximum allowable for its year ended July 31, 2026.
|
|
Qualified
Dividend
Income* |
Dividends
Received
Deduction* |
|
ARK
Genomic Revolution ETF |
0%
|
0%
|
|
ARK
Autonomous Technology & Robotics ETF |
100%
|
74.71%
|
|
ARK
Innovation ETF |
0%
|
0%
|
|
ARK
Next Generation Technology ETF** |
2.96%
|
2.03%
|
|
ARK
Blockchain & Fintech Innovation ETF***
|
92.25%
|
26.27%
|
|
ARK
Space & Defense Innovation ETF****
|
0%
|
0%
|
|
The
3D Printing ETF |
100%
|
87.97%
|
|
ARK
Israel Innovative Technology ETF |
31.73%
|
3.56%
|
For
the fiscal year ended July 31, 2026, ARK Israel Innovative Technology ETF elected to pass through foreign
tax credits of $346,464, foreign source income percent of 71.38%, and recognized foreign source income of $1,439,559.
46
|
Risks
Involved with Investing in the Funds (Unaudited)
|
|
|
This
report should be read in conjunction with the Funds’ prospectus.
The
principal risks of investing in the Funds include:
Disruptive
Innovation Risk Companies that the Adviser believes create and capitalize on disruptive innovation and developing technologies
to displace older technologies or create new markets may not in fact do so. Companies that initially develop a novel technology may not
be able to capitalize on the technology. A Fund may invest in a company that does not currently derive any revenue from disruptive innovations
or technologies, and there is no assurance that a company will derive any revenue from disruptive innovations or technologies in the future.
Equity
Securities Risk The value of the equity securities the Funds hold may fall due to general market and economic conditions, perceptions
regarding the industries in which the issuers of securities the Funds hold participate or factors relating to specific companies in which
the Funds invest (e.g., litigation or government regulation), among other factors. Equity securities may also be particularly sensitive
to general movements in the stock market, and a decline in the broader market may affect the value of the Fund’s equity investments.
The Funds may invest in stock of, warrants to purchase stock of, and other interests in special purpose acquisition companies (SPACs)
or similar special purposes entities. A SPAC is a publicly traded company that raises investment capital for the purpose of acquiring
or merging with an existing company. Investments in SPACs and similar entities are subject to a variety of risks beyond those associated
with other equity securities. Because SPACs and similar entities do not have any operating history or ongoing business other than seeking
acquisitions, the value of their securities is particularly dependent on the ability of the SPAC’s management to identify a merger
target and complete an acquisition. Until an acquisition or merger is completed, a SPAC generally invests its assets, less a portion retained
to cover expenses, in U.S. government securities, money market securities and cash and does not typically pay dividends in respect
of its common stock. As a result, it is possible that an investment in a SPAC may lose value.
Foreign
Securities Risk Investments in the securities of foreign issuers involve risks beyond those associated with investments in U.S. securities
such as risks of currency exchange rates, differences in foreign accounting and legal standards, the availability of less reliable financial
information, and government restrictions on repatriation of capital. Geopolitical risks, including those arising from trade tension and/or
the imposition of trade tariffs, terrorist activity or acts of civil or international hostility, are increasing. For instance, military
conflict and escalating tensions between countries could result in geopolitical instability and adversely affect the global economy or
specific markets. Strategic competition between the U.S. and China and resulting tensions have also contributed to uncertainty
in the geopolitical and regulatory landscapes. Similarly, other events outside of the Trust’s control, including natural disasters,
climate change-related events, pandemics (such as the COVID-19 pandemic) or
health crises may arise from time to time and be accompanied by governmental actions that may increase international tension. Any such
events and responses, including regulatory developments, may cause significant volatility and declines in the global markets, disproportionate
impacts to certain industries or sectors, disruptions to commerce (including to economic activity, travel and supply chains), loss of
life and property damage, and may adversely affect the global economy or capital markets and may cause the Trust’s assets to decline.
Concentration
Risk The Fund’s assets may be concentrated in a particular industry or group of industries to the extent the Index concentrates
in a particular industry or group of industries. If the Fund’s assets are concentrated in a particular industry or group of industries,
the Fund will be subject to the risk that economic, political or other conditions that have a negative effect on that industry or group
of industries will negatively impact the Fund to a greater extent than if the Fund’s assets were invested in a wider variety of
industries.
Index
Tracking Risk An Index Fund’s return may not track the performance of the Index for a number of reasons. For example, an
Index Fund incurs a number of operating expenses not applicable to the applicable Index and incurs costs associated with buying and selling
securities, especially when rebalancing the Index Fund’s securities holdings to reflect changes in the composition of the applicable
Index. An Index Fund also bears the costs and risks associated with buying and selling securities while such costs and risks are not factored
into the return of the applicable Index. When the Index Fund’s Index is rebalanced and the Index Fund in turn rebalances its portfolio
to attempt to increase the correlation between the Index Fund’s portfolio and its applicable Index, any transaction costs and market
exposure arising from such portfolio rebalancing will be borne directly by the Index Fund and its shareholders. Apart from scheduled rebalances,
the Index provider or its agents may carry out additional ad hoc rebalances to the Index Fund’s applicable Index, which may increase
the costs to and the tracking error risk of the Index Fund. In addition, the Index Fund may not be able to invest in certain securities
included in the applicable Index or may not be able to invest in them in the exact proportions in which they are represented in the applicable
Index, due to legal restrictions or limitations imposed by the governments of certain countries, potential adverse tax consequences or
other regulatory reasons. The risk that the Index Fund may not track the performance of the applicable Index may be magnified during times
of heightened market volatility or other unusual market conditions. A lack of liquidity may be due to various events, including markets
events, economic conditions or investor perceptions. Illiquid securities may be difficult to value and their value may be lower than market
price of comparable liquid securities, which would negatively affect the Index Fund’s performance. To the extent the Index Fund
calculates its NAV based on “fair value” prices for certain securities and the value of the applicable Index is based on
securities’ closing prices (i.e., the value of the Index is not based on “fair value” prices), the Index Fund’s
ability to track the applicable Index may be adversely affected. For tax efficiency purposes, the Index Fund may sell certain securities
47
|
Risks
Involved with Investing in the Funds (Unaudited) (continued) |
|
|
to
realize losses causing it to deviate from the applicable Index. Errors in the construction or calculation of the applicable Index may
occur from time to time and any such errors may not be immediately identified and corrected by Solactive, which may have an adverse impact
on the Index Fund and its shareholders.
Authorized
Participants Concentration Risk A Fund has a limited number of financial institutions that may act as Authorized Participants (“APs”)
on an agency basis (i.e., on behalf of other market participants). To the extent that those APs exit the business or are unable to process
creation and/or redemption orders, and no other AP is able to step forward to create and redeem in either of these cases, Shares may possibly
trade at a discount to net asset value (“NAV”). The AP risk may be heightened in the case of ETFs investing internationally
because international ETFs often require APs to post collateral, which only certain APs are able to do.
Health
Care Sector Risk Companies in the health care sector may be adversely affected by government regulations and government health
care programs, restrictions on government reimbursement for medical expenses, increases or decreases in the cost of medical products and
services and product liability claims, among other factors.
Consumer
Discretionary Risk The consumer discretionary sector may be affected by changes in domestic and international economies, exchange
and interest rates, competition, consumers’ disposable income and consumer preferences, social trends and marketing campaigns.
Cyber
Security Risk As the use of Internet technology has become more prevalent in the course of business, funds have become more susceptible
to potential operational risks through breaches in cybersecurity. A breach in cybersecurity refers to both intentional and unintentional
events that may cause the Fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could
cause the Fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or
financial loss. Cybersecurity breaches may involve unauthorized access to the Fund’s digital information systems through “hacking”
or malicious software coding, but may also result from outside attacks such as denial-of-service
attacks through efforts to make network services unavailable to intended users. In addition, cybersecurity breaches of the Fund’s
third-party service providers, such as its administrator, transfer agent or custodian, or issuers in which
the Fund invests, can also subject the Fund to many of the same risks associated with direct cybersecurity breaches. While the Fund has
established business continuity plans and risk management systems designed to reduce the risks associated with cybersecurity, there are
inherent limitations in such plans and systems. Additionally, there is no guarantee that such efforts will succeed, especially because
the Fund does not directly control the cybersecurity systems of issuers or third-party service providers.
Industrials
Sector Risk Companies in the industrials sector may be adversely affected by changes in government regulation (such as through
the imposition or removal of tariffs), world events, economic conditions, environmental damages, product liability claims and exchange
rates.
Information
Technology Sector Risk Information technology companies face intense competition, both domestically and internationally, which
may have an adverse effect on profit margins. The markets in which many information technology companies compete face rapidly evolving
industry standards and government regulations, in the U.S. and abroad, including potential anti-trust
actions, fines and penalties, and frequent new service and product announcements, introductions and enhancements, and changing customer
demands.
Communications
Sector Risk Communication companies are particularly vulnerable to the potential obsolescence of products and services due to technological
advancement and the innovation of competitors. Companies in the communications sector may also be affected by other competitive pressures,
such as pricing competition, as well as research and development costs, substantial capital requirements and government regulation.
Financial
Technology Sector Risk Companies in the financial technology (“FinTech”) sector that are developing financial technologies
that seek to disrupt or displace established financial institutions generally face competition from much larger and more established firms.
FinTech companies may not currently derive any revenue, and there is no assurance that such companies will derive any revenue from innovative
technologies in the future.
Non-Diversified
Risk As a non-diversified investment company, a Fund is subject to the risk that it will be more volatile
than a diversified fund because the Fund may invest a relatively higher proportion of its assets in a relatively smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. As a result, the gains and losses on a single investment may have
a greater impact on a Fund’s NAV and may make the Fund more volatile than more diversified funds.
Market
Trading Risk Each Fund faces numerous market trading risks, including disruptions to the creation and redemption processes of the
Fund, losses from trading in secondary markets, the existence of extreme market volatility, the potential lack of an active trading market
for the Fund’s shares due to market stress, or trading halts impacting the Shares or the Fund’s underlying securities, which
may result in the Fund’s shares trading at a significant premium or discount to NAV. Please see the ARK ETFs’ current
prospectus for more detailed descriptions of the risks of investing in the ARK ETFs.
48
|
Risks
Involved with Investing in the Funds (Unaudited) (concluded) |
|
|
Subsidiary
Risk ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF) and ARK Blockchain & Fintech Innovation
ETF (formerly, ARK Fintech Innovation ETF) gain exposure to cryptocurrency through investments in the Subsidiaries. By investing in the
Subsidiaries, ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF) and ARK Blockchain & Fintech
Innovation ETF (formerly, ARK Fintech Innovation ETF) are indirectly exposed to the risks associated with the Subsidiaries’ investments.
The investments held by the Subsidiaries are generally similar to those that are permitted to be held by ARK Next Generation Technology
ETF (formerly, ARK Next Generation Internet ETF) and ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation
ETF) and are subject to the same risks that apply to similar investments if held directly by ARK Next Generation Technology ETF (formerly,
ARK Next Generation Internet ETF) and ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF). There
can be no assurance that the investment objective of ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF),
ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF) or the Subsidiaries will be achieved. The Subsidiaries
are not registered under the 1940 Act, and generally are not subject to all the investor protections of the 1940 Act. In addition, changes
in the laws of the United States and/or the Cayman Islands could result in the inability of ARK Next Generation Technology ETF
(formerly, ARK Next Generation Internet ETF), ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF)
and/or the Subsidiaries to operate as intended and could adversely affect ARK Next Generation Technology ETF (formerly, ARK Next Generation
Internet ETF) and ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF). Changes in the laws of the
United States and/or the Cayman Islands could adversely affect the performance of ARK Next Generation Technology ETF (formerly,
ARK Next Generation Internet ETF), ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF) and/or the
Subsidiaries.
