ck0001976322-20260227
THEMES
ETF TRUST
PROSPECTUS
February 27, 2026
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| AALG |
Leverage
Shares 2X Long AAL Daily ETF |
| FIGG |
Leverage
Shares 2X Long FIG Daily ETF |
| ADBG |
Leverage
Shares 2X Long ADBE Daily ETF |
| FUTG |
Leverage
Shares 2X Long FUTU Daily ETF |
| AMDG |
Leverage
Shares 2X Long AMD Daily ETF |
| GLGG |
Leverage
Shares 2X Long GLXY Daily ETF |
| ARMG |
Leverage
Shares 2X Long ARM Daily ETF |
| HOOG |
Leverage
Shares 2X Long HOOD Daily ETF |
| ASMG |
Leverage
Shares 2X Long ASML Daily ETF |
| MPG |
Leverage
Shares 2X Long MP Daily ETF |
| AVGG |
Leverage
Shares 2X Long AVGO Daily ETF |
| NBIG |
Leverage
Shares 2X Long NBIS Daily ETF |
| BAIG |
Leverage
Shares 2X Long BBAI Daily ETF |
| NVDG |
Leverage
Shares 2X Long NVDA Daily ETF |
| BLSG |
Leverage
Shares 2X Long BLSH Daily ETF |
| PANG |
Leverage
Shares 2X Long PANW Daily ETF |
| BMNG |
Leverage
Shares 2X Long BMNR Daily ETF |
| PLTG |
Leverage
Shares 2X Long PLTR Daily ETF |
| BOEG |
Leverage
Shares 2X Long BA Daily ETF |
| PYPG |
Leverage
Shares 2X Long PYPL Daily ETF |
| BULG |
Leverage
Shares 2X Long BULL Daily ETF |
| RTXG |
Leverage
Shares 2X Long RTX Daily ETF |
| COIG |
Leverage
Shares 2X Long COIN Daily ETF |
| TSLG |
Leverage
Shares 2X Long TSLA Daily ETF |
| COTG |
Leverage
Shares 2X Long COST Daily ETF |
| TSMG |
Leverage
Shares 2X Long TSM Daily ETF |
| CRCG |
Leverage
Shares 2X Long CRCL Daily ETF |
| UNHG |
Leverage
Shares 2X Long UNH Daily ETF |
| CRMG |
Leverage
Shares 2X Long CRM Daily ETF |
| XYZG |
Leverage
Shares 2X Long XYZ Daily ETF |
| CRWG |
Leverage
Shares 2X Long CRWV Daily ETF |
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each
of the above is listed on The Nasdaq Stock Market LLC
The
U.S. Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
This
prospectus relates to the Funds listed above (each, a “Fund” and collectively,
the “Funds”). The Funds seek daily leveraged investment results and are intended
to be used as short-term trading vehicles.
The
Funds are not intended to be used by, and are not appropriate for, investors who
do not intend to actively monitor and manage their portfolios. The Funds are
very different from most mutual funds and exchange-traded funds. Investors
should note that:
(1)
The Funds pursue daily leveraged investment objectives, which means that the
Funds are riskier than alternatives that do not use leverage because the Funds
seek to magnify the performance of their respective underlying
security.
(2)
Seeking to replicate daily performance of an underlying security means that the
return of a Fund for a period longer than a full trading day will be the product
of a series of daily returns for each trading day during the relevant period. As
a consequence, especially in periods of market volatility, the volatility of the
underlying security may affect a Fund’s return as much as, or more than, the
return of the underlying
security.
Further, the return for investors that invest for periods less than a full
trading day is likely to be different from an underlying leveraged security’s
performance for the full trading day. During periods of high volatility, the
Funds may not perform as expected and the Funds may have losses when an investor
may have expected gains if the Funds are held for a period that is different
than one trading day.
The
Funds are not suitable for all investors. The Funds are designed to be utilized
only by sophisticated investors, such as traders and active investors employing
dynamic strategies. Investors in the Funds should:
(a)
understand the risks associated with the use of leveraged
strategies;
(b)
understand the consequences of seeking daily leveraged investment results;
and
(c)
intend to actively monitor and manage their investments.
Investors
who do not understand the Funds, or do not intend to actively manage their funds
and monitor their investments, should not buy the Funds.
There
is no assurance that any Fund will achieve its daily leveraged investment
objective and an investment in a Fund could lose money. No single Fund is a
complete investment program.
The
Funds’ investment adviser will not attempt to position each Fund’s portfolio to
ensure that a Fund does not gain or lose more than a maximum percentage of its
net asset value on a given trading day. As a consequence, if a Fund’s underlying
security moves more than 50%, as applicable, on a given trading day in a
direction adverse to the Fund, the Fund’s investors would lose all of their
money.
Table
of Contents
SUMMARY
SECTIONS
Leverage
Shares 2X Long AAL Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long AAL Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly traded common stock of American Airlines Group, Inc. (Nasdaq: AAL)
(“AAL” or “Underlying Security”). The return for investors that invest for
periods longer or shorter than a trading day should not be expected to be 200%
of the performance of the Underlying Security for the period. The return of the
Fund for a period longer than a trading day will be the result of each trading
day’s compounded return over the period, which will very likely differ from 200%
of the return of the Underlying Security for that period. Longer holding
periods, higher volatility of the Underlying Security and leverage increase the
impact of compounding on an investor’s returns. During periods of higher
Underlying Security volatility, the volatility of the Underlying Security may
affect the Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of AAL. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
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Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
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Other
Expenses |
| 0.01% |
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Acquired
Fund Fees and Expenses2 |
| 0.02% |
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Total
Annual Fund Operating Expenses3 |
| 0.78% |
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1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
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2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
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3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
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| 1
Year |
3
Years |
5
Years |
10
Years |
| $80 |
$249 |
$433 |
$966 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period July 10, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
transportation industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
American
Airlines Group Inc. is an American publicly-traded airline holding company.
Formed on December 9, 2013, by the merger of AMR Corporation, the parent
company of American Airlines, and US Airways Group, the parent company of US
Airways. The group operates the largest airline in the world, as measured by
number of passengers carried, by fleet size and by scheduled
passenger-kilometers flown. The common stock of American Airlines Group Inc. is
registered under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Information provided to or filed with the Securities and Exchange
Commission (“SEC”) by American Airlines Group, Inc. pursuant to the Exchange Act
can be located by reference to the SEC file number 1-8400 through the SEC’s
website at www.sec.gov. In addition, information regarding American Airlines
Group, Inc. may be obtained from other sources including, but not limited to,
press releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security’s volatility and
its return could affect the Fund’s performance. Fund performance for periods
greater than one single day can be estimated given any set of assumptions for
the following factors: a) Underlying Security volatility; b) Underlying Security
performance; c) period of time; d) financing rates associated with leveraged
exposure; e) other Fund expenses; and f) dividends or interest paid with respect
to the Underlying Security. The chart below provides examples of how volatility
and its return could affect the Underlying Security’s performance. The chart
shows estimated Fund returns for a number of combinations of volatility and
performance over a one-year period. Performance shown in the chart assumes that:
(i) no dividends were paid with respect to the Underlying Security; (ii) there
were no Fund expenses; and (iii) borrowing/lending rates (to obtain leveraged
exposure) of 0%. If Fund expenses and/or actual borrowing/lending rates were
reflected, the estimated returns would be different than those shown.
Particularly during periods of higher volatility, compounding will cause results
for periods longer than a trading day to vary from 200% of the performance of
the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will
impact
each shareholder differently depending on the period of time an investment in
the Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the
Underlying Security’s
annualized volatility is 100%, the Fund would be expected to lose 63.2% of its
value, even if the cumulative return for the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate for the
five-year period ended December 31, 2025 was 48.13%. The Underlying
Security’s highest volatility rate for any one calendar year during the
five-year period was 56.34% and volatility for a shorter period of time may have
been substantially higher. The Underlying Security’s annualized performance for
the five-year period ended December 31, 2025 was 0.26%. Historical
volatility and performance are not indications of what the Underlying Security’s
volatility and performance will be in the future. Volatility for a shorter
period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
American
Airlines Group, Inc. Investing Risk.
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
transportation industry, American Airlines faces risks that include, but are not
limited to: sensitivity to economic downturns and changes in consumer demand for
air travel; dependence on access to sufficient liquidity and capital markets;
high levels of indebtedness and related debt service obligations; pension and
other postretirement benefit funding requirements; intense competition and
pricing pressure from domestic and international carriers; volatility in
aircraft fuel prices and availability; extensive government regulation of
safety, security, labor, environmental matters, and international operations;
labor relations risks, including union negotiations, employee strikes, work
stoppages, and the availability of qualified pilots and other personnel;
reliance on third-party regional operators, vendors, and service providers;
operational risks arising from network and hub concentration, weather events,
and infrastructure constraints; aircraft safety incidents, accidents, or
perceived failures affecting operations or public confidence; dependence on a
limited number of aircraft and engine manufacturers and suppliers, including
delivery delays and parts availability; risks related to fleet renewal,
execution of operational and strategic initiatives, and residual aircraft
values; technology failures, cybersecurity incidents, and evolving data privacy
requirements; litigation and changes in tax laws or regulations; global
political instability, geopolitical conflicts, terrorist attacks, public health
events, and other external disruptions that may adversely affect travel
behavior; climate change and environmental regulations; and potential damage to
the company’s brand or reputation. Any of these risks could materially and
adversely affect the company’s business, financial condition, results of
operations, and prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure.
Conversely,
if the Underlying Security declines in value, the Fund’s net assets will decline
by the same amount as the Fund’s exposure. Therefore, an investor that purchases
shares intraday may experience performance that is greater than, or less than,
the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the transportation
industry.
Transportation
Industry Risk.
Companies in the transportation industry may be adversely affected by
changes in the economy, increases in fuel and operating costs, labor relations,
technology developments, exchange rates, insurance costs, industry competition
and government regulation. Global or regional events and conditions may
materially disrupt or indefinitely impair the operations, financial condition
and liquidity of companies in the transportation industry. Securities of
companies in the transportation industry are generally cyclical and occasionally
subject to sharp price movements.
Airline
Industry Risk.
Airline companies may be adversely affected by a downturn in economic conditions
that can result in decreased demand for air travel. Airline companies may also
be significantly affected by changes in fuel prices, which may be very volatile,
the imposition of tariffs, and/or changes in labor relations and insurance
costs. Airline companies may also be highly dependent on aircraft or related
equipment from a small number of suppliers, and consequently, issues affecting
the availability, reliability, safety, or longevity of such aircraft or
equipment (e.g., the inability of a supplier to meet aircraft demand or the
grounding of an aircraft due to safety concerns) may have a significant effect
on the operations and profitability of Airline
companies.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or
potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
the Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of American Airlines Group, Inc. and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders
and
no other APs step forward to perform these services, or (ii) market makers
and/or liquidity providers exit the business or significantly reduce their
business activities and no other entities step forward to perform their
functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice
President,
Portfolio Management of the Adviser, are jointly and primarily responsible for
the day-to-day management of the Fund and each has served as portfolio manager
since the Fund’s inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long ADBE Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long ADBE Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Adobe, Inc. (Nasdaq: ADBE) (“ADBE” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of ADBE. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.01% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.77% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
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| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $79 |
$246 |
$428 |
$954 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period March 20, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the software
and services industry
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Adobe,
Inc. is a global software company that provides cloud-based solutions for
creative professionals, document management, and customer experiences. Its
products include Adobe Photoshop, Illustrator, Acrobat, Premiere Proo, After
Effects and a wide suite of creative, document and marketing tools. Adobe’s
software enables content creation, editing, publishing, and customer engagement
across digital media, video, photography, web, print, and interactive
applications. The common stock of Adobe, Inc. is registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to
or filed with the Securities and Exchange Commission (“SEC”) by Adobe, Inc.
pursuant to the Exchange Act can be located by reference to the SEC file number
000-15175 through the SEC’s website at www.sec.gov. In addition, information
regarding Adobe, Inc. may be obtained from other sources including, but not
limited to, press releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related the Underlying
Security. The Fund has derived all disclosures contained in this document
regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the underlying security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will
impact
each shareholder differently depending on the period of time an investment in
the Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate for the
five-year period ended December 31, 2025 was 35.18%. The Underlying
Security’s highest volatility rate for any one calendar year during the
five-year period was 45.06% and volatility for a shorter period of time may have
been substantially higher. The Underlying Security’s annualized performance for
the five-year period ended December 31, 2025 was -6.33%. Historical
volatility and performance are not indications of what the Underlying Security
volatility and performance will be in the future. Volatility for a shorter
period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Adobe,
Inc. Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with companies in the software
and services industry, Adobe, Inc. faces risks that include, but are not limited
to: reliance on a limited number of customer accounts for a substantial portion
of its revenue; the development deployment and adoption of new technologies and
products, including AI-enabled solutions; reliance on third-party products,
platforms, and services; ability to hire, retain, train and motivate qualified
personnel and senior management; operational execution, including scaling,
services and support; intense competition across creative, document, and
experience software markets; cybersecurity threats, data breaches, and privacy
compliance; and protection and enforcement of intellectual property rights. Any
of these risks could materially and adversely affect the company’s business,
financial condition, results of operations, and
prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and
international
political, changes in the actual or implied volatility or the reference asset,
the time remaining until the expiration of the option contract and economic
events. The value of the options contracts in which the Fund invests are
substantially influenced by the value of the Underlying Security. The Fund may
experience substantial downside from specific option positions and certain
option positions held by the Fund may expire worthless. The options held by the
Fund are exercisable at the strike price on their expiration date. As an option
approaches its expiration date, its value typically increasingly moves with the
value of the underlying instrument. However, prior to such date, the value of an
option generally does not increase or decrease at the same rate as the
underlying instrument. There may at times be an imperfect correlation between
the movement in values options contracts and the underlying instrument, and
there may at times not be a liquid secondary market for certain options
contracts. The value of the options held by the Fund will be determined based on
market quotations or other recognized pricing methods. Additionally, as the Fund
intends to continuously maintain indirect exposure to the Underlying Security
through the use of options contracts, as the options contracts it holds are
exercised or expire it will enter into new options contracts, a practice
referred to as “rolling.” If the expiring options contracts do not generate
proceeds enough to cover the cost of entering into new options contracts, the
Fund may experience losses. The use of options to generate leverage introduces
additional risks, including significant potential losses if the market moves
unfavorably. The leverage inherent in options can amplify both gains and losses,
leading to increased volatility and potential for substantial losses,
particularly in periods of market uncertainty or low liquidity. Additionally,
the Fund may incur losses if the value of ADBE moves against its positions,
potentially resulting in a complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Artificial
Intelligence (“AI”) Risk.
The Underlying Security’s products are increasingly incorporating AI-powered
features. Companies engaged in AI and big data typically face intense
competition and potentially rapid product obsolescence. These companies are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. There can be no assurance these companies
will be able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. AI and big data companies typically engage in significant amounts of
spending on research and development, as well as mergers and acquisitions, and
there is no guarantee that the products or services produced by these companies
will be successful. AI and big data companies are potential targets for
cyberattacks, which can have a materially adverse impact on the performance of
these companies. In addition, AI technology could face increasing regulatory
scrutiny in the future, which may limit the development of this technology and
impede the growth of companies that develop and/or utilize this technology.
Similarly, the collection of data from consumers and other sources could face
increased scrutiny as regulators consider how the data is collected, stored,
safeguarded and used. AI and big data companies may face regulatory fines and
penalties, including potential forced break-ups, that could hinder the ability
of the companies to operate on an ongoing basis. The customers and/or suppliers
of AI and big data companies may be concentrated in a particular country, region
or industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on AI and big data companies. Country,
government, and/or region-specific regulations or restrictions could have an
impact on AI and big data companies.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the software and services
industry
Software
and Services Industry Risk. Computer
software companies can be significantly affected by competitive pressures,
aggressive pricing, technological developments, changing domestic demand, the
ability to attract and retain skilled employees and availability and price of
components. The market for products produced by software companies is
characterized by rapidly changing technology, rapid product obsolescence,
cyclical market patterns, evolving industry standards and frequent new product
introductions. The success of computer software companies depends in substantial
part on the timely and successful introduction of new products and the ability
to service such products. An unexpected change in one or more
of
the technologies affecting an issuer’s products or in the market for products
based on a particular technology could have a material adverse effect on a
participant’s operating
results.
Many computer software companies rely on
a combination of patents, copyrights, trademarks and trade secret laws to
establish and protect their proprietary rights in their products and
technologies. There can be no assurance that the steps taken by computer
software companies to protect their proprietary rights will be adequate to
prevent misappropriation of their technology or that competitors will not
independently develop technologies that are substantially equivalent or superior
to such companies’
technology.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of the Underlying Security and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long AMD Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long AMD Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Advanced Micro Devices, Inc. (Nasdaq: AMD)
(“AMD” or “Underlying Security”). The return for investors that invest for
periods longer or shorter than a trading day should not be expected to be 200%
of the performance of the Underlying Security for the period. The return of the
Fund for a period longer than a trading day will be the result of each trading
day’s compounded return over the period, which will very likely differ from 200%
of the return of the Underlying Security for that period. Longer holding
periods, higher volatility of the Underlying Security and leverage increase the
impact of compounding on an investor’s returns. During periods of higher
Underlying Security volatility, the volatility of the Underlying Security may
affect the Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of AMD. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.01% |
|
Acquired
Fund Fees and Expenses2 |
| 0.02% |
|
Total
Annual Fund Operating Expenses3 |
| 0.78% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $80 |
$249 |
$433 |
$966 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period January 23, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics, that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure in the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
semiconductors and semiconductor equipment
industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, the Adviser rebalances
the Fund’s portfolio so that its exposure to the Underlying Security is
consistent with the Fund’s investment objective. The impact of the Underlying
Security’s price movements during the day will affect whether the Fund’s
portfolio needs to be rebalanced. For example, if the price of the Underlying
Security has risen on a given day, net assets of the Fund should rise, meaning
that the Fund’s exposure will need to be increased. Conversely, if the price of
the Underlying Security has fallen on a given day, net assets of the Fund should
fall, meaning the Fund’s exposure will need to be reduced. This daily
rebalancing typically results in high portfolio turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Advanced
Micro Devices, Inc. is a global semiconductor company that designs
high-performance and adaptive computing technologies. The company’s products and
solutions support a broad range of markets, including data centers, artificial
intelligence (AI), PCs, gaming and embedded systems. The common stock of
Advanced Micro Devices, Inc. is registered under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Information provided to or filed with the
Securities and Exchange Commission (“SEC”) by Advanced Micro Devices, Inc.
pursuant to the Exchange Act can be located by reference to the SEC file number
001-07882 through the SEC’s website at www.sec.gov. In addition, information
regarding Advanced Micro Devices, Inc. may be obtained from other sources
including, but not limited to, press releases, newspaper articles and other
publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the
Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate for the
five-year period ended December 31, 2025 was 52.38%. The Underlying
Security’s highest volatility rate for any one calendar year during the
five-year period was 61.11% and volatility for a shorter period of time may have
been substantially higher. The Underlying Security’s annualized performance for
the five-year period ended December 31, 2025 was 18.33%. Historical
volatility and performance are not indications of what the Underlying Security
volatility and performance will be in the future. Volatility for a shorter
period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s
shares
could widen. Under such circumstances, the Fund may increase its transaction
fee, change its investment objective by, for example, seeking to track an
alternative security, reduce its leverage or
close.
Advanced
Micro Devices, Inc. Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with companies in the
semiconductors and semiconductor equipment industry Advanced Micro Devices, Inc.
faces risks that include, but are not limited to: intense competition within the
semiconductor industry from large, well-capitalized competitors; economic and
market uncertainty that could reduce demand for its products; potential
concentration of revenue among a limited number of significant customers; risks
related to the protection of intellectual property; fluctuations in foreign
exchange rates; reliance on third-party manufacturers and suppliers, including
potential shortages of manufacturing equipment or materials; cybersecurity
incidents, data breaches, and system failures or outages; potential
incompatibility of its products with industry-standard software or hardware;
increases in operating or input costs; changes in government regulation and the
costs of regulatory compliance; and indebtedness. Any of these risks could
materially and adversely affect the Underlying Security’s business, financial
condition, results of operations, and prospects. Any of these risks could
materially and adversely affect the company’s business, financial condition,
results of operations, and prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining
until
the expiration of the option contract and economic events. The value of the
options contracts in which the Fund invests are substantially influenced by the
value of the Underlying Security. The Fund may experience substantial downside
from specific option positions and certain option positions held by the Fund may
expire worthless. The options held by the Fund are exercisable at the strike
price on their expiration date. As an option approaches its expiration date, its
value typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Artificial
Intelligence (“AI”) Risk.
Companies
engaged in AI and big data typically face intense competition and potentially
rapid product obsolescence. These companies are also heavily dependent on
intellectual property rights and may be adversely affected by loss or impairment
of those rights. There can be no assurance these companies will be able to
successfully protect their intellectual property to prevent the misappropriation
of their technology, or that competitors will not develop technology that is
substantially similar or superior to such companies’ technology. AI and big data
companies typically engage in significant amounts of spending on research and
development, as well as mergers and acquisitions, and there is no guarantee that
the products or services produced by these companies will be successful. AI and
big data companies are potential targets for cyberattacks, which can have a
materially adverse impact on the performance of these companies. In addition, AI
technology could face increasing regulatory scrutiny in the future, which may
limit the development of this technology and impede the growth of companies that
develop and/or utilize this technology. Similarly, the collection of data from
consumers and other sources could face increased scrutiny as regulators consider
how the data is collected, stored, safeguarded and used. AI and big data
companies may face regulatory fines and penalties, including potential forced
break-ups, that could hinder the ability of the companies to operate on an
ongoing basis. The customers and/or suppliers of AI and big data companies may
be concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on AI and big data companies. Country, government, and/or region-specific
regulations or restrictions could have an impact on AI and big data
companies.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a part of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with its investment
objective which may lead to greater losses or reduced gains. In these instances,
the Fund may have
investment
exposure to the Underlying Security that is significantly greater or
significantly less than its stated investment objective. Additionally, the Fund
may close to purchases and sales of Shares prior to the close of trading on the
Nasdaq or other national securities listing exchanges where Shares are listed
and incur significant losses.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
loses value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security rises, the Fund’s net assets
will decline by the same amount as the Fund’s exposure. Therefore, an investor
that purchases shares intraday may experience performance that is greater than,
or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The Fund may have difficulty achieving its daily leveraged investment
objective for many reasons, including fees, expenses, transaction costs,
financing costs related to the use of derivatives, accounting standards and
their application to income items, disruptions, illiquid or high volatility in
the markets for the securities or financial instruments in which the Fund
invests, early and unanticipated closings of the markets on which the holdings
of the Fund trade, resulting in the inability of the Fund to execute intended
portfolio transactions, regulatory and tax considerations, which may cause the
Fund to hold (or not to hold) the Underlying Security. The Fund may take or
refrain from taking positions in order to improve tax efficiency, comply with
regulatory restrictions, or for other reasons, each of which may negatively
affect the Fund’s desired correlation with the Underlying Security. The Fund may
be subject to large movements of assets into and out of the Fund, potentially
resulting in the Fund being over- or under-exposed to the Underlying Security.
