N-1A 1 osietftrustn1a062016.htm osietftrustn1a062016.htm

As filed with the Securities and Exchange Commission on July 6, 2016
 
File Nos.
333-______
811-23167
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
 
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X]
 
Pre-Effective Amendment No.  
 
 
Post-Effective Amendment No.
 
 
and/or
 
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X]
Amendment No.
 
 
OSI ETF TRUST
(Exact Name of Registrant as Specified in Charter)
 
60 STATE STREET, SUITE 700, BOSTON, MA 02109
(Address of Principal Executive Offices) (Zip Code)
 
Registrant's Telephone Number, Including Area Code (617) 855-7670
 
Connor O’Brien, 60 State Street, Suite 700, Boston, MA 02109
(Name and Address of Agent for Service of Process)
 
With a copy to:
Michael D. Mabry, Esq.
Stradley Ronon Stevens & Young, LLP
2005 Market Street, Suite 2600
Philadelphia, PA 19103
 

 
Approximate Date of Proposed Public Offering:
As soon as practicable following the effective date of this registration statement.
 
The Registrant hereby amends this Registration Statement on such dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.


 
 

 
 
O’SHARES
INVESTMENTS
 

SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
 
 
Prospectus
 
O’Shares FTSE Russell U.S. Quality High Dividend ETF ([TICKER])
 
O’Shares FTSE Russell U.S. Quality Value Dividend ETF ([TICKER])
 
O’Shares FTSE Russell U.S. Quality Growth Dividend ETF ([TICKER])
 
O’Shares FTSE Russell Mid-Cap Quality Dividend ETF ([TICKER])
 
O’Shares FTSE Russell Small Cap Quality Dividend ETF ([TICKER])
 
O’Shares FTSE Russell Small and Mid-Cap Quality Dividend ETF ([TICKER])
 
O’Shares FTSE Russell International Quality Dividend ETF ([TICKER])
 
O’Shares FTSE Russell International Quality Dividend ETF (Currency Hedged)  ([TICKER])
 
O’Shares FTSE Russell Emerging Markets Quality Dividend ETF ([TICKER])
 
O’Shares FTSE Russell Emerging Markets Quality Dividend ETF (Currency Hedged) ([TICKER])
 
O’Shares Quality Aggregate Bond ETF ([TICKER])
 
O’Shares Quality Investment Grade Corporate Bond ETF ([TICKER])
 
O’Shares Quality High Yield Corporate Bond ETF ([TICKER])
 
O’Shares Quality Short Term Investment Grade Corporate Bond ETF ([TICKER])
 
O’Shares Quality Short Term High Yield Corporate Bond ETF ([TICKER])
 
O’Shares Quality Preferred Stock ETF ([TICKER])
 
O’Shares Quality Senior Loan ETF ([TICKER])
 

 
 

 


 
 

 
[     ], 2016
 
Shares of the Funds are not individually redeemable and the owners of Shares may purchase or redeem Shares from each Fund in Creation Units only. The purchase and sale price of individual Shares trading on an Exchange may be below, at or above the most recently calculated NAV for such Shares. Shares will be listed for trading on NYSE Arca, Inc. (“Exchange” or “NYSE Arca”).
 
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
 

 
 
 

 

TABLE OF CONTENTS
 
 
Page
 
Fund Summaries 
O’Shares FTSE Russell U.S. Quality High Dividend ETF 
O’Shares FTSE Russell U.S. Quality Value Dividend ETF 
O’Shares FTSE Russell U.S. Quality Growth Dividend ETF 
O’Shares FTSE Russell Mid-Cap Quality Dividend ETF 
O’Shares FTSE Russell Small Cap Quality Dividend ETF 
O’Shares FTSE Russell Small and Mid-Cap Quality Dividend ETF 
O’Shares FTSE Russell International Quality Dividend ETF 
O’Shares FTSE Russell International Quality Dividend ETF (Currency Hedged)
O’Shares FTSE Russell Emerging Markets Quality Dividend ETF 
O’Shares FTSE Russell Emerging Markets Quality Dividend ETF (Currency Hedged) 
O’Shares Quality Aggregate Bond ETF 
O’Shares Quality Investment Grade Corporate Bond ETF 
O’Shares Quality High Yield Corporate Bond ETF 
O’Shares Quality Short Term Investment Grade Corporate Bond ETF 
O’Shares Quality Short Term High Yield Corporate Bond ETF 
O’Shares Quality Preferred Stock ETF 
O’Shares Quality Senior Loan ETF 
More Information About the Funds 
More Information About the Funds’ Investment Objectives 
More Information About the Funds’ Principal Investment Strategies 
More Information about the Funds’ Principal Investment Risks 
Investment Advisory Services 
Investment Adviser 
Portfolio Managers 
Information Regarding Exchange-Traded Funds 
Pricing Fund Shares 
Shareholder Information 
Portfolio Holdings Information 
Distribution and Service Plan 
Dividends and Distributions 
Taxes 
Service Providers 
Index Provider 
 
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133

 
i

 
 
 
 
 
Householding Policy 
Financial Highlights 
 
 
133
133
 
 
 
 
ii

 

Fund Summaries
 
O’Shares FTSE Russell U.S. Quality High Dividend ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “U.S. High Dividend Target Index”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the
 

 
1

 

Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the U.S. High Dividend Target Index.
 
The U.S. High Dividend Target Index is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization issuers with high dividend yields in the United States that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by FTSE-Russell (the “Index Provider”). The high quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies.
 
The constituents of the U.S. High Dividend Target Index are selected from the FTSE USA Index, comprised of [__] of the largest U.S. publicly-listed equities that had an average market capitalization of [__] and minimum market capitalization of [__] as of [__]. The Index Provider selects and weights securities for the U.S. High Dividend Target Index based on a proprietary approach that combines the following three factors: 1) high quality, including measures of profitability, operating efficiency, earnings quality and leverage, 2) low volatility, and 3) high dividend yield for the twelve months preceding each annual reconstitution. Individual index constituent weights are capped at 5% at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually. The U.S. High Dividend Target Index’s investable universe includes real estate investment trusts (“REITs”).
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the U.S. High Dividend Target Index, which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the U.S. High Dividend Target Index, rather than holding all of the investments in the U.S. High Dividend Target Index. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the U.S. High Dividend Target Index. To the extent that the U.S. High Dividend Target Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the U.S. High Dividend Target Index was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the U.S. High Dividend Target Index, but which the Adviser believes will help the Fund track the U.S. High Dividend Target Index. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more U.S. High Dividend Target Index components or in anticipation of changes in the U.S. High Dividend Target Index’s components.
 
The Index Provider, in consultation with the Adviser, developed the U.S. High Dividend Target Index methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the U.S. High Dividend Target Index.
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 

 
2

 


 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the U.S. High Dividend Target Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Derivatives Risk. Derivatives may involve risks different from, or greater than, those associated with more traditional investments. As a result of investing in derivatives, the Fund could lose more than the amount it invests. Derivatives may be highly illiquid, and the Fund may not be able to close out or sell a derivative position at a particular time or at an anticipated price. Derivatives also may be subject to counterparty risk, which includes the risk that a loss may be sustained by the Fund as a result of the insolvency or bankruptcy of, or other non-compliance by, the other party to the transaction.
 
Dividend Paying Stocks Risk. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.
 
Equity Investing Risk. An investment in the Fund involves risks similar to those of investing in any fund holding equity securities, such as market fluctuations, changes in interest rates and perceived trends in stock prices. The values of equity securities could decline generally or could underperform other investments. In addition, securities may decline in value due to factors affecting a specific issuer, market or securities markets generally.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the U.S. High Dividend Target Index accurately, or that the U.S. High Dividend Target Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the U.S. High Dividend Target Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the U.S. High Dividend Target Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Large-Capitalization Stock Risk. The securities of large market capitalization companies may underperform other segments of the market because such companies may be less responsive to competitive challenges and opportunities and may be unable to attain high growth rates during periods of economic expansion.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause
 

 
3

 

increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Mid-Capitalization Securities Risk. The securities of mid-capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, mid-capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the U.S. High Dividend Target Index. As a result, the Fund expects to hold constituent securities of the U.S. High Dividend Target Index regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
REIT Risk. Through its investments in REITs, the Fund will be subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters.
 
REITs are subject to additional risks, including those related to adverse governmental actions, declines in property value and the real estate market, and the potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. REITs are dependent upon specialized management skills and may invest in relatively few properties, a small geographic area or a small number of property types. As a result, investments in REITs may be volatile. REITs are pooled investment vehicles with their own fees and expenses and the Fund will indirectly bear a proportionate share of those fees and expenses.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent U.S. High Dividend Target Index, and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the U.S. High Dividend Target Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the U.S. High Dividend Target Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the U.S. High Dividend Target Index. In addition, the Fund’s NAV may deviate from the U.S. High Dividend Target Index if the Fund fair values a portfolio security at a price other than the price used by the U.S. High Dividend Target Index for that security.  The use of a representative sampling strategy to track the U.S. High Dividend Target Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the U.S. High Dividend Target Index will not be exposed to the less volatile securities in the index universe. Volatile stocks are subject to sharp swings in value.
 

 
4

 


 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]

 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 

 
5

 

O’Shares FTSE Russell U.S. Quality Value Dividend ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “U.S. Value Target Index”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 

 
6

 


 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the U.S. Value Target Index.
 
The U.S. Value Target Index is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization issuers with attractive valuations in the United States that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by FTSE-Russell (the “Index Provider”). The high quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies.
 
The constituents of the U.S. Value Target Index are selected from the FTSE USA Index, comprised of [__] of the largest U.S. publicly-listed equities that had an average market capitalization of [__] and minimum market capitalization of [__] as of [__]. The Index Provider selects and weights securities for the U.S. Value Target Index based on a proprietary approach that combines the following four factors: 1) high quality, including measures of profitability, operating efficiency, earnings quality and leverage, 2) low volatility, 3) high dividend yield for the twelve months preceding each annual reconstitution, and 4) value.  Individual index constituent weights are capped at 5% at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually. The U.S. Value Target Index’s investable universe includes real estate investment trusts (“REITs”).
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the U.S. Value Target Index, which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the U.S. Value Target Index, rather than holding all of the investments in the U.S. Value Target Index. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the U.S. Value Target Index. To the extent that the U.S. Value Target Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the U.S. Value Target Index was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the U.S. Value Target Index, but which the Adviser believes will help the Fund track the U.S. Value Target Index. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more U.S. Value Target Index components or in anticipation of changes in the U.S. Value Target Index’s components.
 
The Index Provider, in consultation with the Adviser, developed the U.S. Value Target Index methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the U.S. Value Target Index.
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 

 
7

 


 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the U.S. Value Target Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Derivatives Risk. Derivatives may involve risks different from, or greater than, those associated with more traditional investments. As a result of investing in derivatives, the Fund could lose more than the amount it invests. Derivatives may be highly illiquid, and the Fund may not be able to close out or sell a derivative position at a particular time or at an anticipated price. Derivatives also may be subject to counterparty risk, which includes the risk that a loss may be sustained by the Fund as a result of the insolvency or bankruptcy of, or other non-compliance by, the other party to the transaction.
 
Dividend Paying Stocks Risk. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.
 
Equity Investing Risk. An investment in the Fund involves risks similar to those of investing in any fund holding equity securities, such as market fluctuations, changes in interest rates and perceived trends in stock prices. The values of equity securities could decline generally or could underperform other investments. In addition, securities may decline in value due to factors affecting a specific issuer, market or securities markets generally.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the U.S. Value Target Index accurately, or that the U.S. Value Target Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the U.S. Value Target Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the U.S. Value Target Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Large-Capitalization Stock Risk. The securities of large market capitalization companies may underperform other segments of the market because such companies may be less responsive to competitive challenges and opportunities and may be unable to attain high growth rates during periods of economic expansion.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Mid-Capitalization Securities Risk. The securities of mid-capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, mid-capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
 

 
8

 


 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the U.S. Value Target Index. As a result, the Fund expects to hold constituent securities of the U.S. Value Target Index regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
REIT Risk. Through its investments in REITs, the Fund will be subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters.
 