Tax
Risk ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF) and ARK Blockchain & Fintech Innovation
ETF (formerly, ARK Fintech Innovation ETF) may seek to gain exposure to cryptocurrency through investments in the Subsidiaries. Treasury
regulations generally treat ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF) and ARK Blockchain &
Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF) income inclusion with respect to the Subsidiaries as qualifying income either
if (A) there is a current distribution out of the earnings and profits of the Subsidiaries that are attributable to such income
inclusion or (B) such inclusion is derived with respect to ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet
ETF)’s and ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF) business of investing in stock,
securities, or currencies. The tax treatment of ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF) and ARK
Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF) investments in the Subsidiaries may be adversely
affected by future legislation, court decisions, Treasury Regulations and/or guidance issued by the IRS that could affect whether income
derived from such investments is “qualifying income” under Subchapter M of the Internal Revenue Code, or otherwise affect
the character, timing and/or amount of ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF) and ARK Blockchain &
Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF) taxable income or any gains and distributions made by ARK Next Generation
Technology ETF (formerly, ARK Next Generation Internet ETF) and ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech
Innovation ETF). No assurances can be provided that the IRS would not be able to successfully assert that ARK Next Generation Technology
ETF (formerly, ARK Next Generation Internet ETF) and ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation
ETF) income from investments in the Subsidiaries was not “qualifying income,” in which case ARK Next Generation Technology
ETF (formerly, ARK Next Generation Internet ETF) and ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation
ETF) would fail to qualify as regulated investment companies under Subchapter M of the Internal Revenue Code if over 10% of their respective
gross income was derived from these investments. If ARK Next Generation Technology ETF (formerly, ARK Next Generation Internet ETF) and
ARK Blockchain & Fintech Innovation ETF (formerly, ARK Fintech Innovation ETF) failed to qualify as regulated investment companies,
they would be subject to federal and state income tax on all of their taxable income at regular corporate tax rates with no deduction
for any distributions paid to shareholders, which would significantly adversely affect the returns to, and could cause substantial losses
for, Fund shareholders. The Cayman Islands does not currently impose any income, corporate or capital gains tax, estate duty, inheritance
tax, gift tax or withholding tax on the Subsidiaries. If Cayman Islands law changes such that the Subsidiaries must pay Cayman Islands
taxes, Fund shareholders would likely suffer decreased investment returns.
49
|
Board
Approval of Management Agreements (Unaudited)
|
|
|
Annual
Review and Approval of ARK ETF Trust Contracts
Under
Section 15(c) of the Investment Company Act of 1940 (“1940 Act”), the ARK ETF Trust’s
(“Trust”) Board of Trustees (“Trustees” or “Board”), including a majority of Trustees who are
not “interested persons” of the Trust (as that term is defined in the 1940 Act) (“Independent Trustees”),
is required annually to consider whether to approve the continuation of (i) the Supervision Agreement between the Trust and ARK
Investment Management, LLC (“ARK”) on behalf of each series of the Trust (each, a “Fund” and, collectively,
“Funds”); and (ii) the Investment Advisory Agreement between the Trust and ARK (collectively, “Management
Agreements”) on behalf of each Fund.
In
advance of the quarterly Board meeting held in person on June 29, 2026 (“Meeting”), the Independent Trustees and
their counsel reviewed and discussed with representatives of an independent data provider the report prepared by that provider, that compared,
among other things, each Fund’s performance, fees and expenses with those of comparable funds managed by other investment advisers
in connection with the Independent Trustees’ consideration of the continuation of the Management Agreements. The Independent Trustees
also considered other information, provided to the Board during the year, as part of its evaluation process. Prior to voting on the Management
Agreements, the Independent Trustees met in Executive Session with ARK’s senior management and also met in private sessions with
their counsel at which time no representatives of management were present.
After
the presentation of relevant information by ARK’s senior management and extensive discussions prior to and at the Meeting, the
Trustees, including the Independent Trustees voting separately, unanimously approved the continuance of the Management Agreements on behalf
of the Funds. The determination made by all of the Trustees to approve the continuation of the Management Agreements was made on the basis
of each Trustee’s business judgment after considering all of the information presented to them. Individual Trustees may have given
different weights to certain factors and assigned various degrees of materiality to information received in connection with the contract
review process. In approving the continuation of the Management Agreements for each Fund, the following factors were considered by the
Trustees, and no one factor was determinative:
(a) The
nature, extent and quality of the services provided by ARK to the Funds under the Management Agreements. The Trustees considered
the nature, extent and quality of the services that ARK provides and will continue to provide under the Management Agreements, including:
(i) the qualifications of the portfolio managers, analysts and other key personnel of ARK who provide and will continue to provide
the supervisory and investment advisory services to the Trust; and (ii) the terms of the Management Agreements. The Trustees considered
ARK’s senior management’s discussion of the various duties and responsibilities of ARK under the Management Agreements.
The Trustees also considered the organizational structure of ARK, the quality of ARK’s investment, administrative, operations,
compliance and legal personnel and ARK’s management of the operations of the Funds.
Based
on these and other factors, the Trustees concluded that the nature, extent and quality of the supervisory and investment advisory services
that had been and that were expected to continue to be provided to the Funds by ARK were satisfactory and supported the decision of the
Trustees to approve the continuation of the Management Agreements with respect to each Fund.
(b) The
investment performance of the Funds relative to comparable exchange-traded
funds (“ETFs”) managed by other investment advisers and relevant market indices. The Trustees considered a report
prepared by an independent data provider, which compared the performance of each of the Funds to that of comparable ETFs as identified
by such independent data provider and appropriate, recognized market indices for the one-year, three-year
and five-year periods ended March 31, 2026, as applicable. The Trustees also considered ARK’s
senior management’s discussion of the relative performance of the Funds for the period ended March 31, 2026 and year to
date.
Based
upon their review of the investment performance of each Fund and ARK’s senior management’s discussion of the investment
performance of the Funds, the Trustees concluded that each Fund’s overall performance was satisfactory relative to the performance
of comparable ETFs and relevant market indices.
(c) A
comparison of the management fees (under the Supervision Agreement, which includes the advisory fees under the Investment Advisory Agreement)
of the Funds with those of comparable ETFs managed by other investment advisers and other funds and accounts managed by ARK with comparable
investment strategies. The Trustees considered a report prepared by an independent data provider, which compared the management
fees paid by the Funds with those paid by comparable ETFs as identified by such independent data provider. The Board noted that the management
fee paid by each actively-managed Fund generally was in line with the applicable actively-managed
peer group median and that the management fee paid by each passively-managed Fund was either below or in
line with the applicable passively-managed peer group median. The Board also considered fee information for
comparable funds and accounts managed by ARK. The Board noted that the fees paid by certain funds and accounts managed by ARK are
the same as the advisory fees paid by the Funds and that in instances where comparable funds or accounts managed by ARK paid lower fees
than the Funds, ARK generally provides these clients with fewer services than it provides to the Funds. The Board noted the relatively
small number of ETFs in the Funds’ respective peer groups given the limited number of ETFs with strategies that are comparable
to those of the Funds.
50
|
Board
Approval of Management Agreements (Unaudited) (concluded)
|
|
|
Based
on their review of the comparative fee data and the other factors considered, the Trustees concluded that the management fee paid by each
Fund was reasonable considering the services received by the Fund.
(d) A
comparison of the net expense ratios of the Funds with those of comparable ETFs managed by other investment advisers. The Trustees
considered a report prepared by an independent data provider, which compared the net expense ratios of the Funds with the net expense
ratios of comparable ETFs as identified by such independent data provider. The Trustees noted that the actively-managed
Funds’ net expense ratios were in line with the applicable actively-managed peer group median and
that the passively-managed Funds’ net expense ratios were either below or in line with the applicable
passively-managed peer group median. The Trustees noted the relatively small number of ETFs in the Funds’
respective peer groups given the limited number of ETFs with strategies that are comparable to those of the Funds.
The
Trustees also took into consideration ARK’s view that the unitary structure of the Funds’ management fees (which encompasses,
among other things, the advisory fees) would continue to be easy to understand by investors and would provide a level of predictability
with respect to the net expense ratios of the Funds.
Based
on the fee comparisons provided to the Board and other factors considered, the Trustees concluded that the net expense ratio of each Fund,
which reflected both the advisory fee and management fee, was reasonable.
(e) The
extent to which economies of scale may be realized as the Funds’ assets increase and whether fee levels would reflect economies
of scale. The Trustees considered ARK’s senior management’s discussion of the structure of the current management
fees and advisory fees and noted that the unitary fee structure effectively acts as a cap on the fees and expenses (excluding certain
specific investment-related and extraordinary fees and expenses) that are borne by the Funds. The Trustees
also noted that, although there currently are no breakpoints in any Fund’s management fees or advisory fees, if a Fund’s
assets increase over time, the Fund might realize other economies of scale if assets increase proportionally more than certain other expenses.
Based
on these considerations, the Trustees concluded that adding breakpoints at specified levels to the Funds’ management fees and advisory
fees was not necessary at that time.
(f) The
cost of the services provided and profits realized by ARK from the relationship with the Funds. The Trustees considered with respect
to each Fund the revenues ARK received from the Fund and the costs ARK incurred in providing services to the Fund. The Trustees also took
into account that certain fees and expenses of the Funds had been assumed and paid by ARK in accordance with the Management Agreements.
The Trustees noted that for the 2025 calendar year, all but two of the Funds had been profitable to ARK.
Based
on the information provided to the Trustees, the Trustees concluded that ARK’s profitability from its relationship with each Fund
was reasonable given the quality and scope of services provided by ARK and the overall investment performance of the Funds.
(g) Benefits
derived or to be derived by ARK and its affiliates from ARK’s relationship with the Funds. The Trustees noted that ARK’s
reputation as an asset manager has likely benefited from the performance of the Funds and had the potential to aid ARK in gathering assets
for its non-fund business operations. The Trustees also considered that ARK’s affiliates were likely
to benefit from the popularity and positive reception of the Funds.
The
Board concluded that the nature and amount of any indirect benefits received by ARK and its affiliates from ARK’s relationship
with the Funds are reasonable.
(h) Financial
Resources of ARK. The Trustees then considered whether ARK was financially sound and had adequate resources to perform its obligations
under the Management Agreements.
Based
on the information provided to the Board, the Trustees concluded that ARK had sufficient financial resources necessary to continue to
perform its obligations under the Management Agreements.
General
Conclusion. Based on its consideration of the factors discussed above, and such other information as it deemed appropriate and
relevant, the Board concluded that it would be in the best interest of each Fund and its shareholders to approve the continuation of the
Management Agreements, including the fees payable under those Agreements. Accordingly, the Board, with Independent Trustees voting separately,
unanimously approved the continuation of the Management Agreements with respect to each Fund for an additional one-year
period.
51
|
Notes
to Financial Statements
July
31, 2026 |
|
|
1.
Organization
ARK
ETF Trust (“Trust”) is an open-end management investment company registered under the Investment
Company Act of 1940, as amended (“1940 Act”) and applies the specialized accounting and reporting guidance in U.S. Generally
Accepted Accounting Principles (U.S. GAAP). The Trust was organized as a Delaware statutory trust on June 7,
2013. The Trust consists of thirteen (13) investment portfolios which are considered to be separate entities for financial reporting and
tax purposes. These financial statements relate solely to ARK DIET Q1 Buffer ETF, ARK DIET Q2 Buffer ETF, ARK DIET Q3 Buffer ETF and ARK
DIET Q4 Buffer ETF (each, a “Fund” and collectively, the “Funds”), each a series of the Trust. Each Fund is
classified as a non-diversified management investment company under the 1940 Act. The ARK DIET Q1 Buffer
ETF commenced operations on January 2, 2026, the ARK DIET Q2 Buffer ETF commenced operations on April
1, 2026, the ARK DIET Q3 Buffer ETF commenced operations on July 1, 2026, and the ARK DIET Q4 Buffer
ETF commenced operations on October 1, 2025.
