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Northern Lights Fund Trust IV
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FUND SUMMARY
Investment Objective:
<p style="margin: 0px">The Sage ESG Intermediate Credit ETF (the “Fund”) seeks to replicate investment results that generally correspond, before fees and expenses, to the performance of the Sage ESG Intermediate Credit Index (the “Index”).</p>
Fees and Expenses of the Fund:
<p style="margin: 0px">This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Investors purchasing or selling shares of the Fund in the secondary market may be subject to costs (including customary brokerage commissions) charged by their broker. These costs are not included in the expense example below.</p>
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Example:
<p style="margin: 0px">This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.</p>
Portfolio Turnover:
<p style="margin: 0px">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 Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund’s performance. During the fiscal period ended August 31, 2019, the Fund’s portfolio turnover rate was 69% of the average value of its portfolio.</p>
Principal Investment Strategies:
<p style="margin: 0px">The Fund generally will invest at least 80% of its total assets in the component securities of the Index. The Index consists of corporate bonds selected from the Barclays Capital U.S. Intermediate Credit Bond Index that meet environmental, social and governance (“ESG”) criteria jointly developed by the Fund’s investment adviser, Sage Advisory Services LTD Co. (“Sage” or the “Adviser”), and Sustainalytics. Sustainalytics, based in London, England, is a global leader in ESG and Corporate Governance research and ratings.
</p><p style="margin: 0px"> </p><p style="margin: 0px">The index provider, which is the Adviser, created and maintains the Index by using the Sage/Sustainalytics proprietary framework to assign each issuer of bonds in the Barclays Capital U.S. Intermediate Credit Bond Index an ESG score from 1 to 100. To measure corporate sustainability, a set of ESG indicators specific to the industry of the respective issuer are scored. A score from 0 to 100 is given to each indicator. The ESG score is determined by the weighted sum of the indicator scores for a particular issuer. To be eligible for inclusion in the Index, an issuer must have a minimum overall ESG score of 50 and must rank in the top forty percent of its peer group. Additionally, each issuer must have a Controversy Score of no higher than 3 (out of 5) and must meet certain other proprietary conditions specific to each industry group. Indicators of controversy for a company are analyzed and given a Controversy Score.
</p><p style="margin: 0px"> </p><p style="margin: 0px">The indicators that are analyzed are:
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt">• News regarding a company that may pose ESG risks for the company;
</p><p style="margin: 0px 0px 0px 20pt">• Incidents of misconduct with ESG implications by a company;
</p><p style="margin: 0px 0px 0px 20pt">• Events, which are a set of incidents that refers to one ESG issue; and
</p><p style="margin: 0px 0px 0px 20pt">• Controversies, which are a set of Events under one ESG topic.
</p><p style="margin: 0px"> </p><p style="margin: 0px">The Index is constructed using a rules-based methodology and consists of investment grade domestic and U.S. dollar denominated foreign credit bonds that meet the criteria described above, representing each industry sector in proportion to the sectors that make up the Barclays Capital U.S. Intermediate Credit Bond Index. The bonds in the Index are also consistent with the duration (which, as of June 30, 2019, was 4.08 years), maturity (which, as of June 30, 2019, was 4.81 years) and yield curve positioning in the Barclays Capital U.S. Intermediate Credit Bond Index. Duration is a measure used to determine the sensitivity of a security’s price to changes in interest rates. The longer a security’s duration, the more sensitive it will be to changes in interest rates. A yield curve is a representation on a chart of the yields on bonds with identical credit ratings but different maturities. The process results in the Index, as well as the Fund, consisting primarily of corporate bonds that display strong fundamentals and positive ESG characteristics.
</p><p style="margin: 0px"> </p><p style="margin: 0px">The index provider expects that the Index will have approximately 120 issues. The components of the Index, and the degree to which these components represent certain industries, are likely to vary over time.
</p><p style="margin: 0px"> </p><p style="margin: 0px">The Index subscribes to the philosophy that companies with more sustainable corporate policies will keep pace with non-ESG portfolios while promoting positive ESG characteristics. Companies with high ESG scores are better actors both environmentally and fiscally, and financial benefits should accrue to bondholders over time by holding companies with the highest standards relative to ESG factors.
