FORM N-1A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | ☒ |
Pre-Effective Amendment No. | ☐ |
Post-Effective Amendment No. 295 | ☒ |
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | ☒ |
Amendment No. 298 | ☒ |
(Check appropriate box or boxes)
EXCHANGE TRADED CONCEPTS TRUST
(Exact Name of Registrant as Specified in Charter)
10900 Hefner Pointe Drive
Suite 207
Oklahoma City, Oklahoma 73120
(Address of Principal Executive Offices, Zip Code)
(405) 778-8377
(Registrant’s Telephone Number, including Area Code)
J. Garrett Stevens
Exchange Traded Concepts Trust
10900 Hefner Pointe Drive
Suite 207
Oklahoma City, Oklahoma 73120
(Name and Address of Agent for Service)
Copy to:
Christopher Menconi
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Ave, NW
Washington, DC 20004
It is proposed that this filing will become effective (check appropriate box):
☒ | Immediately upon filing pursuant to paragraph (b) | |
☐ | On (date) pursuant to paragraph (b) | |
☐ | 60 days after filing pursuant to paragraph (a)(1) | |
☐ | On (date) pursuant to paragraph (a)(1) | |
☐ | 75 days after filing pursuant to paragraph (a)(2) | |
☐ | On (date) pursuant to paragraph (a)(2) of rule 485. |
If appropriate, check the following box:
☐ | This post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
EXPLANATORY NOTE
This Post-Effective Amendment No. 295 relates to the North Shore Dual Share Class ETF (the “Fund”), a separate series of Exchange Traded Concepts Trust (the “Trust”). The sole purpose of this filing is to file as an exhibit to the Trust’s registration statement, risk/return information in interactive data format for the Fund.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 295 to the Registration Statement be signed on its behalf by the undersigned, duly authorized, in the City of Oklahoma, State of Oklahoma, on this 23rd day of June 2020.
Exchange Traded Concepts Trust | ||
|
/s/ J. Garrett Stevens | |
J. Garrett Stevens | ||
Trustee and President |
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 295 to the Registration Statement has been signed below by the following persons in the capacity and on the date indicated.
Signature | Title | Date | |||
* | Trustee | June 23, 2020 | |||
David M. Mahle | |||||
* | Trustee | June 23, 2020 | |||
Mark A. Zurack | |||||
* | Trustee | June 23, 2020 | |||
Timothy J. Jacoby | |||||
* | Trustee | June 23, 2020 | |||
Linda Petrone | |||||
/s/J. Garrett Stevens | Trustee and President | June 23, 2020 | |||
J. Garrett Stevens | |||||
* | Treasurer | June 23, 2020 | |||
James J. Baker Jr. | |||||
* | /s/ J. Garrett Stevens | ||||
J. Garrett Stevens | |||||
* | Attorney-in-Fact, pursuant to power of attorney. |
Exhibit Index
Exhibit Number |
Description | |
EX-101.INS | XBRL Instance Document | |
EX-101.SCH | XBRL Taxonomy Extension Schema Document | |
EX-101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
EX-101.LAB | XBRL Taxonomy Extension Labels Linkbase | |
EX-101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
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Label | Element | Value |
---|---|---|
Risk/Return: | rr_RiskReturnAbstract | |
Document Type | dei_DocumentType | 485BPOS |
Document Period End Date | dei_DocumentPeriodEndDate | May 29, 2020 |
Entity Registrant Name | dei_EntityRegistrantName | EXCHANGE TRADED CONCEPTS TRUST |
Entity Central Index Key | dei_EntityCentralIndexKey | 0001452937 |
Entity Inv Company Type | dei_EntityInvCompanyType | N-1A |
Amendment Flag | dei_AmendmentFlag | false |
Document Creation Date | dei_DocumentCreationDate | May 29, 2020 |
Document Effective Date | dei_DocumentEffectiveDate | May 29, 2020 |
Prospectus Date | rr_ProspectusDate | May 29, 2020 |
North Shore Dual Share Class ETF | North Shore Dual Share Class ETF | ||
Risk/Return: | rr_RiskReturnAbstract | |
Trading Symbol | dei_TradingSymbol | DUAL |
Label | Element | Value | ||
---|---|---|---|---|
North Shore Dual Share Class ETF | ||||
Prospectus [Line Items] | rr_ProspectusLineItems | |||
Risk/Return [Heading] | rr_RiskReturnHeading | North Shore Dual Share Class ETF | ||
Objective [Heading] | rr_ObjectiveHeading | Investment Objective | ||
Objective, Primary [Text Block] | rr_ObjectivePrimaryTextBlock | The North Shore Dual Share Class ETF (the "Fund") seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the North Shore Dual Share Class Index (the "Index"). |
||
Expense [Heading] | rr_ExpenseHeading | Fees and Expenses | ||
Expense Narrative [Text Block] | rr_ExpenseNarrativeTextBlock | This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. This table and the Example below do not include the brokerage commissions that investors may pay on their purchases and sales of shares of the Fund. |