REITs are subject to additional risks, including those related to adverse governmental actions, declines in property value and the real estate market, and the potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. REITs are dependent upon specialized management skills and may invest in relatively few properties, a small geographic area or a small number of property types. As a result, investments in REITs may be volatile. REITs are pooled investment vehicles with their own fees and expenses and the Fund will indirectly bear a proportionate share of those fees and expenses.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent the U.S. Value Target Index, and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the U.S. Value Target Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the U.S. Value Target Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the U.S. Value Target Index. In addition, the Fund’s NAV may deviate from the U.S. Value Target Index if the Fund fair values a portfolio security at a price other than the price used by the U.S. Value Target Index for that security.  The use of a representative sampling strategy to track the U.S. Value Target Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Value Stock Risk: Securities issued by companies that may be perceived as undervalued may fail to appreciate for long periods of time and may never realize their full potential value. Under certain market conditions, value securities have performed better during periods of economic recovery. Therefore, value securities may go in and out of favor over time.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the U.S. Value Target Index will not be exposed to the less volatile securities in the index universe. Volatile stocks are subject to sharp swings in value.
 

 
9

 


 

 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]

 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
10

 

O’Shares FTSE Russell U.S. Quality Growth Dividend ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “U.S. Growth Target Index”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 

 
11

 


 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the U.S. Growth Target Index.
 
The U.S. Growth Target Index is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization issuers with attractive growth in the United States that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by FTSE-Russell (the “Index Provider”). The high quality and low volatility requirements are designed to reduce exposure to high growth and dividend equities that have experienced large price declines, as may occur with some growth and dividend investing strategies.
 
The constituents of the U.S. Growth Target Index are selected from the FTSE USA Index, comprised of [__] of the largest U.S. publicly-listed equities that had an average market capitalization of [__] and minimum market capitalization of [__] as of [__]. The Index Provider selects and weights securities for the U.S. Growth Target Index based on a proprietary approach that combines the following four factors: 1) high quality, including measures of profitability, operating efficiency, earnings quality and leverage, 2) low volatility, 3) high dividend yield for the twelve months preceding each annual reconstitution, and 4) growth.  Individual index constituent weights are capped at 5% at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually. The U.S. Growth Target Index’s investable universe includes real estate investment trusts (“REITs”).
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the U.S. Growth Target Index, which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the U.S. Growth Target Index, rather than holding all of the investments in the U.S. Growth Target Index. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the U.S. Growth Target Index. To the extent that the U.S. Growth Target Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the U.S. Growth Target Index was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the U.S. Growth Target Index, but which the Adviser believes will help the Fund track the U.S. Growth Target Index. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more U.S. Growth Target Index components or in anticipation of changes in the U.S. Growth Target Index’s components.
 
The Index Provider, in consultation with the Adviser, developed the U.S. Growth Target Index methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the U.S. Growth Target Index.
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 

 
12

 


 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the U.S. Growth Target Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Derivatives Risk. Derivatives may involve risks different from, or greater than, those associated with more traditional investments. As a result of investing in derivatives, the Fund could lose more than the amount it invests. Derivatives may be highly illiquid, and the Fund may not be able to close out or sell a derivative position at a particular time or at an anticipated price. Derivatives also may be subject to counterparty risk, which includes the risk that a loss may be sustained by the Fund as a result of the insolvency or bankruptcy of, or other non-compliance by, the other party to the transaction.
 
Dividend Paying Stocks Risk. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.
 
Equity Investing Risk. An investment in the Fund involves risks similar to those of investing in any fund holding equity securities, such as market fluctuations, changes in interest rates and perceived trends in stock prices. The values of equity securities could decline generally or could underperform other investments. In addition, securities may decline in value due to factors affecting a specific issuer, market or securities markets generally.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Growth Stock Risk: Growth securities may be more volatile than other types of investments, may perform differently than the market as a whole and may underperform when compared to securities with different investment parameters. Under certain market conditions, growth securities have performed better during the later stages of economic recovery. Therefore, growth securities may go in and out of favor over time.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the U.S. Growth Target Index accurately, or that the U.S. Growth Target Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the U.S. Growth Target Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the U.S. Growth Target Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Large-Capitalization Stock Risk. The securities of large market capitalization companies may underperform other segments of the market because such companies may be less responsive to competitive challenges and opportunities and may be unable to attain high growth rates during periods of economic expansion.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause
 

 
13

 

increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Mid-Capitalization Securities Risk. The securities of mid-capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, mid-capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the U.S. Growth Target Index. As a result, the Fund expects to hold constituent securities of the U.S. Growth Target Index regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
REIT Risk. Through its investments in REITs, the Fund will be subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters.
 
REITs are subject to additional risks, including those related to adverse governmental actions, declines in property value and the real estate market, and the potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. REITs are dependent upon specialized management skills and may invest in relatively few properties, a small geographic area or a small number of property types. As a result, investments in REITs may be volatile. REITs are pooled investment vehicles with their own fees and expenses and the Fund will indirectly bear a proportionate share of those fees and expenses.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent U.S. Growth Target Index, and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the U.S. Growth Target Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the U.S. Growth Target Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the U.S. Growth Target Index. In addition, the Fund’s NAV may deviate from the U.S. Growth Target Index if the Fund fair values a portfolio security at a price other than the price used by the U.S. Growth Target Index for that security.  The use of a representative sampling strategy to track the U.S. Growth Target Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the U.S. Growth Target Index will not be exposed to the less volatile securities in the index universe. Volatile stocks are subject to sharp swings in value.
 

 
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Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]

 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 

 
15

 

O’Shares FTSE Russell Mid-Cap Quality Dividend ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “U.S. Mid Cap Target Index”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
 
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
 
Other Expenses(2)                                                                                                                   
 
[   ]%
 
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
 
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
               [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses
 

 
16

 

or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the U.S. Mid Cap Target Index.
 
The U.S. Mid Cap Target Index is designed to measure the performance of publicly-listed mid-capitalization dividend-paying issuers in the United States that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by FTSE-Russell (the “Index Provider”). The high quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies.
 
The constituents of the U.S. Mid Cap Target Index are selected from the FTSE USA Mid Cap Index, comprised of [__] U.S. publicly-listed mid-capitalization equities that had market capitalizations between [__] and [__], with an average market capitalization of [__], as of [__]. The Index Provider selects and weights securities for the U.S. Mid Cap Target Index based on a proprietary approach that combines the following three factors: 1) high quality, including measures of profitability, operating efficiency, earnings quality and leverage, 2) low volatility, and 3) high dividend yield for the twelve months preceding each annual reconstitution. Individual index constituent weights are capped at 5% at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually. The U.S. Mid Cap Target Index’s investable universe includes real estate investment trusts (“REITs”).
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the U.S. Mid Cap Target Index, which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the U.S. Mid Cap Target Index, rather than holding all of the investments in the U.S. Mid Cap Target Index. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the U.S. Mid Cap Target Index. To the extent that the U.S. Mid Cap Target Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the U.S. Mid Cap Target Index was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the U.S. Mid Cap Target Index, but which the Adviser believes will help the Fund track the U.S. Mid Cap Target Index. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more U.S. Mid Cap Target Index components or in anticipation of changes in the U.S. Mid Cap Target Index’s components.
 
The Index Provider, in consultation with the Adviser, developed the U.S. Mid Cap Target Index methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the U.S. Mid Cap Target Index.
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 

 
17

 


 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the U.S. Mid Cap Target Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Derivatives Risk. Derivatives may involve risks different from, or greater than, those associated with more traditional investments. As a result of investing in derivatives, the Fund could lose more than the amount it invests. Derivatives may be highly illiquid, and the Fund may not be able to close out or sell a derivative position at a particular time or at an anticipated price. Derivatives also may be subject to counterparty risk, which includes the risk that a loss may be sustained by the Fund as a result of the insolvency or bankruptcy of, or other non-compliance by, the other party to the transaction.
 
Dividend Paying Stocks Risk. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.
 
Equity Investing Risk. An investment in the Fund involves risks similar to those of investing in any fund holding equity securities, such as market fluctuations, changes in interest rates and perceived trends in stock prices. The values of equity securities could decline generally or could underperform other investments. In addition, securities may decline in value due to factors affecting a specific issuer, market or securities markets generally.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the U.S. Mid Cap Target Index accurately, or that the U.S. Mid Cap Target Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the U.S. Mid Cap Target Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the U.S. Mid Cap Target Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Mid-Capitalization Securities Risk. The securities of mid-capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, mid-capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the U.S. Mid Cap Target Index. As a result, the Fund expects to hold constituent securities of the
 

 
18

 

U.S. Mid Cap Target Index regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares.  Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
REIT Risk. Through its investments in REITs, the Fund will be subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters.
 
REITs are subject to additional risks, including those related to adverse governmental actions, declines in property value and the real estate market, and the potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. REITs are dependent upon specialized management skills and may invest in relatively few properties, a small geographic area or a small number of property types. As a result, investments in REITs may be volatile. REITs are pooled investment vehicles with their own fees and expenses and the Fund will indirectly bear a proportionate share of those fees and expenses.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent the U.S. Mid Cap Target Index, and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the U.S. Mid Cap Target Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the U.S. Mid Cap Target Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the U.S. Mid Cap Target Index. In addition, the Fund’s NAV may deviate from the U.S. Mid Cap Target Index if the Fund fair values a portfolio security at a price other than the price used by the U.S. Mid Cap Target Index for that security.  The use of a representative sampling strategy to track the U.S. Mid Cap Target Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the U.S. Mid Cap Target Index will not be exposed to the less volatile securities in the index universe. Volatile stocks are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 

 
19

 


Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]

 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
20

 

O’Shares FTSE Russell Small Cap Quality Dividend ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “U.S. Small Cap Target Index”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
 
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
 
Other Expenses(2)                                                                                                                   
 
[   ]%
 
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
 
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
       [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses
 

 
21

 

or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the U.S. Small Cap Target Index.
 
The U.S. Small Cap Target Index is designed to measure the performance of publicly-listed small-capitalization dividend-paying issuers in the United States that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by FTSE-Russell (the “Index Provider”). The high quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies.
 
The constituents of the U.S. Small Cap Target Index are selected from the FTSE USA Small Cap Index, comprised of [__] U.S. publicly-listed small-capitalization equities that had market capitalizations between [__] and [__], with an average market capitalization of [__], as of [__]. The Index Provider selects and weights securities for the U.S. Small Cap Target Index based on a proprietary approach that combines the following three factors: 1) high quality, including measures of profitability, operating efficiency, earnings quality and leverage, 2) low volatility, and 3) high dividend yield for the twelve months preceding each annual reconstitution. Individual index constituent weights are capped at 5% at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually. The U.S. Small Cap Target Index’s investable universe includes real estate investment trusts (“REITs”).
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the U.S. Small Cap Target Index, which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the U.S. Small Cap Target Index, rather than holding all of the investments in the U.S. Small Cap Target Index. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the U.S. Small Cap Target Index. To the extent that the U.S. Small Cap Target Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the U.S. Small Cap Target Index was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the U.S. Small Cap Target Index, but which the Adviser believes will help the Fund track the U.S. Small Cap Target Index. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more U.S. Small Cap Target Index components or in anticipation of changes in the U.S. Small Cap Target Index’s components.
 
The Index Provider, in consultation with the Adviser, developed the U.S. Small Cap Target Index methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the U.S. Small Cap Target Index.
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 

 
22

 


 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the U.S. Small Cap Target Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Derivatives Risk. Derivatives may involve risks different from, or greater than, those associated with more traditional investments. As a result of investing in derivatives, the Fund could lose more than the amount it invests. Derivatives may be highly illiquid, and the Fund may not be able to close out or sell a derivative position at a particular time or at an anticipated price. Derivatives also may be subject to counterparty risk, which includes the risk that a loss may be sustained by the Fund as a result of the insolvency or bankruptcy of, or other non-compliance by, the other party to the transaction.
 
Dividend Paying Stocks Risk. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.
 
Equity Investing Risk. An investment in the Fund involves risks similar to those of investing in any fund holding equity securities, such as market fluctuations, changes in interest rates and perceived trends in stock prices. The values of equity securities could decline generally or could underperform other investments. In addition, securities may decline in value due to factors affecting a specific issuer, market or securities markets generally.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the U.S. Small Cap Target Index accurately, or that the U.S. Small Cap Target Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the U.S. Small Cap Target Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the U.S. Small Cap Target Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the U.S. Small Cap Target Index. As a result, the Fund expects to hold constituent securities of the U.S. Small Cap Target Index regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 

 
23

 


 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
REIT Risk. Through its investments in REITs, the Fund will be subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters.
 