Additionally, the Fund’s underlying investments and/or reference assets may
trade on markets that may not be open on the same day as the Fund, which may
cause a difference between the changes in the daily performance of the Fund and
changes in the performance of the Underlying Security. Any of these factors
could decrease the correlation between the performance of the Fund and the
Underlying Security and may hinder the Fund’s ability to meet its daily
leveraged investment objective on or around that
day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide short
exposure to the industry to which the Underlying Security is assigned). A
portfolio concentrated in a particular industry may present more risks than a
portfolio broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the semiconductors and
semiconductor equipment industry.
Semiconductors
and Semiconductor Equipment Industry Risk.
Competitive pressures may have a significant effect on the financial condition
of semiconductor companies and, as product cycles shorten and manufacturing
capacity increases, these companies may become increasingly subject to
aggressive pricing, which hampers profitability. Reduced demand for end-user
products, under-utilization of manufacturing capacity, and other factors could
adversely impact the operating results of semiconductor companies. Semiconductor
companies typically face high capital costs and may be heavily dependent on
intellectual property rights. The semiconductor industry is highly cyclical,
which may cause the operating results of
many
semiconductor companies to vary significantly. The stock prices of semiconductor
companies have been and likely will continue to be extremely
volatile.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of the Underlying Security Devices and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as the Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue
trading halts on specific securities or financial instruments. The ability to
trade certain securities or financial instruments may be restricted, which
may result in a fund being unable to buy or sell certain securities or
financial instruments. In these circumstances, a fund may be unable
to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount
of income available for distribution. In addition, in order to
requalify for taxation as a RIC, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long ARM Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long ARM Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Arm Holdings plc (Nasdaq: ARM) (“ARM” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of ARM. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.01% |
|
Acquired
Fund Fees and Expenses2 |
| 0.02% |
|
Total
Annual Fund Operating Expenses3 |
| 0.78% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $80 |
$249 |
$433 |
$966 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period January 13, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure in the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
semiconductors and semiconductor equipment
industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, the Adviser rebalances
the Fund’s portfolio so that its exposure to the Underlying Security is
consistent with the Fund’s investment objective. The impact of the Underlying
Security’s price movements during the day will affect whether the Fund’s
portfolio needs to be rebalanced. For example, if the price of the Underlying
Security has risen on a given day, net assets of the Fund should rise, meaning
that the Fund’s exposure will need to be increased. Conversely, if the price of
the Underlying Security has fallen on a given day, net assets of the Fund should
fall, meaning the Fund’s exposure will need to be reduced. This daily
rebalancing typically results in high portfolio turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Arm
Holdings plc is a British semiconductor intellectual property company that
designs and licenses high-performance, energy efficient computing technologies
that are used across a wide range of devices worldwide, including smartphones,
personal computers, data center servers, automotive systems, and
Internet-of-Things devices. Arm Holdings plc’s portfolio includes central
processing unit (CPU), graphics processing unit (GPU), and neural processing
unit (NPU) intellectual property, including the Cortex-A, Cortex-M, Cortex-R,
Neoverse, Ethos, and SecurCore product families, as well as related software
tools and physical IP designed to address varying performance, power efficiency,
and cost requirements across multiple end markets. Arm Holdings plc is
registered as a foreign private issuer under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Information provided to or filed with the
Securities and Exchange Commission (“SEC”) by Arm Holdings plc pursuant to the
Exchange Act can be located by reference to the SEC file number 001-41800
through
the SEC’s website at www.sec.gov. In addition, information regarding Arm
Holdings may be obtained from other sources including, but not limited to, press
releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities of the Underlying
Security. The Fund has derived all disclosures contained in this document
regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the underlying security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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|
|
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|
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|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate since
inception of trading on September 13, 2023 through the period ended
December 31, 2025 (the “Period”) was 75.28%. The Underlying Security’s
highest volatility rate for any one calendar year during the Period was 88.28%
and volatility for a shorter period of time may have been substantially higher.
The Underlying Security’s annualized performance for the Period was 28.93%.
Historical volatility and performance are not indications of what the Underlying
Security volatility and performance will be in the future. Volatility for a
shorter period of time may have been substantially higher.
For information regarding the effects of volatility and performance
on the long-term performance of the Fund, see “Additional Information About
Investment Techniques and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Arm
Holdings, plc. Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with companies in the
semiconductors and semiconductor equipment industry, ARM Holdings faces risks
that include, but are not limited to: intense competition from large,
well-capitalized semiconductor and technology companies; economic, market, and
industry conditions that may adversely affect demand for its customers’ products
and, in turn, demand for ARM-based technologies is subject to customer adoption,
shifts in AI and supercomputing trends, and regulatory constraints, including
export controls; concentration of revenue among a limited number of significant
licensees and customers; risks related to its licensing- and royalty-based
business model, including the timing and predictability of revenue; risks
related to the protection and enforcement of intellectual property; fluctuations
in foreign currency exchange rates; reliance on third-party manufacturing
partners and ecosystem participants; supply chain disruptions affecting
customers and partners; compatibility of ARM-based solutions with
industry-standard software and hardware; increases in operating costs; and
changes in government regulation and the cost of compliance. Any of these risks
could materially and adversely affect ARM’s business, financial condition,
results of operations, and prospects. Any of these risks could materially and
adversely affect the company’s business, financial condition, results of
operations, and prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a part of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with its investment
objective which may lead to greater losses or reduced gains. In these instances,
the Fund may have investment exposure to the Underlying Security that is
significantly greater or significantly less than its stated investment
objective. Additionally, the Fund may close to purchases and sales of Shares
prior to the close of trading on the Nasdaq or other national securities listing
exchanges where Shares are listed and incur significant
losses.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
loses value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security rises, the Fund’s net assets
will decline by the same amount as the
Fund’s
exposure. Therefore, an investor that purchases shares intraday may experience
performance that is greater than, or less than, the Fund’s stated investment
objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security
(i.e.,
hold more than 25% of its total assets in investments that provide short
exposure to the industry to which the Underlying Security is assigned). A
portfolio concentrated in a particular industry may present more risks than a
portfolio broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the semiconductors and
semiconductor equipment industry.
Semiconductors
and Semiconductor Equipment Industry Risk.
Competitive pressures may have a significant effect on the financial condition
of semiconductor companies and, as product cycles shorten and manufacturing
capacity increases, these companies may become increasingly subject to
aggressive pricing, which hampers profitability. Reduced demand for end-user
products, under-utilization of manufacturing capacity, and other factors could
adversely impact the operating results of semiconductor companies. Semiconductor
companies typically face high capital costs and may be heavily dependent on
intellectual property rights. The semiconductor industry is highly cyclical,
which may cause the operating results of many semiconductor companies to vary
significantly. The stock prices of semiconductor companies have been and likely
will continue to be extremely
volatile.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Arm Holdings plc. and make no representation
as to the performance of the Underlying Security. Investing in the Fund is not
equivalent to investing in the Underlying Security. Fund shareholders will not
have voting rights or rights to receive dividends or other distributions or any
other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the
Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as the Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk
The risk that an exchange or market may close early, close late or issue
trading halts on specific securities or financial instruments. The ability to
trade certain securities or financial instruments may be restricted, which
may result in a fund being unable to buy or sell certain securities or
financial instruments. In these circumstances, a fund may be unable
to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The Fund’s pursuit of its investment strategy will potentially be
limited by the Fund’s intention to qualify for such treatment and could
adversely affect the Fund’s ability to so qualify. The Fund may make certain
investments, including gaining exposure to the underlying reference asset
through the use of swaps, the treatment of which for these purposes is unclear.
If, in any year, the Fund were to fail to qualify for the special tax treatment
accorded a RIC and its shareholders and were ineligible to or were not able to
cure such failure, the Fund would be taxed in the same manner as an ordinary
corporation subject to U.S. federal income tax on all its income at the fund
level. The resulting taxes could substantially reduce the Fund’s net assets and
the amount of income available for distribution. In addition, in order to
requalify for taxation as a RIC, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single
counterparty
and make the Fund more susceptible to risks associated with a single economic,
political or regulatory occurrence than a diversified
fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance information for the Fund is not
included because the Fund did not have a full calendar year of performance prior
to the date of this Prospectus. In the future, performance for
the Fund will be presented in this section. Updated performance information will
be available on the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long ASML Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long ASML Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
American Depositary Receipt (“ADR”) of ASML Holding N.V. (Nasdaq: ASML) (“ASML”
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the ADR of ASML. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.01% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.77% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $79 |
$246 |
$428 |
$954 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period January 13, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure in the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
semiconductors and semiconductor equipment
industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease in the value of the Underlying
Security. At the close of the markets each trading day, the Adviser rebalances
the Fund’s portfolio so that its exposure to the Underlying Security is
consistent with the Fund’s investment objective. The impact of the Underlying
Security’s price movements during the day will affect whether the Fund’s
portfolio needs to be rebalanced. For example, if the price of the Underlying
Security has risen on a given day, net assets of the Fund should rise, meaning
that the Fund’s exposure will need to be increased. Conversely, if the price of
the Underlying Security has fallen on a given day, net assets of the Fund should
fall, meaning the Fund’s exposure will need to be reduced. This daily
rebalancing typically results in high portfolio turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
ASML
Holding is a Netherlands-based semiconductor company that provides lithography
systems, software, and software and services to semiconductor manufacturers for
the mass production of integrated circuits. ASML Holding is registered as a
foreign private issuer under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). Information provided to or filed with the Securities and
Exchange Commission (“SEC”) by ASML Holding pursuant to the Exchange Act can be
located by reference to the SEC file number 001-33463 through the SEC’s website
at www.sec.gov. In addition, information regarding ASML Holding may be obtained
from other sources including, but not limited to, press releases, newspaper
articles and other publicly disseminated documents.
The
Fund will enter into swap agreements and options contracts based on the
Underlying Security, which is an ADR. ADRs provide U.S. investors access to
foreign stocks on domestic exchanges but can exhibit pricing differences
compared to the underlying foreign stocks. These differences stem from factors
such as currency fluctuations, market dynamics, liquidity variances, and tax
implications. Additionally, corporate actions and ADR fees and expenses can
contribute to disparities in pricing between ADRs and the foreign stocks they
represent.
This
document relates only to the securities offered hereby and does not relate to
the ADRs of the Underlying Security or other securities of related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than
those
shown. Particularly during periods of higher volatility, compounding will cause
results for periods longer than a trading day to vary from 200% of the
performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security annualized historical volatility rate for the five-year
period ended December 31, 2025 was 41.64%. The Underlying Security’s
highest volatility rate for any one calendar year during the five-year period
was 51.58% and volatility for a shorter period of time may have been
substantially higher. The Underlying Security’s annualized performance for the
five-year period ended December 31, 2025 was 16.43%. Historical volatility
and performance are not indications of what the Underlying Security volatility
and performance will be in the future.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if
the
Underlying Security does not lose all of its value. Leverage will also have the
effect of magnifying any differences in the Fund’s correlation with the
Underlying Security and may increase the volatility of the
Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
ASML
Holding Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
Prospectus, in addition to the risks associated with companies in the
semiconductors and semiconductor equipment industry, ASML Holding faces risks
that include, but are not limited to: its ability to successfully develop,
manufacture, and deliver highly complex lithography systems that meet the
evolving technology requirements of semiconductor manufacturers; dependence on a
limited number of customers for a substantial portion of its revenue; long sales
cycles and variability in the timing of revenue recognition; supply chain
constraints and reliance on sole- or limited-source suppliers and third-party
partners for critical components and subsystems; manufacturing, assembly,
integration, and installation delays; potential product quality or performance
issues; the ability to protect intellectual property; fluctuations in operating
results; increased scrutiny regarding environmental, social, and governance
matters; and the ability to attract, retain, and motivate highly skilled
employees. Any of these risks could materially and adversely affect ASML’s
business, financial condition, results of operations, and prospects. Any of
these risks could materially and adversely affect the company’s business,
financial condition, results of operations, and
prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an
extended
period, the Fund may determine that it is necessary to make adjustments to the
Fund’s investment strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Artificial
Intelligence (“AI”) Risk.
The
Underlying Security is subject to AI risk in its product development,
operations, and customer adoption. Companies engaged in AI and big data
typically face intense competition and potentially rapid product obsolescence.
These companies are also heavily dependent on intellectual property rights and
may be adversely affected by loss or impairment of those rights. There can be no
assurance these companies will be able to successfully protect their
intellectual property to prevent the misappropriation of their technology, or
that competitors will not develop technology that is substantially similar or
superior to such companies’ technology. AI and big data companies typically
engage in significant amounts of spending on research and development, as well
as mergers and acquisitions, and there is no guarantee that the products or
services produced by these companies will be successful. AI and big data
companies are potential targets for cyberattacks, which can have a materially
adverse impact on the performance of these companies. In addition, AI technology
could face increasing regulatory scrutiny in the future, which may limit the
development of this technology and impede the growth of companies that develop
and/or utilize this technology. Similarly, the collection of data from consumers
and other sources could face increased scrutiny as regulators consider how the
data is collected, stored, safeguarded and used. AI and big data companies may
face regulatory fines and
penalties,
including potential forced break-ups, that could hinder the ability of the
companies to operate on an ongoing basis. The customers and/or suppliers of AI
and big data companies may be concentrated in a particular country, region or
industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on AI and big data companies. Country,
government, and/or region-specific regulations or restrictions could have an
impact on AI and big data companies.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a part of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with its investment
objective which may lead to greater losses or reduced gains. In these instances,
the Fund may have investment exposure to the Underlying Security that is
significantly greater or significantly less than its stated investment
objective. Additionally, the Fund may close to purchases and sales of Shares
prior to the close of trading on the Nasdaq or other national securities listing
exchanges where Shares are listed and incur significant
losses.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
loses value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security rises, the Fund’s net assets
will decline by the same amount as the Fund’s exposure. Therefore, an investor
that purchases shares intraday may experience performance that is greater than,
or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide short
exposure to the industry to which the Underlying Security Holding is assigned).
A portfolio concentrated in a particular industry may present more risks than a
portfolio broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the semiconductors and
semiconductor equipment industry.
Semiconductors
and Semiconductor Equipment Industry Risk.
Competitive pressures may have a significant effect on the financial condition
of semiconductor companies and, as product cycles shorten and manufacturing
capacity increases, these companies may become increasingly subject to
aggressive pricing, which hampers profitability. Reduced demand for end-user
products, under-utilization of manufacturing capacity, and other factors could
adversely impact the operating results of semiconductor companies. Semiconductor
companies typically face high capital costs and may be heavily dependent on
intellectual property rights. The semiconductor industry is highly cyclical,
which may cause the operating results of many semiconductor companies to vary
significantly. The stock prices of semiconductor companies have been and likely
will continue to be extremely
volatile.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of ASML Holding and make no representation as to
the performance of the Underlying Security. Investing in the Fund is not
equivalent to investing in the Underlying Security. Fund shareholders will not
have voting rights or rights to receive dividends or other distributions or any
other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The
Fund may use a variety of money market instruments for cash management purposes,
including money market funds, depositary accounts and repurchase agreements.
Money market funds may be subject to credit risk with respect to the debt
instruments in which they invest. Depository accounts may be subject to credit
risk with respect to the financial institution in which the depository account
is held. Repurchase agreements may be subject to market and credit risk related
to the collateral securing the repurchase agreement. Money market instruments
may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as the Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue
trading halts on specific securities or financial instruments. The ability to
trade certain securities or financial instruments may be restricted, which
may result in a fund being unable to buy or sell certain securities or
financial instruments. In these circumstances, a fund may be unable
to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The Fund’s pursuit of its investment strategy will potentially be
limited by the Fund’s intention to qualify for such treatment and could
adversely affect the Fund’s ability to so qualify. The Fund may make certain
investments, including gaining exposure to the underlying reference asset
through the use of swaps, the treatment of which for these purposes is unclear.
If, in any year, the Fund were to fail to qualify for the special tax treatment
accorded a RIC and its shareholders and were ineligible to or were not able to
cure such failure, the Fund would be taxed in the same manner as an ordinary
corporation subject to U.S. federal income tax on all its income at the fund
level. The resulting taxes could substantially reduce the Fund’s net assets and
the amount of income available for distribution. In addition, in order to
requalify for taxation as a RIC, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long AVGO Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long AVGO Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Broadcom, Inc. (Nasdaq: AVGO) (“AVGO” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of AVGO. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.76% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $78 |
$243 |
$422 |
$942 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period May 15, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
semiconductors and semiconductor equipment
industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Broadcom,
Inc. is a global technology company that designs, develops, and supplies a broad
range of semiconductor and infrastructure software solutions. Broadcom’s
products serve a variety of end markets, including data center, networking,
broadband, wireless, storage, industrial, and enterprise software.. The common
stock of Broadcom, Inc. is registered under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Information provided to or filed with the
Securities and Exchange Commission (“SEC”) by Broadcom, Inc. pursuant to the
Exchange Act can be located by reference to the SEC file number 001-38449
through the SEC’s website at www.sec.gov. In addition, information regarding
Broadcom, Inc. may be obtained from other sources including, but not limited to,
press releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the underlying security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the
Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate for the
five-year period ended December 31, 2025 was 42.32%. The Underlying
Security’s highest volatility rate for any one calendar year during the
five-year period was 53.87% and volatility for a shorter period of time may have
been substantially higher. The Underlying Security’s annualized performance for
the five-year period ended December 31, 2025 was 52.10%. Historical
volatility and performance are not indications of what the Underlying Security
volatility and performance will be in the future. Volatility for a shorter
period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s
shares
could widen. Under such circumstances, the Fund may increase its transaction
fee, change its investment objective by, for example, seeking to track an
alternative security, reduce its leverage or
close.
Broadcom,
Inc. Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with companies in the
semiconductors and semiconductor equipment industry, Broadcom, Inc. faces risks
that include, but are not limited to: intense competition from large,
well-capitalized competitors; its ability to remain competitive depends in part
on the performance of its products in AI workloads and other emerging
technologies; cyclicality and volatility in demand for semiconductor and
infrastructure software products; significant customer concentration and
reliance on a limited number of key customers for a substantial portion of
revenue; risks related to its fabless manufacturing model and dependence on
third-party foundries, suppliers, and subcontractors; supply chain disruptions
and component shortages; risks associated with the integration of acquired
businesses and realization of anticipated synergies; and substantial
indebtedness and related debt-servicing obligation. Any of these risks could
materially and adversely affect the company’s business, financial condition,
results of operations, and prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which
the
Fund invests are substantially influenced by the value of the Underlying
Security. The Fund may experience substantial downside from specific option
positions and certain option positions held by the Fund may expire worthless.
The options held by the Fund are exercisable at the strike price on their
expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the
Underlying
Security is impacted by the Underlying Security’s movement. Because of this, it
is unlikely that the Fund will be perfectly exposed to the Underlying Security
at the end of each day. The possibility of the Fund being materially over- or
under-exposed to the Underlying Security increases on days when the Underlying
Security is volatile near the close of the trading day. Market disruptions,
regulatory restrictions and high volatility will also adversely affect the
Fund’s ability to adjust exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries or industries. As of the
date of this prospectus, the Underlying Security is assigned to the
semiconductors and semiconductor equipment.
Semiconductors
and
Semiconductor Equipment Industry Risk.
Competitive pressures may have a significant effect on the financial condition
of semiconductor companies and, as product cycles shorten and manufacturing
capacity increases, these companies may become increasingly subject to
aggressive pricing, which hampers profitability. Reduced demand for end-user
products, under-utilization of manufacturing capacity, and other factors could
adversely impact the operating results of semiconductor companies. Semiconductor
companies typically face high capital costs and may be heavily dependent on
intellectual property rights. The semiconductor industry is highly cyclical,
which may cause the operating results of many semiconductor companies to vary
significantly. The stock prices of semiconductor companies have been and likely
will continue to be extremely
volatile.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Broadcom, Inc. and make no representation as
to the performance of AVGO. Investing in the Fund is not equivalent to investing
in the Underlying Security. Fund shareholders will not have voting rights or
rights to receive dividends or other distributions or any other rights with
respect to the Underlying Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of
market
volatility, periods of steep market declines, and periods when there is limited
trading activity for shares in the secondary market, in which case such premiums
or discounts may be significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long BA Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long BA Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Boeing Co. (NYSE: BA) (“BA” or “Underlying
Security”). The return for investors that invest for periods longer or shorter
than a trading day should not be expected to be 200% of the performance of the
Underlying Security for the period. The return of the Fund for a period longer
than a trading day will be the result of each trading day’s compounded return
over the period, which will very likely differ from 200% of the return of the
Underlying Security for that period. Longer holding periods, higher volatility
of the Underlying Security and leverage increase the impact of compounding on an
investor’s returns. During periods of higher Underlying Security volatility, the
volatility of the Underlying Security may affect the Fund’s return as much as,
or more than, the return of the Underlying Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of BA. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.02% |
|
Total
Annual Fund Operating Expenses3 |
| 0.77% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $79 |
$246 |
$428 |
$954 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period June 12, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure in the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the capital
goods industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, the Adviser rebalances
the Fund’s portfolio so that its exposure to the Underlying Security is
consistent with the Fund’s investment objective. The impact of the Underlying
Security’s price movements during the day will affect whether the Fund’s
portfolio needs to be rebalanced. For example, if the price of the Underlying
Security has risen on a given day, net assets of the Fund should rise, meaning
that the Fund’s exposure will need to be increased. Conversely, if the price of
the Underlying Security has fallen on a given day, net assets of the Fund should
fall, meaning the Fund’s exposure will need to be reduced. This daily
rebalancing typically results in high portfolio turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Boeing
Co. is an aerospace firm and operates in several segments: Commercial airplanes,
which develops, produces and markets commercial jet aircraft principally to the
commercial airline industry; Defense, Space and Security, which engages in the
research, development, production and modification of manned and unmanned
military aircraft, weapons systems, and space systems; and Global Services,
which provides sustainment, maintenance, and a range of services to support
aerospace platforms and systems. The common stock of Boeing Co. is registered
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Information provided to or filed with the Securities and Exchange Commission
(“SEC”) by Boeing Co. pursuant to the Exchange Act can be located by reference
to the SEC file number 1-442 through the SEC’s website at www.sec.gov. In
addition, information regarding Boeing Co. may be obtained from other sources
including, but not limited to, press releases, newspaper articles and other
publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will
impact
each shareholder differently depending on the period of time an investment in
the Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate for the
five-year period ended December 31, 2025 was 36.88%. The Underlying
Security’s highest volatility rate for any one calendar year during the
five-year period was 46.78% and volatility for a shorter period of time may have
been substantially higher. The Underlying Security’s annualized performance for
the five-year period ended December 31, 2025 was 1.38%. Historical
volatility and performance are not indications of what the Underlying Security
volatility and performance will be in the future. Volatility for a shorter
period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The
Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such
periods,
the Fund’s ability to issue additional Creation Units may be adversely affected.