</p><p style="margin: 0px"> </p><p style="margin: 0px">The Adviser uses a representative sampling indexing strategy to manage the Fund. “Representative sampling” is an indexing strategy that involves investing in a representative sample of securities that collectively has an investment profile similar to that of an applicable underlying index. The securities selected are expected to have, in the aggregate, investment characteristics, fundamental characteristics and liquidity measures similar to those of an underlying index. The Fund may or may not hold all of the securities in the Index.
</p><p style="margin: 0px"> </p><p style="margin: 0px">The Index is sponsored, created, compiled, and maintained by the Adviser. Wilshire Associates is the calculation agent for the Index.
</p><p style="margin: 0px"> </p><p style="margin: 0px">Under normal market conditions, the Fund invests at least 80% of its assets (defined as net assets plus borrowing for investment purposes) in credit bonds. Credit bonds are debt instruments in which an investor loans money to an entity which borrows the funds for a defined period of time at a variable or fixed interest rate. Typically credit bond include corporate bonds and other non-corporate bonds such as sovereign bonds, foreign agencies, and supranational entities. The Fund may invest the remainder of its assets in cash and cash equivalents. The Fund may concentrate its investments in a particular industry or group of industries to the extent that the Index concentrates in an industry or group of industries.
</p>
Principal Investment Risks:
<p style="margin: 0px"><i>As with all funds, there is the risk that you could lose money through your investment in the Fund. Many factors affect the Fund’s net asset value and price of shares and performance.</i>
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 0pt; text-indent: 0pt">The following describes the risks the Fund bears with respect to its investments. As with any fund, there is no guarantee that the Fund will achieve its goal.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Credit Risk.</i> The Fund could lose money if the issuer or guarantor of a debt instrument in which the Fund invests becomes unwilling or unable to make timely principal and/or interest payments, or to otherwise meet its obligations.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Concentration Risk.</i> The Fund may focus its investments in securities of a particular industry to the extent the Index does. Economic, legislative or regulatory developments may occur that significantly affect the industry. This may cause the Fund's net asset value to fluctuate more than that of a fund that does not focus in a particular industry.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Early Close/Trading Halt Risk.</i> 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 prevent the Fund from buying or selling certain securities or financial instruments. In these circumstances, the Fund may be unable to rebalance its portfolio, may be unable to accurately price its investments and may incur substantial trading losses.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>ESG Risk.</i> The ESG investment strategy limits the types and number of investment opportunities available and, as a result, the strategy may underperform other strategies that do not have an ESG focus. The ESG investment strategy may result in the Fund investing in securities or industry sectors that underperform the market as a whole or underperform other funds screened for ESG standards.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>ETF Structure Risk:</i> The Fund and each underlying fund is structured as an ETF and as a result is subject to the special risks, including:
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 40pt; text-indent: -6pt">○ <i>Not Individually Redeemable.</i> An ETF’s shares (“Shares”) are not individually redeemable to retail investors and may be redeemed by the ETF only to authorized participants (“APs”) at net asset value (“NAV”) in large blocks known as “Creation Units.”. An AP may incur brokerage costs purchasing enough Shares to constitute a Creation Unit.
</p><p style="margin: 0px 0px 0px 20pt"> </p><p style="margin: 0px 0px 0px 40pt; text-indent: -6pt">○ <i>Trading Issues.</i> An active trading market for the Shares may not be developed or maintained. Trading in Shares on the Exchange may be halted due to market conditions or for reasons that, in the view of the Exchange, make trading in Shares inadvisable, such as extraordinary market volatility. There can be no assurance that Shares will continue to meet the listing requirements of the Exchange. If the Shares are traded outside a collateralized settlement system, the number of financial institutions that can act as APs that can post collateral on an agency basis is limited, which may limit the market for the Shares.
</p><p style="margin: 0px 0px 0px 20pt"> </p><p style="margin: 0px 0px 0px 40pt; text-indent: -6pt">○ <i>Market Price Variance Risk.</i> The market prices of Shares will fluctuate in response to changes in NAV and supply and demand for Shares and will include a “bid-ask spread” charged by the exchange specialists, market makers or other participants that trade the particular security. There may be times when the market price and the NAV vary significantly. This means that Shares may trade at a discount to NAV.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 80pt; text-indent: 0pt">▪ In times of market stress, market makers may step away from their role market making in the Shares of ETFs and in executing trades, which can lead to differences between the market value of Shares and an ETF’s NAV.