REITs are subject to additional risks, including those related to adverse governmental actions, declines in property value and the real estate market, and the potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. REITs are dependent upon specialized management skills and may invest in relatively few properties, a small geographic area or a small number of property types. As a result, investments in REITs may be volatile. REITs are pooled investment vehicles with their own fees and expenses and the Fund will indirectly bear a proportionate share of those fees and expenses.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent the U.S. Small Cap Target Index, and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Small Capitalization Securities Risk. The securities of small capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, small capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the U.S. Small Cap Target Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the U.S. Small Cap Target Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the U.S. Small Cap Target Index. In addition, the Fund’s NAV may deviate from the U.S. Small Cap Target Index if the Fund fair values a portfolio security at a price other than the price used by the U.S. Small Cap Target Index for that security.  The use of a representative sampling strategy to track the U.S. Small Cap Target Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the U.S. Small Cap Target Index will not be exposed to the less volatile securities in the index universe. Volatile stocks are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 

 
24

 


Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]

 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
25

 

O’Shares FTSE Russell Small and Mid-Cap Quality Dividend ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “U.S. Small and Mid-Cap Target Index”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses
 

 
26

 

or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the U.S. Small and Mid-Cap Target Index.
 
The U.S. Small and Mid-Cap Target Index is designed to measure the performance of publicly-listed small and mid-capitalization dividend-paying issuers in the United States that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by FTSE-Russell (the “Index Provider”). The high quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies.
 
The constituents of the U.S. Small and Mid-Cap Target Index are selected from the FTSE USA Small and Mid-Cap Index, comprised of [__] U.S. publicly-listed small and mid-capitalization equities that had market capitalizations between [__] and [__], with an average market capitalization of [__], as of [__].  The Index Provider selects and weights securities for the U.S. Small and Mid-Cap Target Index based on a proprietary approach that combines the following three factors: 1) high quality, including measures of profitability, operating efficiency, earnings quality and leverage, 2) low volatility, and 3) high dividend yield for the twelve months preceding each annual reconstitution. Individual index constituent weights are capped at 5% at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually. The U.S. Small and Mid-Cap Target Index’s investable universe includes real estate investment trusts (“REITs”).
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the U.S. Small and Mid-Cap Target Index, which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the U.S. Small and Mid-Cap Target Index, rather than holding all of the investments in the U.S. Small and Mid-Cap Target Index. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the U.S. Small and Mid-Cap Target Index. To the extent that the U.S. Small and Mid-Cap Target Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the U.S. Small and Mid-Cap Target Index was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the U.S. Small and Mid-Cap Target Index, but which the Adviser believes will help the Fund track the U.S. Small and Mid-Cap Target Index. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more U.S. Small and Mid-Cap Target Index components or in anticipation of changes in the U.S. Small and Mid-Cap Target Index’s components.
 
The Index Provider, in consultation with the Adviser, developed the U.S. Small and Mid-Cap Target Index methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the U.S. Small and Mid-Cap Target Index.
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade
 

 
27

 

like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the U.S. Small and Mid-Cap Target Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Derivatives Risk. Derivatives may involve risks different from, or greater than, those associated with more traditional investments. As a result of investing in derivatives, the Fund could lose more than the amount it invests. Derivatives may be highly illiquid, and the Fund may not be able to close out or sell a derivative position at a particular time or at an anticipated price. Derivatives also may be subject to counterparty risk, which includes the risk that a loss may be sustained by the Fund as a result of the insolvency or bankruptcy of, or other non-compliance by, the other party to the transaction.
 
Dividend Paying Stocks Risk. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.
 
Equity Investing Risk. An investment in the Fund involves risks similar to those of investing in any fund holding equity securities, such as market fluctuations, changes in interest rates and perceived trends in stock prices. The values of equity securities could decline generally or could underperform other investments. In addition, securities may decline in value due to factors affecting a specific issuer, market or securities markets generally.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the U.S. Small and Mid-Cap Target Index accurately, or that the U.S. Small and Mid-Cap Target Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the U.S. Small and Mid-Cap Target Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the U.S. Small and Mid-Cap Target Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the U.S. Small and Mid-Cap Target Index. As a result, the Fund expects to hold constituent securities of the U.S. Small and Mid-Cap Target Index regardless of their current or projected performance.
 

 
28

 

Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
REIT Risk. Through its investments in REITs, the Fund will be subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters.
 
REITs are subject to additional risks, including those related to adverse governmental actions, declines in property value and the real estate market, and the potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. REITs are dependent upon specialized management skills and may invest in relatively few properties, a small geographic area or a small number of property types. As a result, investments in REITs may be volatile. REITs are pooled investment vehicles with their own fees and expenses and the Fund will indirectly bear a proportionate share of those fees and expenses.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent the U.S. Small and Mid-Cap Target Index, and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Small and Mid-Capitalization Securities Risk. The securities of small and mid-capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, small and mid-capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the U.S. Small and Mid-Cap Target Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the U.S. Small and Mid-Cap Target Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the U.S. Small and Mid-Cap Target Index. In addition, the Fund’s NAV may deviate from the U.S. Small and Mid-Cap Target Index if the Fund fair values a portfolio security at a price other than the price used by the U.S. Small and Mid-Cap Target Index for that security.  The use of a representative sampling strategy to track the U.S. Small and Mid-Cap Target Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the U.S. Small and Mid-Cap Target Index will not be exposed to the less volatile securities in the index universe. Volatile stocks are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by
 

 
29

 

showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
         
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
30

 

O’Shares FTSE Russell International Quality Dividend ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “International Target Index”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
[   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
         [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses
 

 
31

 

or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the International Target Index.
 
The International Target Index is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization dividend-paying international issuers that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by FTSE-Russell (the “Index Provider”). The high quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies.
 
The constituents of the International Target Index are selected from the FTSE Developed International Index, comprised of [__] of the largest developed international publicly-listed equities that had an average market capitalization of [__] and minimum market capitalization of [__] as of [__]. The Index Provider selects and weights securities for the International Target Index based on a proprietary approach that combines the following three factors: 1) high quality, including measures of profitability, operating efficiency, earnings quality and leverage, 2) low volatility, and 3) high dividend yield for the twelve months preceding each annual reconstitution. Individual index constituent weights are capped at 5% at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually. The International Target Index’s investable universe includes real estate investment trusts (“REITs”).
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the International Target Index, which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the International Target Index, rather than holding all of the investments in the International Target Index. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the International Target Index and in depositary receipts representing such securities. To the extent that the International Target Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent. As of [   ], 2016, the International Target Index was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the International Target Index, but which the Adviser believes will help the Fund track the International Target Index. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more International Target Index components or in anticipation of changes in the International Target Index’s components.
 
The Index Provider, in consultation with the Adviser, developed the International Target Index methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the International Target Index.
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 

 
32

 


 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the International Target Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Depositary Receipts Risk. The risks of investments in depositary receipts are substantially similar to Foreign Investment Risks. In addition, depositary receipts may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading.
 
Derivatives Risk. Derivatives may involve risks different from, or greater than, those associated with more traditional investments. As a result of investing in derivatives, the Fund could lose more than the amount it invests. Derivatives may be highly illiquid, and the Fund may not be able to close out or sell a derivative position at a particular time or at an anticipated price. Derivatives also may be subject to counterparty risk, which includes the risk that a loss may be sustained by the Fund as a result of the insolvency or bankruptcy of, or other non-compliance by, the other party to the transaction.
 
Dividend Paying Stocks Risk. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.
 
Equity Investing Risk. An investment in the Fund involves risks similar to those of investing in any fund holding equity securities, such as market fluctuations, changes in interest rates and perceived trends in stock prices. The values of equity securities could decline generally or could underperform other investments. In addition, securities may decline in value due to factors affecting a specific issuer, market or securities markets generally.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Foreign Investment Risk. Returns on investments in foreign securities could be more volatile than, or trail the returns on, investments in U.S. securities. Exposures to foreign securities entail special risks, including due to: differences in information available about foreign issuers; differences in investor protection standards in other jurisdictions; capital controls risks, including the risk of a foreign jurisdiction imposing restrictions on the ability to repatriate or transfer currency or other assets; political, diplomatic and economic risks; regulatory risks; and foreign market and trading risks, including the costs of trading and risks of settlement in foreign jurisdictions. In addition, the Fund’s investments in securities denominated in other currencies could decline due to changes in local currency relative to the value of the U.S. dollar, which may affect the Fund’s returns.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the International Target Index accurately, or that the International Target Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the International Target Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the International Target Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
International Closed Market Trading Risk. Because the Fund’s underlying securities trade on markets that may be closed when the Exchange is open, there are likely to be deviations between current pricing of an underlying
 

 
33

 

security and stale pricing resulting in the Fund trading at a discount or premium to NAV that may be greater than those incurred by other exchange-traded funds.
 
Large-Capitalization Stock Risk. The securities of large market capitalization companies may underperform other segments of the market because such companies may be less responsive to competitive challenges and opportunities and may be unable to attain high growth rates during periods of economic expansion.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Mid-Capitalization Securities Risk. The securities of mid-capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, mid-capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the International Target Index. As a result, the Fund expects to hold constituent securities of the International Target Index regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
REIT Risk. Through its investments in REITs, the Fund will be subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters.
 
REITs are subject to additional risks, including those related to adverse governmental actions, declines in property value and the real estate market, and the potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. REITs are dependent upon specialized management skills and may invest in relatively few properties, a small geographic area or a small number of property types. As a result, investments in REITs may be volatile. REITs are pooled investment vehicles with their own fees and expenses and the Fund will indirectly bear a proportionate share of those fees and expenses.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent the International Target Index, and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 

 
34

 


 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the International Target Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the International Target Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the International Target Index. In addition, the Fund’s NAV may deviate from the International Target Index if the Fund fair values a portfolio security at a price other than the price used by the International Target Index for that security.  The use of a representative sampling strategy to track the International Target Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the International Target Index will not be exposed to the less volatile securities in the index universe. Volatile stocks are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
         
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to
 

 
35

 

recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
36

 

O’Shares FTSE Russell International Quality Dividend ETF (Currency Hedged)
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “International Hedged Target Index”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Acquired Fund Fees and Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses
 

 
37

 

or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the International Hedged Target Index.
 
The International Hedged Target Index is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization dividend paying international issuers that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by FTSE-Russell (the “Index Provider”). The high quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies.
 
The constituents of the International Hedged Target Index are selected from the FTSE Developed International Hedged Index, comprised of [__] of the largest developed international publicly-listed equities that had an average market capitalization of [__] and minimum market capitalization of [__] as of [__]. The Index Provider selects and weights securities for the International Hedged Target Index based on a proprietary approach that combines the following three factors: 1) high quality, including measures of profitability, operating efficiency, earnings quality and leverage, 2) low volatility, and 3) high dividend yield for the twelve months preceding each annual reconstitution. Individual index constituent weights are capped at 5% at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually. The International Hedged Target Index’s investable universe includes real estate investment trusts (“REITs”).
 
The International Hedged Target Index hedges against fluctuations in the relative value of foreign currencies in which the International Hedged Target Index’s components are denominated against the U.S. dollar. Thus, it is designed to have higher returns than an equivalent index that does not hedge against a weakening of such foreign currencies relative to the U.S. dollar. Conversely, the International Hedged Target Index would be expected to have lower returns than an equivalent unhedged index when these foreign currencies are rising in value relative to the U.S. dollar. The International Hedged Target Index applies published one-month currency forward rates to the International Hedged Target Index’s total foreign currency exposures to adjust the value of the foreign currencies against the U.S. dollar. The Fund intends to enter into forward currency contracts or futures contracts to effectuate the hedging strategy embedded in the International Hedged Target Index. Although the hedged nature of the International Hedged Target Index is designed to minimize the impact of currency fluctuations on returns, it does not eliminate the Fund’s exposure to foreign currency fluctuations.
 
Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the International Hedged Target Index and in depositary receipts representing such securities (“80% policy”), including indirectly through the O’Shares FTSE RussellInternational Quality Dividend ETF (the “Underlying Fund”).  To the extent that the International Hedged Target Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the International Hedged Target Index was concentrated in the [_____] sectors.
 