The
investment objective of the Funds is to seek four rolling 12-month periods from January 1 to December
31, April 1 to March 31, July 1 to June 30, and October 1 to September
30 (each, an “Outcome Period”), respectively, to provide investors with a defined risk-return
profile, before fees and expenses.
The
Trust’s fiscal and tax reporting year end is July 31.
2.
Significant Accounting Policies
These
financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”), which require management to make estimates and assumptions that affect the reported amount of assets and liabilities, the
disclosure of contingent liabilities at the date of the financial statements, and the reported amount of increase and decrease in net
assets from operations during the fiscal period. Actual amounts could differ from these estimates. The Trust is an investment company
and follows the investment company accounting standards and reporting guidance under Financial Accounting Standards Board (FASB) Accounting
Standards Codification (“ASC”) Topic 946, “Financial Services — Investment Companies”. Rules and interpretive
releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative
guidance for SEC registrants. The following summarizes the significant accounting policies of the Funds:
Investment
Valuation
The
values of each Fund’s securities that are traded on a securities market are based on such securities’ closing prices on
the principal market on which the securities are traded. Such valuations would typically be categorized as Level 1 in the fair value hierarchy.
If a security’s market price is not readily available or does not otherwise accurately reflect the market value of such security,
the security will be fair valued by ARK Investment Management LLC (the “Adviser”), which was selected by the Board of Trustees
of the Trust (“Board of Trustees”) as valuation designee, to provide such fair values in accordance with the Adviser’s
valuation policies and procedures that were reviewed by, and subject to the oversight of, the Board of Trustees. Each Fund may use fair
value pricing in a variety of circumstances, including but not limited to, situations when the value of a Fund’s security has been
materially affected by events occurring after the close of the market on which such security is principally traded (such as a corporate
action or other news that may materially affect the price of such security) or trading in such security has been suspended or halted.
Such valuations would typically be categorized as Level 2 or Level 3 in the fair value hierarchy. Fair value pricing involves subjective
judgments and it is possible that a fair value determination for a security could be materially different than the value that could be
realized upon the sale of such security. Investments in money market funds are valued at their NAV as of the close of each business day.
Exchange-traded funds are valued at their last sale or official closing price on the principal market.
Securities
listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; Listed options
are generally valued at the last reported sale price, provided such price is within the bid-ask range, otherwise,
they are valued based on the bid or ask price, as determined by a pricing service; FLEX Options are generally valued using models that
consider the terms of the option and relevant market inputs and are typically valued at transaction price on the trade date.
Exchange-traded
derivatives could be classified as Level 1 or Level 2 depending on whether they were traded or modelled on the valuation day. Over-the-counter
(“OTC”) and centrally cleared derivatives are valued using market transactions and other market evidence, including market-based
inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative
pricing sources. Where models are used, the selection of a particular model to value OTC and centrally cleared derivatives depends upon
the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market.
Valuation models require a variety
17
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
of
inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment
rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model
inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives
are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
Investment
Transactions
Investment
transactions are accounted for on the trade date. Realized gains and losses on sales of investment securities are calculated using the
identified cost method. Dividend income is recognized on the ex-dividend date. Interest income and expenses
are recognized on an accrual basis.
Dividend
Distributions
Distributions
to shareholders are recorded on the ex-dividend date and are determined in accordance with federal income
tax regulations, which may differ from U.S. GAAP. Each Fund distributes all or substantially all of its net investment income to shareholders
in the form of dividends. Net realized capital gains are distributed to shareholders as capital gain distributions. Net investment income,
if any, and net capital gains, if any, are typically distributed to shareholders at least annually. Dividends may be declared and paid
more frequently to improve index tracking or to comply with the distribution requirements of the Internal Revenue Code.
Segment
Reporting
The
officers of the Fund acts as the Fund's chief operating decision maker (“CODM”). The Fund operates as a single operating
segment, reflecting the CODM's oversight of long-term strategic asset allocation in accordance with the Trust's
prospectus and investment strategy. The CODM evaluates performance and allocates resources using the Trust's portfolio composition, total
returns, expense ratios, and changes in net assets — measures consistent with the amounts presented in the Trust's financial statements.
Segment assets are presented as “total assets” on the Statement of Assets and Liabilities, and segment revenues and expenses
are presented on the Statement of Operations.
3.
Management and Other Agreements
Management
Each
Fund pays the Adviser a fee calculated daily and payable monthly at an annual rate (stated as a percentage of the average daily net assets
of the Fund) of 0.69% (“Management Fee”) in return for providing investment management and supervisory services under a
comprehensive structure. In addition, the Fund bears other fees and expenses that are not covered by the Supervision Agreement, which
may vary and will affect the total expense ratio of the Fund, such as acquired fund fees and expenses, taxes and governmental fees, brokerage
fees, commissions and other transaction expenses, certain foreign custodial fees and expenses, costs of borrowing money, including interest
expenses, and extraordinary expenses (such as litigation and indemnification expenses). Subject to the oversight of the Board, the Adviser
provides investment management services to each Fund and provides, or causes to be furnished, all supervisory and other services reasonably
necessary for the operation of each Fund and also bears the costs of trustee fees and various third-party
services required by the Funds, including administration, certain custody, audit, legal, transfer agency, and printing costs.
The
Adviser has agreed to waive a portion of its management fee payable by each Fund in an amount equal to the investment advisory fee portion
of the management fee it earns as an investment adviser to the affiliated fund in which the Fund invests. The portion of the management
Fee the Adviser has agreed to waive is 0.55%. As such, the Management Fees in the Statement of Operations have been waived in amounts
totalling $4,590 for ARK DIET Q1 Buffer ETF, $2,063 for the ARK DIET Q2 Buffer ETF, $594 for the ARK DIET Q3 Buffer ETF, and $12,331 for
ARK DIET Q4 Buffer ETF.
Administrator,
Custodian, Transfer Agent and Accounting Agent
The
Bank of New York Mellon is the administrator for the Funds, the custodian of the Funds’ assets and also provides transfer agency,
fund accounting and various administrative services to the Funds (in each capacity, “Administrator,” “Custodian,”
“Transfer Agent” or “Accounting Agent”). The Bank of New York Mellon is a subsidiary of The Bank of New York
Mellon Corporation, a financial holding company.
Distribution
Foreside
Fund Services, LLC serves as the Funds’ distributor (“Distributor”). The Trust has adopted a distribution and service
plan (“Rule 12b-1 Plan”) pursuant to Rule 12b-1 under the 1940
Act. Under the Rule 12b-1 Plan, each Fund is authorized to pay distribution fees in connection with the sale
and distribution of its shares and pay service fees in connection with the provision of ongoing services to shareholders. To date, the
Rule 12b-1 Plan has not been implemented for the Funds and there is no current intention to implement the
Rule 12b-1 Plan.
18
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
Board
of Trustees
Effective
January 1, 2026, each Independent Trustee receives an annual retainer fee of $275,000 for services provided
as a Trustee of the Trust, plus out-of-pocket expenses related to attendance at Board and Committee Meetings.
Prior to this date, the annual retainer fee was $230,000. In addition, the Chairs of the Board and of the Audit Committee each also receive
an additional annual retainer fee of $60,000 and $20,000, respectively, for their service as such. Annual Trustee fees may be reviewed
periodically and changed by the Trust’s Board.
4.
Creation and Redemption Transactions
As
of July 31, 2026, there were an unlimited number of shares of beneficial interest without par value authorized
by the Trust. Individual shares of a Fund may only be purchased and sold at market prices on a national securities exchange through a
broker-dealer. Such transactions may be subject to customary commission rates imposed by the broker-dealer,
and market prices for a Fund’s shares may be at, above or below its net asset value (“NAV”) depending on the premium
or discount at which the Fund’s shares trade.
Each
Fund issues and redeems shares at its NAV only in a large specified number of shares each called a “Creation Unit,” or multiples
thereof, and only with “authorized participants” who have entered into contractual arrangements with the Distributor. A
Creation Unit consists of 25,000 shares. Except when aggregated in Creation Units, shares of each Fund are
not redeemable. Transactions in shares for each Fund are disclosed in detail in the Statements of Changes in Net Assets. The consideration
for a purchase of Creation Units generally consists of the in-kind deposit of specified securities and an
amount of cash or, as permitted or required by a Fund, of cash. A fixed transaction fee is imposed on each creation and redemption transaction.
In addition, a variable charge for certain creation and redemption transactions may be imposed.
5.
Investment Transactions
The
cost of purchases and the proceeds from sales of investment securities (excluding in-kind subscriptions and
redemptions and short-term investments) for the period ended July 31, 2026 were
as follows:
|
Fund
|
Purchases
|
Sales
|
|
ARK
DIET Q1 Buffer ETF |
$ 997,997
|
$ 519,032
|
|
ARK
DIET Q2 Buffer ETF |
997,499
|
—
|
|
ARK
DIET Q3 Buffer ETF |
994,875
|
5,196
|
|
ARK
DIET Q4 Buffer ETF |
3,992,065
|
1,904,597
|
For
the period ended July 31, 2026, the cost of in-kind subscriptions and the proceeds
from in-kind redemptions were as follows:
|
|
In-Kind
|
|
Fund
|
Subscriptions
|
Redemptions
|
|
ARK
DIET Q1 Buffer ETF |
$ 1,048,790
|
$ —
|
|
ARK
DIET Q3 Buffer ETF |
499,643
|
—
|
|
ARK
DIET Q4 Buffer ETF |
1,023,353
|
940,654
|
The
following tables set forth, by certain risk types, the gross value of derivative contracts (not considered to be hedging instruments for
accounting disclosure purposes) as of July 31, 2026. These instruments were used as part of the Fund’s investment strategies
and to obtain and/or manage exposure related to the risks below. The values in the tables below exclude the effects of cash collateral
received or posted pursuant to these derivative contracts, and therefore may not be representative of the Fund’s net exposure.