||
Operating Expenses Caption [Text] | rr_OperatingExpensesCaption | Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) | ||
Portfolio Turnover [Heading] | rr_PortfolioTurnoverHeading | Portfolio Turnover | ||
Portfolio Turnover [Text Block] | rr_PortfolioTurnoverTextBlock | The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when shares of the Fund are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund's performance. Because the Fund is new, portfolio turnover information is not yet available. |
||
Expense Exchange Traded Fund Commissions [Text] | rr_ExpenseExchangeTradedFundCommissions | This table and the Example below do not include the brokerage commissions that investors may pay on their purchases and sales of shares of the Fund. | ||
Other Expenses, New Fund, Based on Estimates [Text] | rr_OtherExpensesNewFundBasedOnEstimates | Other Expenses are based on estimated amounts for the current fiscal year. | ||
Expense Example [Heading] | rr_ExpenseExampleHeading | Example | ||
Expense Example Narrative [Text Block] | rr_ExpenseExampleNarrativeTextBlock | This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then sell all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be: |
||
Strategy [Heading] | rr_StrategyHeading | Principal Investment Strategies | ||
Strategy Narrative [Text Block] | rr_StrategyNarrativeTextBlock | The Fund normally invests at least 80% of its total assets in securities of the Index. The Index is designed to track the performance of "dual class stock" companies – companies that issue at least two share classes of common stock, generally one to the investing public, and the other to the company's founders and executives ("Dual Share Class Companies"). A share class or share classes that are offered to the general public typically have limited or no voting rights, generally giving the company's founders and executives more voting power and, therefore, more control over a company, which is viewed by advocates for Dual Share Class Companies as advantageous to growth, development and long-term success of a company. The Index includes the common stock offered to the general public by Dual Share Class Companies.
Eligible constituents for the Index are Dual Share Class Companies selected from the top 3,000 largest companies by total market capitalization that are primarily listed on a U.S. stock exchange (currently, New York Stock Exchange, The Nasdaq Stock Market LLC, or American Stock Exchange), with a minimum market capitalization of at least $100 million (the "Index Universe"). The Index Universe is then filtered by a company's age, relative to the date of its initial public offering ("IPO"). Companies with IPO offerings six (6) months to 20 years old are selected for the Index. Index constituents are then screened for whether they offer more than one share class of common stock to the public. In this circumstance, the Index methodology calls for either (i) the retention of the existing share class of stock held in the Index if it continues to satisfy all other eligibility criteria or (ii) investment in the share class with the highest trading volume over a 30 day calendar day period. The Index primarily consists of securities of companies incorporated in the United States. The Index is weighted according to a modified market capitalization weighting methodology. As of April 30, 2020, the Index was comprised of 177 component securities.
The Index is rebalanced and reconstituted on an annual basis at the close of the last trading day in June (the "Rebalance Date"). Security selection for the Rebalance Date begins on the close of the trading day on the nearest Friday falling at least one month before the Rebalance Date. Deletions from the Index may be made at any time due to changes in business, mergers, acquisitions, bankruptcies, suspensions, de-listings and spin-offs. The Index is unmanaged and cannot be invested in directly.
The Fund employs a "passive management" investment strategy designed to track the performance of the Index. Exchange Traded Concepts, LLC (the "Adviser") generally will use a replication methodology, meaning it will invest in all of the securities comprising the Index in proportion to the weightings in the Index. However, the Adviser may utilize a sampling methodology under various circumstances, including when it may not be possible or practicable to purchase all of the securities in the Index. The Adviser expects that over time, if the Fund has sufficient assets, the correlation between the Fund's performance, before fees and expenses, and that of the Index will be 95% or better. A figure of 100% would indicate perfect correlation.