Currently, the Fund achieves its investment objective by investing a substantial portion of its assets in the Underlying Fund. The Underlying Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of its underlying index. The Underlying Fund expects to employ a representative sampling strategy in seeking to track the performance of its underlying index, which means it will typically invest in a portfolio of investments that collectively have an investment profile similar to its underlying index, rather than holding all of the investments in its underlying index.
 
The Fund may invest up to 20% of its total assets in investments not included in the International Hedged Target Index, but which the Adviser believes will help the Fund track the International Hedged Target Index. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more International Hedged Target Index components or in anticipation of changes in the International Hedged Target Index’s components.
 

 
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The Index Provider, in consultation with the Adviser, developed the International Hedged Target Index methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the International Hedged Target Index.
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.  For purposes of these Principal Investment Risks, references to the Fund include the Underlying Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the International Hedged Target Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Depositary Receipts Risk. The risks of investments in depositary receipts are substantially similar to Foreign Investment Risks. In addition, depositary receipts may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading.
 
Derivatives Risk. Derivatives may involve risks different from, or greater than, those associated with more traditional investments. As a result of investing in derivatives, the Fund could lose more than the amount it invests. Derivatives may be highly illiquid, and the Fund may not be able to close out or sell a derivative position at a particular time or at an anticipated price. Derivatives also may be subject to counterparty risk, which includes the risk that a loss may be sustained by the Fund as a result of the insolvency or bankruptcy of, or other non-compliance by, the other party to the transaction.
 
Dividend Paying Stocks Risk. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.
 
Equity Investing Risk. An investment in the Fund involves risks similar to those of investing in any fund holding equity securities, such as market fluctuations, changes in interest rates and perceived trends in stock prices. The values of equity securities could decline generally or could underperform other investments. In addition, securities may decline in value due to factors affecting a specific issuer, market or securities markets generally.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Foreign Investment Risk. Returns on investments in foreign securities could be more volatile than, or trail the returns on, investments in U.S. securities. Exposures to foreign securities entail special risks, including due to:
 

 
39

 

differences in information available about foreign issuers; differences in investor protection standards in other jurisdictions; capital controls risks, including the risk of a foreign jurisdiction imposing restrictions on the ability to repatriate or transfer currency or other assets; political, diplomatic and economic risks; regulatory risks; and foreign market and trading risks, including the costs of trading and risks of settlement in foreign jurisdictions. In addition, unless perfectly hedged, the Fund’s investments in securities denominated in other currencies could decline due to changes in local currency relative to the value of the U.S. dollar, which may affect the Fund’s returns.
 
Forward and Futures Contracts Risk. The Fund may invest in forward and futures contracts. The primary risks associated with the use of forward and futures contracts are (i) the imperfect correlation between the price of the contract and the change in value of the underlying asset; (ii) possible lack of liquid secondary market for a forward contract and the resulting inability to close such a contract when desired; (iii) losses caused by unanticipated market movements, which are potentially unlimited; (iv) the inability to predict correctly the direction of securities prices, interest rates, currency exchange rates, and other economic factors; (v) the possibility that the counterparty to a forward contract will default in the performance of its obligations; and (vi) if the Fund has insufficient cash, it may have to sell investments to meet daily variation margin requirements on a futures contract, and the Fund may have to sell investments at a time when it may be disadvantageous to do so.
 
Hedging Risk. The Fund’s hedging strategies may not be successful, and even if they are successful, the Fund’s exposure to foreign currency fluctuations is not expected to be fully hedged at all times.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the International Hedged Target Index accurately, or that the International Hedged Target Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the International Hedged Target Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the International Hedged Target Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
International Closed Market Trading Risk. Because the Fund’s underlying securities trade on markets that may be closed when the Exchange is open, there are likely to be deviations between current pricing of an underlying security and stale pricing resulting in the Fund trading at a discount or premium to NAV that may be greater than those incurred by other exchange-traded funds.
 
Large-Capitalization Stock Risk. The securities of large market capitalization companies may underperform other segments of the market because such companies may be less responsive to competitive challenges and opportunities and may be unable to attain high growth rates during periods of economic expansion.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Mid-Capitalization Securities Risk. The securities of mid-capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, mid-capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the International Hedged Target Index. As a result, the Fund expects to hold constituent securities of the International Hedged Target Index regardless of their current or projected performance. Maintaining investments
 

 
40

 

in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
REIT Risk. Through its investments in REITs, the Fund will be subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters.
 
REITs are subject to additional risks, including those related to adverse governmental actions, declines in property value and the real estate market, and the potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. REITs are dependent upon specialized management skills and may invest in relatively few properties, a small geographic area or a small number of property types. As a result, investments in REITs may be volatile. REITs are pooled investment vehicles with their own fees and expenses and the Fund will indirectly bear a proportionate share of those fees and expenses.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent the International Hedged Target Index, and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the International Hedged Target Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the International Hedged Target Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the International Hedged Target Index. In addition, the Fund’s NAV may deviate from the International Hedged Target Index if the Fund fair values a portfolio security at a price other than the price used by the International Hedged Target Index for that security.  The use of a representative sampling strategy to track the International Hedged Target Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the International Hedged Target Index will not be exposed to the less volatile securities in the index universe. Volatile stocks are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 

 
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Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]

 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
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O’Shares FTSE Russell Emerging Markets Quality Dividend ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “Emerging Markets Target Index”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 

 
43

 


 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the Emerging Markets Target Index.
 
The Emerging Markets Target Index is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization dividend-paying issuers in emerging markets that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by FTSE-Russell (the “Index Provider”). The high quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies.
 
The constituents of the Emerging Markets Target Index are selected from the FTSE Emerging Markets Index, comprised of [__] of the largest emerging market publicly-listed equities that had an average market capitalization of [__] and minimum market capitalization of [__] as of [__]. The Index Provider selects and weights securities for the Emerging Markets Target Index based on a proprietary approach that combines the following three factors: 1) high quality, including measures of profitability, operating efficiency, earnings quality and leverage, 2) low volatility, and 3) high dividend yield for the twelve months preceding each annual reconstitution. Individual index constituent weights are capped at 5% at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually. The Emerging Markets Target Index’s investable universe includes real estate investment trusts (“REITs”).
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the Emerging Market Target Index, which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the Emerging Market Target Index, rather than holding all of the investments in the Emerging Market Target Index. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the Emerging Market Target Index and in depositary receipts representing such securities. To the extent that the Emerging Market Target Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the Emerging Market Target Index was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the Emerging Market Target Index, but which the Adviser believes will help the Fund track the Emerging Market Target Index. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more Emerging Market Target Index components or in anticipation of changes in the Emerging Market Target Index’s components.
 
The Index Provider, in consultation with the Adviser, developed the Emerging Market Target Index methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the Emerging Market Target Index.
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 

 
44

 


 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the Emerging Markets Target Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Depositary Receipts Risk. The risks of investments in depositary receipts are substantially similar to Foreign Investment Risks. In addition, depositary receipts may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading.
 
Derivatives Risk. Derivatives may involve risks different from, or greater than, those associated with more traditional investments. As a result of investing in derivatives, the Fund could lose more than the amount it invests. Derivatives may be highly illiquid, and the Fund may not be able to close out or sell a derivative position at a particular time or at an anticipated price. Derivatives also may be subject to counterparty risk, which includes the risk that a loss may be sustained by the Fund as a result of the insolvency or bankruptcy of, or other non-compliance by, the other party to the transaction.
 
Dividend Paying Stocks Risk. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.
 
Emerging Markets Risk. Investments in securities of issuers in emerging market countries are subject to even greater risks than for foreign investments generally, including increased risks of: illiquidity of securities; price volatility; inflation or deflation; restrictions on foreign investment; nationalization; higher taxation; economic and political instability; pervasive corruption and crime; less governmental regulation; and less developed legal systems.  Some economies in emerging markets are dependent on a range of commodities, and are strongly affected by international commodity prices. Other emerging market economies have experienced rapid growth and industrialization, and there is no assurance that this growth rate will be maintained.
 
Equity Investing Risk. An investment in the Fund involves risks similar to those of investing in any fund holding equity securities, such as market fluctuations, changes in interest rates and perceived trends in stock prices. The values of equity securities could decline generally or could underperform other investments. In addition, securities may decline in value due to factors affecting a specific issuer, market or securities markets generally.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Foreign Investment Risk. Returns on investments in foreign securities could be more volatile than, or trail the returns on, investments in U.S. securities. Exposures to foreign securities entail special risks, including due to: differences in information available about foreign issuers; differences in investor protection standards in other jurisdictions; capital controls risks, including the risk of a foreign jurisdiction imposing restrictions on the ability to repatriate or transfer currency or other assets; political, diplomatic and economic risks; regulatory risks; and foreign market and trading risks, including the costs of trading and risks of settlement in foreign jurisdictions. In addition, the Fund’s investments in securities denominated in other currencies could decline due to changes in local currency relative to the value of the U.S. dollar, which may affect the Fund’s returns.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the Emerging Markets Target Index accurately, or that the Emerging Markets Target Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the Emerging Markets Target Index is designed to achieve, the
 

 
45

 

Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the Emerging Markets Target Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
International Closed Market Trading Risk. Because the Fund’s underlying securities trade on markets that may be closed when the Exchange is open, there are likely to be deviations between current pricing of an underlying security and stale pricing resulting in the Fund trading at a discount or premium to NAV that may be greater than those incurred by other exchange-traded funds.
 
Large-Capitalization Stock Risk. The securities of large market capitalization companies may underperform other segments of the market because such companies may be less responsive to competitive challenges and opportunities and may be unable to attain high growth rates during periods of economic expansion.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Mid-Capitalization Securities Risk. The securities of mid-capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, mid-capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the Emerging Markets Target Index. As a result, the Fund expects to hold constituent securities of the Emerging Markets Target Index regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
REIT Risk. Through its investments in REITs, the Fund will be subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters.
 
REITs are subject to additional risks, including those related to adverse governmental actions, declines in property value and the real estate market, and the potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. REITs are dependent upon specialized management skills and may invest in relatively few properties, a small geographic area or a small number of property types. As a result, investments in REITs may be volatile. REITs are pooled investment vehicles with their own fees and expenses and the Fund will indirectly bear a proportionate share of those fees and expenses.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be
 

 
46

 

no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent the Emerging Markets Target Index, and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the Emerging Markets Target Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the Emerging Markets Target Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the Emerging Markets Target Index. In addition, the Fund’s NAV may deviate from the Emerging Markets Target Index if the Fund fair values a portfolio security at a price other than the price used by the Emerging Markets Target Index for that security.  The use of a representative sampling strategy to track the Emerging Markets Target Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the Emerging Markets Target Index will not be exposed to the less volatile securities in the index universe. Volatile stocks are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]

 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 

 
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Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
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O’Shares FTSE Russell Emerging Markets Quality Dividend ETF (Currency Hedged)
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “Emerging Markets Hedged Target Index”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Acquired Fund Fees and Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses
 

 
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or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the Emerging Markets Hedged Target Index.
 
The Emerging Markets Hedged Target Index is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization dividend paying issuers in emerging markets that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by FTSE-Russell (the “Index Provider”). The high quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies.
 
The constituents of the Emerging Markets Hedged Target Index are selected from the FTSE Emerging Markets Hedged Index, comprised of [__] of the largest emerging market publicly-listed equities that had an average market capitalization of [__] and minimum market capitalization of [__] as of [__]. The Index Provider selects and weights securities for the Emerging Markets Hedged Target Index based on a proprietary approach that combines the following three factors: 1) high quality, including measures of profitability, operating efficiency, earnings quality and leverage, 2) low volatility, and 3) high dividend yield for the twelve months preceding each annual reconstitution. Individual index constituent weights are capped at 5% at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually. The Emerging Markets Hedged Target Index’s investable universe includes real estate investment trusts (“REITs”).
 
The Emerging Markets Hedged Target Index hedges against fluctuations in the relative value of foreign currencies in which the Emerging Markets Hedged Target Index’s components are denominated against the U.S. dollar. Thus, it is designed to have higher returns than an equivalent index that does not hedge against a weakening of such foreign currencies relative to the U.S. dollar. Conversely, the Emerging Markets Hedged Target Index would be expected to have lower returns than an equivalent unhedged index when these foreign currencies are rising in value relative to the U.S. dollar. The Emerging Markets Hedged Target Index applies published one-month currency forward rates to the Emerging Markets Hedged Target Index’s total foreign currency exposures to adjust the value of the foreign currencies against the U.S. dollar. The Fund intends to enter into forward currency contracts or futures contracts to effectuate the hedging strategy embedded in the Emerging Markets Hedged Target Index. Although the hedged nature of the Emerging Markets Hedged Target Index is designed to minimize the impact of currency fluctuations on returns, it does not eliminate the Fund’s exposure to foreign currency fluctuations.
 
Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the Emerging Markets Hedged Target Index and in depositary receipts representing such securities (“80% policy”), including indirectly through the O’Shares FTSE Russell Emerging Markets Quality Dividend ETF (the “Underlying Fund”). To the extent that the Emerging Markets Hedged Target Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent. As of [   ], 2016, the Emerging Markets Hedged Target Index was concentrated in the [_____] sectors.
 
Currently, the Fund achieves its investment objective by investing a substantial portion of its assets in the Underlying Fund. The Underlying Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of its underlying index. The Underlying Fund expects to employ a representative sampling strategy in seeking to track the performance of its underlying index, which means it will typically invest in a portfolio of investments that collectively have an investment profile similar to its underlying index, rather than holding all of the investments in its underlying index.
 

 
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The Fund may invest up to 20% of its total assets in investments not included in the Emerging Markets Hedged Target Index, but which the Adviser believes will help the Fund track the Emerging Markets Hedged Target Index. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more Emerging Markets Hedged Target Index components or in anticipation of changes in the Emerging Markets Hedged Target Index’s components.
 
The Index Provider, in consultation with the Adviser, developed the Emerging Markets Hedged Target Index methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the Emerging Markets Hedged Target Index.
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.  For purposes of these Principal Investment Risks, references to the Fund include the Underlying Fund.  For purposes of these Principal Investment Risks, references to the Fund include the Underlying Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the Emerging Markets Hedged Target Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Depositary Receipts Risk. The risks of investments in depositary receipts are substantially similar to Foreign Investment Risks. In addition, depositary receipts may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading.
 
Derivatives Risk. Derivatives may involve risks different from, or greater than, those associated with more traditional investments. As a result of investing in derivatives, the Fund could lose more than the amount it invests. Derivatives may be highly illiquid, and the Fund may not be able to close out or sell a derivative position at a particular time or at an anticipated price. Derivatives also may be subject to counterparty risk, which includes the risk that a loss may be sustained by the Fund as a result of the insolvency or bankruptcy of, or other non-compliance by, the other party to the transaction.
 
Dividend Paying Stocks Risk. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.
 
Emerging Markets Risk. Investments in securities of issuers in emerging market countries are subject to even greater risks than for foreign investments generally, including increased risks of: illiquidity of securities; price volatility; inflation or deflation; restrictions on foreign investment; nationalization; higher taxation; economic and political instability; pervasive corruption and crime; less governmental regulation; and less developed legal systems.
 

 
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Some economies in emerging markets are dependent on a range of commodities, and are strongly affected by international commodity prices. Other emerging market economies have experienced rapid growth and industrialization, and there is no assurance that this growth rate will be maintained.
 
Equity Investing Risk. An investment in the Fund involves risks similar to those of investing in any fund holding equity securities, such as market fluctuations, changes in interest rates and perceived trends in stock prices. The values of equity securities could decline generally or could underperform other investments. In addition, securities may decline in value due to factors affecting a specific issuer, market or securities markets generally.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Foreign Investment Risk. Returns on investments in foreign securities could be more volatile than, or trail the returns on, investments in U.S. securities. Exposures to foreign securities entail special risks, including due to: differences in information available about foreign issuers; differences in investor protection standards in other jurisdictions; capital controls risks, including the risk of a foreign jurisdiction imposing restrictions on the ability to repatriate or transfer currency or other assets; political, diplomatic and economic risks; regulatory risks; and foreign market and trading risks, including the costs of trading and risks of settlement in foreign jurisdictions. In addition, unless perfectly hedged, the Fund’s investments in securities denominated in other currencies could decline due to changes in local currency relative to the value of the U.S. dollar, which may affect the Fund’s returns.
 
Forward and Futures Contracts Risk. The Fund may invest in forward and futures contracts. The primary risks associated with the use of forward and futures contracts are (i) the imperfect correlation between the price of the contract and the change in value of the underlying asset; (ii) possible lack of liquid secondary market for a forward contract and the resulting inability to close such a contract when desired; (iii) losses caused by unanticipated market movements, which are potentially unlimited; (iv) the inability to predict correctly the direction of securities prices, interest rates, currency exchange rates, and other economic factors; (v) the possibility that the counterparty to a forward contract will default in the performance of its obligations; and (vi) if the Fund has insufficient cash, it may have to sell investments to meet daily variation margin requirements on a futures contract, and the Fund may have to sell investments at a time when it may be disadvantageous to do so.
 
Hedging Risk. The Fund’s hedging strategies may not be successful, and even if they are successful, the Fund’s exposure to foreign currency fluctuations is not expected to be fully hedged at all times.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the Emerging Markets Hedged Target Index accurately, or that the Emerging Markets Hedged Target Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the Emerging Markets Hedged Target Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the Emerging Markets Hedged Target Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
International Closed Market Trading Risk. Because the Fund’s underlying securities trade on markets that may be closed when the Exchange is open, there are likely to be deviations between current pricing of an underlying security and stale pricing resulting in the Fund trading at a discount or premium to NAV that may be greater than those incurred by other exchange-traded funds.
 
Large-Capitalization Stock Risk. The securities of large market capitalization companies may underperform other segments of the market because such companies may be less responsive to competitive challenges and opportunities and may be unable to attain high growth rates during periods of economic expansion.
 

 
52

 


 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Mid-Capitalization Securities Risk. The securities of mid-capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, mid-capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the Emerging Markets Hedged Target Index. As a result, the Fund expects to hold constituent securities of the Emerging Markets Hedged Target Index regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
REIT Risk. Through its investments in REITs, the Fund will be subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters.
 
REITs are subject to additional risks, including those related to adverse governmental actions, declines in property value and the real estate market, and the potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. REITs are dependent upon specialized management skills and may invest in relatively few properties, a small geographic area or a small number of property types. As a result, investments in REITs may be volatile. REITs are pooled investment vehicles with their own fees and expenses and the Fund will indirectly bear a proportionate share of those fees and expenses.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent the Emerging Markets Hedged Target Index, and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the Emerging Markets Hedged Target Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the Emerging Markets Hedged Target Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the Emerging Markets Hedged Target Index. In addition, the Fund’s NAV may deviate from the Emerging Markets Hedged Target Index if the Fund fair values a portfolio security at a price other than the price used by the
 

 
53

 

Emerging Markets Hedged Target Index for that security.  The use of a representative sampling strategy to track the Emerging Markets Hedged Target Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the Emerging Markets Hedged Target Index will not be exposed to the less volatile securities in the index universe. Volatile stocks are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]

 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
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O’Shares Quality Aggregate Bond ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “[______ Index]”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 

 
55

 


 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the [______ Index].
 
The [______ Index] is designed to measure the performance of liquid, U.S. dollar-denominated investment grade bonds with certain credit quality metrics including lower leverage, higher interest expense coverage and strong cash flow, as well as yield and liquidity thresholds, selected from the total U.S. investment-grade bond market.  The [______ Index] includes investment-grade U.S. Treasury bonds, government-related bonds, corporate bonds, mortgage-backed pass through securities (including those issued or guaranteed by the Government National Mortgage Association (“Ginnie Mae”) and U.S. government-sponsored entities, such as the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”)), commercial mortgage-backed securities and asset-backed securities that are publicly offered for sale in the United States.  The credit quality, yield and liquidity threshold requirements are designed to reduce exposure to issuers with greater credit and liquidity risk.
 
The constituents of the [______ Index] are selected from the [______ Index].  Currently, the bonds eligible for inclusion in the [______ Index] include U.S. dollar-denominated bonds that have an average rating of investment grade.  Ratings from Fitch Ratings, Inc. (“Fitch”), Moody’s Investors Services (“Moody’s”) or Standard & Poor’s Ratings Services are considered. If more than one agency provides a rating, the average rating is attached to the bond.  Investment grade securities are securities rated Baa3 or BBB- (or the equivalent) or better by a nationally recognized statistical rating organization, or, if unrated, determined to be of comparable quality.
 
Interactive Data Pricing and Reference Data LLC (the “Index Provider”) selects and weights securities for the [______ Index] based on a proprietary approach that combines the following 3 factors: 1) higher credit quality, including measures of leverage, interest expense coverage and cash flow, 2) a yield threshold and 3) liquidity. Individual index constituent weights are capped at [__%] at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually.
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the [______ Index], which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the [______ Index], rather than holding all of the investments in the [______ Index]. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the [______ Index] or to-be-announced (“TBA”) transactions representing components.  To the extent that the [______ Index] concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the [______ Index] was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the [______ Index], but which the Adviser believes will help the Fund track the [______ Index]. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more [______ Index] components or in anticipation of changes in the [______ Index]’s components.
 
The Index Provider, in consultation with the Adviser, developed the [______ Index] methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the [______ Index].
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other
 

 
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government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the [_______] Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Credit Risk. An issuer of debt securities may fail to make interest payments and repay principal when due, in whole or in part. Changes in an issuer’s financial strength or in a security’s credit rating may affect a security’s value.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Extension Risk. Some debt securities, particularly mortgage-backed securities, are subject to the risk that the debt security’s effective maturity is extended because calls or prepayments are less or slower than anticipated, particularly when interest rates rise. The market value of such security may then decline and become more interest rate sensitive.
 
Income Risk. Because the Fund can only distribute what it earns, the Fund’s distributions to shareholders may decline when prevailing interest rates fall or when the Fund experiences defaults on debt securities it holds.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the [_______] Index accurately, or that the [_______] Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the [_______] Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the [_______] Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Interest Rate Risk. When interest rates rise, debt security prices generally fall. The opposite is also generally true: debt security prices rise when interest rates fall. Interest rate changes are influenced by a number of factors, including government policy, monetary policy, inflation expectations, perceptions of risk, and supply and demand of bonds. In general, securities with longer maturities or durations are more sensitive to these interest rate changes.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 

 
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Mortgage-Backed and Asset-Backed Securities Risk. Mortgage-backed securities differ from conventional debt securities because principal is paid back periodically over the life of the security rather than at maturity. The Fund may receive unscheduled payments of principal due to voluntary prepayments, refinancings or foreclosures on the underlying mortgage loans. Because of prepayments, mortgage-backed securities may be less effective than some other types of debt securities as a means of “locking in” long-term interest rates and may have less potential for capital appreciation during periods of falling interest rates. A reduction in the anticipated rate of principal prepayments, especially during periods of rising interest rates, may increase or extend the effective maturity of mortgage-backed securities, making them more sensitive to interest rate changes, subject to greater price volatility, and more susceptible than some other debt securities to a decline in market value when interest rates rise.
 
Issuers of asset-backed securities may have limited ability to enforce the security interest in the underlying assets, and credit enhancements provided to support the securities, if any, may be inadequate to protect investors in the event of default. Like mortgage-backed securities, asset-backed securities may be subject to prepayment and extension risks.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the [______ Index]. As a result, the Fund expects to hold constituent securities of the [______ Index] regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
Prepayment Risk. Prepayment risk occurs when a debt security can be repaid in whole or in part prior to the security’s maturity and the Fund must reinvest the proceeds it receives, during periods of declining interest rates, in securities that pay a lower rate of interest. Also, if a security has been purchased at a premium, the value of the premium would be lost in the event of prepayment. Prepayments generally increase when interest rates fall.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent [______ Index], and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the [_______] Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the [_______] Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the [_______] Index. In addition, the Fund’s NAV may deviate from the [_______] Index if the Fund fair values a portfolio security at a price other than the price used by the [_______] Index for that security.  The use of a representative sampling strategy to track the [_______] Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the [______ Index] will not be exposed to the less volatile securities in the index universe. Volatile securities are subject to sharp swings in value.
 

 
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Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 

 
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O’Shares Quality Investment Grade Corporate Bond ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “[______ Index]”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 

 
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Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the [______ Index].
 
The [______ Index] is designed to measure the performance of liquid, U.S. dollar-denominated investment grade corporate bonds with certain credit quality metrics including lower leverage, higher interest expense coverage and strong cash flow, as well as yield and liquidity thresholds.  The credit quality, yield and liquidity threshold requirements are designed to reduce exposure to issuers with greater credit and liquidity risk.
 