ARK
DIET Q1 Buffer ETF
|
Risk
|
Statements
of Assets and Liabilities |
Assets
|
Statements
of Assets and Liabilities |
Liabilities
|
|
Equity
|
Purchased
options contracts, at value |
$151,722
|
Written
options contracts, at value |
$(104,923)
|
|
Total
|
|
$151,722
|
|
$(104,923)
|
ARK
DIET Q2 Buffer ETF
|
Risk
|
Statements
of Assets and Liabilities |
Assets
|
Statements
of Assets and Liabilities |
Liabilities
|
|
Equity
|
Purchased
options contracts, at value |
$150,083
|
Written
options contracts, at value |
$(173,977)
|
|
Total
|
|
$150,083
|
|
$(173,977)
|
19
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
ARK
DIET Q3 Buffer ETF
|
Risk
|
Statements
of Assets and Liabilities |
Assets
|
Statements
of Assets and Liabilities |
Liabilities
|
|
Equity
|
Purchased
options contracts, at value |
$225,722
|
Written
options contracts, at value |
$(148,401)
|
|
Total
|
|
$225,722
|
|
$(148,401)
|
ARK
DIET Q4 Buffer ETF
|
Risk
|
Statements
of Assets and Liabilities |
Assets
|
Statements
of Assets and Liabilities |
Liabilities
|
|
Equity
|
Purchased
options contracts, at value |
$185,193
|
Written
options contracts, at value |
$(19,012)
|
|
Total
|
|
$185,193
|
|
$(19,012)
|
The
following tables set forth, by certain risk types, the Fund’s gains (losses) related to these derivatives and their indicative
volumes for the period ended July 31, 2026. These gains (losses) should be considered in the context that
these derivative contracts may have been executed to create investment opportunities and/or economically hedge certain investments, and
accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These
gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the
Statement of Operations:
ARK
DIET Q1 Buffer ETF
|
Risk
|
Statement
of Operations |
Net
Realized
Gain (Loss) |
Net
Change in
Unrealized
Gain (Loss) |
|
Equity
|
Net
realized gain (loss) from Purchased options/Net change in unrealized gain (loss) on Purchased options |
$ (8,220)
|
$(99,100)
|
|
Equity
|
Net
realized gain (loss) from Written options/Net change in unrealized gain (loss) on Written options |
(8,273)
|
172,581
|
|
Total
|
|
$(16,493)
|
$ 73,481
|
ARK
DIET Q2 Buffer ETF
|
Risk
|
Statement
of Operations |
Net
Realized
Gain (Loss) |
Net
Change in
Unrealized
Gain (Loss) |
|
Equity
|
Net
realized gain (loss) from Purchased options/Net change in unrealized gain (loss) on Purchased options |
$ —
|
$(29,143)
|
|
Equity
|
Net
realized gain (loss) from Written options/Net change in unrealized gain (loss) on Written options |
—
|
5,747
|
|
Total
|
|
$ —
|
$(23,396)
|
ARK
DIET Q3 Buffer ETF
|
Risk
|
Statement
of Operations |
Net
Realized
Gain (Loss) |
Net
Change in
Unrealized
Gain (Loss) |
|
Equity
|
Net
realized gain (loss) from Purchased options/Net change in unrealized gain (loss) on Purchased options |
$ —
|
$(30,512)
|
|
Equity
|
Net
realized gain (loss) from Written options/Net change in unrealized gain (loss) on Written options |
—
|
108,209
|
|
Total
|
|
$ —
|
$ 77,697
|
ARK
DIET Q4 Buffer ETF
|
Risk
|
Statement
of Operations |
Net
Realized
Gain (Loss) |
Net
Change in
Unrealized
Gain (Loss) |
|
Equity
|
Net
realized gain (loss) from Purchased options/Net change in unrealized gain (loss) on Purchased options |
$(152,498)
|
$(121,049)
|
|
Equity
|
Net
realized gain (loss) from Written options/Net change in unrealized gain (loss) on Written options |
146,610
|
347,010
|
|
Total
|
|
$ (5,888)
|
$ 225,961
|
20
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
For
the period ended July 31, 2026, the average number of contracts held for options were as follows:
|
|
Average
Number of
Contracts(1)
|
|
Fund
|
Written
Options
|
Purchased
Options |
|
ARK
DIET Q1 Buffer ETF |
194
|
217
|
|
ARK
DIET Q2 Buffer ETF |
148
|
168
|
|
ARK
DIET Q3 Buffer ETF |
185
|
207
|
|
ARK
DIET Q4 Buffer ETF |
352
|
400
|
6.
Federal Income Tax
Each
Fund intends to continue to qualify as a “regulated investment company” under Subchapter M of the Internal Revenue Code
of 1986, as amended. If so qualified, a Fund will not be subject to U.S. federal income tax on the portion of its taxable investment income
and capital gains that it distributes to its shareholders. U.S. GAAP provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements, and requires the evaluation of tax positions taken or expected to be taken
in the course of preparing a Fund’s tax returns to determine whether the tax positions are “more-likely-than-not”
to be sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not
threshold would be recorded as a tax benefit or expense in the current year. Interest and penalties related to income taxes would be recorded
as income tax expense. The management of the Funds is required to analyze all open tax years, from inception through July
31, 2026, as defined by IRS statute of limitations, for all major jurisdictions, including federal tax authorities and certain
state tax authorities. As of July 31, 2026, the Funds did not have a liability for any unrecognized tax benefits.
The Funds have no examinations in progress and are not aware of any tax positions for which it is reasonably possible that the amounts
of unrecognized tax benefits will significantly change in the next twelve months.
The
Funds adopted FASB Accounting Standards Update 2023-09, Income Taxes (Topic 740) — Improvements
to Income Tax Disclosures (ASU 2023-09), which enhances income tax disclosures, including disclosure of income
taxes paid disaggregated by jurisdiction. Adoption of the new standard impacted financial statement disclosures only and did not affect
any Fund’s financial position or the results of its operations. At July 31, 2026, there were no disclosures
necessary.
At
July 31, 2026, the approximate cost of investments and net unrealized appreciation (depreciation) for federal
income tax purposes was as follows:
|
Fund
|
Cost
|
Gross
Unrealized
Appreciation
|
Gross
Unrealized
Depreciation
|
Net
Unrealized
Appreciation
(Depreciation) |
|
|
ARK
DIET Q1 Buffer ETF |
$1,804,774
|
$173,808
|
$(267,362)
|
$ (93,554
|
)
|
|
ARK
DIET Q2 Buffer ETF |
1,176,852
|
59,536
|
(29,143)
|
30,393
|
|
|
ARK
DIET Q3 Buffer ETF |
1,757,583
|
141,201
|
(242,104)
|
(100,903
|
)
|
|
ARK
DIET Q4 Buffer ETF |
2,622,919
|
378,348
|
(828,919)
|
(450,571
|
)
|
The
differences between book-basis and tax-basis components of net assets are primarily
attributable to tax deferral of losses on wash sales, in-kind creation and redemption transactions, net operating
losses, and straddle deferrals. Certain capital accounts in the financial statements have been adjusted for permanent book-tax
differences. These adjustments have no impact on net asset values.
At
July 31, 2026, the components of distributable earnings (loss) on a tax basis were as follows:
|
Fund
|
Undistributed
Income |
Undistributed
Long-term
Capital Gains |
Accumulated
Capital
Gains/(Losses) |
Net
Unrealized
Appreciation
(Depreciation) |
Total Earnings
(Losses) |
|
ARK
DIET Q1 Buffer ETF |
$ —
|
$ —
|
$ (1)
|
$ (93,554)
|
$ (93,555)
|
|
ARK
DIET Q2 Buffer ETF |
—
|
—
|
—
|
30,393
|
30,393
|
|
ARK
DIET Q3 Buffer ETF |
—
|
—
|
—
|
(100,903)
|
(100,903)
|
|
ARK
DIET Q4 Buffer ETF |
132,167
|
—
|
—
|
(450,571)
|
(318,404)
|
21
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
At
July 31, 2026, the effect of permanent book/tax reclassifications resulted in increase/(decrease) to the
components of net assets as follows:
|
Fund
|
Total
Distributable
Earnings |
Paid-in Capital
|
|
ARK
DIET Q1 Buffer ETF |
$ 1,099
|
$ (1,099)
|
|
ARK
DIET Q2 Buffer ETF |
418
|
(418)
|
|
ARK
DIET Q3 Buffer ETF |
139
|
(139)
|
|
ARK
DIET Q4 Buffer ETF |
5,581
|
(5,581)
|
The
tax character of distributions paid during the period indicated was as follows:
|
|
Period
Ended July 31, 2026 |
|
Fund
|
Ordinary
Income* |
Long-Term
Capital Gain |
Return
of Capital |
|
ARK
DIET Q1 Buffer ETF |
$ —
|
$ —
|
$ —
|
|
ARK
DIET Q2 Buffer ETF |
—
|
—
|
—
|
|
ARK
DIET Q3 Buffer ETF |
—
|
—
|
—
|
|
ARK
DIET Q4 Buffer ETF |
8,120
|
—
|
—
|
At
July 31, 2026, for Federal income tax purposes, the Funds have capital loss carryforwards available as shown
in the table below, to the extent provided by regulations, to offset future capital gains for an unlimited period. To the extent that
these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be
distributed to shareholders.
|
Fund
|
Short-Term
|
Long-Term
|
Total
Amount |
|
ARK
DIET Q1 Buffer ETF |
$ (1)
|
$ —
|
$ (1)
|
|
ARK
DIET Q2 Buffer ETF |
—
|
—
|
—
|
|
ARK
DIET Q3 Buffer ETF |
—
|
—
|
—
|
|
ARK
DIET Q4 Buffer ETF |
—
|
—
|
—
|
7.
Indemnification Obligations
The
Funds have a variety of indemnification obligations under contracts with their service providers. The Funds’ maximum exposure under
these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk
of loss to be remote.
8.
Investment Risks
Clearing
Member Default Risk: Transactions in certain options such as FLEX Options and listed options are required to be centrally cleared
(“cleared options”). In a transaction involving cleared options, the Fund’s counterparty is a clearing house, such
as the Options Clearing Corporation (the “OCC”), rather than a bank or broker. Since the Fund is not a member of clearing
houses and only members of a clearing house (“clearing members”) can participate directly in the clearing house, the Fund
will hold cleared options through accounts at clearing members. In cleared options positions, the Fund will make payments (including margin
payments) to, and receive payments from, a clearing house through their accounts at clearing members. Margin requirements are set by the
OCC and the Fund’s clearing member and generally may be increased at any time. Margin requirements could increase significantly
during periods of volatility or market disruptions, and the Fund may be forced to sell assets at a disadvantageous time or price to meet
such margin calls, which could negatively impact the Fund’s performance. Customer funds held at a clearing organization in connection
with any option contracts are held in a commingled omnibus account and are not identified to the name of the clearing member’s
individual customers. As a result, assets deposited by the Fund with any clearing member as margin for its options contracts may, in certain
circumstances, be used to satisfy losses of other clients of the Fund’s clearing member. In addition, although clearing members
guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of the Fund might not
be fully protected in the event of the clearing member’s bankruptcy. The Fund is also subject to the risk that a limited number
of clearing members are willing to transact on the Fund’s behalf, which heightens the risks associated
22
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
with
a clearing member’s default. If a clearing member defaults, the Fund could lose some or all of the benefits of a transaction entered
into by the Fund with the clearing member. The loss of a clearing member for the Fund to transact with could result in increased transaction
costs and other operational issues that could impede the Fund’s ability to implement its investment strategy. If the Fund cannot
find a clearing member to transact with on the Fund’s behalf, the Fund may be unable to effectively implement its investment strategy.
Derivatives
Risk: Derivatives involve risks different from, and, in certain cases, greater than, the risks presented by more traditional investments.
These include credit risk, liquidity risk, management risk and leverage risk. Derivative products are highly specialized instruments that
require an understanding not only of the underlying instrument but also of the derivative itself, without the benefit of observing the
performance of the derivative under all possible market conditions. In particular, the use and complexity of derivatives require the maintenance
of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative adds to the Fund’s
investment portfolio, and the ability to forecast price, interest rate or currency exchange rate movements correctly. The failure of another
party to a derivative to comply with the terms may cause the Fund to incur a loss. The credit risk for exchange-traded
or centrally cleared derivatives is generally less than for privately negotiated derivatives through the interposition of a clearinghouse
to the exchange-traded or centrally-cleared derivative trade, which provides
a guarantee of performance. If a derivative transaction is particularly large or if the relevant market is illiquid (as is the case with
many privately negotiated derivatives), it may not be possible to initiate a transaction or liquidate a position at an advantageous price.
Adverse changes in the value or level of the underlying asset, rate or index can result in a loss substantially greater than the amount
invested in the derivative itself.