As a result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Boeing
Co. Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with companies in the capital goods industry, Boeing Co.
faces risks that include, but are not limited to: changing market conditions
that can significantly affect demand for commercial aircraft and related
services; cost overruns and execution challenges on development and production
programs; customer concentration among a limited number of commercial airlines
and government customers; stringent and evolving regulatory oversight, including
ongoing regulatory and compliance matters; the ability to attract and retain a
highly skilled workforce; production quality issues and operational challenges
that may result in delivery delays; supply chain instability and reliance on the
performance and financial condition of subcontractors; changes in U.S. defense
spending levels and delays in government appropriations; intense competition;
and cybersecurity threats. In addition, Boeing Co. derives a substantial portion
of its revenue from customers outside the United States and is therefore subject
to risks associated with international operations, including changes in global
trade policies, fluctuations in foreign currency exchange rates, taxation, and
geopolitical events such as terrorism, armed conflict, and public health crises.
Any of these risks could materially and adversely affect the company’s business,
financial condition, results of operations, and
prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The Fund will be subject to regulatory constraints relating to the
level of value at risk that the Fund may incur through its derivatives
portfolio. To the extent the Fund exceeds these regulatory thresholds over an
extended period, the Fund may determine that it is necessary to make adjustments
to the Fund’s investment strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are
influenced
by, among other things, actual and anticipated changes in the value of the
underlying instrument, including the anticipated volatility, which are affected
by fiscal and monetary policies and by national and international political,
changes in the actual or implied volatility or the reference asset, the time
remaining until the expiration of the option contract and economic events. The
value of the options contracts in which the Fund invests are substantially
influenced by the value of the Underlying Security. The Fund may experience
substantial downside from specific option positions and certain option positions
held by the Fund may expire worthless. The options held by the Fund are
exercisable at the strike price on their expiration date. As an option
approaches its expiration date, its value typically increasingly moves with the
value of the underlying instrument. However, prior to such date, the value of an
option generally does not increase or decrease at the same rate as the
underlying instrument. There may at times be an imperfect correlation between
the movement in values options contracts and the underlying instrument, and
there may at times not be a liquid secondary market for certain options
contracts. The value of the options held by the Fund will be determined based on
market quotations or other recognized pricing methods. Additionally, as the Fund
intends to continuously maintain indirect exposure to the Underlying Security
through the use of options contracts, as the options contracts it holds are
exercised or expire it will enter into new options contracts, a practice
referred to as “rolling.” If the expiring options contracts do not generate
proceeds enough to cover the cost of entering into new options contracts, the
Fund may experience losses. The use of options to generate leverage introduces
additional risks, including significant potential losses if the market moves
unfavorably. The leverage inherent in options can amplify both gains and losses,
leading to increased volatility and potential for substantial losses,
particularly in periods of market uncertainty or low liquidity. Additionally,
the Fund may incur losses if the value of the Underlying Security moves against
its positions, potentially resulting in a complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk. If for any reason the Fund is unable to rebalance all or a part of
its portfolio, or if all or a portion of the portfolio is rebalanced
incorrectly, the Fund’s investment exposure may not be consistent with its
investment objective. In these instances, the Fund may have investment exposure
to the Underlying Security that is significantly greater or significantly less
than its stated multiple. As a result, the Fund may be more exposed to leverage
risk than if it had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
loses value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security rises, the Fund’s net assets
will decline by the same amount as the Fund’s exposure. Therefore, an investor
that purchases shares intraday may experience performance that is greater than,
or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately,
or
may experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The Fund may have difficulty achieving its daily leveraged investment
objective for many reasons, including fees, expenses, transaction costs,
financing costs related to the use of derivatives, accounting standards and
their application to income items, disruptions, illiquid or high volatility in
the markets for the securities or financial instruments in which the Fund
invests, early and unanticipated closings of the markets on which the holdings
of the Fund trade, resulting in the inability of the Fund to execute intended
portfolio transactions, regulatory and tax considerations, which may cause the
Fund to hold (or not to hold) the Underlying Security. The Fund may take or
refrain from taking positions in order to improve tax efficiency, comply with
regulatory restrictions, or for other reasons, each of which may negatively
affect the Fund’s desired correlation with the Underlying Security. The Fund may
be subject to large movements of assets into and out of the Fund, potentially
resulting in the Fund being over- or under-exposed to the Underlying Security.
Additionally, the Fund’s underlying investments and/or reference assets may
trade on markets that may not be open on the same day as the Fund, which may
cause a difference between the changes in the daily performance of the Fund and
changes in the performance of the Underlying Security. Any of these factors
could decrease the correlation between the performance of the Fund and the
Underlying Security and may hinder the Fund’s ability to meet its daily
leveraged investment objective on or around that
day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide short
exposure to the industry to which the Underlying Security is assigned). A
portfolio concentrated in a particular industry may present more risks than a
portfolio broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the capital goods
industry.
Capital
Goods Industry Risk. The capital goods industry may be
affected by fluctuations in the business cycle and by other factors affecting
manufacturing demands. The capital goods industry depends heavily on corporate
spending. Companies in the capital goods industry may perform well during times
of economic expansion, but as economic conditions worsen, the demand for capital
goods may decrease. Many capital goods are sold internationally, and companies
in this industry may be affected by market conditions in other countries and
regions.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Boeing Co. and make no representation as to
the performance of the Underlying Security. Investing in the Fund is not
equivalent to investing in the Underlying Security. Fund shareholders will not
have voting rights or rights to receive dividends or other distributions or any
other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of
market
volatility, periods of steep market declines, and periods when there is limited
trading activity for shares in the secondary market, in which case such premiums
or discounts may be significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as the Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue
trading halts on specific securities or financial instruments. The ability to
trade certain securities or financial instruments may be restricted, which
may result in a fund being unable to buy or sell certain securities or
financial instruments. In these circumstances, a fund may be unable
to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90%of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The Fund’s pursuit of its investment strategy will potentially be
limited by the Fund’s intention to qualify for such treatment and could
adversely affect the Fund’s ability to so qualify. The Fund may make certain
investments, including gaining exposure to the underlying reference asset
through the use of swaps, the treatment of which for these purposes is unclear.
If, in any year, the Fund were to fail to qualify for the special tax treatment
accorded a RIC and its shareholders and were ineligible to or were not able to
cure such failure, the Fund would be taxed in the same manner as an ordinary
corporation subject to U.S. federal income tax on all its income at the fund
level. The resulting taxes could substantially reduce the Fund’s net assets and
the amount of income available for distribution. In addition, in order to
requalify for taxation as a RIC, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long BBAI Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long BBAI Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of BigBear.ai Holdings, Inc. (NYSE: BBAI) (“BBAI”
or “Underlying Security”). The return for investors that invest for periods
longer or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of BBAI. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.02% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.78% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $80 |
$249 |
$433 |
$966 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period August 20, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which BigBear.ai Holdings, Inc. is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the software
and services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
BigBear.ai
Holdings, Inc. provides artificial intelligence (AI)-powered decision
intelligence solutions. The company offers software and services for national
security, supply chain management, and digital identity and biometrics
applications, leveraging capabilities that include data ingestion and
enrichment, AI and machine learning, predictive analytics, and advanced
visualization. The common stock of BigBear.ai Holdings, Inc. is registered under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Information provided to or filed with the Securities and Exchange Commission
(“SEC”) by BigBear.ai Holdings, Inc. pursuant to the Exchange Act can be located
by reference to the SEC file number 001-40031 through the SEC’s website at
www.sec.gov. In addition, information regarding BigBear.ai Holdings, Inc. may be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the
Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate since
inception of trading on January 3, 2022 through the period ended
December 31, 2025 (the “Period”) was 168.20%. The Underlying Security’s
highest volatility rate for any one calendar year during the Period was 297.85%
and volatility for a shorter period of time may have been substantially higher.
The Underlying Security’s annualized performance for the Period was -11.29%.
Historical volatility and performance are not indications of what the Underlying
Security’s volatility and performance will be in the future. Volatility for a
shorter period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The
Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s
shares
could trade at a premium or discount to their net asset value and/or the bid-ask
spread of the Fund’s shares could widen. Under such circumstances, the Fund may
increase its transaction fee, change its investment objective by, for example,
seeking to track an alternative security, reduce its leverage or
close.
BigBear.ai
Holdings, Inc. Investing Risk.
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
software and services industry, the Underlying Security faces risks that
include, but are not limited to: dependence on U.S. government customers for a
significant portion of its revenue and the risk of contract delay, modification,
termination, or non-renewal; uncertainty related to U.S. government budgeting,
appropriations, shutdowns, and continuing resolutions; customer and contract
concentration; a limited operating history and history of losses; the ability to
sustain revenue growth and achieve profitability; long, complex, and
unpredictable sales cycles requiring significant time and expense; competition
from larger and better-capitalized companies; execution and integration risks
related to acquisitions; cybersecurity and data protection risks; reliance on
key personnel with specialized expertise and security clearances; and liquidity
and capital-raising risks. Any of these risks could materially and adversely
affect the company’s business, financial condition, and results of
operations.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which
the
Fund invests are substantially influenced by the value of the Underlying
Security. The Fund may experience substantial downside from specific option
positions and certain option positions held by the Fund may expire worthless.
The options held by the Fund are exercisable at the strike price on their
expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Artificial
Intelligence (“AI”) Risk.
The Underlying Security provides AI-powered analytics, decision-support
software, and machine learning solutions to commercial and government clients.
Companies engaged in AI and big data typically face intense competition and
potentially rapid product obsolescence. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. AI and big data companies typically engage in significant amounts of
spending on research and development, as well as mergers and acquisitions, and
there is no guarantee that the products or services produced by these companies
will be successful. AI and big data companies are potential targets for
cyberattacks, which can have a materially adverse impact on the performance of
these companies. In addition, AI technology could face increasing regulatory
scrutiny in the future, which may limit the development of this technology and
impede the growth of companies that develop and/or utilize this technology.
Similarly, the collection of data from consumers and other sources could face
increased scrutiny as regulators consider how the data is collected, stored,
safeguarded and used. AI and big data companies may face regulatory fines and
penalties, including potential forced break-ups, that could hinder the ability
of the companies to operate on an ongoing basis. The customers and/or suppliers
of AI and big data companies may be concentrated in a particular country, region
or industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on AI and big data companies. Country,
government, and/or region-specific regulations or restrictions could have an
impact on AI and big data companies.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying
Security
that is significantly greater or less than its stated multiple. As a result, the
Fund may be more exposed to leverage risk than if it had been properly
rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the software and services
industry.
Software
and Services Industry Risk. Computer
software companies can be significantly affected by competitive pressures,
aggressive pricing, technological developments, changing domestic demand, the
ability to attract and retain skilled employees and availability and price of
components. The market for products produced by software companies is
characterized by rapidly changing technology, rapid product obsolescence,
cyclical market patterns, evolving industry standards and frequent new product
introductions. The success of computer software companies depends in substantial
part on the timely and successful introduction of new products and the ability
to service such products. An unexpected change in one or more of the
technologies affecting an issuer’s products or in the market for products based
on a particular technology could have a material adverse effect on a
participant’s operating results.
Many
computer software companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their proprietary
rights in their products and technologies. There can be no assurance that the
steps taken by computer software companies to protect their proprietary rights
will be adequate to prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such companies’
technology.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of BigBear.ai Holdings, Inc. and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the
security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special
tax treatment accorded a RIC and its shareholders and were ineligible
to or were not able to cure such failure, the Fund would be taxed in the same
manner as an ordinary corporation subject to U.S. federal income tax on all its
income at the fund level. The resulting taxes could substantially reduce the
Fund’s net assets and the amount of income available for distribution. In
addition, in order to requalify for taxation as a RIC, the Fund could be
required to recognize unrealized gains, pay substantial taxes and interest, and
make certain distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long BLSH Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long BLSH Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Bullish, Inc. (NYSE: BLSH) (“BLSH”, or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of BLSH. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.04% |
|
Total
Annual Fund Operating Expenses3 |
| 0.79% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $81 |
$252 |
$439 |
$978 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period October 24, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange® (“FLEX”) call and put options contracts
that are based on the value of the price returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
financial services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease in the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Bullish,
Inc. is a regulated digital asset exchange and infrastructure company. Bullish,
Inc. operates a technology-driven platform for trading digital assets, including
spot and derivatives markets, and is focused on providing deep liquidity, robust
compliance, and market integrity. Bullish, Inc. also owns CoinDesk, a digital
media, events, and indices business serving the global crypto ecosystem.
Bullish, Inc. is a foreign private issuer registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to
or filed with the Securities and Exchange Commission (“SEC”) by Bullish, Inc.
pursuant to the Exchange Act can be located by reference to the SEC file number
001-42797 through the SEC’s website at www.sec.gov. In addition, information
regarding Bullish, Inc. may be obtained from other sources including, but not
limited to, press releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security. The Fund has derived all disclosures
contained in this document regarding the Underlying Security from the publicly
available documents described above. Neither the Fund, the Trust, the Adviser
nor any affiliate has participated in the preparation of such documents. Neither
the Fund, the Trust, the Adviser nor any affiliate makes any representation that
such publicly available documents or any other publicly available information
regarding the Underlying Security is accurate or complete. Furthermore, the Fund
cannot give any assurance that all events occurring prior to the date of the
prospectus (including events that would affect the accuracy or completeness of
the publicly available documents described above) that would affect the trading
price of the Underlying Security have been publicly disclosed. Subsequent
disclosure of any such events or the disclosure of, or failure to disclose,
material future events concerning the Underlying Security could affect the value
of the Fund’s investments with respect to the Underlying Security and therefore
the value of the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Fund.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk. The
Fund has a daily leveraged investment objective and the Fund’s performance for
periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security’s volatility and
its return could affect the Fund’s performance. Fund performance for periods
greater than one single day can be estimated given any set of assumptions for
the following factors: a) Underlying Security volatility; b) Underlying Security
performance; c) period of time; d) financing rates associated with leveraged
exposure; e) other Fund expenses; and f) dividends or interest paid with respect
to the Underlying Security. The chart below provides examples of how volatility
and its return could affect the Underlying Security’s performance. The chart
shows estimated Fund returns for a number of combinations of volatility and
performance over a one-year period. Performance shown in the chart assumes that:
(i) no dividends were paid with respect to the Underlying Security; (ii) there
were no Fund expenses; and (iii) borrowing/lending rates (to obtain leveraged
exposure) of 0%. If Fund expenses and/or actual borrowing/lending rates were
reflected, the estimated returns would be different than those shown.
Particularly during periods of higher volatility, compounding will cause results
for periods longer than a trading day to vary from 200% of the performance of
the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the
Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the
Underlying Security’s annualized volatility is 100%, the Fund would be expected
to lose 63.2% of its value, even if the cumulative return for the year was 0%.
Areas
shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
As
of the date of this Prospectus, the Underlying Security has not yet traded on a
listing exchange for a one-year calendar period and, therefore, does not have an
annualized historical volatility rate or total return performance available to
report. When available, historical volatility and performance are not
indications of what the Underlying Security volatility and performance will be
in the future. The volatility of U.S. exchange-traded securities or instruments
that reflect the value of the Underlying Security may differ from the volatility
of the Underlying Security. Given that BLSH recently commenced trading in August
2025, there is limited data on which investors can evaluate the
security.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The
Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
Bullish,
Inc. Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with the financial services
industry, Bullish, Inc.
faces
risks that include, but are not limited to: the evolving and increasingly
complex regulatory environment and significant market volatility in the digital
assets industry; its ability to operate a secure, reliable, and high-quality
trading platform for digital assets; its ability to attract, retain, and expand
its customer base across its various businesses; and its ability to anticipate
and adapt to rapidly changing market conditions, technological developments, and
competitive dynamics. Bullish, Inc. operates in a highly competitive industry,
including competition from unregulated or less-regulated entities, and may not
be able to adapt quickly or effectively to changes in the digital assets and
regulatory landscape. In addition, Bullish, Inc.’s ownership and operation of
CoinDesk presents significant risks, including perceived or actual conflicts of
interest and reputational harm. Bullish also expects operating expenses to
increase in the foreseeable future and may not be able to achieve or sustain
profitability or positive cash flow from operations. Any of these risks could
materially and adversely affect the company’s business, financial condition,
results of operations, and prospects.
Derivatives
Risk. Derivatives
are financial instruments that derive value from the underlying reference asset
or assets, such as stocks, bonds, or funds (including ETFs), interest rates or
indexes. Investing in derivatives may expose the Fund to greater risks, and may
result in larger losses or small gains, than investing directly in the reference
assets underlying those derivatives, which may prevent the Fund from achieving
its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect
correlation
between the movement in values of options contracts and the underlying
instrument, and there may at times not be a liquid secondary market for certain
options contracts. The value of the options held by the Fund will be determined
based on market quotations or other recognized pricing methods. Additionally, as
the Fund intends to continuously maintain indirect exposure to the Underlying
Security through the use of options contracts, as the options contracts it holds
are exercised or expire it will enter into new options contracts, a practice
referred to as “rolling.” If the expiring options contracts do not generate
proceeds enough to cover the cost of entering into new options contracts, the
Fund may experience losses. The use of options to generate leverage introduces
additional risks, including significant potential losses if the market moves
unfavorably. The leverage inherent in options can amplify both gains and losses,
leading to increased volatility and potential for substantial losses,
particularly in periods of market uncertainty or low liquidity. Additionally,
the Fund may incur losses if the value of the Underlying Security moves against
its positions, potentially resulting in a complete loss of the premium
paid.
Counterparty/Collateral
Risk. If
a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Digital
Assets Risk. The
Underlying Security’s operations and revenue depend on the performance,
adoption, and security of blockchain networks and digital assets. The Fund is
subject to digital assets risk due to its investment exposure to the Underlying
Security. The trading prices of many digital assets, including Bitcoin, have
experienced extreme volatility and may continue to do so. Extreme volatility in
the future, including further declines in the trading prices of bitcoin, could
have a material adverse effect on the Shares. Bitcoins are bearer instruments
and the loss or destruction of a private key required to access a bitcoin may be
irreversible. If a private key is lost, destroyed or otherwise compromised and
no backup of the private key is accessible, the owner would be unable to access
the bitcoin corresponding to that private key and the private key will not be
capable of being restored by the digital asset network. Digital asset networks
and the software used to operate them are in the early stages of development.
Given the recentness of the development of digital asset networks, bitcoin may
not function as intended and parties may be unwilling to use bitcoin, which
would dampen the growth, if any, of digital asset networks. Governance of many
digital asset networks, such as the Bitcoin network, are by voluntary consensus
and open competition. As a result, there may be a lack of consensus or clarity
on the governance of digital asset networks, which may stymie each such
network’s utility and ability to grow and face challenges.
There
is a lack of consensus regarding the regulation of bitcoin and its market. As a
result of the growth in the size of the bitcoin market, the U.S. Congress and a
number of U.S. federal and state agencies (including FinCEN, SEC, OCC, CFTC,
FINRA, the Consumer Financial Protection Bureau, the Department of Justice, the
Department of Homeland Security, the Federal Bureau of Investigation, the
Internal Revenue Service, state financial institution regulators, and others)
have been examining the operations of digital asset networks, digital asset
users and digital asset markets. Many of these state and federal agencies have
brought enforcement actions or issued consumer advisories regarding the risks
posed by digital assets to investors. Ongoing and future regulatory actions with
respect to digital assets may alter, perhaps to a materially adverse extent, the
nature of an investment in a digital asset.
Blockchain
Risk. The
Underlying Security’s operations and revenue depend on the performance,
adoption, and security of blockchain networks and digital assets. Blockchain
companies may be adversely impacted by government regulations or economic
conditions. Blockchain technology is new and its uses are in many cases
untested
or unclear. These companies may also have significant exposure to fluctuations
in the spot prices of digital assets, particularly to the extent that demand for
a company’s hardware or services may increase as the spot price of digital
assets increase. Blockchain companies typically face intense competition and
potentially rapid product obsolescence. In addition, many blockchain companies
store sensitive consumer information and could be the target of cybersecurity
attacks and other types of theft, which could have a negative impact on these
companies. Access to a given blockchain may require a specific cryptographic key
(in effect a string of characters granting unique access to initiate
transactions related to specific digital assets) or set of keys, the theft,
loss, or destruction of which, either by accident or as a result of the efforts
of a third party, could irrevocably impair a claim to the digital assets stored
on that blockchain. Many blockchain companies currently operate under less
regulatory scrutiny than traditional financial services companies and banks, but
there is significant risk that regulatory oversight could increase in the
future. Higher levels of regulation could increase costs and adversely impact
the current business models of some blockchain companies. For example,
restrictions imposed by foreign governments, including China, on the use and
mining of digital assets, may adversely impact blockchain companies and in turn
the Fund. These companies could be negatively impacted by disruptions in service
caused by hardware or software failure, or by interruptions or delays in service
by third-party data center hosting facilities and maintenance providers.
Blockchain companies involved in digital assets may face slow adoption rates and
be subject to higher levels of regulatory scrutiny in the future, which could
severely impact the viability of these companies. blockchain companies,
especially smaller companies, tend to be more volatile than companies that do
not rely heavily on technology. The customers and/or suppliers of blockchain
companies may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on blockchain companies.
Rebalancing
Risk. If
for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk. The
intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or
for
other reasons, each of which may negatively affect the Fund’s desired
correlation with the Underlying Security. The Fund may be subject to large
movements of assets into and out of the Fund, potentially resulting in the Fund
being over- or under-exposed to the Underlying Security. Additionally, the
Fund’s underlying investments and/or reference assets may trade on markets that
may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk. The
Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the financial services
industry.
Financial
Services Industry Risk. Financial
services companies are subject to extensive governmental regulation which may
limit both the amounts and types of loans and other financial commitments they
can make, the interest rates and fees they can charge, the scope of their
activities, the prices they can charge and the amount of capital they must
maintain. Profitability is largely dependent on the availability and cost of
capital funds and can fluctuate significantly when interest rates change or due
to increased competition. In addition, deterioration of the credit markets
generally may cause an adverse impact in a broad range of markets, including
U.S. and international credit and interbank money markets generally, thereby
affecting a wide range of financial institutions and markets. Certain events in
the financial industry may cause an unusually high degree of volatility in the
financial markets, both domestic and foreign, and cause certain financial
services companies to incur large losses. Securities of financial services
companies may experience a dramatic decline in value when such companies
experience substantial declines in the valuations of their assets, take action
to raise capital (such as the issuance of debt or equity securities), or cease
operations. Credit losses resulting from financial difficulties of borrowers and
financial losses associated with investment activities can negatively impact the
industry. Insurance companies may be subject to severe price competition.
Adverse economic, business or political developments could adversely affect
financial institutions engaged in mortgage finance or other lending or investing
activities directly or indirectly connected to the value of real
estate.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk. Publicly
issued equity securities, including common stocks, are subject to market risks
that may cause their prices to fluctuate over time. Fluctuations in the value of
equity securities in which the Fund invests, and/or has exposure to, will cause
the net asset value of the Fund to fluctuate.