The Fund will concentrate its investments (i.e., invest more than 25% of its total assets) in a particular industry or group of industries to approximately the same extent that the Index concentrates in an industry or group of industries. As of April 30, 2020, the Index was not concentrated in any industry. In addition, in replicating the Index, the Fund may from time to time invest a significant portion of its assets in the securities of companies in one or more sectors. As of April 30, 2020, a significant portion of the Index consisted of companies in the communication services and information technology sectors.
The index provider is North Shore Indices, Inc. (the "Index Provider"), which is not affiliated with the Fund or the Adviser. The Index Provider developed the methodology for determining the securities to be included in the Index and is responsible for the ongoing maintenance of the Index. The Index is calculated by Indxx, LLC, which is not affiliated with the Fund or the Adviser. |
||
Strategy Portfolio Concentration [Text] | rr_StrategyPortfolioConcentration | The Fund normally invests at least 80% of its total assets in securities of the Index. In addition, the Fund will concentrate its investments (i.e., invest more than 25% of its total assets) in a particular industry or group of industries to approximately the same extent that the Index concentrates in an industry or group of industries. As of April 30, 2020, the Index was not concentrated in any industry. In addition, in replicating the Index, the Fund may from time to time invest a significant portion of its assets in the securities of companies in one or more sectors. As of April 30, 2020, a significant portion of the Index consisted of companies in the communication services and information technology sectors. | ||
Risk [Heading] | rr_RiskHeading | Principal Risks | ||
Risk Narrative [Text Block] | rr_RiskNarrativeTextBlock | As with all funds, a shareholder is subject to the risk that his or her investment could lose money. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. The principal risks affecting shareholders' investments in the Fund are set forth below.
Dual Share Class Companies Risk: Dual Share Class Companies create unique risks. Dual Share Class Companies allow for a concentration of voting power in the hands of company insiders through a disproportionate allocation of voting rights among stockholders. Holders of the share class that is available to the investing public, such as the Fund, typically have limited or no voting rights and are not able to enjoy the voting rights they would have if they invested in the stock of companies with traditional ownership structures. Such stockholders may be negatively affected in a variety of ways, including a company's owners may use such power for personal benefit, while passing on financial risk to common stockholders. The governance structure of Dual Share Class Companies allows for the entrenchment of management in the company, which may prevent common stockholders from being able to address issues relating to mismanagement of the company, such as share dilution, increased company debt, and financial underperformance relevant to the market. Investing only in a portfolio of Dual Share Class Companies may impact the Fund's relative investment performance depending on whether such investments are in or out of favor in the market. A portfolio of Dual Share Class Companies may underperform a portfolio that includes companies with traditional ownership structures.
Common Stock Risk: Common stock holds the lowest priority in the capital structure of a company and, therefore, takes the largest share of the company's risk and its accompanying volatility. The value of the common stock held by the Fund may fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate, or facts relating to specific companies in which the Fund invests.
Market Risk: The market price of a security or instrument could decline, sometimes rapidly or unpredictably, due to general market conditions that are not specifically related to a particular company, such as real or perceived adverse economic or political conditions throughout the world, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. Local, regional, or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the market generally and on specific securities. The market value of a security may also decline because of factors that affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry.
Early Close/Trading Halt Risk: An exchange or market may close or issue trading halts on specific securities, or the ability to buy or sell certain securities or financial instruments may be restricted, which may result in the Fund being unable to buy or sell certain securities or financial instruments. In such circumstances, the Fund may be unable to rebalance its portfolio, may be unable to accurately price its investments and/or may incur substantial trading losses.
Equity Risk: The value of the equity securities held by the Fund may fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate, or facts relating to specific companies in which the Fund invests.
Index Tracking Risk: The Fund's return may not match or achieve a high degree of correlation with the return of the Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund sought to replicate the Index.
Industry Concentration Risk: Because the Fund's assets will be concentrated in an industry or group of industries to the extent the Index concentrates in a particular industry or group of industries, the Fund is subject to loss due to adverse occurrences that may affect that industry or group of industries. As of April 30, 2020, the Index was not concentrated in any industry.