Disruptive
Innovation Risk: Companies that the Adviser believes are capitalizing on disruptive innovation and developing technologies to displace
older technologies or create new markets may not in fact do so. Companies that initially develop a novel technology may not be able to
capitalize on the technology. Companies that develop disruptive technologies may face political or legal attacks from competitors, industry
groups or local and national governments. These companies may also be exposed to risks applicable to sectors other than the disruptive
innovation theme for which they are chosen, and the securities issued by these companies may underperform the securities of other companies
that are primarily focused on a particular theme. The ARK Innovation ETF (“the Underlying ETF”) may invest in a company
that does not currently derive any revenue from disruptive innovations or technologies, and there is no assurance that a company will
derive any revenue from disruptive innovations or technologies in the future. A disruptive innovation or technology may constitute a small
portion of a company’s overall business. As a result, the success of a disruptive innovation or technology may not affect the value
of the equity securities issued by the company.
FLEX
Options Risk: The Fund utilizes FLEX Options guaranteed for settlement by the OCC, and they each bear the risk that the OCC will
be unable or unwilling to fulfill its obligations under the FLEX Options contracts, which is a form of counterparty risk. As a result,
the ability of the Fund to meet its objective depends on the OCC being able to meet its obligations. In the unlikely event that the OCC
becomes insolvent or is otherwise unable to meet its settlement obligations, the Fund could suffer significant losses. Additionally, FLEX
Options may be less liquid than certain other securities, such as standardized options. In a less liquid market, the Fund may have difficulty
closing out certain FLEX Options positions at desired times and prices. Terminating the FLEX Options in a less liquid market may require
the payment of a premium or acceptance of a discounted price and may take longer to complete. Additionally, in such a market, the liquidation
of a large number of options may significantly impact the price. The Fund may experience substantial downside from certain FLEX Option
positions, and FLEX Option positions may expire worthless.
The
value of the FLEX Options will be affected by, among others, changes in the value of the Underlying ETF, changes in interest rates, changes
in the actual and implied volatility of the Underlying ETF and the remaining time until the FLEX Options expire. During periods of reduced
market liquidity or in the absence of readily available market quotations, or when there is reduced availability of reliable objective
pricing data for the FLEX Options, the ability of the Fund to value the FLEX Options may become more difficult. The value of the FLEX
Options does not increase or decrease at the same rate as the level of the Underlying ETF (although they generally move in the same direction).
Due to the cost of the options used by the Fund and other Fund fees and expenses, the correlation of the Fund’s performance to
that of the Underlying ETF is expected to be less than if the Fund solely invested directly in the Underlying ETF (i.e., without using
options), and could be substantially less. Prior to the expiration date, the value of the FLEX Options will be determined based upon the
Fund’s valuation policy. Because a component of the FLEX Option’s value will be affected by, among other things, changes
in the value of the Underlying ETF, changes in interest rates, changes in the actual and implied volatility of the Underlying ETF and
the remaining time until the FLEX Options expire, the value of the Fund’s FLEX Options positions is not anticipated to increase
or decrease at the same rate as the Underlying ETF, and it is possible they may move in different directions. As a result, the Fund’s
NAV may not increase or decrease at the same rate as the Underlying ETF. Similarly, the components of the option’s value are anticipated
to impact the effect of the Buffer on the Fund’s NAV, which may not be in full effect prior to the end of the Outcome Period. The
Fund’s strategy is designed to produce the outcomes upon the expiration of the FLEX Options on the last business day of the Outcome
Period, and it should not be expected that the outcomes will be provided at any point other than the end of the Outcome Period.
23
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
Investment
Objective and Outcomes Risk: There is no guarantee that the Fund will succeed in its attempt to achieve its investment objective
and/or its strategy to limit the Fund’s exposure to losses in the Underlying ETF’s share price to no more than 50% of the
Fund’s NAV during the Outcome Period. An investor could lose some or all of their investment in the Fund. Circumstances under which
the Fund might not achieve its objective and/or its strategy to limit the Fund’s exposure to losses in the Underlying ETF’s
share price to no more than 50% of the Fund’s NAV during the Outcome Period include, but are not limited to: (i) if the Fund disposes
of FLEX Options; (ii) if the Fund is unable to maintain the intended proportional relationship based on the number of FLEX Options in
the Fund’s portfolio; (iii) significant accrual of Fund expenses in connection with effecting the Fund’s investment strategy;
(iv) losses resulting from the Fund’s investment strategy; or (v) adverse tax law changes affecting the treatment of FLEX Options.
Liquidity
Risk — Listed Options: There is no guarantee that a liquid secondary trading market will exist for the listed options, including
FLEX Options, in which the Fund may invest. The trading in such listed options may be less deep and liquid than the market for certain
other exchange traded option contracts. In a less liquid market for the listed options terminating the listed options may require the
payment of a premium or acceptance of a discounted price and may take longer to complete. Additionally, the liquidation of a large number
of listed options may more significantly impact the price in a less liquid market. Further, the Fund requires a sufficient number of participants
to facilitate the purchase and sale of options on an exchange to provide liquidity to the Fund for its listed option positions. A less
liquid trading market may adversely impact the value of the listed options and the value of your investment.
Management
Risk: As actively-managed ETFs, the Funds are subject to management risk. In managing the Funds, the
Adviser applies investment strategies, techniques and analyses in making investment decisions for the Funds, but there can be no guarantee
that these actions will produce the intended results. The ability of the Adviser or Sub-Adviser to successfully
implement the Fund’s investment strategies will significantly influence the Fund’s performance. The success of the Fund
will depend in part upon the skill and expertise of certain key personnel of the Adviser or Sub-Adviser,
and there can be no assurance that any such personnel will continue to be associated with the Fund.
Margin
Requirements Risk: The Fund’s positions in listed options, including FLEX Options, on the Underlying ETF are subject to
initial and maintenance margin requirements that will require the Fund to pledge assets to collateralize the Fund’s exposure under
the options. Margin requirements may increase based on various market conditions, including the volatility or market price of the options
or the Underlying ETF. If margin requirements increase, the Fund may be required to sell its investments to meet its margin posting obligations.
Market
Risk: The value of the Fund’s assets will fluctuate as the markets in which the Fund invests fluctuate. The value of the
Fund’s investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, such as
inflation (or expectations for inflation), deflation (or expectations for deflation), interest rates, global demand for particular products
or resources, market instability, debt crises and downgrades, embargoes, tariffs, sanctions and other trade barriers, regulatory events,
other governmental trade or market control programs and related geopolitical events. In addition, the value of the Fund’s investments,
and those of the Underlying ETF, may be negatively affected by the occurrence of global events such as war, military conflict, acts of
terrorism, social unrest, environmental disasters, natural disasters or events, recessions, supply chain disruptions, political instability,
and infectious disease epidemics or pandemics.
For
example, an outbreak of an infectious disease may negatively affect economies, markets and individual companies throughout the world,
including those in which the Fund and/or the Underlying ETF invests. The effects of such pandemics to public health and business and market
conditions, including exchange trading suspensions and closures may have a significant negative impact on the performance of the Fund’s
investments, increase the Fund’s volatility, negatively impact the Fund’s arbitrage and pricing mechanisms, exacerbate pre-existing
political, social and economic risks to the Fund, and negatively impact broad segments of businesses and populations. The Fund’s
operations may be interrupted as a result, which may contribute to the negative impact on investment performance. In addition, governments,
their regulatory agencies, or self-regulatory organizations may take actions in response to a pandemic that
affect the instruments in which the Fund invests and the Underlying ETF in ways that could have a significant negative impact on the Fund’s
investment performance.
New
Fund Risk: There can be no assurance that the Fund will grow to or maintain an economically viable size, in which case the Board
may determine to liquidate the Fund if it determines that liquidation is in the best interest of shareholders. Liquidation of the Fund
can be initiated without shareholder approval. As a result, the timing of the Fund’s liquidation may not be favorable.
Option
Writing Risk: The Funds invest in options that derive their performance from the performance of the Underlying ETF. Writing and
buying options are speculative activities and entail investment exposures that are greater than their cost would suggest, meaning that
a small investment in an option could have a substantial impact on the performance of the Fund. The Fund’s use of call and put
options can lead to losses because of adverse movements in the price or value of the Underlying ETF, which may be magnified by certain
features of the options. These risks are heightened when the Fund’s portfolio managers use options to enhance the Fund’s
return or as a substitute for a position or security. When selling a call or put option, the Fund will receive a premium; however, this
premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above or below, respectively,
the strike price by an amount equal to or greater than
24
|
Notes
to Financial Statements (continued)
July
31, 2026 |
|
|
the
premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected
by changes in the value or yield of the option’s underlying asset, an increase in interest rates, a change in the actual or perceived
volatility of the stock market or the underlying asset and the remaining time to expiration. Additionally, the value of an option does
not increase or decrease at the same rate as the underlying asset(s). The Fund’s use of options, due to the cost of the options,
will reduce the Fund’s ability to get returns equal to the Underlying ETF. This means that if the Underlying ETF experiences gains
for an Outcome Period, the Fund will not benefit to the same extent from those gains. In addition, if the price of the underlying asset
of an option is above the strike price of a written call option or below the strike price for a written put option, the value of the option,
and consequently of the Fund, may decline significantly more than if the Fund invested directly in the underlying asset instead of using
options. The Fund invests in options that derive their performance from the performance of the Underlying ETF and can be volatile and
involve various types and degrees of risks. The Fund could experience a loss if its options do not perform as anticipated, or are not
correlated with the performance of the Underlying ETF or if the Fund is unable to purchase or liquidate a position because of an illiquid
secondary market.
Other
Investment Companies Risk: In addition to investing in options, the Fund invests in the Underlying ETF, which is another investment
company. Accordingly, shareholders will bear not only their proportionate share of the Fund’s expenses, but also, indirectly, the
similar expenses of the Underlying ETF. Shareholders would also be exposed to the risks associated not only with the Fund, but also with
the portfolio investments of the Underlying ETF. The underlying securities in the Underlying ETF may not follow the price movements of
the industry or sector the Underlying ETF is designed to track. Trading in the Underlying ETF may be halted if the trading in one or more
of the Underlying ETF’s underlying securities is halted, which could result in the Underlying ETF being more volatile.
Outcome
Period Risk: The Fund’s investment strategy is designed to deliver targeted outcomes that may only be realized if Fund shares
are bought by the first day of the Outcome Period and held until the end of the Outcome Period. In addition, the participation rate may
change from one Outcome Period to the next and is unlikely to remain the same for consecutive Outcome Periods, although the Hurdle strike
price is set at 5% over the Underlying ETF’s share price at the beginning of each Outcome Period. This means that the net asset
value of the Fund will not increase until the Underlying ETF’s share price exceeds 105% of the Underlying ETF’s share price
at the beginning of the Outcome Period plus the Fund’s net expenses and when the share price of the Underlying ETF declines the
Fund’s returns will be further reduced by the Fund’s expenses. The Hurdle and downside participation offset are established
prior to taking into account the Fund’s reflected in the Statement of Operations annualized over each Outcome Period. Accordingly,
the Fund’s returns will be reduced by Fund fees and expenses as well as any brokerage commissions, trading fees, taxes and non-routine
or extraordinary expenses incurred by the Fund throughout an Outcome Period. As a result, the performance of the Fund over an Outcome
period will be reduced by these expenses. If an investor purchases shares after the Outcome Period starts or sell their shares before
the Outcome Period ends, they may receive a very different return based on the Fund’s current value. At the end of each Outcome
Period, the Fund's buffer, hurdle, and participation rate reset based on then-current market conditions and
the Underlying ETF's NAV. Investors who purchase or redeem shares mid-period may not experience the full
benefit of the downside buffer or upside participation, which are designed to apply only when shares are held from the start through the
end of an Outcome Period.