Indirect
Investment Risk. The
Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking
any
corporate actions that might affect the value of the Fund. The Trust, the Fund
and any affiliate are not responsible for the performance of Bullish and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk. The
Fund may use a variety of money market instruments for cash management purposes,
including money market funds, depositary accounts and repurchase agreements.
Money market funds may be subject to credit risk with respect to the debt
instruments in which they invest. Depository accounts may be subject to credit
risk with respect to the financial institution in which the depository account
is held. Repurchase agreements may be subject to market and credit risk related
to the collateral securing the repurchase agreement. Money market instruments
may lose money.
Repurchase
Agreements Risk. The
Fund may enter into repurchase agreements. In a repurchase agreement, a party
sells a security, commonly a U.S. government security, and agrees to buy the
security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks. The
Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund. Due
to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV. As
with all ETFs, shares of the Fund may be bought and sold in the secondary market
at market prices. The price of shares of the Fund, like the price of all traded
securities, will be subject to factors such as supply and demand, as well as the
current value of the Fund’s portfolio holdings. Although it is expected that the
market price of the shares of the Fund will approximate the Fund’s NAV, there
may be times when the market price of the shares is more than the NAV intraday
(premium) or less than the NAV intraday (discount). This risk is heightened in
times of market volatility, periods of steep market declines, and periods when
there is limited trading activity for shares in the secondary market, in which
case such premiums or discounts may be significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity
of the Fund’s underlying portfolio holdings, which can be significantly less
liquid than shares of the Fund, and this could lead to differences between the
market price of the shares of the Fund and the underlying value of those
shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The
Fund will generally effect creations and redemptions for cash rather than for
in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk. In
order to qualify for the special tax treatment accorded a regulated investment
company (“RIC”) and its shareholders, the Fund must derive at least 90% of its
gross income for each taxable year from “qualifying income,” meet certain asset
diversification tests at the end of each taxable quarter and meet annual
distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
IPO
Risk. The
market value of shares of an initial public offering (“IPO”), including those of
the Underlying Security, will fluctuate considerably due to factors such as the
absence of a prior public market, unseasoned trading, the small number of shares
available for trading and limited information about the issuer. The purchase of
IPO shares may involve high transaction costs. IPO shares are subject to market
risk and liquidity risk.
New
Fund Risk. As
of the date of this prospectus, the Fund has no operating history and currently
has fewer assets than larger funds. Like other new funds, large inflows and
outflows may impact the Fund’s market exposure for limited periods of time. This
impact may be positive or negative, depending on the direction of market
movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the
Fund may be adversely impacted. Certain market conditions or restrictions may
prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk. Daily
rebalancing of the Fund’s holdings pursuant to its daily investment objective
causes a much greater number of portfolio transactions when compared to most
ETFs. Additionally, active secondary market trading of the Shares could cause
more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not commence
operations prior to the date of this Prospectus. In the future,
performance for the Fund will be presented in this section. Updated performance
information will be available on the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s inception in
October 2025.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net
asset
value, market price, premiums and discounts, and bid-ask spreads is available on
the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long BMNR Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long BMNR Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Bitmine Immersion Technologies, Inc. (NYSE:
BMNR) (“BMNR” or “Underlying Security”). The return for investors that invest
for periods longer or shorter than a trading day should not be expected to be
200% of the performance of the Underlying Security for the period. The return of
the Fund for a period longer than a trading day will be the result of each
trading day’s compounded return over the period, which will very likely differ
from 200% of the return of the Underlying Security for that period. Longer
holding periods, higher volatility of the Underlying Security and leverage
increase the impact of compounding on an investor’s returns. During periods of
higher Underlying Security volatility, the volatility of the Underlying Security
may affect the Fund’s return as much as, or more than, the return of the
Underlying Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of Bitmine Immersion Technologies, Inc.
The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.03% |
|
Total
Annual Fund Operating Expenses3 |
| 0.78% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and expenses. |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
|
|
|
|
| |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $80 |
$249 |
$433 |
$966 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period October 24, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated U.S. exchanges. Traditional
exchange-traded options contracts have standardized terms, such as the type
(call or put), the reference asset, the strike price and expiration date.
Exchange-listed options contracts are guaranteed for settlement by the Options
Clearing Corporation (“OCC”). FLEX Options are a type of exchange-listed
options
contract with uniquely customizable terms that allow investors to customize key
terms like type, strike price and expiration date that are standardized in a
typical options contract. FLEX Options are also guaranteed for settlement by the
OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to which the Underlying Security is assigned). As of the date of this
prospectus, the Underlying Security is assigned to the software and services
industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Bitmine
Immersion Technologies, Inc. operates as a blockchain technology company and
digital asset platform. The company holds a large Ethereum (ETH) treasury and
participates in staking to generate rewards from its ETH holdings. The common
stock of Bitmine Immersion Technologies, Inc. is registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to
or filed with the Securities and Exchange Commission (“SEC”) by Bitmine
Immersion Technologies, Inc. pursuant to the Exchange Act can be located by
reference to the SEC file number 001-42675 through the SEC’s website at
www.sec.gov. In addition, information regarding Bitmine Immersion Technologies,
Inc. may be obtained from other sources including, but not limited to, press
releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any
representation
that such publicly available documents or any other publicly available
information regarding the Underlying Security is accurate or complete.
Furthermore, the Fund cannot give any assurance that all events occurring prior
to the date of the prospectus (including events that would affect the accuracy
or completeness of the publicly available documents described above) that would
affect the trading price of the Underlying Security have been publicly
disclosed. Subsequent disclosure of any such events or the disclosure of, or
failure to disclose, material future events concerning the Underlying Security
could affect the value of the Fund’s investments with respect to the Underlying
Security and therefore the value of the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would
be expected to lose 63.2% of its value, even if the cumulative return for the
year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate for the
five-year period ended December 31, 2025 (the “Period”) was 419.77%. The
Underlying Security’s highest historical volatility rate for any one calendar
year during the Period was 748.38% and volatility for a shorter period of time
may have been substantially higher. The Underlying Security’s annualized
historical performance for the Period was -18.61%. Historical volatility and
performance are not indications of what the Underlying Security’s volatility and
performance will be in the future. Volatility for a shorter period of time may
have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The
Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Bitmine
Immersion Technologies, Inc. Investing Risk.
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with the software and
services industry, Bitmine Immersion Technologies, Inc. is subject to risks that
include, but are not limited to: volatility in the value of Ethereum and other
digital assets, failures or disruptions in blockchain networks, loss or
compromise of cryptographic keys, cybersecurity breaches, regulatory changes
affecting digital assets or blockchain operations, and the ability to attract
and retain key personnel; the trading price of the Underlying Security has
historically been and is likely to continue to be volatile, and short-seller
activity may further influence market price; and the Underlying Security is a
highly dynamic company, and its operations, including its products and services,
may change. Any of these risks could materially and adversely affect the
company’s business, financial condition, results of operations, and
prospects.
The Underlying Security holds digital assets, as part of its
corporate treasury operations. The market value of digital assets is highly
volatile and may be subject to significant price fluctuations, which could
materially adversely affect the Underlying Security’s financial condition,
results of operations, liquidity, or stock price. In addition, digital assets
may be subject to evolving regulatory frameworks, cybersecurity risks, custody
risks, accounting treatment risks, and potential impairment charges, any of
which could adversely affect the Underlying Security. Because the Fund seeks
daily investment results that correspond to twice (2X) the daily performance of
the Underlying Security’s common stock, increased volatility in the Underlying
Security’s stock may result in increased volatility of the Fund. The Fund does
not invest directly in digital assets.
There
is a lack of consensus regarding the regulation of Bitcoin and Ethereum and
their respective markets. As a result of the growth in the size of the Bitcoin
or Ether markets, the U.S. Congress and a number of U.S. federal and state
agencies (including FinCEN, SEC, OCC, CFTC, FINRA, the Consumer Financial
Protection Bureau, the Department of Justice, the Department of Homeland
Security, the Federal Bureau of Investigation, the Internal Revenue Service,
state financial institution regulators, and others) have been examining the
operations of digital asset networks, digital asset users and digital asset
markets. Many of these state and federal agencies have brought enforcement
actions or issued consumer advisories regarding the risks posed by digital
assets to investors. Ongoing and future regulatory actions with respect to
digital assets may alter, perhaps to a materially adverse extent, the nature of
an investment in a digital asset.
Blockchain
Risk.
The Underlying Security operates as a blockchain-based digital asset platform.
Blockchain companies may be adversely impacted by government regulations or
economic conditions. Blockchain technology is new and its uses are in many cases
untested or unclear. These companies may also have significant exposure to
fluctuations in the spot prices of digital assets, particularly to the extent
that demand for a company’s hardware or services may increase as the spot price
of digital assets increase. Blockchain companies typically face intense
competition and potentially rapid product obsolescence. In addition, many
blockchain companies store sensitive consumer information and could be the
target of cybersecurity attacks and other types of theft, which could have a
negative impact on these companies. Access to a given blockchain may require a
specific cryptographic key (in effect a string of characters granting unique
access to initiate transactions related to specific digital assets) or set of
keys, the theft, loss, or destruction of which, either by accident or as a
result of the efforts of a third party, could irrevocably impair a claim to the
digital assets stored on that blockchain. Many blockchain companies currently
operate under less regulatory scrutiny than traditional financial services
companies and banks, but there is significant risk that regulatory oversight
could increase in the future. Higher levels of regulation could increase costs
and adversely impact the current business models of some blockchain companies.
For example, restrictions imposed by foreign governments, including China, on
the use and mining of digital assets, may adversely impact blockchain companies
and in turn the Fund. These companies could be negatively impacted by
disruptions in service caused by hardware or software failure, or by
interruptions or delays in service by third-party data center hosting facilities
and maintenance providers. Blockchain companies involved in digital assets may
face slow adoption rates and be subject to higher levels of regulatory scrutiny
in the future, which could severely impact the viability of these companies.
blockchain companies, especially smaller companies, tend to be more volatile
than companies that do not rely heavily on technology. The customers and/or
suppliers of blockchain companies may be concentrated in a particular country,
region or industry. Any adverse event affecting one of these countries, regions
or industries could have a negative impact on blockchain
companies.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium paid.
Counterparty
Risk/Collateral.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to If for
any reason the Fund is unable to rebalance all or a portion of its portfolio, or
if all or a portion of the portfolio is rebalanced incorrectly, the Fund’s
investment exposure may not be consistent with the Fund’s investment objective.
In these instances, the Fund may have investment exposure to the Underlying
Security that is significantly greater or less than its stated multiple. As a
result, the Fund may be more exposed to leverage risk than if it had been
properly rebalanced and may not achieve its investment objective. that is
significantly greater or less than its stated multiple. As a result, the Fund
may be more exposed to leverage risk than if it had been properly rebalanced and
may not achieve its investment objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or
for
other reasons, each of which may negatively affect the Fund’s desired
correlation with the Underlying Security. The Fund may be subject to large
movements of assets into and out of the Fund, potentially resulting in the Fund
being over- or under-exposed to the Underlying Security. Additionally, the
Fund’s underlying investments and/or reference assets may trade on markets that
may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the software and services
industry.
Software
and Services Industry Risk.
Computer software companies can be significantly affected by competitive
pressures, aggressive pricing, technological developments, changing domestic
demand, the ability to attract and retain skilled employees and availability and
price of components. The market for products produced by software companies is
characterized by rapidly changing technology, rapid product obsolescence,
cyclical market patterns, evolving industry standards and frequent new product
introductions. The success of computer software companies depends in substantial
part on the timely and successful introduction of new products and the ability
to service such products. An unexpected change in one or more of the
technologies affecting an issuer’s products or in the market for products based
on a particular technology could have a material adverse effect on a
participant’s operating results.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Bitmine Immersion Technologies, Inc. and make
no representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the
value
of fixed income securities owned by the Fund. In general, the market price of
fixed income securities with longer maturities will increase or decrease more in
response to changes in interest rates than shorter-term securities. Other risk
factors include credit risk (the debtor may default), extension risk (an issuer
may exercise its right to repay principal on a fixed rate obligation held by the
Fund later than expected), and prepayment risk (the debtor may pay its
obligation early, reducing the amount of interest payments). These risks could
affect the value of a particular investment by the Fund, possibly causing the
Fund’s share price and total return to be reduced and fluctuate more than other
types of investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments.
In these circumstances, a fund may be unable to rebalance its portfolio, may be
unable to accurately price its investments and/or may incur substantial trading
losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments,
such
as swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s inception in
October 2025.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long BULL Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long BULL Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Webull Corporation (Nasdaq: BULL) (“BULL” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the performance of the Underlying
Security performance is flat, and it is possible that the Fund will lose money
even if the performance of the Underlying Security increases over a period
longer than a single day. An investor could lose the full principal value of
his/her investment within a single day if the price of the Underlying Security
falls by more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of BULL. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.11% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.87% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and expenses. |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
|
|
|
|
| |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $89 |
$278 |
$482 |
$1,073 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period August 8, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated U.S. exchanges. Traditional
exchange-traded options contracts have standardized terms, such as the type
(call or put), the reference asset, the strike price and expiration date.
Exchange-listed options contracts are guaranteed for settlement by the Options
Clearing Corporation (“OCC”). FLEX Options are a type of exchange-listed
options
contract with uniquely customizable terms that allow investors to customize key
terms like type, strike price and expiration date that are standardized in a
typical options contract. FLEX Options are also guaranteed for settlement by the
OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
financial services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease in the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Webull
Corporation is a United States-based financial services technology company that
provides an integrated digital investment platform. Webull Corporation offers
products and services, including securities and digital asset trading, wealth
management product distribution, market data and information, investor community
features, and investor education. The common stock of Webull Corporation is
registered as a foreign private issuer under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Information provided to or filed with the
Securities and Exchange Commission (“SEC”) by Webull Corporation pursuant to the
Exchange Act can be located by reference to the SEC file number 001-42597
through the SEC’s website at www.sec.gov. In addition, information regarding
Webull Corporation may be obtained from other sources including, but not limited
to, press releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in
the
preparation of such documents. Neither the Fund, the Trust, the Adviser nor any
affiliate makes any representation that such publicly available documents or any
other publicly available information regarding the Underlying Security is
accurate or complete. Furthermore, the Fund cannot give any assurance that all
events occurring prior to the date of the prospectus (including events that
would affect the accuracy or completeness of the publicly available documents
described above) that would affect the trading price of the Underlying Security
have been publicly disclosed. Subsequent disclosure of any such events or the
disclosure of, or failure to disclose, material future events concerning the
Underlying Security could affect the value of the Fund’s investments with
respect to the Underlying Security and therefore the value of the
Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
performance of the Underlying Security performance, before fees and expenses.
Compounding has a significant impact on funds that are leveraged and that
rebalance daily. The impact of compounding becomes more pronounced as volatility
and holding periods increase and will impact each shareholder differently
depending on the period of time an investment in the Fund is held and the
volatility of the Underlying Security during the shareholder’s holding period of
an investment in the Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one-year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying
Security’s
return is flat. For
instance, if the
Underlying Security’s
annualized volatility is 100%, the Fund would be expected to lose 63.2% of its
value, even if the cumulative return for the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
As
of the date of this Prospectus, the Underlying Security has not been traded
publicly on a listing exchange for a one-year calendar period and, therefore,
does not have an annualized historical volatility rate or total return
performance available to report. When available, historical volatility and
performance are not indications of what the Underlying Security volatility and
performance will be in the future. The volatility of U.S. exchange-traded
securities or instruments that reflect the value of the Underlying Security may
differ from the volatility of the Underlying Security. Given that the Underlying
Security commenced trading in April 2025, there is limited data on which
investors can evaluate the security.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Webull
Corporation Investing Risk.
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with financial services
industry, Webull faces risks that include, but are not limited to: operating in
a heavily regulated and supervised environment, where changes in the
interpretation and enforcement of laws and regulations could materially impact
its operations; exposure to market volatility that may adversely affect trading
activity, customer engagement, and revenues; reliance on complex technology
systems and infrastructure, the failure or disruption of which could materially
impair its operations; cybersecurity, data privacy, and information security
risks; liquidity and counterparty risks associated with clearing, settlement,
and custody arrangements; competitive pressures, including pricing competition
and declining transaction-based revenues; and changes in broader financial
market conditions that could negatively affect investor participation and demand
for its products and services. Any of these risks could materially and adversely
affect the company’s business, financial condition, results of operations, and
prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The Fund will be subject to regulatory constraints relating to the
level of value at risk that the Fund may incur through its derivatives
portfolio. To the extent the Fund exceeds these regulatory thresholds over an
extended period, the Fund may determine that it is necessary to make adjustments
to the Fund’s investment strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the
Fund
may expire worthless. The options held by the Fund are exercisable at the strike
price on their expiration date. As an option approaches its expiration date, its
value typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
gains value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines, the Fund’s net assets
will decline by the same amount as the Fund’s exposure. Therefore, an investor
that purchases shares intraday may experience performance that is greater than,
or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund
being
materially over- or under-exposed to the Underlying Security increases on days
when the Underlying Security is volatile near the close of the trading day.
Market disruptions, regulatory restrictions and high volatility will also
adversely affect the Fund’s ability to adjust exposure to the required
levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
IPO
Risk. The
market value of shares of an initial public offering (“IPO”), including those of
the Underlying Security, will fluctuate considerably due to factors such as the
absence of a prior public market, unseasoned trading, the small number of shares
available for trading and limited information about the issuer. The purchase of
IPO shares may involve high transaction costs. IPO shares are subject to market
risk and liquidity risk.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several. As of the date of this prospectus, the
Underlying Security is assigned to the financial services industry.
Financial
Services Industry Risk.
Financial services companies are subject to extensive governmental regulation
which may limit both the amounts and types of loans and other financial
commitments they can make, the interest rates and fees they can charge, the
scope of their activities, the prices they can charge and the amount of capital
they must maintain. Profitability is largely dependent on the availability and
cost of capital funds and can fluctuate significantly when interest rates change
or due to increased competition. In addition, deterioration of the credit
markets generally may cause an adverse impact in a broad range of markets,
including U.S. and international credit and interbank money markets generally,
thereby affecting a wide range of financial institutions and markets. Certain
events in the financial industry may cause an unusually high degree of
volatility in the financial markets, both domestic and foreign, and cause
certain financial services companies to incur large losses. Securities of
financial services companies may experience a dramatic decline in value when
such companies experience substantial declines in the valuations of their
assets, take action to raise capital (such as the issuance of debt or equity
securities), or cease operations. Credit losses resulting from financial
difficulties of borrowers and financial losses associated with investment
activities can negatively impact the industry. Insurance companies may be
subject to severe price competition. Adverse economic, business or political
developments could adversely affect financial institutions engaged in mortgage
finance or other lending or investing activities directly or indirectly
connected to the value of real
estate.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
the Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Webull Corporation and make no representation
as to the performance of the Underlying Security. Investing in the Fund is not
equivalent to investing in the Underlying Security. Fund shareholders will not
have voting rights or rights to receive dividends or other distributions or any
other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.t
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the
Fund
may significantly reduce investment results and an investment in shares of the
Fund may not be advisable for investors who anticipate regularly making small
investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single
counterparty
and make the Fund more susceptible to risks associated with a single economic,
political or regulatory occurrence than a diversified
fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long COIN Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long COIN Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Coinbase Global, Inc. (Nasdaq: COIN) (“COIN” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of COIN. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.02% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.78% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $80 |
$249 |
$433 |
$966 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period March 13, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated U.S. exchanges. Traditional
exchange-traded options contracts have standardized terms, such as the type
(call or put), the reference asset, the strike price and expiration date.
Exchange-listed options contracts are guaranteed for settlement by the Options
Clearing Corporation (“OCC”). FLEX Options are a type of exchange-listed options
contract with uniquely customizable terms that allow investors to customize key
terms like type, strike price and expiration date that are standardized in a
typical options contract. FLEX Options are also guaranteed for settlement by the
OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure in the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
financial services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, the Adviser rebalances
the Fund’s portfolio so that its exposure to the Underlying Security is
consistent with the Fund’s investment objective. The impact of the Underlying
Security’s price movements during the day will affect whether the Fund’s
portfolio needs to be rebalanced. For example, if the price of the Underlying
Security has risen on a given day, net assets of the Fund should rise, meaning
that the Fund’s exposure will need to be increased. Conversely, if the price of
the Underlying Security has fallen on a given day, net assets of the Fund should
fall, meaning the Fund’s exposure will need to be reduced. This daily
rebalancing typically results in high portfolio turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Coinbase
Global, Inc. is a holding company whose primary operating subsidiary is
Coinbase, Inc. Through its subsidiaries, Coinbase Global, Inc. operates a
platform that enables customers to engage in a wide range of activities related
to crypto assets, including trading, staking, custody, spending, and earning.
The common stock of Coinbase Global, Inc. is registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to
or filed with the Securities and Exchange Commission (“SEC”) by Coinbase Global,
Inc. pursuant to the Exchange Act can be located by reference to the SEC file
number 001-40289 through the SEC’s website at www.sec.gov. In addition,
information regarding Coinbase Global, Inc. may be
obtained
from other sources including, but not limited to, press releases, newspaper
articles and other publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate since
inception of trading on April 13, 2021 through the period ended
December 31, 2025 (the “Period”) was 87.14%. The Underlying Security’s
highest volatility rate for any one calendar year during the Period was 107.08%
and volatility for a shorter period of time may have been substantially higher.
The Underlying Security’s annualized performance for the Period was -1.99%.
Historical volatility and performance are not indications of what the Underlying
Security volatility and performance will be in the future. Volatility for a
shorter period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Coinbase
Global, Inc. Investing Risk.