</p><p style="margin: 0px 0px 0px 60pt; text-indent: 0pt"> </p><p style="margin: 0px 0px 0px 80pt; text-indent: 0pt">▪ To the extent APs exit the business or are unable to process creations or redemptions and no other AP can step in to do so, there may be a significantly reduced trading market in the Shares, which can lead to differences between the market value of Shares and an ETF’s NAV.
</p><p style="margin: 0px 0px 0px 60pt; text-indent: 0pt"> </p><p style="margin: 0px 0px 0px 80pt; text-indent: 0pt">▪ The market price for the Shares may deviate from an ETF’s NAV, particularly during times of market stress, with the result that investors may pay significantly more or significantly less for Shares than an ETF’s NAV, which is reflected in the bid and ask price for Shares or in the closing price.
</p><p style="margin: 0px 0px 0px 60pt; text-indent: 0pt"> </p><p style="margin: 0px 0px 0px 80pt; text-indent: 0pt">▪ When all or a portion of an ETFs underlying securities trade in a market that is closed when the market for the Shares is open, there may be changes from the last quote of the closed market and the quote from an ETF’s domestic trading day, which could lead to differences between the market value of the Shares and an ETF’s NAV.
</p><p style="margin: 0px 0px 0px 60pt; text-indent: 0pt"> </p><p style="margin: 0px 0px 0px 80pt; text-indent: 0pt">▪ In stressed market conditions, the market for the Shares may become less liquid in response to the deteriorating liquidity of an ETF’s portfolio. This adverse effect on the liquidity of the Shares may, in turn, lead to differences between the market value of the Shares and an ETF’s NAV.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Fixed Income Risk.</i> When the Fund invests in fixed income securities, the value of your investment in the Fund will fluctuate with changes in interest rates. Typically, a rise in interest rates causes a decline in the value of fixed income securities owned by the Fund. In general, the market price of fixed income securities with longer maturities will increase or decrease more in response to changes in interest rates than shorter-term securities. Other risk factors include credit risk (the debtor may default), extension risk (an issuer may exercise its right to repay principal on a fixed rate obligation held by the Fund later than expected), and prepayment risk (the debtor may pay its obligation early, reducing the amount of interest payments). These risks could affect the value of a particular investment by the Fund, possibly causing the Fund's share price and total return to be reduced and fluctuate more than other types of investments.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Foreign Investment Risk.</i> The Fund’s investments in securities of foreign issuers may involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Issuer Risk.</i> The value of a security may increase for many reasons which directly relate to the issuer, such as management performance, improved financial condition and increased demand of the issuer’s goods or services. An increase in the value of the securities of an issuer or guarantor of a debt instrument may cause the value of your investment in the Fund to decrease.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Index Risk.</i> Unlike many investment companies, the Fund does not utilize an investing strategy that seeks returns in excess of the Index. Therefore, it would not necessarily sell a security unless that security is removed from the Index, even if that security generally is underperforming.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Liquidity Risk.</i> Trading in shares of the Fund may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in shares inadvisable. A particular investment may be difficult to purchase or sell, and the Fund may be unable to sell illiquid securities (for example, certain swap agreements) at an advantageous time or price or achieve its desired level of exposure to a certain section.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Management Risk.</i> As the Fund may not fully replicate the Index, it is subject to the risk that investment management strategy may not produce the intended results.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Market Risk.</i> Due to market conditions, the value of the Fund’s investments may fluctuate significantly from day to day. Price fluctuations may be temporary or may last for extended periods. This volatility may cause the value of your investment in the Fund to decrease.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Passive Investment Risk.</i> The Fund is not actively managed and the Adviser will not sell shares of an equity security due to current or projected underperformance of a security, industry or sector, unless that security is removed from the Index or the selling of shares of that security is otherwise required upon a rebalancing of the Index as addressed in the Index methodology.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Sampling Risk.</i> The Fund’s use of a representative sampling approach, if used, could result in its holding a smaller number of securities than are in the Index. As a result, an adverse development with an issuer of securities held by the Fund could result in a greater decline in NAV than would be the case if the Fund held all of the securities in the Index. To the extent the assets in the Fund are smaller, these risks will be greater.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Tracking Error Risk.</i> Tracking error is the divergence of the Fund’s performance from that of the Index. Tracking error may occur because of imperfect correlation between the Fund’s holdings of portfolio securities and those in the Index, pricing differences, the Fund’s holding of cash, differences on timing of the accrual of dividends, changes to the Index or the need to meet various regulatory requirements. This risk may be heightened during times of increased market volatility or other unusual market conditions. Tracking error also may result because the Fund incurs fees and expenses, while the Index does not.