Position
Limits Risk: The options exchanges have established limits on the maximum number of puts and calls covering the same underlying
security that may be held or written by a single investor or group of investors acting in concert or under common control (regardless
of whether the options are purchased or written on the same or different exchanges or are held or written in one or more accounts or through
one or more brokers). These are referred to as “position limits.” The position limit applicable to a particular option class
is determined by the options exchange based on the number of shares outstanding and trading volume of the security underlying the option.
The rules of the options markets generally limit the maximum number of options on the same side of the market (i.e., calls held plus puts
written, or puts held plus calls written) with respect to a single underlying interest that may be carried in the accounts of a single
investor or group of investors acting in concert. An options market may require that positions in certain listed options or FLEX Options
be aggregated with positions in certain other options for purposes of calculating position limits.
The
clearing members that clear the Fund’s listed option positions are required to monitor and report the Fund’s positions to
the options exchanges and may be required to liquidate positions in excess of these limits. Failure to comply with position limits may
result in the imposition of fines and other sanctions by the options exchanges.
Even
if the Fund does not intend to exceed applicable position limits, it is possible that different clients managed by the Advisor and its
affiliates may be aggregated. Therefore, the trading decisions of the Advisor may have to be modified and positions held by the Fund liquidated
in order to avoid exceeding such limits. The modification of investment decisions or the elimination of open positions, if it occurs,
may adversely affect the profitability of the Fund and prevent the Fund from achieving its investment objective. A violation of position
limits could also lead to regulatory action materially adverse to the Fund’s investment strategy.
25
|
Notes
to Financial Statements (concluded)
July
31, 2026 |
|
|
9.
New Accounting Pronouncement
In
December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09, Income
Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which enhances the
transparency and decision usefulness of income tax disclosures. The amendments are effective for annual periods beginning after December
15, 2024. The Fund has adopted ASU 2023-09, which did not have a material impact on the Fund's financial
statements or disclosures.
On
September 9, 2026, the FASB issued ASU 2026-03, Fair Value Measurement (Topic
820): Investment companies with Equity Securities Subject to Contractual Sale Restrictions, that requires investment companies to incorporate
the effect of any contractual sale restriction when measuring the fair value of an equity security. ASU 2026-03
also requires investment companies to disclose the amount of any discount(s) attributable to contractual sale restrictions included in
the fair value measurement of equity securities. The new standard must be applied prospectively to all equity securities upon adoption
with any changes in fair value recorded as an adjustment to earnings. ASU 2026-03 is effective for annual
reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting
periods, with early adoption permitted. At this time, management is still evaluating the potential impact of adopting the amendments and
has not yet determined the impact, if any, on the Fund's financial statement disclosures.
10.
Subsequent Events
A
new Investment Period for the ARK DIET Q4 Buffer ETF will begin as of October 1, 2026, and will end on September
30, 2027. At the Conclusion of an Outcome Period, a new Outcome Period generally will begin for the applicable Fund, with a new
hurdle rate, cap and/or participation rate established based on then-current market conditions and the price
of options on the Underlying ETF at the start of the new Outcome Period. A new Investment Period for a Buffer ETF typically begins on
the first business date following the conclusion of its prior Outcome Period. Additional information regarding the terms of a Fund's current
or upcoming Outcome Period, including the applicable hurdle rate and participation rate, can be found in the supplement to that Fund's
Summary Prospectus and the Funds' Prospectus then in effect. Additional information can be found in the supplement to the ARK DIET Q4
Buffer ETF's Summary Prospectus and the Funds’ Prospectus.
Subsequent
events occurring after July 31, 2026 have been evaluated for potential impact to this Report through the
date the Report was issued, and it has been determined that no additional events have occurred that require disclosure.
26
|
Report
of Independent Registered Public Accounting Firm |
|
|
To
the Shareholders of ARK DIET Q1 Buffer ETF, ARK DIET Q2 Buffer ETF, ARK DIET Q3 Buffer ETF and ARK DIET Q4 Buffer ETF and the Board of
Trustees of ARK ETF Trust
Opinion
on the Financial Statements
We
have audited the accompanying statements of assets and liabilities of ARK DIET Q1 Buffer ETF, ARK DIET Q2 Buffer ETF, ARK DIET Q3 Buffer
ETF and ARK DIET Q4 Buffer ETF (collectively referred to as the “Funds”), (four of the funds constituting ARK ETF Trust
(the “Trust”)), including the schedules of investments, as of July 31, 2026, and the related
statements of operations, changes in net assets, and the financial highlights for each of the periods indicated in the table below and
the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present
fairly, in all material respects, the financial position of each of the Funds (four of the funds constituting ARK ETF Trust) at July
31, 2026, and the results of their operations, changes in net assets and financial highlights for each of the periods indicated
in the table below, in conformity with U.S. generally accepted accounting principles.
|
Funds
constituting ARK
ETF Trust |
Statements
of operations
Statements of changes in net assets
Financial highlights |
|
ARK
DIET Q1 Buffer ETF |
For
the period from January 2, 2026 (commencement of operations) to July 31, 2026 |
|
ARK
DIET Q2 Buffer ETF |
For
the period from April 1, 2026 (commencement of operations) to July 31, 2026 |
|
ARK
DIET Q3 Buffer ETF |
For
the period from July 1, 2026 (commencement of operations) to July 31, 2026 |
|
ARK
DIET Q4 Buffer ETF |
For
the period from October 1, 2025 (commencement of operations) to July 31, 2026 |
Basis
for Opinion
These
financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the
Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust
is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As
part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no
such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July
31, 2026, by correspondence with the custodian and broker. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.
/s/
Ernst & Young LLP
We
have served as the auditor of one or more ARK Invest investment companies since 2022.
New
York, New York
September
25, 2026
27
|
Supplemental
Information (Unaudited)
|
|
|
Quarterly
Portfolio Schedule. The ARK ETF Trust files with the Securities and Exchange Commission on Form N-PORT the
complete schedule of portfolio holdings for each ARK ETF for the first and third quarters of each fiscal year. The ARK ETF Trust’s
Forms N-PORT are available on the Securities and Exchange Commission’s website at www.sec.gov.
Copies of the filings are available without charge, upon request, by calling (727) 810-8160. In addition,
each ARK ETF’s current portfolio holdings are updated daily and are available on our website, www.ark-funds.com.
Proxy
Voting Policies and Procedures. A description of ARK Investment Management LLC’s proxy voting policies and procedures, which
are applicable to the ARK ETFs, is available without charge, upon request, by calling (727) 810-8160 collect
or visiting our website at www.ark-funds.com or the Securities and Exchange
Commission’s website at www.sec.gov.
Proxy
Voting Record. The ARK ETFs file with the Securities and Exchange Commission their proxy voting records on Form
N-PX for each 12 month period ending June 30. Form N-PX must
be filed each year by August 31. The most recent Form N-PX or voting
record information is available without charge, upon request, by calling (727) 810-8160 collect
or visiting the Securities and Exchange Commission’s website at www.sec.gov.
Premium/Discount
Information. Information about the difference between daily market prices on the secondary market for shares of each ARK ETF and
the ARK ETF’s net asset value can be found on our website, www.ark-funds.com.
28
|
Risks
Involved with Investing in the Funds (Unaudited)
|
|
|
This
report should be read in conjunction with the Funds’ prospectus.
The
principal risks of investing in the Funds’ include:
Communications
Sector Risk. The Underlying ETF will be more affected by the performance of the communications sector than a fund with less exposure
to such sector. Communication companies are particularly vulnerable to the potential obsolescence of products and services due to technological
advancement and the innovation of competitors. Companies in the communications sector may also be affected by other competitive pressures,
such as pricing competition, as well as research and development costs, substantial capital requirements and government regulation. Additionally,
fluctuating domestic and international demand, shifting demographics and often unpredictable changes in consumer tastes can drastically
affect a communication company’s profitability. While all companies may be susceptible to network security breaches, certain companies
in the communications sector may be particular targets of hacking and potential theft of proprietary or consumer information or disruptions
in service, which could have a material adverse effect on their businesses.
Consumer
Discretionary Risk. The consumer discretionary sector may be affected by changes in domestic and international economies, exchange
and interest rates, competition, consumers’ disposable income and consumer preferences, social trends and marketing campaigns.
Cyber
Security Risk. As the use of internet technology has become more prevalent in the course of business, funds have become more susceptible
to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional
events from external or internal sources that may cause the Fund to lose proprietary information, suffer data corruption, lose operational
capacity, or result in unauthorized access to confidential information. Such events could prevent the Fund from engaging in normal business
activities and cause the Fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective
measures and/or financial loss. Cyber security breaches may involve, among other things, unauthorized access to the Fund’s digital
information systems through “hacking” or malicious software coding, ransomware attacks that impair the Fund’s ability
to access its data or systems until a ransom is paid, or denial-of-service attacks that make network services
unavailable to intended users. Recently, geopolitical tensions may have increased the scale and sophistication of deliberate attacks,
particularly those from nation-states or from entities with nation-state backing.
In addition, cyber security breaches of the Fund’s third-party service providers, such as its adviser,
administrator, transfer agent or custodian, the Fund’s trading counterparties, and issuers in which the Fund invests, can also
subject the Fund to many of the same risks associated with direct cyber security breaches. Cyber security breaches experienced by an issuer
in which the Fund invests can also impact the value of the Fund’s investment in that issuer. While the Funds have established business
continuity plans and risk management systems designed to reduce the risks associated with cyber security, there are inherent limitations
in such plans and systems. Additionally, there is no guarantee that such efforts will succeed, especially because the Funds do not directly
control the cyber security systems of their third-party service providers, trading counterparties, or issuers.
Equity
Securities Risk. The value of the equity securities that the Underlying ETF holds will fall due to general market and economic
conditions, perceptions regarding the industries in which the issuers of such securities participate or factors relating to specific companies
in which the Underlying ETF invests. An unfavorable earnings report or a failure to make anticipated dividend payments by an issuer whose
securities are held by the Underlying ETF may affect the value of the Underlying ETF’s investment. Equity securities may also be
particularly sensitive to general movements in the stock market, and a decline in the broader market may affect the value of the Underlying
ETF’s equity investments.
• Special
Purpose Acquisition Companies (SPACs). The Underlying ETF may invest in stocks of, warrants to purchase stock of, and other interests
in SPACs or similar special purposes entities. A SPAC is a publicly traded company that raises investment capital for the purpose of acquiring
or merging with an existing company. Because SPACs and similar entities are so-called “blank check
companies” and do not have any operating history or ongoing business other than seeking acquisitions, the value of their securities
is particularly dependent on the ability of the SPAC’s management to identify a merger target and complete an acquisition. An investment
in a SPAC or similar entity is subject to a variety of risks, including that (i) a significant portion of the monies raised by the SPAC
for the purpose of identifying and effecting an acquisition or merger may be expended during the search for a target transaction; (ii)
an attractive acquisition or merger target may not be identified at all and the SPAC will be required to return any remaining monies to
shareholders; (iii) any proposed merger or acquisition may be unable to obtain the requisite approval, if any, of SPAC shareholders;
(iv) an acquisition or merger once effected may prove unsuccessful and an investment in the SPAC may lose value; (v) the warrants
or other rights with respect to the SPAC held by the Underlying ETF may expire worthless or may be repurchased or retired by the SPAC
at an unfavorable price; (vi) the Underlying ETF may be delayed in receiving any redemption or liquidation proceeds from a SPAC to which
it is entitled; (vii) an investment in an SPAC may be diluted by additional later offerings of interests in the SPAC or by other investors
exercising existing rights to purchase shares of the SPAC; (viii) no or only a thinly traded market for shares of or interests in an SPAC
may develop, leaving the Underlying ETF unable to sell
29
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Risks
Involved with Investing in the Funds (Unaudited) (continued) |
|
|
its
interest in an SPAC or to sell its interest only at a price below what the Underlying ETF believes is the SPAC interest’s intrinsic
value; and (ix) the values of investments in SPACs may be highly volatile and may depreciate significantly over time. Until an acquisition
or merger is completed, a SPAC generally invests its assets, less a portion retained to cover expenses, in U.S. government securities,
money market securities and cash and does not typically pay dividends in respect of its common stock. As a result, it is possible that
an investment in a SPAC may lose value.