Issuer-specific attributes may cause an investment held by the Fund
to be more volatile than the market generally. The value of an individual
security or particular type of security may be more volatile than the market as
a whole and may perform differently from the value of the market as a whole. As
of the date of this prospectus, in addition to the risks associated with
companies in the financial services industry, Coinbase Global, Inc. faces risks
that include but are not limited to: significant fluctuations in operating
results; dependence of revenues on the prices of digital assets and transaction
volumes on its platform; concentration of revenues in a limited number of
digital assets; overall demand for and adoption of digital assets; macroeconomic
conditions, including interest rate fluctuations; limitations on the
development, growth, and functionality of digital assets and related
technologies; cyberattacks, security breaches, and failures of information
technology systems; a rapidly evolving and uncertain regulatory landscape;
intense competition; material pending litigation, class actions, investigations,
and regulatory enforcement actions; reliance on third-party service providers;
and the potential theft, loss, or destruction of private keys required to access
digital assets held in custody for customers or the company, which may be
irreversible. Any of these risks could materially and adversely affect the
company’s business, financial condition, results of operations, and
prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are
influenced
by, among other things, actual and anticipated changes in the value of the
underlying instrument, including the anticipated volatility, which are affected
by fiscal and monetary policies and by national and international political,
changes in the actual or implied volatility or the reference asset, the time
remaining until the expiration of the option contract and economic events. The
value of the options contracts in which the Fund invests are substantially
influenced by the value of the Underlying Security. The Fund may experience
substantial downside from specific option positions and certain option positions
held by the Fund may expire worthless. The options held by the Fund are
exercisable at the strike price on their expiration date. As an option
approaches its expiration date, its value typically increasingly moves with the
value of the underlying instrument. However, prior to such date, the value of an
option generally does not increase or decrease at the same rate as the
underlying instrument. There may at times be an imperfect correlation between
the movement in values options contracts and the underlying instrument, and
there may at times not be a liquid secondary market for certain options
contracts. The value of the options held by the Fund will be determined based on
market quotations or other recognized pricing methods. Additionally, as the Fund
intends to continuously maintain indirect exposure to the Underlying Security
through the use of options contracts, as the options contracts it holds are
exercised or expire it will enter into new options contracts, a practice
referred to as “rolling.” If the expiring options contracts do not generate
proceeds enough to cover the cost of entering into new options contracts, the
Fund may experience losses. The use of options to generate leverage introduces
additional risks, including significant potential losses if the market moves
unfavorably. The leverage inherent in options can amplify both gains and losses,
leading to increased volatility and potential for substantial losses,
particularly in periods of market uncertainty or low liquidity. Additionally,
the Fund may incur losses if the value of the Underlying Security moves against
its positions, potentially resulting in a complete loss of the premium
paid.
Digital
Assets Risk. The
Underlying Security’s revenues come from transaction fees on digital asset
transactions. The Fund is subject to digital assets risk due to its investment
exposure to the Underlying Security. The trading prices of many digital assets,
including Bitcoin, have experienced extreme volatility and may continue to do
so. Extreme volatility in the future, including further declines in the trading
prices of bitcoin, could have a material adverse effect on the Shares. Bitcoins
are bearer instruments and the loss or destruction of a private key required to
access a bitcoin may be irreversible. If a private key is lost, destroyed or
otherwise compromised and no backup of the private key is accessible, the owner
would be unable to access the bitcoin corresponding to that private key and the
private key will not be capable of being restored by the digital asset network.
Digital asset networks and the software used to operate them are in the early
stages of development. Given the recentness of the development of digital asset
networks, bitcoin may not function as intended and parties may be unwilling to
use bitcoin, which would dampen the growth, if any, of digital asset networks.
Governance of many digital asset networks, such as the Bitcoin network, are by
voluntary consensus and open competition. As a result, there may be a lack of
consensus or clarity on the governance of digital asset networks, which may
stymie each such network’s utility and ability to grow and face
challenges.
There
is a lack of consensus regarding the regulation of bitcoin and its market. As a
result of the growth in the size of the bitcoin market, the U.S. Congress and a
number of U.S. federal and state agencies (including FinCEN, SEC, OCC, CFTC,
FINRA, the Consumer Financial Protection Bureau, the Department of Justice, the
Department of Homeland Security, the Federal Bureau of Investigation, the
Internal Revenue Service, state financial institution regulators, and others)
have been examining the operations of digital asset networks, digital asset
users and digital asset markets. Many of these state and federal agencies have
brought enforcement actions or issued consumer advisories regarding the risks
posed by digital assets to investors. Ongoing and future regulatory actions with
respect to digital assets may alter, perhaps to a materially adverse extent, the
nature of an investment in a digital asset.
Blockchain
Risk. The
Underlying Security relies on blockchain networks for transaction settlement,
custody and account integrity. Blockchain
companies may be adversely impacted by government regulations or economic
conditions. Blockchain technology is new and its uses are in many cases untested
or unclear. These companies may also have significant exposure to fluctuations
in the spot prices of digital assets, particularly to the extent that demand for
a company’s hardware or services may increase as the spot price of digital
assets increase. Blockchain companies typically face intense competition and
potentially rapid product obsolescence. In addition, many blockchain companies
store sensitive consumer information and could be the target of cybersecurity
attacks and other types of theft, which could have a negative impact on these
companies. Access to a given blockchain may require a specific cryptographic key
(in effect a string of characters granting unique access to initiate
transactions related to specific digital assets) or set of keys, the theft,
loss, or destruction of
which,
either by accident or as a result of the efforts of a third party, could
irrevocably impair a claim to the digital assets stored on that blockchain. Many
blockchain companies currently operate under less regulatory scrutiny than
traditional financial services companies and banks, but there is significant
risk that regulatory oversight could increase in the future. Higher levels of
regulation could increase costs and adversely impact the current business models
of some blockchain companies. For example, restrictions imposed by foreign
governments, including China, on the use and mining of digital assets, may
adversely impact blockchain companies and in turn the Fund. These companies
could be negatively impacted by disruptions in service caused by hardware or
software failure, or by interruptions or delays in service by third-party data
center hosting facilities and maintenance providers. Blockchain companies
involved in digital assets may face slow adoption rates and be subject to higher
levels of regulatory scrutiny in the future, which could severely impact the
viability of these companies. blockchain companies, especially smaller
companies, tend to be more volatile than companies that do not rely heavily on
technology. The customers and/or suppliers of blockchain companies may be
concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on blockchain companies.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a part of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with its investment
objective which may lead to greater losses or reduced gains. In these instances,
the Fund may have investment exposure to the Underlying Security that is
significantly greater or significantly less than its stated investment
objective. Additionally, the Fund may close to purchases and sales of Shares
prior to the close of trading on the Nasdaq or other national securities listing
exchanges where Shares are listed and incur significant
losses.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
loses value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security rises, the Fund’s net assets
will decline by the same amount as the Fund’s exposure. Therefore, an investor
that purchases shares intraday may experience performance that is greater than,
or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund
being
materially over- or under-exposed to the Underlying Security increases on days
when the Underlying Security is volatile near the close of the trading day.
Market disruptions, regulatory restrictions and high volatility will also
adversely affect the Fund’s ability to adjust exposure to the required
levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide short
exposure to the industry to which the Underlying Security. is assigned). A
portfolio concentrated in a particular industry may present more risks than a
portfolio broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the financial services
industry.
Financial
Services Industry Risk.
Financial services companies are subject to extensive governmental regulation
which may limit both the amounts and types of loans and other financial
commitments they can make, the interest rates and fees they can charge, the
scope of their activities, the prices they can charge and the amount of capital
they must maintain. Profitability is largely dependent on the availability and
cost of capital funds and can fluctuate significantly when interest rates change
or due to increased competition. In addition, deterioration of the credit
markets generally may cause an adverse impact in a broad range of markets,
including U.S. and international credit and interbank money markets generally,
thereby affecting a wide range of financial institutions and markets. Certain
events in the financial industry may cause an unusually high degree of
volatility in the financial markets, both domestic and foreign, and cause
certain financial services companies to incur large losses. Securities of
financial services companies may experience a dramatic decline in value when
such companies experience substantial declines in the valuations of their
assets, take action to raise capital (such as the issuance of debt or equity
securities), or cease operations. Credit losses resulting from financial
difficulties of borrowers and financial losses associated with investment
activities can negatively impact the industry. Insurance companies may be
subject to severe price competition. Adverse economic, business or political
developments could adversely affect financial institutions engaged in mortgage
finance or other lending or investing activities directly or indirectly
connected to the value of real
estate.
Cybersecurity
Risk. Failures or breaches of the electronic systems of the Fund and/or the
Fund’s service providers, including the Adviser, market makers, Authorized
Participants or the issuers of securities in which the Fund invests, have the
ability to cause disruptions, negatively impact the Fund’s business operations
and/or potentially result in financial losses to the Fund and its shareholders.
While the Fund has established business continuity plans and risk management
systems seeking to address system breaches or failures, there are inherent
limitations in such plans and systems. Furthermore, the Fund cannot control the
cybersecurity plans and systems of the Fund’s Adviser, other service providers,
market makers, Authorized Participants or issuers of securities in which the
Fund invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to
the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Coinbase Global, Inc. and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of
all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as the Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue
trading halts on specific securities or financial instruments. The ability to
trade certain securities or financial instruments may be restricted, which
may result in a fund being unable to buy or sell certain securities or
financial instruments. In these circumstances, a fund may be unable
to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90%of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The Fund’s pursuit of its investment strategy will potentially be
limited by the Fund’s intention to qualify for such treatment and could
adversely affect the Fund’s ability to so qualify. The Fund may make certain
investments, including gaining exposure to the underlying reference asset
through the use of swaps, the treatment of which for these purposes is unclear.
If, in any year, the Fund were to fail to qualify for the special tax treatment
accorded a RIC and its shareholders and were ineligible to or were not able to
cure such failure, the Fund would be taxed in the same manner as an ordinary
corporation subject to U.S. federal income tax on all its income at the fund
level. The resulting taxes could substantially reduce the Fund’s net assets and
the amount of income available for distribution. In addition, in order to
requalify for taxation as a RIC, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund
and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance information for the Fund is not
included because the Fund did not have a full calendar year of performance prior
to the date of this Prospectus. In the future, performance for
the Fund will be presented in this section. Updated performance information will
be available on the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and
redeems
Creation Units in exchange for a portfolio of securities (the “Deposit
Securities”) and/or a designated amount of U.S. cash that the Fund specifies
each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long COST Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long COST Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Costco Wholesale Corporation (Nasdaq: COST)
(“COST” or “Underlying Security”). The return for investors that invest for
periods longer or shorter than a trading day should not be expected to be 200%
of the performance of the Underlying Security for the period. The return of the
Fund for a period longer than a trading day will be the result of each trading
day’s compounded return over the period, which will very likely differ from 200%
of the return of the Underlying Security for that period. Longer holding
periods, higher volatility of the Underlying Security and leverage increase the
impact of compounding on an investor’s returns. During periods of higher
Underlying Security volatility, the volatility of the Underlying Security may
affect the Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of COST. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.02% |
|
Acquired
Fund Fees and Expenses2 |
| 0.00% |
|
Total
Annual Fund Operating Expenses3 |
| 0.77% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $79 |
$246 |
$428 |
$954 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period September 17, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated U.S. exchanges. Traditional
exchange-traded options contracts have standardized terms, such as the type
(call or put), the reference asset, the strike price and expiration date.
Exchange-listed options contracts are guaranteed for settlement by the Options
Clearing Corporation (“OCC”). FLEX Options are a type of exchange-listed options
contract with uniquely customizable terms that allow investors to customize key
terms like type, strike price and expiration date that are standardized in a
typical options contract. FLEX Options are also guaranteed for settlement by the
OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the consumer
staples distribution industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Costco
Wholesale Corporation, is a multinational corporation that operates a chain of
membership-only warehouse club stores offering a limited selection of
high-quality merchandise at low prices to members. The common stock of Costco
Wholesale Corporation is registered under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Information provided to or filed with the
Securities and Exchange Commission (“SEC”) by Costco Wholesale Corporation
pursuant to the Exchange Act can be located by reference to the SEC file number
0-20355 through the SEC’s website at www.sec.gov. In addition, information
regarding Costco Wholesale Corporation may be obtained from other sources
including, but not limited to, press releases, newspaper articles and other
publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security ’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will
impact
each shareholder differently depending on the period of time an investment in
the Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical volatility rate for the five-year
period ended December 31, 2025 was 22.50%. The Underlying Security’s
highest volatility rate for any one calendar year during the five-year period
was 31.35% and volatility for a shorter period of time may have been
substantially higher. The Underlying Security’s annualized performance for the
five-year period ended December 31, 2025 was 17.80%. Historical volatility
and performance are not indications of what the Underlying Security’s volatility
and performance will be in the future.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The
Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such
periods,
the Fund’s ability to issue additional Creation Units may be adversely affected.
As a result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Costco
Wholesale Corporation Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with companies in the consumer staples distribution
industry, Costco Wholesale Corporation faces risks that include, but are not
limited to: unsuccessful implementation of its growth strategy, including
expansion in existing and new markets; failure to attract and retain members or
maintain membership renewal rates; intense competition from other retailers and
warehouse club operators; fluctuations in merchandise, fuel, transportation, and
labor costs; supply chain disruptions or vendor concentration; dependence on
membership fees to generate a significant portion of operating income; failure
to timely identify or effectively respond to changing consumer preferences;
risks associated with payment processing and information technology systems,
including cybersecurity and data privacy; regulatory compliance obligations;
risks related to international operations and foreign currency fluctuations; and
general economic conditions that may impact consumer spending and operating
costs. Any of these risks could materially and adversely affect the company’s
business, financial condition, results of operations, and
prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and
international
political, changes in the actual or implied volatility or the reference asset,
the time remaining until the expiration of the option contract and economic
events. The value of the options contracts in which the Fund invests are
substantially influenced by the value of the Underlying Security. The Fund may
experience substantial downside from specific option positions and certain
option positions held by the Fund may expire worthless. The options held by the
Fund are exercisable at the strike price on their expiration date. As an option
approaches its expiration date, its value typically increasingly moves with the
value of the underlying instrument. However, prior to such date, the value of an
option generally does not increase or decrease at the same rate as the
underlying instrument. There may at times be an imperfect correlation between
the movement in values options contracts and the underlying instrument, and
there may at times not be a liquid secondary market for certain options
contracts. The value of the options held by the Fund will be determined based on
market quotations or other recognized pricing methods. Additionally, as the Fund
intends to continuously maintain indirect exposure to the Underlying Security
through the use of options contracts, as the options contracts it holds are
exercised or expire it will enter into new options contracts, a practice
referred to as “rolling.” If the expiring options contracts do not generate
proceeds enough to cover the cost of entering into new options contracts, the
Fund may experience losses. The use of options to generate leverage introduces
additional risks, including significant potential losses if the market moves
unfavorably. The leverage inherent in options can amplify both gains and losses,
leading to increased volatility and potential for substantial losses,
particularly in periods of market uncertainty or low liquidity. Additionally,
the Fund may incur losses if the value of the Underlying Security moves against
its positions, potentially resulting in a complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the consumer staples
distribution industry.
Consumer
Staples Distribution Industry Risk.
Companies in the consumer staples
distribution industry may be affected by changes in the global economy, consumer
spending, and consumer demand. These companies may also be adversely affected by
changes or trends in commodity prices, which can be unpredictable. Companies in
this industry face significant competition, which may adversely impact
profitability. Additionally, fads, marketing campaigns, and other factors
affecting consumer demand are tied closely to the performance of companies in
this industry.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security Corporation is not affiliated with the Trust, the
Adviser or any affiliates thereof and is not involved with this offering in any
way, and has no obligation to consider the Fund in taking any corporate actions
that might affect the value of the Fund. The Trust, the Fund and any affiliate
are not responsible for the performance of Costco Wholesale Corporation and make
no representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of
market
volatility, periods of steep market declines, and periods when there is limited
trading activity for shares in the secondary market, in which case such premiums
or discounts may be significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long CRCL Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long CRCL Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Circle Internet Group, Inc. (NYSE: CRCL) (“CRCL”
or “Underlying Security”). The return for investors that invest for periods
longer or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the performance of the Underlying
Security performance is flat, and it is possible that the Fund will lose money
even if the performance of the Underlying Security increases over a period
longer than a single day. An investor could lose the full principal value of
his/her investment within a single day if the price of the Underlying Security
falls by more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of CRCL. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.02% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.78% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $80 |
$249 |
$433 |
$966 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period August 8, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the software
and services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease in the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Circle
Internet Group, Inc. is a global financial technology firm that builds and
operates blockchain-based payments and treasury infrastructure and is the issuer
of USDC, a fully reserved, regulated digital dollar stablecoin. The common stock
of Circle Internet Group, Inc. is registered under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). Information provided to or filed with
the Securities and Exchange Commission (“SEC”) by Circle Internet Group, Inc.
pursuant to the Exchange Act can be located by reference to the SEC file number
001-42671 through the SEC’s website at www.sec.gov. In addition, information
regarding Circle Internet Group, Inc. may be obtained from other sources
including, but not limited to, press releases, newspaper articles and other
publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities of related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security. from the publicly available
documents described above. Neither the Fund, the Trust, the Adviser nor any
affiliate has participated in the preparation of such documents. Neither the
Fund, the Trust, the Adviser nor any affiliate makes any representation that
such publicly available documents or any other publicly available information
regarding the Underlying Security is accurate or complete. Furthermore, the Fund
cannot give any assurance that all events occurring prior to the date of the
prospectus (including events that would affect the accuracy or completeness of
the publicly available documents described above) that would affect the trading
price of the Underlying Security have been publicly disclosed. Subsequent
disclosure of any such events or the disclosure of, or failure to disclose,
material future events concerning the Underlying Security could affect the value
of the Fund’s investments with respect to the Underlying Security and therefore
the value of the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
performance of the Underlying Security performance, before fees and expenses.
Compounding has a significant impact on funds that are leveraged and that
rebalance daily. The impact of compounding becomes more pronounced as volatility
and holding periods increase and will impact each shareholder differently
depending on the period of time an investment in the Fund is held and the
volatility of the Underlying Security during the shareholder’s holding period of
an investment in the Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the
Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one-year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the
Underlying Security’s
annualized volatility is 100%, the Fund would be expected to lose 63.2% of its
value, even if the cumulative return for the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
As
of the date of this Prospectus, the Underlying Security has not yet traded on a
listing exchange for a one-year calendar period and, therefore, does not have an
annualized historical volatility rate or total return performance available to
report. When available, historical volatility and performance are not
indications of what the Underlying Security volatility and performance will be
in the future. The volatility of U.S. exchange-traded securities or instruments
that reflect the value of the Underlying Security may differ from the volatility
of the Underlying Security. Given that the Underlying Security recently
commenced trading in June 2025, there is limited data on which investors can
evaluate the security.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s
shares could trade at a premium or discount to their net asset value
and/or the bid-ask spread of the Fund’s shares could widen. Under such
circumstances, the Fund may increase its transaction fee, change its investment
objective by, for example, seeking to track an alternative security, reduce its
leverage or close.
Circle
Internet Group, Inc.
Investing Risk.
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
software and services industry, Circle Internet Group, Inc. faces risks that
include, but are not limited to: those arising from its role as the issuer of
USDC, a stablecoin designed to maintain a value pegged to the U.S. dollar;
stablecoins are subject to significant and evolving regulatory scrutiny in the
United States and internationally, including potential legislation, regulation,
and enforcement actions that could restrict the issuance, redemption, or reserve
management of stablecoins and materially adversely affect Circle’s business,
financial condition, and results of operations; its ability to maintain full
reserve backing of USDC with high-quality liquid assets, primarily cash and U.S.
Treasury securities, is critical to market confidence; any perceived
instability, lack of transparency, or reserve deficiency could result in rapid
redemptions and reputational harm; and it is subject to operational,
cybersecurity, and fraud risks, as well as technology risks associated with
reliance on public blockchain networks. Any of these risks could materially and
adversely affect the company’s business, financial condition, results of
operations, and prospects.
Stablecoin
Risk.
The Fund will have significant exposure to stablecoins, as a result of its
concentrated exposure to Circle Internet Group, Inc., an issuer of stablecoins.
Although U.S. dollar- or Euro-pegged stablecoins are designed to maintain a
stable value by being backed by fiat currency reserves or other liquid assets,
there is no guarantee that the peg will be maintained or that the reserves will
be sufficient, transparent or accessible in times of market stress. The issuer’s
ability to honor redemptions on a 1:1 basis may be impaired by inadequate
reserve management, limited oversight, insolvency or legal restrictions.
Moreover, the stablecoin market is subject to an evolving regulatory
environment. Any legislative or enforcement actions targeting stablecoin
issuers, custodians or reserve assets could impact the stablecoin’s
functionality, tradability or value. Even where reserves are fully
collateralized, lack of independent audits, insufficient disclosures or
concentration in a single custodian or asset type (e.g.,
short-term U.S. Treasuries) may expose investors to hidden vulnerabilities.
Additionally, stablecoins are typically reliant on blockchain infrastructure and
smart contracts, which may be subject to bugs, outages or cyberattacks. A
failure to maintain the peg or loss of confidence in the stablecoin could result
in rapid redemptions, illiquidity, and significant losses to investors.
Investors should not assume that exposure to a U.S. dollar- or Euro-pegged
stablecoin is equivalent to holding U.S. dollars, Euros or risk-free
assets.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to
exchange
the return (or differentials in rates of return) earned or realized on
particular predetermined reference or underlying securities or instruments. The
gross return to be exchanged or swapped between the parties is calculated based
on a notional amount or the return on or change in value of a particular dollar
amount invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
gains value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines, the Fund’s net assets
will decline by the same amount as the Fund’s exposure. Therefore, an investor
that purchases shares intraday may experience performance that is greater than,
or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
IPO
Risk. The
market value of shares of an initial public offering (“IPO”), including those of
the Underlying Security, will fluctuate considerably due to factors such as the
absence of a prior public market, unseasoned trading, the small number of shares
available for trading and limited information about the issuer. The purchase of
IPO shares may involve high transaction costs. IPO shares are subject to market
risk and liquidity risk.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the software and services
industry.
Software
and Services Industry Risk. Computer
software companies can be significantly affected by competitive pressures,
aggressive pricing, technological developments, changing domestic demand, the
ability to attract and retain skilled employees and availability and price of
components. The market for products produced by software companies is
characterized by rapidly changing technology, rapid product obsolescence,
cyclical market patterns, evolving industry standards and frequent new product
introductions. The success of computer software companies depends in substantial
part on the timely and successful introduction of new products and the ability
to service such products. An unexpected change in one or more
of
the technologies affecting an issuer’s products or in the market for products
based on a particular technology could have a material adverse effect on a
participant’s operating results.
Many
computer software companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their proprietary
rights in their products and technologies. There can be no assurance that the
steps taken by computer software companies to protect their proprietary rights
will be adequate to prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such companies’
technology.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
the Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of CRCL and make no representation as to the
performance of the Underlying Security. Investing in the Fund is not equivalent
to investing in the Underlying Security. Fund shareholders will not have voting
rights or rights to receive dividends or other distributions or any other rights
with respect to the Underlying Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long CRM Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long CRM Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Salesforce, Inc. (NYSE: CRM) (“CRM” or
“Underlying Security). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of CRM. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.01% |
|
Acquired
Fund Fees and Expenses2 |
| 0.02% |
|
Total
Annual Fund Operating Expenses3 |
| 0.78% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $80 |
$249 |
$433 |
$966 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period April 3, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the software
and services industry
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Salesforce,
Inc. is a cloud-based software company that provides customer relationship
management solutions and enterprise applications for sales, customer service,
marketing, commerce, analytics, artificial intelligence, and application
development. The common stock of Salesforce, Inc. is registered under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Information
provided to or filed with the Securities and Exchange Commission (“SEC”) by
Salesforce, Inc. pursuant to the Exchange Act can be located by reference to the
SEC file number 001-32224 through the SEC’s website at www.sec.gov. In addition,
information regarding Salesforce, Inc. may be obtained from other sources
including, but not limited to, press releases, newspaper articles and other
publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the underlying security over the same period. The
Fund will lose money if the underlying security performance is flat over time,
and as a result of daily rebalancing, the underlying security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the underlying security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security ’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the
Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical volatility rate for the five-year
period ended December 31, 2025 was 35.29%. The Underlying Security’s
highest volatility rate for any one calendar year during the five-year period
was 47.22% and volatility for a shorter period of time may have been
substantially higher. The Underlying Security’s annualized performance for the
five-year period ended December 31, 2025 was 3.76%. Historical volatility
and performance are not indications of what the Underlying Security volatility
and performance will be in the future.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s
shares
could widen. Under such circumstances, the Fund may increase its transaction
fee, change its investment objective by, for example, seeking to track an
alternative security, reduce its leverage or
close.