Issuer-Specific Risk: Fund performance depends on the performance of individual securities to which the Fund has exposure. Issuer-specific events, including changes in the financial condition of an issuer, can have a negative impact on the value of the Fund.
Large-Capitalization Risk: Returns on investments in securities of large companies could trail the returns on investments in securities of smaller and mid-sized companies.
Limited Authorized Participants, Market Makers and Liquidity Providers Risk: Because the Fund is an exchange-traded fund ("ETF"), only a limited number of institutional investors (known as "Authorized Participants") are authorized to purchase and redeem shares directly from the Fund. In addition, there may be a limited number of market makers and/or liquidity providers in the marketplace. To the extent either of the following events occur, shares of the Fund may trade at a material discount to net asset value ("NAV") and possibly face delisting: (i) Authorized Participants exit the business or otherwise become unable to process creation and/or redemption orders and no other Authorized Participants step forward to perform these services, or (ii) market makers and/or liquidity providers exit the business or significantly reduce their business activities and no other entities step forward to perform their functions.
New/Smaller Fund Risk: A new or smaller fund is subject to the risk that its performance may not represent how the fund is expected to or may perform in the long term. In addition, new funds have limited operating histories for investors to evaluate and new and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies. There can be no assurance that the Fund will achieve an economically viable size, in which case it could ultimately liquidate. The Fund may be liquidated by the Board of Trustees without a shareholder vote. In a liquidation, shareholders of the Fund will receive an amount equal to the Fund's NAV, after deducting the costs of liquidation, including the transaction costs of disposing of the Fund's portfolio investments. Receipt of a liquidation distribution may have negative tax consequences for shareholders. Additionally, during the Fund's liquidation all or a portion of the Fund's portfolio may be invested in a manner not consistent with its investment objective and investment policies.
Operational Risk: The Fund and its service providers may experience disruptions that arise from human error, processing and communications errors, counterparty or third-party errors, technology or systems failures, any of which may have an adverse impact on the Fund.
Passive Investment Risk: The Fund is not actively managed and, therefore, the Fund would not sell a security due to current or projected underperformance of the security, industry, or sector unless that security is removed from the Index or selling the security is otherwise required upon a rebalancing of the Index.
Sector Focus Risk: The Fund may invest a significant portion of its assets in one or more sectors and thus will be more susceptible to the risks affecting those sectors. While the Fund's sector exposure is expected to vary over time based on the composition of the Index, the Fund anticipates that it may be subject to some or all of the risks described below. The list below is not a comprehensive list of the sectors to which the Fund may have exposure over time and should not be relied on as such.
Communication Services Sector Risk. Communication services companies are particularly vulnerable to the potential obsolescence of products and services due to technological advancement and the innovation of competitors. Companies in the communication services 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 services company's profitability. While all companies may be susceptible to network security breaches, certain companies in the communication services 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.
Information Technology Sector Risk: The Fund is subject to the risk that market or economic factors impacting information technology companies and companies that rely heavily on technology advances could have a major effect on the value of the Fund's investments in the information technology sector. The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation and competition, both domestically and internationally, including competition from foreign competitors with lower production costs.
Small- and Mid-Capitalization Risk: The small- and mid-capitalization companies in which the Fund invests may be more vulnerable to adverse business or economic events than larger, more established companies, and may underperform other segments of the market or the equity market as a whole. Securities of small- and mid-capitalization companies generally trade in lower volumes, are often more vulnerable to market volatility, and are subject to greater and more unpredictable price changes than larger capitalization stocks or the stock market as a whole.