Financial
Technology Risk. Companies that are developing financial technologies that seek to disrupt or displace established financial institutions
generally face competition from much larger and more established firms. Fintech Innovation Companies may not be able to capitalize on
their disruptive technologies if they face political and/or legal attacks from competitors, industry groups or local and national governments.
Laws generally vary by country, creating some challenges to achieving scale. A Fintech Innovation Company may not currently derive any
revenue, and there is no assurance that such company will derive any revenue from innovative technologies in the future. Additionally,
Fintech Innovation Companies may be adversely impacted by potential rapid product obsolescence, cybersecurity attacks, increased regulatory
oversight and disruptions in the technology they depend on.
Foreign
Securities Risk. Investment in the securities of foreign issuers involves risks beyond those associated with investments in U.S.
securities. These additional risks include greater market volatility, the availability of less reliable financial information, higher
transactional and custody costs, taxation by foreign governments, decreased market liquidity and political instability. Because many foreign
securities markets may be limited in size, the prices of securities that trade in such markets may be influenced by large traders. Certain
foreign markets that have historically been considered relatively stable may become volatile in response to changed conditions or new
developments. Increased interconnectivity of world economies and financial markets increases the possibility that adverse developments
and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions. Foreign
issuers are often subject to less stringent requirements regarding accounting, auditing, financial reporting and record keeping than are
U.S. issuers, and therefore, not all material information may be available or reliable. Securities exchanges or foreign governments may
adopt rules or regulations that may negatively impact the Underlying ETF’s ability to invest in foreign securities or may prevent
the Underlying ETF from repatriating its investments. In addition, the Underlying ETF may not receive shareholder communications or be
permitted to vote the securities that it holds, as the issuers may be under no legal obligation to distribute shareholder communications.
Certain
issuers located in foreign countries in which the Underlying ETF may invest may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations and/or countries identified by the U.S. Government as
state sponsors of terrorism. As a result, an issuer may sustain damage to its reputation if it is identified as an issuer which operates
in, or has dealings with, such countries. The Underlying ETF, as an investor in such issuers, will be indirectly subject to those risks.
The type and severity of sanctions and other similar measures, including counter sanctions and other retaliatory actions, that may be
imposed could vary broadly in scope, and their impact is impossible to predict. These types of measures may include, but are not limited
to, banning a sanctioned country from global payment systems that facilitate cross-border payments, restricting
the settlement of securities transactions by certain investors, and freezing the assets of particular countries, entities, or persons.
The imposition of sanctions and other similar measures could, among other things, cause a decline in the value and/or liquidity of securities
issued by the sanctioned country or companies located in or economically tied to the sanctioned country, downgrades in the credit ratings
of the sanctioned country or companies located in or economically tied to the sanctioned country, devaluation of the sanctioned country’s
currency, and increased market volatility and disruption in the sanctioned country and throughout the world. Sanctions and other similar
measures could limit or prevent the Underlying ETF from buying and selling securities (in the sanctioned country and other markets), significantly
delay or prevent the settlement of securities transactions, and significantly impact the Underlying ETF’s liquidity and performance.
Securities
registration, custody, and settlement may in some instances be subject to delays and legal and administrative uncertainties. Foreign investment
in the securities markets of certain foreign countries is restricted or controlled to varying degrees. These restrictions or controls
may at times limit or preclude investment in certain securities and may increase the costs and expenses of the Underlying ETF. Because
of these restrictions, the Underlying ETF may invest in entities that provide economic exposure to specific foreign issuers through contractual
arrangements, but do not provide the entities or the Underlying ETF with ownership interests in those foreign issuers. Changes in law
or regulation could significantly harm the value of the Underlying ETF’s investments in such entities. In addition, the repatriation
of investment income, capital or the proceeds of sales of securities from certain of the countries is controlled under regulations, including
in some cases the need for certain advance government notification or authority, and if a deterioration occurs in a country’s balance
of payments, the country could impose temporary restrictions on foreign capital remittances. The Underlying ETF also could be adversely
affected by delays in, or a refusal to grant, any required governmental approval for repatriation, as well as by the application to it
of other restrictions on investment.
30
|
Risks
Involved with Investing in the Funds (Unaudited) (continued)
|
|
|
Health
Care Sector Risk. The health care sector may be affected by government regulations and government health care programs, restrictions
on government reimbursement for medical expenses, increases or decreases in the cost of medical products and services and product liability
claims, among other factors. Many health care companies are: (i) heavily dependent on patent protection and intellectual property rights
and the expiration of a patent may adversely affect their profitability; (ii) subject to extensive litigation based on product liability
and similar claims; and (iii) subject to competitive forces that may make it difficult to raise prices and, in fact, may result in price
discounting. Many health care products and services may be subject to regulatory approvals. The process of obtaining such approvals may
be long and costly, and delays or failure to receive such approvals may negatively impact the business of such companies. Additional or
more stringent laws and regulations enacted in the future could have a material adverse effect on such companies in the health care sector.
In addition, issuers in the health care sector include issuers having their principal activities in the biotechnology industry, medical
laboratories and research, drug laboratories and research and drug manufacturers, which have the additional risks described below.
• Biotechnology
Company Risk. A biotechnology company’s valuation can often be based largely on the potential or actual performance of a
limited number of products and can accordingly be greatly affected if one of its products proves, among other things, unsafe, ineffective
or unprofitable. Biotechnology companies are subject to regulation by, and the restrictions of, the U.S. Food and Drug Administration,
the U.S. Environmental Protection Agency, state and local governments, and foreign regulatory authorities.
• Pharmaceutical
Company Risk. Companies in the pharmaceutical industry can be significantly affected by, among other things, government approval
of products and services, government regulation and reimbursement rates, product liability claims, patent expirations and protection and
intense competition.
Information
Technology Sector Risk. The information technology sector includes companies engaged in internet software and services, technology
hardware and storage peripherals, electronic equipment instruments and components, and semiconductors and semiconductor equipment. Information
technology companies face intense competition, both domestically and internationally, which may have an adverse effect on profit margins.
Information technology companies may have limited product lines, markets, financial resources or personnel. The products of information
technology companies may face rapid product obsolescence due to technological developments and frequent new product introduction, unpredictable
changes in growth rates and competition for the services of qualified personnel. Failure to introduce new products, develop and maintain
a loyal customer base, or achieve general market acceptance for their products could have a material adverse effect on a company’s
business. Companies in the information technology sector are heavily dependent on intellectual property and the loss of patent, copyright
and trademark protections may adversely affect the profitability of these companies.
• Internet
Company Risk. Many Internet-related companies have incurred large losses since their inception and
may continue to incur large losses in the hope of capturing market share and generating future revenues. Accordingly, many such companies
expect to incur significant operating losses for the foreseeable future, and may never be profitable. The markets in which many Internet
companies compete face rapidly evolving industry standards, frequent new service and product announcements, introductions and enhancements,
and changing customer demands. The failure of an Internet company to adapt to such changes could have a material adverse effect on the
company’s business. Additionally, the widespread adoption of new Internet, networking, telecommunications technologies, or other
technological changes could require substantial expenditures by an Internet company to modify or adapt its services or infrastructure,
which could have a material adverse effect on an Internet company’s business.
• Semiconductor
Company Risk. Competitive pressures may have a significant effect on the financial condition of semiconductor companies and, as
product cycles shorten and manufacturing capacity increases, these companies may become increasingly subject to aggressive pricing, which
hampers profitability. Reduced demand for end-user products, under-utilization
of manufacturing capacity, and other factors could adversely impact the operating results of companies in the semiconductor sector. Semiconductor
companies typically face high capital costs and may be heavily dependent on intellectual property rights. The semiconductor sector is
highly cyclical, which may cause the operating results of many semiconductor companies to vary significantly. The stock prices of companies
in the semiconductor sector have been and likely will continue to be extremely volatile.
• Software
Industry Risk. The software industry can be significantly affected by intense competition, aggressive pricing, technological innovations,
and product obsolescence. Companies in the software industry are subject to significant competitive pressures, such as aggressive pricing,
new market entrants, competition for market share, short product cycles due to an accelerated rate of technological developments and the
potential for limited earnings and/or falling profit margins. These companies also face the risks that new services, equipment or technologies
will not be accepted by consumers and
31
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Risks
Involved with Investing in the Funds (Unaudited) (concluded) |
|
|
businesses
or will become rapidly obsolete. These factors can affect the profitability of these companies and, as a result, the value of their securities.
Also, patent protection is integral to the success of many companies in this industry,
and profitability can be affected materially by, among other things, the cost of obtaining (or failing to obtain) patent approvals, the
cost of litigating patent infringement and the loss of patent protection for products (which significantly increases pricing pressures
and can materially reduce profitability with respect to such products). In addition, many software companies have limited operating histories.
Prices of these companies’ securities historically have been more volatile than other securities, especially over the short term.
Market
Trading Risk. The Fund faces numerous market trading risks, including disruptions to the creation and redemption processes of the
Fund, losses from trading in secondary markets, the existence of extreme market volatility, the potential lack of an active trading market
for Shares due to market stress, or trading halts impacting the Shares or the Fund’s underlying securities, which may result in
Shares trading at a significant premium or discount to their NAV. The NAV of Shares will fluctuate with changes in the market value of
the Fund’s securities holdings. The market prices of Shares will fluctuate in accordance with changes in their NAV and supply and
demand on an Exchange. The Adviser cannot predict whether Shares will trade below, at or above their NAV. Price differences may be due,
in large part, to the fact that supply and demand forces at work in the secondary trading market for Shares will be closely related to,
but not identical to, the same forces influencing the prices of the securities in the Fund’s portfolio trading individually or
in the aggregate at any point in time. If a shareholder purchases Shares at a time when the market price is at a premium to the NAV or
sells Shares at a time when the market price is at a discount to the NAV, the shareholder may pay more for, or receive less than, the
underlying value of the Shares, respectively. Any of these factors, discussed above and further below, may lead to Shares trading at a
premium or discount to the Fund’s NAV.
While
Shares are listed on an exchange, there can be no assurance that an active trading market for the Shares will be maintained. Further,
secondary markets may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods in times of
market stress because market makers and APs may step away from making a market in the Shares and in executing creation and redemption
orders, which could cause a material deviation in the Fund’s market price from its NAV. The Funds’ distributor does not
maintain a secondary market in the Shares. Investors purchasing and selling shares in the secondary market may not experience investment
results consistent with those experienced by those APs creating and redeeming directly with the Fund.
Decisions
by market makers or APs to reduce their role or “step away” from these activities in times of market stress could inhibit
the effectiveness of the arbitrage process in maintaining the relationship between the underlying value of the Fund’s portfolio
securities and the Fund’s market price. This reduced effectiveness could result in Fund Shares trading at a price which differs
materially from NAV and also in greater than normal intraday bid/ask spreads for Fund Shares.
Non-Diversified
Risk. Investment companies are classified as either “diversified” or “non-diversified”
under the 1940 Act. Each Fund is classified as a “non-diversified” investment company under
the 1940 Act, although each is diversified for Internal Revenue Code purposes. An investment company classified as “diversified”
under the 1940 Act is subject to certain limitations with respect to the value of the company’s assets invested in particular issuers.