Salesforce,
Inc. Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with companies in the software
and services industry, Salesforce, Inc. faces risks that include, but are not
limited to: its reliance on a subscription-based business model and the ability
to attract and retain customers and renew and expand customer subscriptions;
concentration of revenue among a limited number of large customers; intense
competition; fluctuations in customer demand and IT spending due to
macroeconomic conditions; risks associated with the development, deployment, and
use of new technologies, including artificial intelligence; reliance on
third-party infrastructure, products, and services; cybersecurity incidents,
data breaches, and data privacy compliance; the ability to attract, retain,
train, and motivate qualified personnel and senior management; risks related to
acquisitions and integration of acquired businesses; protection of intellectual
property; regulatory compliance and litigation; and risks associated with
international operations and foreign currency fluctuations. Any of these risks
could materially and adversely affect the company’s business, financial
condition, results of operations, and prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which
the
Fund invests are substantially influenced by the value of the Underlying
Security. The Fund may experience substantial downside from specific option
positions and certain option positions held by the Fund may expire worthless.
The options held by the Fund are exercisable at the strike price on their
expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Artificial
Intelligence (“AI”) Risk.
The Underlying Security embeds AI throughout its platform. Companies engaged in
AI and big data typically face intense competition and potentially rapid product
obsolescence. These companies are also heavily dependent on intellectual
property rights and may be adversely affected by loss or impairment of those
rights. There can be no assurance these companies will be able to successfully
protect their intellectual property to prevent the misappropriation of their
technology, or that competitors will not develop technology that is
substantially similar or superior to such companies’ technology. AI and big data
companies typically engage in significant amounts of spending on research and
development, as well as mergers and acquisitions, and there is no guarantee that
the products or services produced by these companies will be successful. AI and
big data companies are potential targets for cyberattacks, which can have a
materially adverse impact on the performance of these companies. In addition, AI
technology could face increasing regulatory scrutiny in the future, which may
limit the development of this technology and impede the growth of companies that
develop and/or utilize this technology. Similarly, the collection of data from
consumers and other sources could face increased scrutiny as regulators consider
how the data is collected, stored, safeguarded and used. AI and big data
companies may face regulatory fines and penalties, including potential forced
break-ups, that could hinder the ability of the companies to operate on an
ongoing basis. The customers and/or suppliers of AI and big data companies may
be concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on AI and big data companies. Country, government, and/or region-specific
regulations or restrictions could have an impact on AI and big data
companies.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the software and services
industry.
Software
and Services Industry Risk. Computer
software companies can be significantly affected by competitive pressures,
aggressive pricing, technological developments, changing domestic demand, the
ability to attract and retain skilled employees and availability and price of
components. The market for products produced by software companies is
characterized by rapidly changing technology, rapid product obsolescence,
cyclical market patterns, evolving industry standards and frequent new product
introductions. The success of computer software companies depends in substantial
part on the timely and successful introduction of new products and the ability
to service such products. An unexpected change in one or more
of
the technologies affecting an issuer’s products or in the market for products
based on a particular technology could have a material adverse effect on a
participant’s operating results.
Many
computer software companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their proprietary
rights in their products and technologies. There can be no assurance that the
steps taken by computer software companies to protect their proprietary rights
will be adequate to prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such companies’
technology.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Salesforce, Inc. and make no representation
as to the performance of the Underlying Security. Investing in the Fund is not
equivalent to investing in the Underlying Security. Fund shareholders will not
have voting rights or rights to receive dividends or other distributions or any
other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long CRWV Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long CRWV Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of CoreWeave, Inc. (Nasdaq: CRWV) (“CRWV” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of CRWV. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.01% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.77% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and expenses. |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
|
|
|
|
| |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
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|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $79 |
$246 |
$428 |
$954 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period August 8, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated U.S. exchanges. Traditional
exchange-traded options contracts have standardized terms, such as the type
(call or put), the reference asset, the strike price and expiration date.
Exchange-listed options contracts are guaranteed for settlement by the Options
Clearing Corporation (“OCC”). FLEX Options are a type of exchange-listed
options
contract with uniquely customizable terms that allow investors to customize key
terms like type, strike price and expiration date that are standardized in a
typical options contract. FLEX Options are also guaranteed for settlement by the
OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to which the Underlying Security is assigned). As of the date of this
prospectus, the Underlying Security is assigned to the software and services
industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
CoreWeave,
Inc. is a cloud infrastructure technology company that provides a specialized
cloud platform designed to support complex artificial intelligence and
high-performance computing workloads. The CoreWeave Cloud Platform consists of
software and cloud services that enable customers to deploy, manage, and scale
AI infrastructure efficiently. The common stock of CoreWeave, Inc. is registered
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Information provided to or filed with the Securities and Exchange Commission
(“SEC”) by CoreWeave, Inc. pursuant to the Exchange Act can be located by
reference to the SEC file number 001-42563 through the SEC’s website at
www.sec.gov. In addition, information regarding CoreWeave, Inc. may be obtained
from other sources including, but not limited to, press releases, newspaper
articles and other publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security. from the publicly available
documents described above. Neither the Fund, the Trust, the Adviser nor any
affiliate has participated in
the
preparation of such documents. Neither the Fund, the Trust, the Adviser nor any
affiliate makes any representation that such publicly available documents or any
other publicly available information regarding the Underlying Security is
accurate or complete. Furthermore, the Fund cannot give any assurance that all
events occurring prior to the date of the prospectus (including events that
would affect the accuracy or completeness of the publicly available documents
described above) that would affect the trading price of the Underlying Security
have been publicly disclosed. Subsequent disclosure of any such events or the
disclosure of, or failure to disclose, material future events concerning the
Underlying Security could affect the value of the Fund’s investments with
respect to the Underlying Security and therefore the value of the
Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying
Security’s
return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
As
of the date of this Prospectus, the Underlying Security has not yet traded on a
listing exchange for a one-year calendar period and, therefore, does not have an
annualized historical volatility rate or total return performance available to
report. When available, historical volatility and performance are not
indications of what the Underlying Security volatility and performance will be
in the future. The volatility of U.S. exchange-traded securities or instruments
that reflect the value of the Underlying Security may differ from the volatility
of the Underlying Security. Given that the Underlying Security recently
commenced trading in March 2025, there is limited data on which investors can
evaluate the security.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The
Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
CoreWeave,
Inc. Investing Risk.
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
software and services industry, CoreWeave, Inc. faces risks that include, but
are not limited to: its limited operating history and rapid growth; dependence
on a small number of large customers and concentration of revenues; the
capital-intensive nature of its business and the need for significant ongoing
investment in infrastructure; reliance on a limited number of suppliers for
GPUs, networking equipment, and other critical components; constraints related
to data center capacity, power availability, and energy costs; intense
competition in the cloud infrastructure market; risks associated with rapid
technological change in artificial intelligence and high-performance computing;
system outages, service disruptions, or cybersecurity incidents; reliance on
third-party data centers and service providers; regulatory, environmental, and
energy-related requirements; and general macroeconomic conditions that may
affect customer demand and financing availability. Any of these risks could
materially and adversely affect the company’s business, financial condition,
results of operations, and prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their
expiration date. As an option approaches
its expiration date, its value typically increasingly moves with the value of
the underlying instrument. However, prior to such date, the value of an option
generally does not increase or decrease at the same rate as the underlying
instrument. There may at times be an imperfect correlation between the movement
in values options contracts and the underlying instrument, and there may at
times not be a liquid secondary market for certain options contracts. The value
of the options held by the Fund will be determined based on market quotations or
other recognized pricing methods. Additionally, as the Fund intends to
continuously maintain indirect exposure to the Underlying Security through the
use of options contracts, as the options contracts it holds are exercised or
expire it will enter into new options contracts, a practice referred to as
“rolling.” If the expiring options contracts do not generate proceeds enough to
cover the cost of entering into new options contracts, the Fund may experience
losses. The use of options to generate leverage introduces additional risks,
including significant potential losses if the market moves unfavorably. The
leverage inherent in options can amplify both gains and losses, leading to
increased volatility and potential for substantial losses, particularly in
periods of market uncertainty or low liquidity. Additionally, the Fund may incur
losses if the value of the Underlying Security moves against its positions,
potentially resulting in a complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Artificial
Intelligence (“AI”) Risk.
The Underlying Security provides cloud infrastructure optimized for graphics
processing unit-intensive workloads, including AI training and inference.
Companies engaged in AI and big data typically face intense competition and
potentially rapid product obsolescence. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. AI and big data companies typically engage in significant amounts of
spending on research and development, as well as mergers and acquisitions, and
there is no guarantee that the products or services produced by these companies
will be successful. AI and big data companies are potential targets for
cyberattacks, which can have a materially adverse impact on the performance of
these companies. In addition, AI technology could face increasing regulatory
scrutiny in the future, which may limit the development of this technology and
impede the growth of companies that develop and/or utilize this technology.
Similarly, the collection of data from consumers and other sources could face
increased scrutiny as regulators consider how the data is collected, stored,
safeguarded and used. AI and big data companies may face regulatory fines and
penalties, including potential forced break-ups, that could hinder the ability
of the companies to operate on an ongoing basis. The customers and/or suppliers
of AI and big data companies may be concentrated in a particular country, region
or industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on AI and big data companies. Country,
government, and/or region-specific regulations or restrictions could have an
impact on AI and big data companies.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
IPO
Risk. The
market value of shares of an initial public offering (“IPO”), including those of
the Underlying Security, will fluctuate considerably due to factors such as the
absence of a prior public market, unseasoned trading, the small number of shares
available for trading and limited information about the issuer. The purchase of
IPO shares may involve high transaction costs. IPO shares are subject to market
risk and liquidity risk.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the software and services
industry.
Software
and Services Industry Risk. Computer
software companies can be significantly affected by competitive pressures,
aggressive pricing, technological developments, changing domestic demand, the
ability to attract and retain skilled employees and availability and price of
components. The market for products produced by software companies is
characterized by rapidly changing technology, rapid product obsolescence,
cyclical market patterns, evolving industry standards and frequent new product
introductions. The success of computer software companies depends in substantial
part on the timely and successful introduction of new products and the ability
to service such products. An unexpected change in one or more
of
the technologies affecting an issuer’s products or in the market for products
based on a particular technology could have a material adverse effect on a
participant’s operating results.
Many
computer software companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their proprietary
rights in their products and technologies. There can be no assurance that the
steps taken by computer software companies to protect their proprietary rights
will be adequate to prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such companies’
technology.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of CoreWeave, Inc. and make no representation as
to the performance of the Underlying Security. Investing in the Fund is not
equivalent to investing in the Underlying Security. Fund shareholders will not
have voting rights or rights to receive dividends or other distributions or any
other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long FIG Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long FIG Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Figma, Inc. (NYSE: FIG) (“FIG” or “Underlying
Security”). The return for investors that invest for periods longer or shorter
than a trading day should not be expected to be 200% of the performance of the
Underlying Security for the period. The return of the Fund for a period longer
than a trading day will be the result of each trading day’s compounded return
over the period, which will very likely differ from 200% of the return of the
Underlying Security for that period. Longer holding periods, higher volatility
of the Underlying Security and leverage increase the impact of compounding on an
investor’s returns. During periods of higher Underlying Security volatility, the
volatility of the Underlying Security may affect the Fund’s return as much as,
or more than, the return of the Underlying Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of FIG. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
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Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
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Other
Expenses |
| 0.00% |
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Total
Annual Fund Operating Expenses2 |
| 0.75% |
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1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and expenses. |
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2 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
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| 1
Year |
3
Years |
5
Years |
10
Years |
| $77 |
$240 |
$417 |
$930 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period October 13, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated U.S. exchanges. Traditional
exchange-traded options contracts have standardized terms, such as the type
(call or put), the reference asset, the strike price and expiration date.
Exchange-listed options contracts are guaranteed for settlement by the Options
Clearing Corporation (“OCC”). FLEX Options are a type of exchange-listed options
contract with uniquely customizable terms that allow investors to customize key
terms like type, strike price and expiration date that are standardized in a
typical options contract. FLEX Options are also guaranteed for settlement by the
OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the software
and services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease in the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Figma,
Inc. is a collaborative, cloud-based design platform that enables teams to
create, prototype, and iterate on user interfaces and digital experiences in
real-time. The common stock of Figma, Inc. is registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to
or filed with the Securities and Exchange Commission (“SEC”) by Figma, Inc.
pursuant to the Exchange Act can be located by reference to the SEC file number
001-42761 through the SEC’s website at www.sec.gov. In addition, information
regarding Figma, Inc. may be obtained from other sources including, but not
limited to, press releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such
events
or the disclosure of, or failure to disclose, material future events concerning
the Underlying Security could affect the value of the Fund’s investments with
respect to the Underlying Security and therefore the value of the
Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Fund.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The
table
below is not a representation of the Fund’s actual returns, which may be
significantly better or worse than the returns shown below as a result of any of
the factors discussed above or in “Daily Correlation Risk” below.
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| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
As
of the date of this Prospectus, the Underlying Security has not yet traded on a
listing exchange for a one-year calendar period and, therefore, does not have an
annualized historical volatility rate or total return performance available to
report. When available, historical volatility and performance are not
indications of what the Underlying Security volatility and performance will be
in the future. The volatility of U.S. exchange-traded securities or instruments
that reflect the value of the Underlying Security may differ from the volatility
of the Underlying Security. Given that the Underlying Security recently
commenced trading in July 2025, there is limited data on which investors can
evaluate the security.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk. The Fund obtains investment exposure in excess of its net assets by
utilizing leverage and may lose more money in market conditions that are adverse
to its investment objective than a fund that does not utilize leverage. An
investment in the Fund is exposed to the risk that a decline in the daily
performance of the Underlying Security will be magnified. This means that an
investment in the Fund will be reduced by an amount equal to 2% for every 1%
daily decline in the Underlying Security, not including the costs of financing
leverage and other operating expenses, which would further reduce its value. The
Fund could lose an amount greater than its net assets in the event of a security
decline of more than 50%. This would result in a total loss of a shareholder’s
investment in one day even if the Underlying Security subsequently moves in the
opposite direction and eliminates all or a portion of its earlier daily change.
A total loss may occur in a single day even if the Underlying Security does not
lose all of its value. Leverage will also have the effect of magnifying any
differences in the Fund’s correlation with the Underlying Security and may
increase the volatility of the Fund.
Figma,
Inc. Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with the software and services
industry, Figma Inc., faces risks that include, but are not limited to: intense
competition from companies with greater financial, technical, marketing, and
sales resources, as well as from startups offering innovative solutions; its
ability to retain existing customers and increase adoption of its platform while
attracting new customers; its ability to develop new offerings and functionality
and enhance existing products, including through the integration of artificial
intelligence; risks associated with expanding its business domestically and
internationally; its ability to scale and effectively deploy its sales
organization; risks related to entering new markets and addressing new use
cases; the ability to increase brand awareness; risks related to pricing and
packaging in a rapidly evolving software landscape, including due to advances in
artificial intelligence; cybersecurity incidents and protection of
customer
data; reliance on third-party cloud infrastructure and service providers; and
risks associated with identifying, acquiring, or integrating complementary
businesses, products, or technologies. Any of these risks could materially and
adversely affect the company’s business, financial condition, results of
operations, and prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values of options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of
options
to generate leverage introduces additional risks, including significant
potential losses if the market moves unfavorably. The leverage inherent in
options can amplify both gains and losses, leading to increased volatility and
potential for substantial losses, particularly in periods of market uncertainty
or low liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Artificial
Intelligence (“AI”) Risk.
Figma, Inc. has integrated AI-powered tools for design suggestions, prototyping,
content generation, and automation. Companies engaged in AI and big data
typically face intense competition and potentially rapid product obsolescence.
These companies are also heavily dependent on intellectual property rights and
may be adversely affected by loss or impairment of those rights. There can be no
assurance these companies will be able to successfully protect their
intellectual property to prevent the misappropriation of their technology, or
that competitors will not develop technology that is substantially similar or
superior to such companies’ technology. AI and big data companies typically
engage in significant amounts of spending on research and development, as well
as mergers and acquisitions, and there is no guarantee that the products or
services produced by these companies will be successful. AI and big data
companies are potential targets for cyberattacks, which can have a materially
adverse impact on the performance of these companies. In addition, AI technology
could face increasing regulatory scrutiny in the future, which may limit the
development of this technology and impede the growth of companies that develop
and/or utilize this technology. Similarly, the collection of data from consumers
and other sources could face increased scrutiny as regulators consider how the
data is collected, stored, safeguarded and used. AI and big data companies may
face regulatory fines and penalties, including potential forced break-ups, that
could hinder the ability of the companies to operate on an ongoing basis. The
customers and/or suppliers of AI and big data companies may be concentrated in a
particular country, region or industry. Any adverse event affecting one of these
countries, regions or industries could have a negative impact on AI and big data
companies. Country, government, and/or region-specific regulations or
restrictions could have an impact on AI and big data
companies.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant
losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the software and services
industry.
Software
and Services Industry Risk. Computer
software companies can be significantly affected by competitive pressures,
aggressive pricing, technological developments, changing domestic demand, the
ability to attract and retain skilled employees and availability and price of
components. The market for products produced by software companies is
characterized by rapidly changing technology, rapid product obsolescence,
cyclical market patterns, evolving industry standards and frequent new product
introductions. The success of computer software companies depends in substantial
part on the timely and successful introduction of new products and the ability
to service such products. An unexpected change in one or more of the
technologies affecting an issuer’s products or in the market for products based
on a particular technology could have a material adverse effect on a
participant’s operating results.
Many computer software companies rely
on a combination of patents, copyrights, trademarks and trade secret laws to
establish and protect their proprietary rights in their products and
technologies. There can be no assurance that the steps taken by computer
software companies to protect their proprietary rights will be adequate to
prevent misappropriation of their technology or that competitors will not
independently develop technologies that are substantially equivalent or superior
to such companies’ technology.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems
of
the Fund’s Adviser, other service providers, market makers, Authorized
Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Figma, Inc. and make no representation as to
the performance of the Underlying Security. Investing in the Fund is not
equivalent to investing in the Underlying Security. Fund shareholders will not
have voting rights or rights to receive dividends or other distributions or any
other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments
with
a single counterparty or a few counterparties. This may increase the Fund’s
volatility and increase the risk that the Fund’s performance will decline based
on the performance of a single issuer or the credit of a single counterparty and
make the Fund more susceptible to risks associated with a single economic,
political or regulatory occurrence than a diversified
fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long FUTU Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long FUTU Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
American Depositary Receipt (“ADR”) of Futu Holdings Limited (Nasdaq: FUTU)
(“FUTU” or “Underlying Security”). The return for investors that invest for
periods longer or shorter than a trading day should not be expected to be 200%
of the performance of the Underlying Security for the period. The return of the
Fund for a period longer than a trading day will be the result of each trading
day’s compounded return over the period, which will very likely differ from 200%
of the return of the Underlying Security for that period. Longer holding
periods, higher volatility of the Underlying Security and leverage increase the
impact of compounding on an investor’s returns. During periods of higher
Underlying Security volatility, the volatility of the Underlying Security may
affect the Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the ADR of FUTU. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Total
Annual Fund Operating Expenses2 |
| 0.75% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and expenses. |
|
2 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $77 |
$240 |
$417 |
$930 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period October 13, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security’s ADR.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated U.S. exchanges. Traditional
exchange-traded options contracts have standardized terms, such as the type
(call or put), the reference asset, the strike price and expiration date.
Exchange-listed options contracts are guaranteed for settlement by the Options
Clearing Corporation (“OCC”). FLEX Options are a type of exchange-listed options
contract with uniquely customizable terms that allow investors to customize key
terms like type, strike price and expiration date that are standardized in a
typical options contract. FLEX Options are also guaranteed for settlement by the
OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
financial services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Futu
Holdings Limited is a digital brokerage and wealth management service provider
headquartered in Hong Kong. Through its proprietary digital platforms, Futubull
and Moomoo, the company provides online financial services, including securities
and derivatives brokerage, margin financing, wealth management product
distribution, market data and information services, and online community
features. Futu Holdings Limited also offers wealth management products,
including mutual funds, private funds, bonds, and structured products, as well
as financial information and investor education services. Futu Holdings Limited
is registered as a foreign private issuer under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Information provided to or filed with the
Securities and Exchange Commission (“SEC”) by Futu pursuant to the Exchange Act
can be located by reference to the SEC file number 001-38820 through the SEC’s
website at www.sec.gov. In addition, information regarding Futu Holdings Limited
may be obtained from other sources including, but not limited to, press
releases, newspaper articles and other publicly disseminated
documents.
The
Fund will enter into swap agreements based on the Underlying Security, which is
an ADR. ADRs provide U.S. investors access to foreign stocks on domestic
exchanges but can exhibit pricing differences compared to the underlying foreign
stocks. These differences stem from factors such as currency fluctuations,
market dynamics, liquidity variances, and tax implications. Additionally,
corporate actions and ADR fees and expenses can contribute to disparities in
pricing between ADRs and the foreign stocks they
represent.
This
document relates only to the securities offered hereby and does not relate to
the ADRs of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will
impact
each shareholder differently depending on the period of time an investment in
the Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical volatility rate for the five-year
period ended December 31, 2025 was 79.38%. The Underlying Security’s
highest volatility rate for any one calendar year during the five-year period
was 108.47% and volatility for a shorter period of time may have been
substantially higher. The Underlying Security’s annualized performance for the
five-year period ended December 31, 2025 was 27.39%. Historical volatility
and performance are not indications of what the Underlying Security’s volatility
and performance will be in the future.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such
periods,
the Fund’s ability to issue additional Creation Units may be adversely affected.
As a result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Futu
Holdings Limited Investing Risk.