Trading Risk. Shares of the Fund may trade on the NYSE Arca, Inc. (the "Exchange") above or below their NAV. The NAV of Fund's shares will fluctuate with changes in the market value of the Fund's holdings. In addition, although the Fund's shares are currently listed on the Exchange, there can be no assurance that an active trading market for shares will develop or be maintained. Trading in Fund shares may be halted due to market conditions or for reasons that, in the view of the Exchange, make trading in shares of the Fund inadvisable. |
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Risk Lose Money [Text] | rr_RiskLoseMoney | As with all funds, a shareholder is subject to the risk that his or her investment could lose money. | ||
Risk Not Insured Depository Institution [Text] | rr_RiskNotInsuredDepositoryInstitution | An investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. | ||
Bar Chart and Performance Table [Heading] | rr_BarChartAndPerformanceTableHeading | Performance Information | ||
Performance Narrative [Text Block] | rr_PerformanceNarrativeTextBlock | The Fund is new and, therefore, has no performance history. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the Fund by comparing the Fund's return to a broad measure of market performance. |
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Performance One Year or Less [Text] | rr_PerformanceOneYearOrLess | Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the Fund by comparing the Fund's return to a broad measure of market performance. | ||
North Shore Dual Share Class ETF | North Shore Dual Share Class ETF | ||||
Prospectus [Line Items] | rr_ProspectusLineItems | |||
Management Fee | rr_ManagementFeesOverAssets | 0.85% | ||
Distribution and Service (12b-1) Fees | rr_DistributionAndService12b1FeesOverAssets | none | ||
Other Expenses | rr_OtherExpensesOverAssets | none | [1] | |
Total Annual Fund Operating Expenses | rr_ExpensesOverAssets | 0.85% | ||
1 Year | rr_ExpenseExampleYear01 | $ 87 | ||
3 Years | rr_ExpenseExampleYear03 | $ 271 | ||
|
Label | Element | Value |
---|---|---|
Prospectus [Line Items] | rr_ProspectusLineItems | |
Document Type | dei_DocumentType | 485BPOS |
Document Period End Date | dei_DocumentPeriodEndDate | May 29, 2020 |
Entity Registrant Name | dei_EntityRegistrantName | EXCHANGE TRADED CONCEPTS TRUST |
Entity Central Index Key | dei_EntityCentralIndexKey | 0001452937 |
Amendment Flag | dei_AmendmentFlag | false |
Document Creation Date | dei_DocumentCreationDate | May 29, 2020 |
Document Effective Date | dei_DocumentEffectiveDate | May 29, 2020 |
Prospectus Date | rr_ProspectusDate | May 29, 2020 |
Total | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
North Shore Dual Share Class ETF | |||||||||||||||||
North Shore Dual Share Class ETF | |||||||||||||||||
Investment Objective | |||||||||||||||||
The North Shore Dual Share Class ETF (the "Fund") seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the North Shore Dual Share Class Index (the "Index"). | |||||||||||||||||
Fees and Expenses | |||||||||||||||||
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. This table and the Example below do not include the brokerage commissions that investors may pay on their purchases and sales of shares of the Fund. | |||||||||||||||||
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) | |||||||||||||||||
| |||||||||||||||||
Example | |||||||||||||||||
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then sell all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be: | |||||||||||||||||
| |||||||||||||||||
Portfolio Turnover | |||||||||||||||||
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when shares of the Fund are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund's performance. Because the Fund is new, portfolio turnover information is not yet available. | |||||||||||||||||
Principal Investment Strategies | |||||||||||||||||
The Fund normally invests at least 80% of its total assets in securities of the Index. The Index is designed to track the performance of "dual class stock" companies – companies that issue at least two share classes of common stock, generally one to the investing public, and the other to the company's founders and executives ("Dual Share Class Companies"). A share class or share classes that are offered to the general public typically have limited or no voting rights, generally giving the company's founders and executives more voting power and, therefore, more control over a company, which is viewed by advocates for Dual Share Class Companies as advantageous to growth, development and long-term success of a company. The Index includes the common stock offered to the general public by Dual Share Class Companies.
Eligible constituents for the Index are Dual Share Class Companies selected from the top 3,000 largest companies by total market capitalization that are primarily listed on a U.S. stock exchange (currently, New York Stock Exchange, The Nasdaq Stock Market LLC, or American Stock Exchange), with a minimum market capitalization of at least $100 million (the "Index Universe"). The Index Universe is then filtered by a company's age, relative to the date of its initial public offering ("IPO"). Companies with IPO offerings six (6) months to 20 years old are selected for the Index. Index constituents are then screened for whether they offer more than one share class of common stock to the public. In this circumstance, the Index methodology calls for either (i) the retention of the existing share class of stock held in the Index if it continues to satisfy all other eligibility criteria or (ii) investment in the share class with the highest trading volume over a 30 day calendar day period. The Index primarily consists of securities of companies incorporated in the United States. The Index is weighted according to a modified market capitalization weighting methodology. As of April 30, 2020, the Index was comprised of 177 component securities.