As a non-diversified investment company, each Fund is subject to the risk that it will be more volatile than
a diversified fund because the Fund may invest a relatively higher proportion of its assets in a relatively smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. As a result, the gains and losses on a single investment may have
a greater impact on a Fund’s NAV and may make the Fund more volatile than more diversified funds.
Tax
Risk. Certain aspects of the tax treatment of derivative instruments are currently unclear and may be affected by changes in legislation,
regulations or other legally binding authority. The federal income tax treatment of a derivative may be less favorable than that given
to a direct investment in an underlying asset and may adversely affect the timing, character and amount of income the Fund realizes from
its investments.
32
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Board
Approval of Management Agreements (Unaudited)
|
|
|
Board
Approval of Management and Sub-Advisory Agreements for ARK DIET Q1 Buffer ETF, ARK DIET Q2 Buffer ETF, ARK DIET Q3 Buffer ETF and ARK
DIET Q4 Buffer ETF
Under
Section 15(c) of the Investment Company Act of 1940 (“1940 Act”), ARK ETF Trust’s (“Trust”) Board of
Trustees (“Trustees” or “Board”), including a majority of Trustees who are not “interested persons”
of the Trust (as that term is defined in the 1940 Act) (“Independent Trustees”), was required to consider whether to approve
the proposed (i) Supervision Agreement between the Trust and ARK Investment Management, LLC (“ARK” or the “Investment
Adviser”) on behalf of ARK DIET Q1 Buffer ETF, ARK DIET Q2 Buffer ETF, ARK DIET Q3 Buffer ETF and ARK DIET Q4 Buffer ETF (each,
a “Fund” and, collectively, the “Funds”)(“Supervision Agreement”); (ii) Investment Advisory
Agreement between the Trust and ARK (collectively with the Supervision Agreement, “Management Agreements”) on behalf of
each Fund; and (iii) the sub-advisory agreement (the “Sub-Advisory Agreement”
and, together with the Management Agreements, the “Agreements”) between ARK and Milliman Financial Risk Management LLC (the
“Sub-Adviser”) with respect to each Fund.
At
the September 23, 2025 meeting of the Board (the “September 2025 Meeting”), the Board, including
a majority of the Independent Trustees, initially approved the proposed Management Agreements on behalf of each Fund, including ARK DIET
Q2 Buffer ETF and ARK DIET Q3 Buffer ETF.
In
advance of the September 2025 Meeting, the Independent Trustees and their counsel reviewed and discussed information provided by ARK that
they determined was reasonably necessary to evaluate the terms of the proposed Management Agreements. In connection with their consideration
of each Agreement, the Trustees received written materials and oral presentations prepared by the Investment Adviser and the Sub-Adviser
on the topics covered and were advised by their independent legal counsel. In evaluating the Management Agreements, the Trustees considered
information included in presentations made by the Investment Adviser and other information received at prior Board meetings. Prior to
voting on the proposed Management Agreements on behalf of the Funds, the Independent Trustees met in Executive Session with ARK’s
senior management and also met in private sessions with their counsel at which time no representatives of management were present.
After
the presentation of relevant information by ARK’s senior management and extensive discussions prior to and at the September 2025
Meeting, the Trustees, including the Independent Trustees voting separately, unanimously approved the proposed Agreements on behalf of
the Funds. The determination made by all of the Trustees to approve the proposed Agreements was made on the basis of each Trustee’s
business judgment after considering all of the information presented to them. Individual Trustees may have given different weights to
certain factors and assigned various degrees of materiality to information received in connection with their evaluation of the proposed
Agreements. In approving the proposed Agreements on behalf of the Funds, the following factors were considered by the Trustees, and no
one factor was determinative:
Management
Agreements:
(a)
Nature, Extent and Quality of Services provided by ARK to the Funds under the Management Agreements. The Trustees considered the
nature, extent and quality of the services that ARK would provide to the Funds under the proposed Management Agreements, including: (i)
the qualifications of the portfolio manager, analysts and other key personnel of ARK who would provide the supervisory and investment
advisory services to the Funds; and (ii) the terms of the proposed Management Agreements. The Trustees considered ARK’s senior
management’s discussion of the various duties and responsibilities of ARK under the proposed Management Agreements. The Trustee’s
also considered that the Funds would employ a “manager of managers” structure, whereby ARK is responsible for selecting
a sub-adviser (subject to Board approval) and overseeing its day-to-day management
of Fund assets. In this regard, the Trustees considered both the investment advisory services and non-advisory
services that would be provided by ARK and its affiliates (including oversight of the Sub-Adviser) The Trustees
also considered information regarding ARK’s efforts relating to business continuity planning. In addition, the Trustees considered
the sub-adviser oversight process that ARK was expected to employ going forward, which included areas such
as investment analytics, risk management and compliance. The Trustees also considered the organizational structure of ARK, the quality
of ARK’s investment, administrative, operations, compliance and legal personnel that ARK currently provides to other series of
the Trust overseen by the Board and would provide to the Funds, and ARK’s proposed management of the operations of the Funds.
Based
on these and other factors, the Trustees concluded that the nature, extent and quality of the supervisory and investment advisory services
that would be provided to the Funds by ARK pursuant to the proposed Management Agreements were satisfactory and supported the decision
of the Trustees to approve the proposed Management Agreements with respect to the Funds.
(b)
Performance. The Trustees noted that as newly established series of the Trust, the Funds had no performance history that they could
review.
33
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Board
Approval of Management Agreements (Unaudited) (continued)
|
|
|
(c)
Proposed Fees and Estimated Expenses. The Trustees considered the proposed fees payable by the Funds to ARK under the proposed
Management Agreements in relation to the services to be received by the Funds from ARK. In evaluating the reasonableness of the proposed
fees payable by the Funds, the Trustees noted that the proposed fees generally were in line with the fees paid by other series of the
Trust. The Board also took into account the Funds’ proposed fee and expense structure, noting that under that structure ARK would
generally pay all non-management expenses of the Funds other than certain excluded expenses, such as taxes
and governmental fees, brokerage fees, commissions and other transaction expenses, certain foreign custodial fees and expenses, costs
of borrowing money, including interest expenses, and extraordinary expenses. They also considered ARK's undertaking to waive a portion
of its management fee payable by each Fund in an amount equal to the investment advisory fee portion of the management fee it earns as
an investment adviser to the affiliated fund(s) in which the Fund invests.
The
Trustees concluded that the proposed fees that would be paid by the Funds under the Management Agreements were reasonable considering
the services that the Funds would receive.
(d)
The extent to which economies of scale may be realized as the Funds’ assets increase and whether fee levels would reflect economies
of scale. The Trustees considered ARK’s senior management’s discussion of the proposed fee and expense structure
for the Funds and noted that the proposed unitary fee structure effectively acts as a cap on the fees and expenses (excluding certain
specific investment-related and extraordinary fees and expenses) that are borne by the Funds. The Trustees
also noted that ARK would bear most of the ordinary fees and expenses of the Funds. The Trustees further noted that, although there currently
are no breakpoints in the proposed fee structure for the Funds, if the Funds’ assets increase over time, the Funds might realize
other economies of scale if assets increase proportionally more than certain other expenses.
Based
on these considerations, the Trustees concluded that adding breakpoints at specified levels to the Funds’ proposed fee structure
was not appropriate at that time.
(e)
Costs and Profitability. In considering the anticipated profitability of the Funds to ARK, the Trustees noted the challenges in
evaluating the profitability of the Funds given that they had not yet commenced operations and there were not comparable investment products
currently being offered. The Trustees noted, however, that under the Funds’ proposed fee and expense structure, the Funds would
not be profitable to ARK until such time as the Funds had achieved scale.
(f)
Benefits derived or to be derived by ARK and its affiliates from ARK’s relationship with the Funds. The Trustees then considered
the extent to which ARK may derive any ancillary or indirect benefits from the Funds’ operations as a result of ARK’s relationship
with the Funds. The Trustees noted that ARK’s reputation as an asset manager could benefit from the performance of the Funds, which
has the potential to aid ARK in gathering assets for its non-fund business operations. The Trustees also
considered that ARK’s affiliates were likely to benefit if the Funds have a positive reception and gain popularity.
The
Board concluded that the nature and amount of any indirect benefits that ARK and its affiliates would receive from ARK’s relationship
with the Funds are reasonable.
(g)
Financial Resources of ARK. The Trustees then considered whether ARK was financially sound and had adequate resources to perform
its obligations under the proposed Management Agreements.
Based
on the information provided to the Board, the Trustees concluded that ARK had sufficient financial resources necessary to continue to
perform its obligations under the Management Agreements.
General
Conclusion. Based on its consideration of all the factors discussed, and such other information as it deemed appropriate and relevant,
the Board concluded that it would be in the best interest of the Funds and their shareholders to approve the proposed the Management Agreements
on behalf of the Funds, including the proposed fees payable under those Agreements. Accordingly, the Board, with Independent Trustees
voting separately, unanimously approved the proposed Management Agreements with respect to the Funds.
Sub-Advisory
Agreement:
Nature,
Extent, and Quality of the Services to be Provided Under the Sub-Advisory
Agreement. The Trustees considered the nature, extent and quality of the services that the Sub-Adviser
would provide to the Funds under the proposed Sub-Advisory Agreement. In evaluating the Sub-Advisory
Agreement, the Trustees relied upon materials furnished and presentations made by ARK and the Sub-Adviser.
In evaluating the nature, extent, and quality of services to be provided by the Sub-Adviser, the Trustees
considered information on the services to be provided to the Funds by the Sub-Adviser, including information
about (i) the qualifications of the Sub-Adviser’s portfolio managers and other key personnel of the
Sub-Adviser who would provide investment advisory services to the Funds and their compensation structure;
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Board
Approval of Management Agreements (Unaudited) (concluded)
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(ii)
the Sub-Adviser’s policies and procedures in place to address potential conflicts of interest; and
(iii) the Sub-Adviser’s compliance program and code of ethics. In this regard, they also considered
assessments provided by ARK of the Sub-Adviser, the Sub-Adviser’s investment
strategies and personnel, and its compliance program. The Trustees also considered information regarding the Sub-Adviser’s
efforts related to business continuity planning. Based on these and other factors, the Trustees concluded that the nature, extent and
quality of the services expected to be provided to the Funds by the Sub-Adviser pursuant to the proposed
Sub-Advisory Agreement were satisfactory and supported the decision of the Trustees to approve the proposed
Sub-Advisory Agreement with respect to the Funds.
Costs
of Services to be Provided. The Trustees reviewed the terms of the proposed Sub-Advisory Agreement,
including the sub-advisory fee to be payable by ARK to the Sub-Adviser. They
considered any breakpoints in the sub-advisory fee rate to be payable under the Sub-Advisory
Agreement and that the benefit of any breakpoints would not lower the overall cost of services to the Funds. The Trustees noted that the
compensation paid to the Sub-Adviser would be paid by ARK, not by the Funds. They also noted that the terms
of the Sub-Advisory Agreement were the result of arms’ length negotiations between ARK and the Sub-Adviser.
The Trustees considered the amount of the proposed fees expected to be retained by ARK. The Trustees concluded that the proposed fee under
the Sub-Advisory Agreement was reasonable considering the services that the Funds expected to receive under
the Sub-Advisory Agreement.
General
Conclusion. Based on its consideration of all the factors discussed, and such other information as it deemed appropriate and relevant,
the Board concluded that it would be in the best interest of the Funds and their shareholders to approve the proposed Sub-Advisory
Agreement on behalf of the Funds, including the proposed sub-advisory fee payable under that Agreement. Accordingly,
the Board, with Independent Trustees voting separately, unanimously approved the proposed Sub-Advisory Agreement
with respect to the Funds.
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