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
financial services industry, Futu Holdings Limited faces risks that include, but
are not limited to: the fact that its historical growth rates may not be
indicative of future performance, making it difficult to evaluate its future
prospects; extensive and evolving regulatory requirements applicable to its
business; historical deficiencies in online client onboarding procedures that
did not strictly follow regulatory requirements in Hong Kong, which may subject
the company to regulatory actions, including reprimands, fines, limitations or
prohibitions on future business activities, and suspension or revocation of
licenses or trading rights, and may adversely affect its business, financial
condition, results of operations, brand reputation, and prospects; the absence
of licenses or permits to provide securities brokerage services in Mainland
China; intense competition in the online brokerage and wealth management
industries; changes in social conditions and political and economic policies of
the People’s Republic of China (“PRC”); uncertainties regarding the
interpretation and enforcement of PRC laws, rules, and regulations; the risk
that its American depositary shares may be delisted or prohibited from trading
in the United States under the Holding Foreign Companies Accountable Act if the
PCAOB is unable to inspect or investigate its auditors; and risks related to
macroeconomic conditions, including uneven economic growth, geopolitical
tensions, global trade disruptions, fluctuations in foreign currency exchange
rates, interest rate changes, and inflation. Any of these risks could materially
and adversely affect the company’s business, financial condition, results of
operations, and prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an
extended
period, the Fund may determine that it is necessary to make adjustments to the
Fund’s investment strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount
as
the Fund’s exposure. Therefore, an investor that purchases shares intraday may
experience performance that is greater than, or less than, the Fund’s stated
investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant
losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the financial services
industry
Financial
Services Industry Risk.
Financial services companies are subject to extensive governmental regulation
which may limit both the amounts and types of loans and other financial
commitments they can make, the interest rates and fees they can charge, the
scope of their activities, the prices they can charge and the amount of capital
they must maintain. Profitability is largely dependent on the availability and
cost of capital funds and can fluctuate significantly when interest rates change
or due to increased competition. In addition, deterioration of the credit
markets generally may cause an adverse impact in a broad range of markets,
including U.S. and international credit and interbank money markets generally,
thereby affecting a wide range of financial institutions and markets. Certain
events in the financial industry may cause an unusually high degree of
volatility in the financial markets, both domestic and foreign, and cause
certain financial services companies to incur large losses. Securities of
financial services companies may experience a dramatic decline in value when
such companies experience substantial declines in the valuations of their
assets, take action to raise capital (such as the issuance of debt or equity
securities), or cease operations. Credit losses resulting from financial
difficulties of borrowers and financial losses associated with investment
activities can negatively impact the industry. Insurance companies may be
subject to severe price competition. Adverse economic, business or political
developments could adversely affect financial institutions engaged in mortgage
finance or other lending or investing activities directly or indirectly
connected to the value of real
estate.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the
Fund
invests, have the ability to cause disruptions, negatively impact the Fund’s
business operations and/or potentially result in financial losses to the Fund
and its shareholders. While the Fund has established business continuity plans
and risk management systems seeking to address system breaches or failures,
there are inherent limitations in such plans and systems. Furthermore, the Fund
cannot control the cybersecurity plans and systems of the Fund’s Adviser, other
service providers, market makers, Authorized Participants or issuers of
securities in which the Fund invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Futu Holdings Limited and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face
delisting:
(i) APs exit the business or otherwise become unable to process creation and/or
redemption orders and no other APs step forward to perform these services, or
(ii) market makers and/or liquidity providers exit the business or significantly
reduce their business activities and no other entities step forward to perform
their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market
exposure
for limited periods of time. This impact may be positive or negative, depending
on the direction of market movement during the period
affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long GLXY Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long GLXY Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Galaxy Digital Inc. (Nasdaq: GLXY) (“GLXY” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the performance of the Underlying
Security performance is flat, and it is possible that the Fund will lose money
even if the performance of the Underlying Security increases over a period
longer than a single day. An investor could lose the full principal value of
his/her investment within a single day if the price of the Underlying Security
falls by more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of GLXY. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.76% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $78 |
$243 |
$422 |
$942 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period August 20, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange® (“FLEX”) call and put options contracts
that are based on the value of the price returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
financial services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease in the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Galaxy
Digital Inc. is a digital asset financial services and investment management
company that serves institutions, startups, and qualified individuals across the
digital asset and blockchain ecosystem. Galaxy Digital Inc. holds significant
digital assets, including Bitcoin, Ethereum, and other cryptocurrencies, both
for its own account and to facilitate client services, and these holdings are
material to its financial condition and results of operations. The common stock
of Galaxy Digital Inc. is registered under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Information provided to or filed with the
Securities and Exchange Commission (“SEC”) by Galaxy Digital Inc. pursuant to
the Exchange Act can be located by reference to the SEC file number 001-42655
through the SEC’s website at www.sec.gov. In addition, information regarding
Galaxy Digital Inc. may be obtained from other sources including, but not
limited to, press releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk. The
Fund has a daily leveraged investment objective and the Fund’s performance for
periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
performance of the Underlying Security performance, before fees and expenses.
Compounding has a significant impact on funds that are leveraged and that
rebalance daily. The impact of compounding becomes more pronounced as volatility
and holding periods increase and will impact each shareholder differently
depending on the period of time an investment in the Fund is held and the
volatility of the Underlying Security during the shareholder’s holding period of
an investment in the Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will
impact
each shareholder differently depending on the period of time an investment in
the Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one-year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the
Underlying Security’s annualized
volatility is 100%, the Fund would be expected to lose 63.2% of its value, even
if the cumulative return for the year was 0%. Areas
shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical volatility rate for the five-year
period ended December 31, 2025 was 99.19%. The Underlying Security’s
highest volatility rate for any one calendar year during the five-year period
was 121.34% and volatility for a shorter period of time may have been
substantially higher. The Underlying Security’s annualized performance for the
five-year period ended December 31, 2025 was 20.66%. Historical volatility
and performance are not indications of what the Underlying Security’s volatility
and performance will be in the future.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The
Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s
shares
could trade at a premium or discount to their net asset value and/or the bid-ask
spread of the Fund’s shares could widen. Under such circumstances, the Fund may
increase its transaction fee, change its investment objective by, for example,
seeking to track an alternative security, reduce its leverage or
close.
Galaxy
Digital Inc. Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with companies in the financial
services industry Galaxy Digital Inc. faces risks that include, but are not
limited to: significant volatility in digital asset prices and markets, which
may materially impact trading activity, asset values, revenues, and operating
results; dependence on continued development, adoption, and acceptance of
digital assets and blockchain technology; material exposure to market, credit,
liquidity, and counterparty risks arising from its trading, asset management,
lending, staking, and principal investing activities; operating in a highly
regulated and evolving regulatory environment, where changes in laws,
regulations, or enforcement actions related to digital assets could restrict
operations or increase compliance costs; operational, technology, and
cybersecurity risks, including failures of systems or safeguards for digital
assets; reliance on key personnel and the ability to attract and retain
specialized talent; competition from traditional financial institutions,
crypto-native firms, and decentralized platforms; and fluctuations in interest
rates, capital markets activity, and broader economic conditions that could
adversely affect financial performance. Any of these risks could materially and
adversely affect the company’s business, financial conditions, results of
operations, and prospectus.
The
Underlying Security holds digital assets as part of its corporate treasury
operations. The market value of digital assets is highly volatile and may be
subject to significant price fluctuations, which could materially adversely
affect the Underlying Security’s financial condition, results of operations,
liquidity, or stock price. In addition, digital assets may be subject to
evolving regulatory frameworks, cybersecurity risks, custody risks, accounting
treatment risks, and potential impairment charges, any of which could adversely
affect the Underlying Security. Because the Fund seeks daily investment results
that correspond to twice (2X) the daily performance of the Underlying Security’s
common stock, increased volatility in the Underlying Security’s stock may result
in increased volatility of the Fund. The Fund does not invest directly in
digital assets.
Derivatives
Risk. Derivatives
are financial instruments that derive value from the underlying reference asset
or assets, such as stocks, bonds, or funds (including ETFs), interest rates or
indexes. Investing in derivatives may expose the Fund to greater risks, and may
result in larger losses or small gains, than investing directly in the reference
assets underlying those derivatives, which may prevent the Fund from achieving
its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant
losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk. If
a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk. If
for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk. The
intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the
Underlying
Security gains value, the Fund’s net assets will rise by the same amount as the
Fund’s exposure. Conversely, if the Underlying Security declines, the Fund’s net
assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant
losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk. The
Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the financial services
industry.
Financial
Services Industry Risk. Financial
services companies are subject to extensive governmental regulation which may
limit both the amounts and types of loans and other financial commitments they
can make, the interest rates and fees they can charge, the scope of their
activities, the prices they can charge and the amount of capital they must
maintain. Profitability is largely dependent on the availability and cost of
capital funds and can fluctuate significantly when interest rates change or due
to increased competition. In addition, deterioration of the credit markets
generally may cause an adverse impact in a broad range of markets, including
U.S. and international credit and interbank money markets generally, thereby
affecting a wide range of financial institutions and markets. Certain events in
the financial industry may cause an unusually high degree of volatility in the
financial markets, both domestic and foreign, and cause certain financial
services companies to incur large losses. Securities of financial services
companies may experience a dramatic decline in value when such companies
experience substantial declines in the valuations of their assets, take action
to raise capital (such as the issuance of debt or equity securities), or cease
operations. Credit losses resulting from financial difficulties of borrowers and
financial losses associated with investment activities can negatively impact the
industry. Insurance companies may be subject to severe price competition.
Adverse economic, business or political developments could adversely affect
financial institutions engaged in mortgage finance or other lending or investing
activities directly or indirectly connected to the value of real
estate.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk. Publicly
issued equity securities, including common stocks, are subject to market risks
that may cause their prices to fluctuate over time. Fluctuations in the value of
equity securities in which the Fund invests, and/or has exposure to, will cause
the net asset value of the Fund to fluctuate.
Indirect
Investment Risk. The
Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Galaxy Digital Inc. and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk. The
Fund may use a variety of money market instruments for cash management purposes,
including money market funds, depositary accounts and repurchase agreements.
Money market funds may be subject to credit risk with respect to the debt
instruments in which they invest. Depository accounts may be subject to credit
risk with respect to the financial institution in which the depository account
is held. Repurchase agreements may be subject to market and credit risk related
to the collateral securing the repurchase agreement. Money market instruments
may lose money.
Repurchase
Agreements Risk. The
Fund may enter into repurchase agreements. In a repurchase agreement, a party
sells a security, commonly a U.S. government security, and agrees to buy the
security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks. The
Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited
number
of market makers and/or liquidity providers in the marketplace. To the extent
either of the following events occur, shares of the Fund may trade at a material
discount to NAV and possibly face delisting: (i) APs exit the business or
otherwise become unable to process creation and/or redemption orders and no
other APs step forward to perform these services, or (ii) market makers and/or
liquidity providers exit the business or significantly reduce their business
activities and no other entities step forward to perform their
functions.
Costs
of Buying or Selling Shares of the Fund. Due
to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV. As
with all ETFs, shares of the Fund may be bought and sold in the secondary market
at market prices. The price of shares of the Fund, like the price of all traded
securities, will be subject to factors such as supply and demand, as well as the
current value of the Fund’s portfolio holdings. Although it is expected that the
market price of the shares of the Fund will approximate the Fund’s NAV, there
may be times when the market price of the shares is more than the NAV intraday
(premium) or less than the NAV intraday (discount). This risk is heightened in
times of market volatility, periods of steep market declines, and periods when
there is limited trading activity for shares in the secondary market, in which
case such premiums or discounts may be significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The
Fund will generally effect creations and redemptions for cash rather than for
in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk. In
order to qualify for the special tax treatment accorded a regulated investment
company (“RIC”) and its shareholders, the Fund must derive at least 90% of its
gross income for each taxable year from “qualifying income,” meet certain asset
diversification tests at the end of each taxable quarter and meet annual
distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk. As
of the date of this prospectus, the Fund has no operating history and currently
has fewer assets than larger funds. Like other new funds, large inflows and
outflows may impact the Fund’s market exposure for limited periods of time. This
impact may be positive or negative, depending on the direction of market
movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk. Daily
rebalancing of the Fund’s holdings pursuant to its daily investment objective
causes a much greater number of portfolio transactions when compared to most
ETFs. Additionally, active secondary market trading of the Shares could cause
more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long HOOD Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long HOOD Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Robinhood Markets, Inc. (Nasdaq: HOOD) (“HOOD”
or “Underlying Security”). The return for investors that invest for periods
longer or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of HOOD. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
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Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
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Other
Expenses |
| 0.08% |
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Acquired
Fund Fees and Expenses2 |
| 0.02% |
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Total
Annual Fund Operating Expenses3 |
| 0.85% |
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1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
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2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
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3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
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| 1
Year |
3
Years |
5
Years |
10
Years |
| $87 |
$271 |
$471 |
$1,049 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period March 20, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange® (“FLEX”) call and put options contracts
that are based on the value of the price returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
financial services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Robinhood
Markets, Inc. operates a financial services platform in the United States. Its
platform enables users to invest in stocks, ETFs, American Depositary Receipts,
options, gold, and cryptocurrencies. The common stock of Robinhood Markets, Inc.
is registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Information provided to or filed with the Securities and
Exchange Commission (“SEC”) by Robinhood Markets, Inc. pursuant to the Exchange
Act can be located by reference to the SEC file number 001-40691 through the
SEC’s website at www.sec.gov.
In addition, information regarding Robinhood Markets, Inc. may be obtained from
other sources including, but not limited to, press releases, newspaper articles
and other publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk. The
Fund has a daily leveraged investment objective and the Fund’s performance for
periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the
Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%. Areas
shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate since
inception of trading on July 28, 2021 through the period ended December 31,
2025 (the “Period”) was 74.05%. The Underlying Security’s highest volatility
rate for any one calendar year during the Period was 116.17% and volatility for
a shorter period of time may have been substantially higher. The Underlying
Security’s annualized performance for the Period was 24.38%. Historical
volatility and performance are not indications of what the Underlying Security
volatility and performance will be in the future. Volatility for a shorter
period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk. The
Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s
shares
could widen. Under such circumstances, the Fund may increase its transaction
fee, change its investment objective by, for example, seeking to track an
alternative security, reduce its leverage or
close.
Robinhood
Markets, Inc. Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with companies in the financial
services industry, Robinhood Markets, Inc. faces a number of risks that include,
but are not limited to: a history of operating losses and the potential for
continued volatility in results of operations; reliance on transaction-based
revenues, including risks related to reduced trading activity, pricing
compression, changes in relationships with market makers, and regulatory actions
or prohibitions affecting payment for order flow and similar practices; exposure
to fluctuations in interest rates and rapidly changing interest rate
environments; liquidity and capital requirements necessary to support clearing,
settlement, margin lending, and business growth; intense regulatory scrutiny and
enforcement actions, as well as litigation risk; platform reliability, system
capacity, cybersecurity, and operational risks; reputational harm; dependence on
key personnel and the ability to attract and retain highly skilled employees;
international operational and regulatory risks; and risks associated with crypto
asset-related products and services, including regulatory uncertainty, market
volatility, custody, and compliance risks, including those arising from the
pending acquisition and integration of Bitstamp. Any of these risks could
materially and adversely affect the company’s business, financial condition,
results of operations, and prospects.
Derivatives
Risk. Derivatives
are financial instruments that derive value from the underlying reference asset
or assets, such as stocks, bonds, or funds (including ETFs), interest rates or
indexes. Investing in derivatives may expose the Fund to greater risks, and may
result in larger losses or small gains, than investing directly in the reference
assets underlying those derivatives, which may prevent the Fund from achieving
its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument,
including
the anticipated volatility, which are affected by fiscal and monetary policies
and by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk. If
a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk. If
for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk. The
intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk. The
Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the financial services
industry.
Financial
Services Industry Risk. Financial
services companies are subject to extensive governmental regulation which may
limit both the amounts and types of loans and other financial commitments they
can make, the interest rates and fees they can charge, the scope of their
activities, the prices they can charge and the amount of capital they must
maintain. Profitability is largely dependent on the availability and cost of
capital funds and can fluctuate significantly when interest rates change or due
to increased competition. In addition, deterioration of the credit markets
generally may cause an adverse impact in a broad range of markets, including
U.S. and international credit and interbank money markets generally, thereby
affecting a wide range of financial institutions and markets. Certain events in
the financial industry may cause an unusually high degree of volatility in the
financial markets, both domestic and foreign, and cause certain financial
services companies to incur large losses. Securities of financial services
companies may experience a dramatic decline in value when such companies
experience substantial declines in the valuations of their assets, take action
to raise capital (such as the issuance of debt or equity securities), or cease
operations. Credit losses resulting from financial difficulties of borrowers and
financial losses associated with investment activities can negatively impact the
industry. Insurance companies may be subject to severe price competition.
Adverse economic, business or political developments could adversely affect
financial institutions engaged in mortgage finance or other lending or investing
activities directly or indirectly connected to the value of real
estate.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk. Publicly
issued equity securities, including common stocks, are subject to market risks
that may cause their prices to fluctuate over time. Fluctuations in the value of
equity securities in which the Fund invests, and/or has exposure to, will cause
the net asset value of the Fund to fluctuate.
Indirect
Investment Risk. The
Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Robinhood and make no representation as to
the performance of the Underlying Security. Investing in the Fund is not
equivalent to investing in the Underlying Security. Fund shareholders will not
have voting rights or rights to receive dividends or other distributions or any
other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk. The
Fund may use a variety of money market instruments for cash management purposes,
including money market funds, depositary accounts and repurchase agreements.
Money market funds may be subject to credit risk with respect to the debt
instruments in which they invest. Depository accounts may be subject to credit
risk with respect to the financial institution in which the depository account
is held. Repurchase agreements may be subject to market and credit risk related
to the collateral securing the repurchase agreement. Money market instruments
may lose money.
Repurchase
Agreements Risk. The
Fund may enter into repurchase agreements. In a repurchase agreement, a party
sells a security, commonly a U.S. government security, and agrees to buy the
security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks. The
Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund. Due
to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the
Fund
may significantly reduce investment results and an investment in shares of the
Fund may not be advisable for investors who anticipate regularly making small
investments.
Shares
of the Fund May Trade at Prices Other Than NAV. As
with all ETFs, shares of the Fund may be bought and sold in the secondary market
at market prices. The price of shares of the Fund, like the price of all traded
securities, will be subject to factors such as supply and demand, as well as the
current value of the Fund’s portfolio holdings. Although it is expected that the
market price of the shares of the Fund will approximate the Fund’s NAV, there
may be times when the market price of the shares is more than the NAV intraday
(premium) or less than the NAV intraday (discount). This risk is heightened in
times of market volatility, periods of steep market declines, and periods when
there is limited trading activity for shares in the secondary market, in which
case such premiums or discounts may be significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC
(the
“Exchange”) and may be traded on U.S. exchanges other than the Exchange, there
can be no assurance that shares of the Fund will trade with any volume, or at
all, on any stock exchange. In stressed market conditions, the liquidity of
shares of the Fund may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than shares of the
Fund, and this could lead to differences between the market price of the shares
of the Fund and the underlying value of those
shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The
Fund will generally effect creations and redemptions for cash rather than for
in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk. In
order to qualify for the special tax treatment accorded a regulated investment
company (“RIC”) and its shareholders, the Fund must derive at least 90% of its
gross income for each taxable year from “qualifying income,” meet certain asset
diversification tests at the end of each taxable quarter and meet annual
distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk. As
of the date of this prospectus, the Fund has no operating history and currently
has fewer assets than larger funds. Like other new funds, large inflows and
outflows may impact the Fund’s market exposure for limited periods of time. This
impact may be positive or negative, depending on the direction of market
movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single
counterparty
and make the Fund more susceptible to risks associated with a single economic,
political or regulatory occurrence than a diversified
fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk. Daily
rebalancing of the Fund’s holdings pursuant to its daily investment objective
causes a much greater number of portfolio transactions when compared to most
ETFs. Additionally, active secondary market trading of the Shares could cause
more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long MP Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long MP Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of MP Materials Corporation (NYSE: MP) (“MP” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the performance of the Underlying
Security performance is flat, and it is possible that the Fund will lose money
even if the performance of the Underlying Security increases over a period
longer than a single day. An investor could lose the full principal value of
his/her investment within a single day if the price of the Underlying Security
falls by more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of MP. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.76% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $78 |
$243 |
$422 |
$942 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period October 24, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated U.S. exchanges. Traditional
exchange-traded options contracts have standardized terms, such as the type
(call or put), the reference asset, the strike price and expiration date.
Exchange-listed options contracts are guaranteed for settlement by the Options
Clearing Corporation (“OCC”). FLEX Options are a type of exchange-listed options
contract with uniquely customizable terms that allow investors to customize key
terms like type, strike price and expiration date that are standardized in a
typical options contract. FLEX Options are also guaranteed for settlement by the
OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
materials industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease in the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
MP
Materials Corporation
produces
rare earth materials and products used in advanced technologies. The company
operates in two segments, Materials and Magnetics. The Materials segment owns
and operates the Mountain Pass rare earth mine and processing facility located
near Mountain Pass, San Bernardino County, California, the only active rare
earth mining and processing site in North America. The Magnetics segment is
focused on the production of rare earth magnetic precursor products and the
development of rare earth magnet manufacturing capabilities. The common stock of
MP Materials Corporation is registered under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Information provided to or filed with the
Securities and Exchange Commission (“SEC”) by MP Materials Corporation pursuant
to the Exchange Act can be located
by
reference to the SEC file number 001-39277 through the SEC’s website at
www.sec.gov. In addition, information regarding MP Materials Corporation may be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
performance of the Underlying Security performance, before fees and expenses.
Compounding has a significant impact on funds that are leveraged and that
rebalance daily. The impact of compounding becomes more pronounced as volatility
and holding periods increase and will impact each shareholder differently
depending on the period of time an investment in the Fund is held and the
volatility of the Underlying Security during the shareholder’s holding period of
an investment in the Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one-year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the
Underlying Security’s
annualized volatility is 100%, the Fund would be expected to lose 63.2% of its
value, even if the cumulative return for the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate for the
five-year period ended December 31, 2025 was 71.68%. The Underlying
Security’s highest volatility rate for any one calendar year during the
five-year period was 96.51% and volatility for a shorter period of time may have
been substantially higher. The Underlying Security’s annualized performance for
the five-year period ended December 31, 2025 was 11.63%. Historical
volatility and performance are not indications of what the Underlying Security’s
volatility and performance will be in the future. Volatility for a shorter
period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
MP
Materials Corporation Investing Risk. Issuer-specific attributes may cause an investment held by the Fund
to be more volatile than the market generally. The value of an individual
security or particular type of security may be more volatile than the market as
a whole and may perform differently from the value of the market as a whole. As
of the date of this prospectus, in addition to the risks associated with the
materials industry, MP Materials Corporation faces risks that include, but are
not limited to: changes in trade policies and geopolitical conditions in the
United States, China, and other countries, including the imposition of tariffs
or other restrictions; its ability to expand sales of rare earth products in
markets outside of China; uncertainties related to its commercial arrangements
with Shenghe Resources (Singapore) International Trading Pte. Ltd. and its
decision to cease shipments of rare earth concentrate to China, including the
ability to resume such shipments; risks associated with the development and
ramp-up of its downstream operations, including rare earth separation and
vertical integration initiatives; fluctuations in demand for and pricing of rare
earth products; uncertainties regarding the growth of end markets and
competition from substitute materials; intense competition within the rare earth
mining, processing, and magnetics industries; changes in China’s political
environment and industrial policies; unanticipated costs, delays, or technical
challenges related to the expansion of separation and magnetics facilities;
operational risks at the Mountain Pass mine, including power, water, and
logistics constraints; access to raw materials; reserve estimation
uncertainties; labor relations; cybersecurity and information technology risks;
capital intensity and funding requirements; and sustainability-related risks.