The Index is rebalanced and reconstituted on an annual basis at the close of the last trading day in June (the "Rebalance Date"). Security selection for the Rebalance Date begins on the close of the trading day on the nearest Friday falling at least one month before the Rebalance Date. Deletions from the Index may be made at any time due to changes in business, mergers, acquisitions, bankruptcies, suspensions, de-listings and spin-offs. The Index is unmanaged and cannot be invested in directly.
The Fund employs a "passive management" investment strategy designed to track the performance of the Index. Exchange Traded Concepts, LLC (the "Adviser") generally will use a replication methodology, meaning it will invest in all of the securities comprising the Index in proportion to the weightings in the Index. However, the Adviser may utilize a sampling methodology under various circumstances, including when it may not be possible or practicable to purchase all of the securities in the Index. The Adviser expects that over time, if the Fund has sufficient assets, the correlation between the Fund's performance, before fees and expenses, and that of the Index will be 95% or better. A figure of 100% would indicate perfect correlation.
The Fund will concentrate its investments (i.e., invest more than 25% of its total assets) in a particular industry or group of industries to approximately the same extent that the Index concentrates in an industry or group of industries. As of April 30, 2020, the Index was not concentrated in any industry. In addition, in replicating the Index, the Fund may from time to time invest a significant portion of its assets in the securities of companies in one or more sectors. As of April 30, 2020, a significant portion of the Index consisted of companies in the communication services and information technology sectors.
The index provider is North Shore Indices, Inc. (the "Index Provider"), which is not affiliated with the Fund or the Adviser. The Index Provider developed the methodology for determining the securities to be included in the Index and is responsible for the ongoing maintenance of the Index. The Index is calculated by Indxx, LLC, which is not affiliated with the Fund or the Adviser. | |||||||||||||||||
Principal Risks | |||||||||||||||||
As with all funds, a shareholder is subject to the risk that his or her investment could lose money. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. The principal risks affecting shareholders' investments in the Fund are set forth below.
Dual Share Class Companies Risk: Dual Share Class Companies create unique risks. Dual Share Class Companies allow for a concentration of voting power in the hands of company insiders through a disproportionate allocation of voting rights among stockholders. Holders of the share class that is available to the investing public, such as the Fund, typically have limited or no voting rights and are not able to enjoy the voting rights they would have if they invested in the stock of companies with traditional ownership structures. Such stockholders may be negatively affected in a variety of ways, including a company's owners may use such power for personal benefit, while passing on financial risk to common stockholders. The governance structure of Dual Share Class Companies allows for the entrenchment of management in the company, which may prevent common stockholders from being able to address issues relating to mismanagement of the company, such as share dilution, increased company debt, and financial underperformance relevant to the market. Investing only in a portfolio of Dual Share Class Companies may impact the Fund's relative investment performance depending on whether such investments are in or out of favor in the market. A portfolio of Dual Share Class Companies may underperform a portfolio that includes companies with traditional ownership structures.
Common Stock Risk: Common stock holds the lowest priority in the capital structure of a company and, therefore, takes the largest share of the company's risk and its accompanying volatility. The value of the common stock held by the Fund may fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate, or facts relating to specific companies in which the Fund invests.
Market Risk: The market price of a security or instrument could decline, sometimes rapidly or unpredictably, due to general market conditions that are not specifically related to a particular company, such as real or perceived adverse economic or political conditions throughout the world, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. Local, regional, or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the market generally and on specific securities. The market value of a security may also decline because of factors that affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry.
Early Close/Trading Halt Risk: An exchange or market may close or issue trading halts on specific securities, or the ability to buy or sell certain securities or financial instruments may be restricted, which may result in the Fund being unable to buy or sell certain securities or financial instruments. In such circumstances, the Fund may be unable to rebalance its portfolio, may be unable to accurately price its investments and/or may incur substantial trading losses.
Equity Risk: The value of the equity securities held by the Fund may fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate, or facts relating to specific companies in which the Fund invests.
Index Tracking Risk: The Fund's return may not match or achieve a high degree of correlation with the return of the Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund sought to replicate the Index.
Industry Concentration Risk: Because the Fund's assets will be concentrated in an industry or group of industries to the extent the Index concentrates in a particular industry or group of industries, the Fund is subject to loss due to adverse occurrences that may affect that industry or group of industries. As of April 30, 2020, the Index was not concentrated in any industry.