The constituents of the [______ Index] are selected from the [______ Index].  Currently, the bonds eligible for inclusion in the [______ Index] include U.S. dollar-denominated corporate bonds that: 1) are issued by companies domiciled in the U.S. and 2) have an average rating of investment grade.  Ratings from Fitch Ratings, Inc. (“Fitch”), Moody’s Investors Services (“Moody’s”) or Standard & Poor’s Ratings Services are considered. If more than one agency provides a rating, the average rating is attached to the bond.  Investment grade securities are securities rated Baa3 or BBB- (or the equivalent) or better by a nationally recognized statistical rating organization, or, if unrated, determined to be of comparable quality.
 
Interactive Data Pricing and Reference Data LLC (the “Index Provider”) selects and weights securities for the [______ Index] based on a proprietary approach that combines the following 3 factors: 1) higher credit quality, including measures of leverage, interest expense coverage and cash flow, 2) a yield threshold and 3) liquidity. Individual index constituent weights are capped at [__%] at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually.
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the [______ Index], which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the [______ Index], rather than holding all of the investments in the [______ Index]. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the [______ Index]. To the extent that the [______ Index] concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the [______ Index] was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the [______ Index], but which the Adviser believes will help the Fund track the [______ Index]. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more [______ Index] components or in anticipation of changes in the [______ Index]’s components.
 
The Index Provider, in consultation with the Adviser, developed the [______ Index] methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the [______ Index].
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade
 

 
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like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the [_______] Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Credit Risk. An issuer of debt securities may fail to make interest payments and repay principal when due, in whole or in part. Changes in an issuer’s financial strength or in a security’s credit rating may affect a security’s value.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Extension Risk. Some debt securities are subject to the risk that the debt security’s effective maturity is extended because calls or prepayments are less or slower than anticipated, particularly when interest rates rise. The market value of such security may then decline and become more interest rate sensitive.
 
Income Risk. Because the Fund can only distribute what it earns, the Fund’s distributions to shareholders may decline when prevailing interest rates fall or when the Fund experiences defaults on debt securities it holds.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the [_______] Index accurately, or that the [_______] Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the [_______] Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the [_______] Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Interest Rate Risk. When interest rates rise, debt security prices generally fall. The opposite is also generally true: debt security prices rise when interest rates fall. Interest rate changes are influenced by a number of factors, including government policy, monetary policy, inflation expectations, perceptions of risk, and supply and demand of bonds. In general, securities with longer maturities or durations are more sensitive to these interest rate changes.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the [______ Index]. As a result, the Fund expects to hold constituent securities of the [______ Index] regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 

 
62

 


 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent [______ Index], and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the [_______] Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the [_______] Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the [_______] Index. In addition, the Fund’s NAV may deviate from the [_______] Index if the Fund fair values a portfolio security at a price other than the price used by the [_______] Index for that security.  The use of a representative sampling strategy to track the [_______] Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the [______ Index] will not be exposed to the less volatile securities in the index universe. Volatile securities are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV
 

 
63

 

(a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
64

 

 O’Shares Quality High Yield Corporate Bond ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “[______ Index]”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 

 
65

 


 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the [______ Index].
 
The [______ Index] is designed to measure the performance of liquid, U.S. dollar-denominated high yield corporate bonds with certain credit quality metrics including leverage thresholds, interest expense coverage and cash flow levels, as well as yield and liquidity requirements.  The credit quality, yield and liquidity requirements are designed to reduce exposure to issuers with greater credit and liquidity risk.
 
The constituents of the [______ Index] are selected from the [______ Index].  Currently, the bonds eligible for inclusion in the [______ Index] include U.S. dollar-denominated corporate bonds that: 1) are issued by companies domiciled in the U.S. and 2) have an average rating below investment grade.  Ratings from Fitch Ratings, Inc. (“Fitch”), Moody’s Investors Services (“Moody’s”) or Standard & Poor’s Ratings Services are considered. If more than one agency provides a rating, the average rating is attached to the bond.  High yield (or non-investment grade) securities are securities rated lower than Baa3 or BBB- (or the equivalent) by a nationally recognized statistical rating organization, or, if unrated, determined to be of comparable quality.
 
Interactive Data Pricing and Reference Data LLC (the “Index Provider”) selects and weights securities for the [______ Index] based on a proprietary approach that combines the following 3 factors: 1) higher credit quality, including measures of leverage, interest expense coverage and cash flow, 2) a yield threshold and 3) liquidity. Individual index constituent weights are capped at [__%] at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually.
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the [______ Index], which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the [______ Index], rather than holding all of the investments in the [______ Index]. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the [______ Index]. To the extent that the [______ Index] concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the [______ Index] was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the [______ Index], but which the Adviser believes will help the Fund track the [______ Index]. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more [______ Index] components or in anticipation of changes in the [______ Index]’s components.
 
The Index Provider, in consultation with the Adviser, developed the [______ Index] methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the [______ Index].
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade
 

 
66

 

like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the [_______] Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Credit Risk. An issuer of debt securities may fail to make interest payments and repay principal when due, in whole or in part. Changes in an issuer’s financial strength or in a security’s credit rating may affect a security’s value.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Extension Risk. Some debt securities are subject to the risk that the debt security’s effective maturity is extended because calls or prepayments are less or slower than anticipated, particularly when interest rates rise. The market value of such security may then decline and become more interest rate sensitive.
 
High-Yield Debt Securities Risk.  Issuers of lower-rated or “high-yield” debt securities (also known as “junk bonds”) are not as strong financially as those issuing higher credit quality debt securities. High-yield debt securities are generally considered predominantly speculative by the applicable rating agencies as their issuers are more likely to encounter financial difficulties and are more vulnerable to changes in the relevant economy, such as a recession or a sustained period of rising interest rates, that could affect their ability to make interest and principal payments when due. The prices of high-yield debt securities generally fluctuate more than those of higher credit quality. High-yield debt securities are generally more illiquid (harder to sell) and harder to value.
 
Income Risk. Because the Fund can only distribute what it earns, the Fund’s distributions to shareholders may decline when prevailing interest rates fall or when the Fund experiences defaults on debt securities it holds.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the [_______] Index accurately, or that the [_______] Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the [_______] Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the [_______] Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Interest Rate Risk. When interest rates rise, debt security prices generally fall. The opposite is also generally true: debt security prices rise when interest rates fall. Interest rate changes are influenced by a number of factors, including government policy, monetary policy, inflation expectations, perceptions of risk, and supply and demand of bonds. In general, securities with longer maturities or durations are more sensitive to these interest rate changes.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause
 

 
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increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the [______ Index]. As a result, the Fund expects to hold constituent securities of the [______ Index] regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent [______ Index], and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the [_______] Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the [_______] Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the [_______] Index. In addition, the Fund’s NAV may deviate from the [_______] Index if the Fund fair values a portfolio security at a price other than the price used by the [_______] Index for that security.  The use of a representative sampling strategy to track the [_______] Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the [______ Index] will not be exposed to the less volatile securities in the index universe. Volatile securities are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 

 
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Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]

 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
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 O’Shares Quality Short Term Investment Grade Corporate Bond ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “[______ Index]”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 

 
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Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the [______ Index].
 
The [______ Index] is designed to measure the performance of liquid, U.S. dollar-denominated investment grade corporate bonds with certain credit quality metrics including lower leverage, higher interest expense coverage and strong cash flow, as well as yield and liquidity thresholds.  The credit quality, yield and liquidity threshold requirements are designed to reduce exposure to issuers with greater credit and liquidity risk.
 
The constituents of the [______ Index] are selected from the [______ Index].  Currently, the bonds eligible for inclusion in the [______ Index] include U.S. dollar-denominated corporate bonds that: 1) are issued by companies domiciled in the U.S., 2) have an average rating of investment grade and 3) have a maturity not longer than 5 years.  Ratings from Fitch Ratings, Inc. (“Fitch”), Moody’s Investors Services (“Moody’s”) or Standard & Poor’s Ratings Services are considered. If more than one agency provides a rating, the average rating is attached to the bond.  Investment grade securities are securities rated Baa3 or BBB- (or the equivalent) or better by a nationally recognized statistical rating organization, or, if unrated, determined to be of comparable quality.
 
Interactive Data Pricing and Reference Data LLC (the “Index Provider”) selects and weights securities for the [______ Index] based on a proprietary approach that combines the following 3 factors: 1) higher credit quality, including measures of leverage, interest expense coverage and cash flow, 2) a yield threshold and 3) liquidity. Individual index constituent weights are capped at [__%] at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually.
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the [______ Index], which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the [______ Index], rather than holding all of the investments in the [______ Index]. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the [______ Index]. To the extent that the [______ Index] concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the [______ Index] was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the [______ Index], but which the Adviser believes will help the Fund track the [______ Index]. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more [______ Index] components or in anticipation of changes in the [______ Index]’s components.
 
The Index Provider, in consultation with the Adviser, developed the [______ Index] methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the [______ Index].
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade
 

 
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like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the [_______] Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Credit Risk. An issuer of debt securities may fail to make interest payments and repay principal when due, in whole or in part. Changes in an issuer’s financial strength or in a security’s credit rating may affect a security’s value.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Extension Risk. Some debt securities are subject to the risk that the debt security’s effective maturity is extended because calls or prepayments are less or slower than anticipated, particularly when interest rates rise. The market value of such security may then decline and become more interest rate sensitive.
 
Income Risk. Because the Fund can only distribute what it earns, the Fund’s distributions to shareholders may decline when prevailing interest rates fall or when the Fund experiences defaults on debt securities it holds.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the [_______] Index accurately, or that the [_______] Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the [_______] Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the [_______] Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Interest Rate Risk. When interest rates rise, debt security prices generally fall. The opposite is also generally true: debt security prices rise when interest rates fall. Interest rate changes are influenced by a number of factors, including government policy, monetary policy, inflation expectations, perceptions of risk, and supply and demand of bonds. In general, securities with longer maturities or durations are more sensitive to these interest rate changes.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the [______ Index]. As a result, the Fund expects to hold constituent securities of the [______ Index] regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 

 
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Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent [______ Index], and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the [_______] Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the [_______] Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the [_______] Index. In addition, the Fund’s NAV may deviate from the [_______] Index if the Fund fair values a portfolio security at a price other than the price used by the [_______] Index for that security.  The use of a representative sampling strategy to track the [_______] Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the [______ Index] will not be exposed to the less volatile securities in the index universe. Volatile securities are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV
 

 
73

 

(a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
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O’Shares Quality Short Term High Yield Corporate Bond ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “[______ Index]”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 

 
75

 


 
Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the [______ Index].
 
The [______ Index] is designed to measure the performance of liquid, U.S. dollar-denominated high yield corporate bonds with certain credit quality metrics including leverage thresholds, interest expense coverage and cash flow levels, as well as yield and liquidity requirements.  The credit quality, yield and liquidity requirements are designed to reduce exposure to issuers with greater credit and liquidity risk.
 
The constituents of the [______ Index] are selected from the [______ Index].  Currently, the bonds eligible for inclusion in the [______ Index] include U.S. dollar-denominated corporate bonds that: 1) are issued by companies domiciled in the U.S., 2) have an average rating below investment grade and 3) have a maturity not longer than 5 years.  Ratings from Fitch Ratings, Inc. (“Fitch”), Moody’s Investors Services (“Moody’s”) or Standard & Poor’s Ratings Services are considered. If more than one agency provides a rating, the average rating is attached to the bond.  High yield (or non-investment grade) securities are securities rated lower than Baa3 or BBB- (or the equivalent) by a nationally recognized statistical rating organization, or, if unrated, determined to be of comparable quality.
 
Interactive Data Pricing and Reference Data LLC (the “Index Provider”) selects and weights securities for the [______ Index] based on a proprietary approach that combines the following 3 factors: 1) higher credit quality, including measures of leverage, interest expense coverage and cash flow, 2) a yield threshold and 3) liquidity. Individual index constituent weights are capped at [__%] at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually.
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the [______ Index], which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the [______ Index], rather than holding all of the investments in the [______ Index]. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the [______ Index]. To the extent that the [______ Index] concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the [______ Index] was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the [______ Index], but which the Adviser believes will help the Fund track the [______ Index]. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more [______ Index] components or in anticipation of changes in the [______ Index]’s components.
 