</p><p style="margin: 0px"> </p><p style="margin: 0px 0px 0px 20pt; text-indent: -6pt">• <i>Trading Risk.</i> Shares may trade below their NAV. The NAV of the Shares will fluctuate with changes in the market value of the Fund’s holdings. In addition, although the Shares are currently listed on the Exchange, there can be no assurance that an active trading market for the Shares will develop or be maintained.</p>
Performance:
<p style="margin: 0px">The bar chart and performance table below show the variability of the Fund’s returns, which is some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year. The bar chart shows performance of the Fund’s shares for each calendar year since the Fund's inception. The performance table compares the performance of the Fund over time to the performance of a broad-based securities market index. You should be aware that the Fund’s past performance (before and after taxes) is not necessarily an indication of how the Fund will perform in the future. Updated performance information will be available at no cost by visiting www.SageETFs.com or by calling 888-724-3911.</p>
Performance Bar Chart For Calendar Year Ended December 31
<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse">
<tr><td style="width: 33%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border: Black 1pt solid">Best Quarter:</td>
<td style="width: 46%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border: Black 1pt solid">4<sup>th</sup> Quarter 2018</td>
<td style="width: 21%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border: Black 1pt solid">0.80%</td></tr>
<tr><td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border: Black 1pt solid">Worst Quarter:</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border: Black 1pt solid">1<sup>st</sup> Quarter 2018</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border: Black 1pt solid">(1.52%)</td></tr></table>
<p style="margin: 0px"> </p>
<p style="margin: 0px; text-align: center">The Fund’s year-to-date return as of the most recent fiscal quarter, which ended September 30, 2019 was 7.82%.</p>
Performance Table Average Annual Total Returns (For periods ended December 31, 2018)
0.0020
.0000
0.0109
0.0129
0.0035
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The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based upon these assumptions your costs would be:
36
316
617
1474
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-0.0027
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-0.0027
-0.0131
-0.0017
0.0030
0.0014
-0.0025
-0.0128
-0.0063
0.0022
-0.0042
2017-10-31
Return before taxes
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2020-12-31
0.69
Under normal market conditions, the Fund invests at least 80% of its assets (defined as net assets plus borrowing for investment purposes) in credit bonds.
As with all funds, there is the risk that you could lose money through your investment in the Fund.
The bar chart and performance table below show the variability of the Fund's returns, which is some indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year
You should be aware that the Fund's past performance (before and after taxes) is not necessarily an indication of how the Fund will perform in the future.
www.SageETFs.com
888-724-3911
The Fund's year-to-date return as of the most recent fiscal quarter
2019-09-30
0.0782
Best Quarter:
2018-12-31
0.0080
Worst Quarter:
2018-03-31
-0.0152
N-1A
The Fund's adviser has contractually agreed to reduce its fees and/or absorb expenses of the Fund, until at least December 31, 2020 to ensure that total annual fund operating expenses after fee waiver and/or reimbursement (exclusive of any front-end or contingent deferred loads, taxes, brokerage fees and commissions, borrowing costs (such as interest and dividend expense on securities sold short), acquired fund fees and expenses, fees and expenses associated with investments in other collective investment vehicles or derivative instruments (including for example option and swap fees and expenses), or extraordinary expenses such as litigation) will not exceed 0.35% of the Fund. This fee waivers and expense reimbursements are subject to possible recoupment from the Fund in future years (within the three years after the fees have been waived or reimbursed), if such recoupment can be achieved within the lesser of the foregoing expense limits or those in place at the time of recapture. This agreement may be terminated only by the Trust's Board of Trustees on 60 days' written notice to the Fund's adviser.