Issuer-Specific Risk: Fund performance depends on the performance of individual securities to which the Fund has exposure. Issuer-specific events, including changes in the financial condition of an issuer, can have a negative impact on the value of the Fund.
Large-Capitalization Risk: Returns on investments in securities of large companies could trail the returns on investments in securities of smaller and mid-sized companies.
Limited Authorized Participants, Market Makers and Liquidity Providers Risk: Because the Fund is an exchange-traded fund ("ETF"), only a limited number of institutional investors (known as "Authorized Participants") are authorized to purchase and redeem shares directly from the Fund. In addition, there may be a limited number of market makers and/or liquidity providers in the marketplace. To the extent either of the following events occur, shares of the Fund may trade at a material discount to net asset value ("NAV") and possibly face delisting: (i) Authorized Participants exit the business or otherwise become unable to process creation and/or redemption orders and no other Authorized Participants step forward to perform these services, or (ii) market makers and/or liquidity providers exit the business or significantly reduce their business activities and no other entities step forward to perform their functions.
New/Smaller Fund Risk: A new or smaller fund is subject to the risk that its performance may not represent how the fund is expected to or may perform in the long term. In addition, new funds have limited operating histories for investors to evaluate and new and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies. There can be no assurance that the Fund will achieve an economically viable size, in which case it could ultimately liquidate. The Fund may be liquidated by the Board of Trustees without a shareholder vote. In a liquidation, shareholders of the Fund will receive an amount equal to the Fund's NAV, after deducting the costs of liquidation, including the transaction costs of disposing of the Fund's portfolio investments. Receipt of a liquidation distribution may have negative tax consequences for shareholders. Additionally, during the Fund's liquidation all or a portion of the Fund's portfolio may be invested in a manner not consistent with its investment objective and investment policies.
Operational Risk: The Fund and its service providers may experience disruptions that arise from human error, processing and communications errors, counterparty or third-party errors, technology or systems failures, any of which may have an adverse impact on the Fund.
Passive Investment Risk: The Fund is not actively managed and, therefore, the Fund would not sell a security due to current or projected underperformance of the security, industry, or sector unless that security is removed from the Index or selling the security is otherwise required upon a rebalancing of the Index.
Sector Focus Risk: The Fund may invest a significant portion of its assets in one or more sectors and thus will be more susceptible to the risks affecting those sectors. While the Fund's sector exposure is expected to vary over time based on the composition of the Index, the Fund anticipates that it may be subject to some or all of the risks described below. The list below is not a comprehensive list of the sectors to which the Fund may have exposure over time and should not be relied on as such.
Communication Services Sector Risk. Communication services companies are particularly vulnerable to the potential obsolescence of products and services due to technological advancement and the innovation of competitors. Companies in the communication services 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 services company's profitability. While all companies may be susceptible to network security breaches, certain companies in the communication services 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.
Information Technology Sector Risk: The Fund is subject to the risk that market or economic factors impacting information technology companies and companies that rely heavily on technology advances could have a major effect on the value of the Fund's investments in the information technology sector. The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation and competition, both domestically and internationally, including competition from foreign competitors with lower production costs.
Small- and Mid-Capitalization Risk: The small- and mid-capitalization companies in which the Fund invests may be more vulnerable to adverse business or economic events than larger, more established companies, and may underperform other segments of the market or the equity market as a whole. Securities of small- and mid-capitalization companies generally trade in lower volumes, are often more vulnerable to market volatility, and are subject to greater and more unpredictable price changes than larger capitalization stocks or the stock market as a whole.
Trading Risk. Shares of the Fund may trade on the NYSE Arca, Inc. (the "Exchange") above or below their NAV. The NAV of Fund's shares will fluctuate with changes in the market value of the Fund's holdings. In addition, although the Fund's shares are currently listed on the Exchange, there can be no assurance that an active trading market for shares will develop or be maintained. Trading in Fund shares may be halted due to market conditions or for reasons that, in the view of the Exchange, make trading in shares of the Fund inadvisable. | |||||||||||||||||
Performance Information | |||||||||||||||||
The Fund is new and, therefore, has no performance history. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the Fund by comparing the Fund's return to a broad measure of market performance. |