The Index Provider, in consultation with the Adviser, developed the [______ Index] methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the [______ Index].
 
Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade
 

 
76

 

like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the [_______] Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Credit Risk. An issuer of debt securities may fail to make interest payments and repay principal when due, in whole or in part. Changes in an issuer’s financial strength or in a security’s credit rating may affect a security’s value.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Extension Risk. Some debt securities are subject to the risk that the debt security’s effective maturity is extended because calls or prepayments are less or slower than anticipated, particularly when interest rates rise. The market value of such security may then decline and become more interest rate sensitive.
 
High-Yield Debt Securities Risk.  Issuers of lower-rated or “high-yield” debt securities (also known as “junk bonds”) are not as strong financially as those issuing higher credit quality debt securities. High-yield debt securities are generally considered predominantly speculative by the applicable rating agencies as their issuers are more likely to encounter financial difficulties and are more vulnerable to changes in the relevant economy, such as a recession or a sustained period of rising interest rates, that could affect their ability to make interest and principal payments when due. The prices of high-yield debt securities generally fluctuate more than those of higher credit quality. High-yield debt securities are generally more illiquid (harder to sell) and harder to value.
 
Income Risk. Because the Fund can only distribute what it earns, the Fund’s distributions to shareholders may decline when prevailing interest rates fall or when the Fund experiences defaults on debt securities it holds.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the [_______] Index accurately, or that the [_______] Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the [_______] Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the [_______] Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Interest Rate Risk. When interest rates rise, debt security prices generally fall. The opposite is also generally true: debt security prices rise when interest rates fall. Interest rate changes are influenced by a number of factors, including government policy, monetary policy, inflation expectations, perceptions of risk, and supply and demand of bonds. In general, securities with longer maturities or durations are more sensitive to these interest rate changes.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause
 

 
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increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the [______ Index]. As a result, the Fund expects to hold constituent securities of the [______ Index] regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent [______ Index], and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the [_______] Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the [_______] Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the [_______] Index. In addition, the Fund’s NAV may deviate from the [_______] Index if the Fund fair values a portfolio security at a price other than the price used by the [_______] Index for that security.  The use of a representative sampling strategy to track the [_______] Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the [______ Index] will not be exposed to the less volatile securities in the index universe. Volatile securities are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 

 
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Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]

 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
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O’Shares Quality Preferred Stock ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “[______ Index]”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 

 
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Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the [______ Index].
 
The [______ Index] is designed to measure the performance of U.S. dollar-denominated preferred stocks with certain credit quality metrics including leverage thresholds, interest expense coverage and cash flow levels, as well as yield and liquidity requirements.  The credit quality, yield and liquidity requirements are designed to reduce exposure to issuers with greater credit and liquidity risk.
 
In general, preferred stock is a class of equity security that pays a specified dividend that must be paid before any dividends can be paid to common stockholders and takes precedence over common stock in the event of a company’s liquidation. Although preferred stocks represent a partial ownership interest in a company, preferred stocks generally do not carry voting rights and have economic characteristics similar to fixed-income securities. Preferred stocks generally are issued with a fixed par value and pay dividends based on a percentage of that par value at a fixed or variable rate. Additionally, preferred stocks often have a liquidation value that generally equals the original purchase price of the preferred stock at the date of issuance.
 
The constituents of the [______ Index] are selected from the [______ Index].  The [______ Index] excludes certain issues of preferred stock, such as those that are issued by special ventures (e.g., toll roads or dam operators) or structured products and brand name products issued by financial institutions that are packaged securities linked to indices or other stocks. The [______ Index] may include many different categories of preferred stock, such as floating, variable and fixed-rate preferreds, callable preferreds, convertible preferreds, cumulative and non-cumulative preferreds, trust preferreds or various other traditional and hybrid issues of preferred stock.  The [______ Index] may include preferred stock issued by large-, mid- or small-capitalization companies.
 
Interactive Data Pricing and Reference Data LLC (the “Index Provider”) selects and weights securities for the [______ Index] based on a proprietary approach that combines the following 3 factors: 1) higher credit quality, including measures of leverage, interest expense coverage and cash flow, 2) a yield threshold and 3) liquidity. Individual index constituent weights are capped at [__%] at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually.
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the [______ Index], which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the [______ Index], rather than holding all of the investments in the [______ Index]. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the [______ Index]. To the extent that the [______ Index] concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [__], the [______ Index] was concentrated in the financial industry group.  Components of the [______ Index] primarily include financials, telecommunications and utilities companies. The components of the [______ Index], and the degree to which these components represent certain industries, may change over time.
 
The Fund may invest up to 20% of its total assets in investments not included in the [______ Index], but which the Adviser believes will help the Fund track the [______ Index]. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more [______ Index] components or in anticipation of changes in the [______ Index]’s components.
 
The Index Provider, in consultation with the Adviser, developed the [______ Index] methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the [______ Index].
 

 
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Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the [_______] Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Credit Risk. An issuer of debt securities may fail to make interest payments and repay principal when due, in whole or in part. Changes in an issuer’s financial strength or in a security’s credit rating may affect a security’s value.
 
Dividend Paying Stocks Risk. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.
 
Equity Investing Risk. An investment in the Fund involves risks similar to those of investing in any fund holding equity securities, such as market fluctuations, changes in interest rates and perceived trends in stock prices. The values of equity securities could decline generally or could underperform other investments. In addition, securities may decline in value due to factors affecting a specific issuer, market or securities markets generally.
 
Exchange-Traded Funds and Other Investment Companies Risk. The risks of investing in securities of ETFs and other investment companies typically reflect the risks of the types of instruments in which the underlying ETF or other investment company invests. In addition, with such investments, the Fund indirectly bears its proportionate share of the fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher and performance may be lower.
 
Financials Sector Risk. Performance of companies in the financials sector may be adversely impacted by many factors, including, among others, government regulations, economic conditions, credit rating downgrades, changes in interest rates, and decreased liquidity in credit markets. The impact of more stringent capital requirements, recent or future regulation on any individual financial company, or recent or future regulation on the financials sector as a whole cannot be predicted.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the [_______] Index accurately, or that the [_______] Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the [_______] Index is designed to achieve, the Index Provider does not guarantee the quality, accuracy or completeness of data in respect of its indices, and does not guarantee that the [_______] Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Interest Rate Risk. When interest rates rise, debt security prices generally fall. The opposite is also generally true: debt security prices rise when interest rates fall. Interest rate changes are influenced by a number of factors,
 

 
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including government policy, monetary policy, inflation expectations, perceptions of risk, and supply and demand of bonds. In general, securities with longer maturities or durations are more sensitive to these interest rate changes.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the [______ Index]. As a result, the Fund expects to hold constituent securities of the [______ Index] regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
Preferred Stock Risk. Preferred stock is subject to many of the risks associated with debt securities, including interest rate risk. In addition, preferred stock may not pay a dividend, an issuer may suspend payment of dividends on preferred stock at any time, and in certain situations an issuer may call or redeem its preferred stock or convert it to common stock. To the extent that the Fund invests a substantial portion of its assets in convertible preferred stocks, declining common stock values may also cause the value of the Fund’s investments to decline.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent [______ Index], and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Telecommunications Sector Risk. Companies in the telecommunications sector may be affected by industry competition, substantial capital requirements, government regulation and obsolescence of telecommunications products and services due to technological advancement.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the [_______] Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the [_______] Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the [_______] Index. In addition, the Fund’s NAV may deviate from the [_______] Index if the Fund fair values a portfolio security at a price other than the price used by the [_______] Index for that security.  The use of a representative sampling strategy to track the [_______] Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Utilities Sector Risk. The utilities sector is subject to significant government regulation and oversight. Deregulation, however, may subject utility companies to greater competition and may reduce their profitability.
 

 
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Companies in the utilities sector may be adversely affected due to increases in fuel and operating costs, rising costs of financing capital construction and the cost of complying with regulations, among other factors.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the [______ Index] will not be exposed to the less volatile securities in the index universe. Volatile securities are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]

 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
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O’Shares Quality Senior Loan ETF
 
Investment Objective
 
The Fund seeks to track the performance (before fees and expenses) of the [______ Index] (the “[______ Index]”).
 
Fees and Expenses
 
This table describes the fees and expenses you may pay if you buy and hold shares in the Fund. Transaction costs that may be incurred by the investor such as brokerage commissions for buying and selling securities are not reflected in the table below.
 
Annual Fund Operating Expenses (expenses you pay each year as a % of the value of your investment)
 
Management Fees                                                                                                                  
 
[   ]%
Distribution and/or Service (12b-1) Fees(1)                                                                                                                   
 
0.00%
Other Expenses(2)                                                                                                                   
 
[   ]%
Total Annual Fund Operating Expenses                                                                                                                  
 
 [   ]%
Fee Waiver and Expense Reimbursement(3)                                                                                                                   
 
        [   ]%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
 
[   ]%
 
(1)  Pursuant to a Rule 12b-1 distribution and service plan (“Plan”), the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund, and the Board of Trustees of OSI ETF Trust (the “Trust”) has not currently approved the commencement of any payments under the Plan.
 
(2)  Based on estimated amounts for the current fiscal year.
 
(3)  The Fund’s investment adviser, O’Shares Investment Advisers, LLC ( the “Adviser”), has entered into a written fee waiver and expense reimbursement agreement pursuant to which the Adviser has agreed to waive its fees and reimburse expenses for the Fund until at least [   ] so that the total annual fund operating expenses after fee waiver and expense reimbursement for the Fund (except for distribution fees (including payments under a Rule 12b-1 plan), brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, taxes, interest (including borrowing costs and dividend expenses on securities sold short), Trustee fees, litigation expenses and other extraordinary expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto)) are limited to [   ] %. This undertaking can only be changed with the approval of the Board of Trustees of the Trust.
 
Example
 
The following example is intended to help you compare the cost of investing in the Fund with the costs 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 each year, except that the Fund’s expenses are reduced during the first year by the fee waiver and expense reimbursement agreement described above. The example does not reflect any brokerage commissions that you may pay on purchases and sales of Fund shares. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares, your costs would be:
 
1 YEAR
 
3 YEARS
$[  ]
 
$[  ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the Fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the example, affect the Fund’s performance. Because the Fund has not yet commenced operations, it does not have a portfolio turnover rate to provide.
 

 
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Principal Investment Strategies
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the [______ Index].
 
The [______ Index] is designed to measure the performance of liquid, U.S. dollar-denominated senior loans with certain credit quality metrics including leverage thresholds, interest expense coverage and cash flow levels, as well as yield and liquidity requirements.  The credit quality, yield and liquidity requirements are designed to reduce exposure to issuers with greater credit and liquidity risk.
 
Senior loans are generally defined to include leveraged loans, bank loans and/or floating rate loans. Banks and other lending institutions generally issue senior loans to corporations, partnerships or other entities (“borrowers”). These borrowers operate in a variety of industries and geographic regions, including foreign countries.
 
Senior loans often are issued in connection with recapitalizations, acquisitions, leveraged buyouts and re-financings. Senior loans typically are structured and administered by a financial institution that acts as agent for the lenders in the lending group. The Fund generally will purchase loans from banks or other financial institutions through assignments or participations. The Fund may acquire a direct interest in a loan from the agent or another lender by assignment or an indirect interest in a loan as a participation in another lender’s portion of a loan. The Fund generally will sell loans it holds by way of an assignment, but may sell participation interests in such loans at any time to facilitate its ability to fund redemption requests.
 
The constituents of the [______ Index] are selected from the [______ Index].  Currently, the senior loans eligible for inclusion in the [______ Index] include U.S. dollar-denominated senior loans that: 1) are issued by companies domiciled in the U.S. and 2) have an average rating above [____].  Ratings from Fitch Ratings, Inc. (“Fitch”), Moody’s Investors Services (“Moody’s”) or Standard & Poor’s Ratings Services are considered. If more than one agency provides a rating, the average rating is attached to the senior loan.
 
[____] (the “Index Provider”) selects and weights securities for the [______ Index] based on a proprietary approach that combines the following 3 factors: 1) higher credit quality, including measures of leverage, interest expense coverage and cash flow, 2) a yield threshold and 3) liquidity. Individual index constituent weights are capped at [__%] at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually.
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the [______ Index], which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the [______ Index], rather than holding all of the investments in the [______ Index]. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the [______ Index]. To the extent that the [______ Index] concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent.  As of [   ], 2016, the [______ Index] was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the [______ Index], but which the Adviser believes will help the Fund track the [______ Index]. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities, derivatives, such as [____], and cash and cash equivalents as substitutes for one or more [______ Index] components or in anticipation of changes in the [______ Index]’s components.
 
The Index Provider, in consultation with the Adviser, developed the [______ Index] methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the [______ Index].
 

 
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Principal Investment Risks
 
There can be no guarantee that the Fund will achieve its investment objective. The Fund is an exchange-traded fund, not a bank deposit, and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. The value of your investment may fall, sometimes sharply, and you could lose money by investing in the Fund.
 
Authorized Participants Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in, shares of the Fund may trade like closed-end fund shares at a significant discount to net asset value (“NAV”) and may face delisting from the Exchange.
 
Cash and Cash Equivalents Risk. Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which the Fund may invest is rapidly rising.
 
Concentration Risk. To the extent that the [_______] Index is concentrated in a particular industry or group of industries, the Fund is also expected to be concentrated in that industry or group of industries, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry or group of industries.
 
Credit Risk. An issuer of debt securities may fail to make interest payments and repay principal when due, in whole or in part. Changes in an issuer’s financial strength or in a security’s credit rating may affect a security’s value.
 
Extension Risk. Some debt securities are subject to the risk that the debt security’s effective maturity is extended because calls or prepayments are less or slower than anticipated, particularly when interest rates rise. The market value of such security may then decline and become more interest rate sensitive.
 
Floating Rate Corporate Investments Risk. Floating rate corporate loans and corporate debt securities generally have credit ratings below investment grade and may be subject to resale restrictions. They are often issued in connection with highly leveraged transactions, and may be subject to greater credit risks than other investments including the possibility of default or bankruptcy. A significant portion of floating rate investments may be “covenant lite” loans that may contain fewer or less restrictive constraints on the borrower or other borrower-friendly characteristics.
 
High-Yield Debt Securities Risk.  Issuers of lower-rated or “high-yield” debt securities (also known as “junk bonds”) are not as strong financially as those issuing higher credit quality debt securities. High-yield debt securities are generally considered predominantly speculative by the applicable rating agencies as their issuers are more likely to encounter financial difficulties and are more vulnerable to changes in the relevant economy, such as a recession or a sustained period of rising interest rates, that could affect their ability to make interest and principal payments when due. The prices of high-yield debt securities generally fluctuate more than those of higher credit quality. High-yield debt securities are generally more illiquid (harder to sell) and harder to value.
 
Impairment of Collateral Risk. The value of collateral securing a loan or other corporate debt security may decline after the Fund invests and there is a risk that the value of the collateral may not be sufficient to cover the amount owed to the Fund, or the collateral securing a loan may be found invalid, may be used to pay other outstanding obligations of the borrower under applicable law or may be difficult to sell.
 
Income Risk. Because the Fund can only distribute what it earns, the Fund’s distributions to shareholders may decline when prevailing interest rates fall or when the Fund experiences defaults on debt securities it holds.
 
Index-Related Risk. There is no assurance that the Index Provider will compile the [_______] Index accurately, or that the [_______] Index will be determined, composed or calculated accurately. While the Index Provider provides descriptions of what the [_______] Index is designed to achieve, the Index Provider does not guarantee the quality,
 

 
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accuracy or completeness of data in respect of its indices, and does not guarantee that the [_______] Index will be in line with its described index methodology. Any gains, losses or costs to the Fund that are caused by Index Provider errors will therefore be borne by the Fund and its shareholders.
 
Interest Rate Risk. When interest rates rise, debt security prices generally fall. The opposite is also generally true: debt security prices rise when interest rates fall. Interest rate changes are influenced by a number of factors, including government policy, monetary policy, inflation expectations, perceptions of risk, and supply and demand of bonds. In general, securities with longer maturities or durations are more sensitive to these interest rate changes.
 
Liquidity Risk. Liquidity risk exists when investments are difficult to purchase or sell. This can reduce the Fund’s returns because the Fund or an entity in which it invests may be unable to transact at advantageous times or prices.
 
Market Events Risk. Turbulence in the financial markets and reduced liquidity may negatively affect issuers, which could have an adverse effect on the Fund. In addition, there is a risk that policy changes by the U.S. Government, Federal Reserve and/or other government actors, such as increasing interest rates, could cause increased volatility in financial markets and disruption in the creation/redemption process of the Fund, which could have a negative impact on the Fund.
 
Passive Investment Risk. The Fund is managed with a passive investment strategy, attempting to track the performance of the [______ Index]. As a result, the Fund expects to hold constituent securities of the [______ Index] regardless of their current or projected performance. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
 
Premium-Discount Risk. Fund shares may trade above or below their NAV. The market prices of Fund shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Fund shares. Therefore, you may pay more than NAV when you buy shares of the Fund on the Exchange, and you may receive less than NAV when you sell those shares on the Exchange.
 
Prepayment Risk. Prepayment risk occurs when a debt security can be repaid in whole or in part prior to the security’s maturity and the Fund must reinvest the proceeds it receives, during periods of declining interest rates, in securities that pay a lower rate of interest. Also, if a security has been purchased at a premium, the value of the premium would be lost in the event of prepayment. Prepayments generally increase when interest rates fall.
 
Secondary Market Trading Risk. Investors buying or selling Fund shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Fund shares. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in Fund shares on the Exchange may be halted.
 
Sector Risk. To the extent [______ Index], and thereby the Fund, emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
 
Senior Loan Risk. The risk that investing in senior loans exposes the Fund to heightened credit risk, call risk, settlement risk and liquidity risk. If an issuer of a senior loan prepays or redeems the loan prior to maturity, the Fund will have to reinvest the proceeds in other senior loans or instruments that may pay lower interest rates.
 
Tracking Error Risk. The investment performance of the Fund may diverge from that of the [_______] Index due to, among other things, fees and expenses paid by the Fund, including the cost of buying and selling securities, that are not reflected in the [_______] Index. If the Fund is small, it may experience greater tracking error. If the Fund is not fully invested, holding cash balances may prevent it from tracking the [_______] Index. In addition, the Fund’s NAV may deviate from the [_______] Index if the Fund fair values a portfolio security at a price other than the price
 

 
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used by the [_______] Index for that security.  The use of a representative sampling strategy to track the [_______] Index may also produce greater tracking error than if the Fund employed a full replication strategy.
 
Variable Rate Securities Risk. Because changes in interest rates on variable rate securities (including floating rate securities) may lag behind changes in market rates, the value of such securities may decline during periods of rising interest rates until their interest rates reset to market rates. During periods of declining interest rates, because the interest rates on variable rate securities generally reset downward, their market value is unlikely to rise to the same extent as the value of comparable fixed rate securities.
 
Volatility Risk. There is a risk that the present and future volatility of a security, relative to the market index, will not be the same as it has historically been and thus that the [______ Index] will not be exposed to the less volatile securities in the index universe. Volatile securities are subject to sharp swings in value.
 
Performance Information
 
Performance information will be available in the Prospectus after the Fund has been in operation for one full calendar year. When provided, the information will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the future.
 
Management
 
Investment Adviser: O’Shares Investment Advisers, LLC
 
Portfolio Managers:
 
The following table lists the persons responsible for day-to-day management of the Fund’s portfolio:
 
Employee
 
Length of Service
 
Title
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]
[    ]
 
Since inception
 
[    ]

 
Purchase and Sale of Fund Shares
 
The Fund is an exchange-traded fund or ETF. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer and investors may pay a commission to such broker-dealers in connection with their purchase or sale. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares aggregated into blocks of 50,000 shares or multiples thereof (“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The Fund will issue or redeem Creation Units in return for a basket of assets that the Fund specifies each day.
 
Tax Information
 
The Fund’s distributions are expected to be taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to
 

 
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recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
 

 
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More Information About the Funds
 
More Information About the Funds’ Investment Objectives
 
Each Fund seeks to track the performance (before fees and expenses) of its target index (“Target Index”). Each Fund’s investment objective is non-fundamental and may be changed without shareholder approval with at least 60 days’ notice to shareholders.
 
More Information About the Funds’ Principal Investment Strategies
 
O’Shares FTSE Russell U.S. Quality High Dividend ETF
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the Target Index.
 
The Target Index is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization issuers with high dividend yields in the United States that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by the Index Provider. The high quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies.
 
The constituents of the Target Index are selected from the FTSE USA Index, comprised of [__] of the largest U.S. publicly-listed equities that had an average market capitalization of [__] and minimum market capitalization of [__] as of [__].The Index Provider selects and weights securities for the Target Index based on a proprietary approach that combines the following three factors: 1) high quality, including measures of profitability, operating efficiency, earnings quality and leverage, 2) low volatility, and 3) high dividend yield for the twelve months preceding each annual reconstitution. Individual index constituent weights are capped at 5% at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually. The Target Index’s investable universe includes REITs.
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the Target Index, which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the Target Index, rather than holding all of the investments in Target Index. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the Target Index. To the extent that the Target Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent. As of [   ], 2016, the Target Index was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the Target Index, but which the Adviser believes will help the Fund track the Target Index. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities,  derivatives, such as [____], and cash and cash equivalents as substitutes for one or more Target Index components or in anticipation of changes in the Target Index’s components.  There may also be instances in which the Adviser may choose to overweight securities in the Target Index.
 
The Fund may not be fully invested at times as a result of, for example, cash flows into the Fund or reserves of cash held by the Fund to meet redemptions and pay expenses. In addition, the Fund may not be able to invest in certain securities included in the Target Index due to restrictions or limitations on the trading of such securities or a lack of liquidity in such securities. Under these circumstances, the Fund may not track the Target Index with the same degree of accuracy as it otherwise would.
 
The Index Provider, in consultation with the Adviser, developed the Target Index methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the Target Index.  The Target Index is unmanaged and cannot be invested in directly.
 

 
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O’Shares FTSE Russell U.S. Quality Value Dividend ETF
 
The Fund employs a “passive management” or “rules based” investment approach that seeks to track the performance of the Target Index.
 
The Target Index is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization issuers with attractive valuations in the United States that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by the Index Provider. The high quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies.
 
The constituents of the Target Index are selected from the FTSE USA Index, comprised of [__] of the largest U.S. publicly-listed equities that had an average market capitalization of [__] and minimum market capitalization of [__] as of [__]. The Index Provider selects and weights securities for the Target Index based on a proprietary approach that combines the following four factors: 1) high quality, including measures of profitability, operating efficiency, earnings quality and leverage, 2) low volatility, 3) high dividend yield for the twelve months preceding each annual reconstitution, and 4) value.  Individual index constituent weights are capped at 5% at each quarterly rebalance to avoid overexposure to any single security and are tested for liquidity semi-annually. The Target Index’s investable universe includes REITs.
 
The Fund expects to employ a representative sampling strategy in seeking to track the performance of the Target Index, which means it will typically invest in a portfolio of investments that collectively has an investment profile similar to the Target Index, rather than holding all of the investments in the Target Index. Under normal market conditions, the Fund will invest at least 80% of its total assets in the components of the Target Index. To the extent that the Target Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund is expected to concentrate to approximately the same extent. As of [   ], 2016, the Target Index was concentrated in the [_____] sectors.
 
The Fund may invest up to 20% of its total assets in investments not included in the Target Index, but which the Adviser believes will help the Fund track the Target Index. For example, there may be instances in which the Adviser may choose to purchase or sell investments including ETF and other investment company securities,  derivatives, such as [____], and cash and cash equivalents as substitutes for one or more Target Index components or in anticipation of changes in the Target Index’s components.  There may also be instances in which the Adviser may choose to overweight securities in the Target Index.
 
The Fund may not be fully invested at times as a result of, for example, cash flows into the Fund or reserves of cash held by the Fund to meet redemptions and pay expenses. In addition, the Fund may not be able to invest in certain securities included in the Target Index due to restrictions or limitations on the trading of such securities or a lack of liquidity in such securities. Under these circumstances, the Fund may not track the Target Index with the same degree of accuracy as it otherwise would.
 
The Index Provider, in consultation with the Adviser, developed the Target Index methodology. The Index Provider is responsible for the ongoing maintenance, calculation and administration of the Target Index.  The Target Index is unmanaged and cannot be invested in directly.