Any of these risks could materially and adversely affect the company’s business,
financial condition, and results of operations.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of MP Materials
Corporation and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an
extended
period, the Fund may determine that it is necessary to make adjustments to the
Fund’s investment strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
gains value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines, the Fund’s net assets
will decline by the same amount as the
Fund’s
exposure. Therefore, an investor that purchases shares intraday may experience
performance that is greater than, or less than, the Fund’s stated investment
objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant
losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security . The Fund may take or refrain
from taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the materials
industry.
Materials
Industry Risk.
The risks of investments in the materials industry include: adverse effects from
commodity price volatility, exchange rate fluctuations, social and political
unrest, war, import or export controls, increased competition; the possibility
that production of industrial materials may exceed demand as a result of
overbuilding or economic downturns, leading to poor investment returns; risk for
environmental damage and product liability claims; and adverse effects from
depletion of resources, technical progress, labor relations and government
regulations.
Metals
and Mining Industry Risk. Metals
and mining companies can be significantly affected by events relating to
international political and economic developments, energy conservation, the
success of exploration projects, commodity prices, and tax and other government
regulations. Investments in metals and mining companies may be speculative and
may be subject to greater price volatility than investments in other types of
companies. Risks of metals and mining investments include: changes in
international monetary policies or economic and political conditions that can
affect the supply of natural resources and consequently the value of metals and
mining company investments; the United States or foreign governments may pass
laws or regulations limiting metals investments for strategic or other policy
reasons; and increased environmental or labor costs may depress the value of
metals and mining investments. Risks of investing in metals and mining company
stocks also include inaccurate estimates of mineral reserves and future
production levels, varying expectations of mine production costs, unexpected
changes in mineral prices, technological and operational hazards in mining and
mine development activities, uncertainties
inherent
in the calculation of mineral reserves, mineral resources and metal recoveries,
the timing and availability of financing, and mandated expenditures for safety
and pollution control devices.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of MP Materials Corporation and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount
of
income available for distribution. In addition, in order to requalify for
taxation as a RIC, the Fund could be required to recognize unrealized gains, pay
substantial taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s inception in
October 2025.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long NBIS Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long NBIS Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Nebius Group N.V. (Nasdaq: NBIS) (“NBIS” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the performance of the Underlying
Security performance is flat, and it is possible that the Fund will lose money
even if the performance of the Underlying Security increases over a period
longer than a single day. An investor could lose the full principal value of
his/her investment within a single day if the price of the Underlying Security
falls by more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of NBIS. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.76% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $78 |
$243 |
$422 |
$942 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period October 24, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the software
and services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease in the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Nebius
Group N.V. is a technology company that develops and operates full-stack
infrastructure solutions to support customers in the global artificial
intelligence industry, including cloud, high-performance computing, and related
software platforms. Nebius Group N.V. is registered as a foreign private issuer
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Information provided to or filed with the Securities and Exchange Commission
(“SEC”) by Nebius Group N.V. pursuant to the Exchange Act can be located by
reference to the SEC file number 001-35173 through the SEC’s website at
www.sec.gov. In addition, information regarding Nebius Group N.V. may be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities of the Underlying
Security. The Fund has derived all disclosures contained in this document
regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
performance of the Underlying Security performance, before fees and expenses.
Compounding has a significant impact on funds that are leveraged and that
rebalance daily. The impact of compounding becomes more pronounced as volatility
and holding periods increase and will impact each shareholder differently
depending on the period of time an investment in the Fund is held and the
volatility of the Underlying Security during the shareholder’s holding period of
an investment in the Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security . The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security ; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the
Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one-year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the
Underlying Security’s
annualized volatility is 100%, the Fund would be expected to lose 63.2% of its
value, even if the cumulative return for the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate since
inception of trading on October 21, 2024 through the period ended
December 31, 2025 (the “Period”) was 112.58%. The Underlying Security’s
highest historical volatility rate for any one calendar year during the Period
was 120.27% and volatility for a shorter period of time may have been
substantially higher. The Underlying Security’s annualized historical
performance for the Period was 104.58%. Historical volatility and performance
are not indications of what the Underlying Security volatility and performance
will be in the future. Volatility for a shorter period of time may have been
substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s
shares
could trade at a premium or discount to their net asset value and/or the bid-ask
spread of the Fund’s shares could widen. Under such circumstances, the Fund may
increase its transaction fee, change its investment objective by, for example,
seeking to track an alternative security, reduce its leverage or
close.
Nebius
Group N.V. Investing Risk.
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with the software and
services industry, Nebius Group N.V. faces risks that include, but are not
limited to: significant and evolving competition and the risk that it may be
unable to adapt to rapidly changing technologies, customer requirements, or
specifications; the fact that its business is at an early stage of development
and operates in new and rapidly evolving markets; capital-intensive operations,
a history of losses, and the need to raise additional equity or debt financing
to support ongoing operations and growth; geopolitical and macroeconomic
developments, including protectionist measures, restrictions on foreign
companies, and policies favoring local competitors; technological developments
in generative AI, including the potential for new models to require less
computing power, which could reduce demand for its offerings; dependence on a
limited number of suppliers for sophisticated hardware and infrastructure, and
risks related to supply chain disruptions, delays, or increased costs;
regulatory uncertainty and heightened political scrutiny relating to AI
technologies, data centers, export controls, and related compliance obligations
across multiple jurisdictions; and the risk that failure to comply with
applicable laws and regulations could result in investigations, litigation,
penalties, or limitations on its business model. Any of these risks could
materially and adversely affect the company’s business, financial condition, and
results of operations.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Artificial
Intelligence (“AI”) Risk. The
Underlying Security builds infrastructure specifically for AI applications and
its revenue and growth are tied to the demand for AI computing. Companies
engaged in AI and big data typically face intense competition and potentially
rapid product obsolescence. These companies are also heavily dependent on
intellectual property rights and may be adversely affected by loss or impairment
of those rights. There can be no assurance these companies will be able to
successfully protect their intellectual property to prevent the misappropriation
of their technology, or that competitors will not develop technology that is
substantially similar or superior to such companies’ technology. AI and big data
companies typically engage in significant amounts of spending on research and
development, as well as mergers and acquisitions, and there is no guarantee that
the products or services produced by these companies will be successful. AI and
big data companies are potential targets for cyberattacks, which can have a
materially adverse impact on the performance of these companies. In addition, AI
technology could face increasing regulatory scrutiny in the future, which may
limit the development of this technology and impede the growth of companies that
develop and/or utilize this technology. Similarly, the collection of data from
consumers and other sources could face increased scrutiny as regulators consider
how the data is collected, stored, safeguarded and used. AI and big data
companies may face regulatory fines and penalties, including potential forced
break-ups, that could hinder the ability of the companies to operate on an
ongoing basis. The customers and/or suppliers of AI and big data companies may
be concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries,
regions
or industries could have a negative impact on AI and big data companies.
Country, government, and/or region-specific regulations or restrictions could
have an impact on AI and big data companies.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
gains value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines, the Fund’s net assets
will decline by the same amount as the Fund’s exposure. Therefore, an investor
that purchases shares intraday may experience performance that is greater than,
or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security . The Fund may take or refrain
from taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the software and services
industry.
Software
and Services Industry Risk. Computer
software companies can be significantly affected by competitive pressures,
aggressive pricing, technological developments, changing domestic demand, the
ability to attract and retain skilled employees and availability and price of
components. The market for products produced by software companies is
characterized by rapidly changing technology, rapid product
obsolescence,
cyclical market patterns, evolving industry standards and frequent new product
introductions. The success of computer software companies depends in substantial
part on the timely and successful introduction of new products and the ability
to service such products. An unexpected change in one or more of the
technologies affecting an issuer’s products or in the market for products based
on a particular technology could have a material adverse effect on a
participant’s operating
results.
Many computer software companies rely
on a combination of patents, copyrights, trademarks and trade secret laws to
establish and protect their proprietary rights in their products and
technologies. There can be no assurance that the steps taken by computer
software companies to protect their proprietary rights will be adequate to
prevent misappropriation of their technology or that competitors will not
independently develop technologies that are substantially equivalent or superior
to such companies’ technology.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Nebius Group N.V. and make no representation
as to the performance of the Underlying Security. Investing in the Fund is not
equivalent to investing in the Underlying Security. Fund shareholders will not
have voting rights or rights to receive dividends or other distributions or any
other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is
held.
Repurchase agreements may be subject to market and credit risk related to the
collateral securing the repurchase agreement. Money market instruments may lose
money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from
“qualifying
income,” meet certain asset diversification tests at the end of each taxable
quarter and meet annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s inception in
October 2025.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long NVDA Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long NVDA Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Nvidia Corporation (Nasdaq: NVDA) (“NVDA” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of NVDA. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
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| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.76% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
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|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $78 |
$243 |
$422 |
$942 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal year ended October 31, 2025, the Fund’s portfolio turnover
rate was 0% of the average value of its portfolio. The Fund’s
portfolio turnover rate is calculated without regard to transactions in cash
instruments or derivatives. Because the Fund makes extensive use of derivatives,
its portfolio turnover would be significantly higher if such transactions were
included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated
U.S.
exchanges. Traditional exchange-traded options contracts have standardized
terms, such as the type (call or put), the reference asset, the strike price and
expiration date. Exchange-listed options contracts are guaranteed for settlement
by the Options Clearing Corporation (“OCC”). FLEX Options are a type of
exchange-listed options contract with uniquely customizable terms that allow
investors to customize key terms like type, strike price and expiration date
that are standardized in a typical options contract. FLEX Options are also
guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure in the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
semiconductors and semiconductor equipment
industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, the Adviser rebalances
the Fund’s portfolio so that its exposure to the Underlying Security is
consistent with the Fund’s investment objective. The impact of the Underlying
Security’s price movements during the day will affect whether the Fund’s
portfolio needs to be rebalanced. For example, if the price of the Underlying
Security has risen on a given day, net assets of the Fund should rise, meaning
that the Fund’s exposure will need to be increased. Conversely, if the price of
the Underlying Security has fallen on a given day, net assets of the Fund should
fall, meaning the Fund’s exposure will need to be reduced. This daily
rebalancing typically results in high portfolio turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Nvidia
Corporation is a computing platform company. NVIDIA designs and develops
graphics processing units (GPUs), central processing units (CPUs), networking
solutions, and related software and systems for use in accelerated computing.
Nvidia Corporation’s platforms are used to power applications in artificial
intelligence, data center computing, gaming, professional visualization, and
autonomous vehicles. Nvidia Corporation pioneered accelerated computing to
address complex computational workloads, and its graphics processing
unit-accelerated platforms have become foundational to modern artificial
intelligence, including deep learning and data analytics. The common stock of
Nvidia Corporation is registered under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Information provided to or filed with the
Securities and Exchange Commission (“SEC”) by Nvidia Corporation pursuant to the
Exchange Act can be located by reference to the SEC file number 0-23985 through
the SEC’s website at www.sec.gov. In addition, information regarding Nvidia
Corporation
may be obtained from other sources including, but not limited to, press
releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical volatility rate for the five-year
period ended December 31, 2025 was 52.20%. The Underlying Security’s
highest volatility rate for any one calendar year during the five-year period
was 63.21% and volatility for a shorter period of time may have been
substantially higher. The Underlying Security’s annualized performance for the
five-year period ended December 31, 2025 was 70.06%. Historical volatility
and performance are not indications of what the Underlying Security volatility
and performance will be in the future.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The
Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Nvidia
Corporation Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with companies in the
semiconductors and semiconductor equipment industry, Nvidia Corporation faces
risks that include, but are not limited to: its ability to meet the evolving
demands of its end markets, including gaming, data center, professional
visualization and automotive; intense competition; changes in customer demand;
supply chain disruptions, manufacturing delays and capacity constraints;
potential mismatches between supply and demand resulting in product shortages or
excess inventory; dependence on third-party manufacturers and suppliers to
fabricate, assemble, test and package its products, which limits control over
production schedules, yields and quality; product defects; international sales
and operations, including adverse economic conditions, geopolitical developments
and trade restrictions; U.S. export controls and other government regulations
that limit or restrict sales to certain countries or customers; impacts of
climate change, including energy and water availability; risks related to
business investments and acquisitions; revenue concentration among a limited
number of customers, partners and distributors; ability to attract and retain
key personnel; cybersecurity and data protection incidents; business disruptions
and failures of information systems; fluctuations in operating results;
increased scrutiny related to environmental, social and governance matters;
risks associated with the development, deployment and regulation of AI;
intellectual property protection; evolving data privacy, security, tax and other
regulatory requirements; and other legal and compliance risks. Any of these
risks could materially and adversely affect the company’s business, financial
condition, results of operations, and prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Artificial
Intelligence (“AI”) Risk.
The
Underlying Security derives a substantial portion of its business from providing
graphics processing units (GPUs) and software platforms for AI workloads.
Companies engaged in AI and big data typically face intense competition and
potentially rapid product obsolescence. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. AI and big data companies typically engage in significant amounts of
spending on research and development, as well as mergers and acquisitions, and
there is no guarantee that the products or services produced by these companies
will be successful. AI and big data companies are potential targets for
cyberattacks, which can have a materially adverse impact on the performance of
these companies. In addition, AI technology could face increasing regulatory
scrutiny in the future, which may limit the development of this technology and
impede the growth of companies that develop
and/or
utilize this technology. Similarly, the collection of data from consumers and
other sources could face increased scrutiny as regulators consider how the data
is collected, stored, safeguarded and used. AI and big data companies may face
regulatory fines and penalties, including potential forced break-ups, that could
hinder the ability of the companies to operate on an ongoing basis. The
customers and/or suppliers of AI and big data companies may be concentrated in a
particular country, region or industry. Any adverse event affecting one of these
countries, regions or industries could have a negative impact on AI and big data
companies. Country, government, and/or region-specific regulations or
restrictions could have an impact on AI and big data
companies.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
loses value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security rises, the Fund’s net assets
will decline by the same amount as the Fund’s exposure. Therefore, an investor
that purchases shares intraday may experience performance that is greater than,
or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide short
exposure to the industry to which the Underlying Security is assigned). A
portfolio concentrated in a particular industry may present more risks
than
a portfolio broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the semiconductors and
semiconductor equipment industry.
Semiconductors
and Semiconductor Equipment Industry Risk.
Competitive pressures may have a significant effect on the financial condition
of semiconductor companies and, as product cycles shorten and manufacturing
capacity increases, these companies may become increasingly subject to
aggressive pricing, which hampers profitability. Reduced demand for end-user
products, under-utilization of manufacturing capacity, and other factors could
adversely impact the operating results of semiconductor companies. Semiconductor
companies typically face high capital costs and may be heavily dependent on
intellectual property rights. The semiconductor industry is highly cyclical,
which may cause the operating results of many semiconductor companies to vary
significantly. The stock prices of semiconductor companies have been and likely
will continue to be extremely
volatile.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Nvidia Corporation and make no representation
as to the performance of the Underlying Security. Investing in the Fund is not
equivalent to investing in the Underlying Security. Fund shareholders will not
have voting rights or rights to receive dividends or other distributions or any
other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The
Fund may use a variety of money market instruments for cash management purposes,
including money market funds, depositary accounts and repurchase agreements.
Money market funds may be subject to credit risk with respect to the debt
instruments in which they invest. Depository accounts may be subject to credit
risk with respect to the financial institution in which the depository account
is
held.
Repurchase agreements may be subject to market and credit risk related to the
collateral securing the repurchase agreement. Money market instruments may lose
money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as the Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue
trading halts on specific securities or financial instruments. The ability to
trade certain securities or financial instruments may be restricted, which
may result in a fund being unable to buy or sell certain securities or
financial instruments. In these circumstances, a fund may be unable
to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and willy
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90%of its gross income for each taxable year from
“qualifying
income,” meet certain asset diversification tests at the end of each taxable
quarter and meet annual distribution requirements.
The Fund’s pursuit of its investment strategy will potentially be
limited by the Fund’s intention to qualify for such treatment and could
adversely affect the Fund’s ability to so qualify. The Fund may make certain
investments, including gaining exposure to the underlying reference asset
through the use of swaps, the treatment of which for these purposes is unclear.
If, in any year, the Fund were to fail to qualify for the special tax treatment
accorded a RIC and its shareholders and were ineligible to or were not able to
cure such failure, the Fund would be taxed in the same manner as an ordinary
corporation subject to U.S. federal income tax on all its income at the fund
level. The resulting taxes could substantially reduce the Fund’s net assets and
the amount of income available for distribution. In addition, in order to
requalify for taxation as a RIC, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has limited operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Fund’s performance for the most
recent calendar years ended December 31. The table illustrates how the Fund’s
average annual returns for the 1-year and since inception periods compare with
those of a broad measure of market performance and the Index. The
Fund’s past performance, before and after taxes, does not necessarily indicate
how it will perform in the future. Updated performance
information will be available on the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Calendar Year Total
Return
During
the period of time shown in the bar chart, the Fund’s highest quarterly
return was 90.65% for the quarter ended June 30, 2025, and
the lowest quarterly return
was -44.11% for the quarter ended March 31,
2025.
Average Annual
Total Returns for the Period Ended December 31,
2025
|
|
|
|
|
|
|
|
| |
|
Leverage
Shares 2X Long NVDA Daily ETF |
1
Year |
Since
Inception
(December 13,
2024) |
| Return
Before Taxes |
32.71% |
24.01% |
| Return
After Taxes on Distributions |
27.05% |
18.97% |
|
Return
After Taxes on Distributions and Sale of
Shares |
19.41% |
16.23% |
|
S&P
500 Index
(reflects no deduction for
fees, expenses, or taxes) |
17.88% |
13.88% |
After-tax returns are
calculated using the historical highest marginal individual U.S. federal income
tax rates during the period covered by the table above and do not reflect the
impact of state and local taxes. Actual after-tax returns depend
on an investor’s tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Shares through tax-deferred
arrangements such as an individual retirement account (“IRA”) or other
tax-advantaged accounts. In
certain cases, the figure representing “Return After Taxes on Distributions and
Sale of Shares” may be higher than the other return figures for the same period.
A higher after-tax return results when a capital loss occurs upon redemption and
provides an assumed tax deduction that benefits the
investor.
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long PANW Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long PANW Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Palo Alto Networks, Inc. (Nasdaq: PANW) (“PANW”
or “Underlying Security”). The return for investors that invest for periods
longer or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of PANW. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.76% |
|
|
|
|
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| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
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| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $78 |
$243 |
$422 |
$942 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period March 20, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the software
and services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Palo
Alto Networks, Inc. is a global cybersecurity company that provides a
comprehensive platform of security solutions to protect organizations across
networks, cloud environments, endpoints and applications. Palo Alto Networks,
Inc.’s offerings include hardware and software firewalls, centralized security
management, and cloud-delivered and subscription-based security services that
provide advanced threat prevention, detection and response, and secure access.
Palo Alto Networks, Inc.’s solutions are designed to help customers prevent
cyber threats and securely enable digital transformation. The common stock of
Palo Alto Networks, Inc. is registered under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Information provided to or filed with the
Securities and Exchange Commission (“SEC”) by Palo Alto Networks, Inc. pursuant
to the Exchange Act can be located by reference to the SEC file number 001-35594
through the SEC’s website at www.sec.gov.
In
addition, information regarding Palo Alto Networks, Inc. may be obtained from
other sources including, but not limited to, press releases, newspaper articles
and other publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security ’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical volatility rate for the five-year
period ended December 31, 2025 was 40.34%. The Underlying Security’s
highest volatility rate for any one calendar year during the five-year period
was 48.55% and volatility for a shorter period of time may have been
substantially higher. The Underlying Security’s annualized performance for the
five-year period ended December 31, 2025 was 25.74%. Historical volatility
and performance are not indications of what the Underlying Security volatility
and performance will be in the future.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Palo
Alto Networks, Inc. Investing Risk. Issuer-specific attributes may cause an investment held by the Fund
to be more volatile than the market generally. The value of an individual
security or particular type of security may be more volatile than the market as
a whole and may perform differently from the value of the market as a whole. As
of the date of this prospectus, in addition to the risks associated with
companies in the software and services industry, Palo Alto Networks, Inc. faces
risks that include, but are not limited to: its reliance on a limited number of
customers for a significant portion of its revenue; rapid technological change
and the successful development and deployment of new products and services;
dependence on third-party technologies, cloud service providers and channel
partners; intense competition; the ability to attract, retain and motivate
qualified personnel and senior management; sales execution and operating
complexity; cybersecurity incidents affecting its platforms or customers; the
use of artificial intelligence in its offerings; the protection of intellectual
property; and evolving global regulatory, privacy and litigation risks. Any of
these risks could materially and adversely affect the company’s business,
financial condition and results of operations.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and
international
political, changes in the actual or implied volatility or the reference asset,
the time remaining until the expiration of the option contract and economic
events. The value of the options contracts in which the Fund invests are
substantially influenced by the value of the Underlying Security. The Fund may
experience substantial downside from specific option positions and certain
option positions held by the Fund may expire worthless. The options held by the
Fund are exercisable at the strike price on their expiration date. As an option
approaches its expiration date, its value typically increasingly moves with the
value of the underlying instrument. However, prior to such date, the value of an
option generally does not increase or decrease at the same rate as the
underlying instrument. There may at times be an imperfect correlation between
the movement in values options contracts and the underlying instrument, and
there may at times not be a liquid secondary market for certain options
contracts. The value of the options held by the Fund will be determined based on
market quotations or other recognized pricing methods. Additionally, as the Fund
intends to continuously maintain indirect exposure to the Underlying Security
through the use of options contracts, as the options contracts it holds are
exercised or expire it will enter into new options contracts, a practice
referred to as “rolling.” If the expiring options contracts do not generate
proceeds enough to cover the cost of entering into new options contracts, the
Fund may experience losses. The use of options to generate leverage introduces
additional risks, including significant potential losses if the market moves
unfavorably. The leverage inherent in options can amplify both gains and losses,
leading to increased volatility and potential for substantial losses,
particularly in periods of market uncertainty or low liquidity. Additionally,
the Fund may incur losses if the value of the Underlying Security moves against
its positions, potentially resulting in a complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Artificial
Intelligence (“AI”) Risk.
Companies engaged in AI and big data typically face intense competition and
potentially rapid product obsolescence. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that competitors will not develop
technology that is substantially similar or superior to such companies’
technology. AI and big data companies typically engage in significant amounts of
spending on research and development, as well as mergers and acquisitions, and
there is no guarantee that the products or services produced by these companies
will be successful. AI and big data companies are potential targets for
cyberattacks, which can have a materially adverse impact on the performance of
these companies. In addition, AI technology could face increasing regulatory
scrutiny in the future, which may limit the development of this technology and
impede the growth of companies that develop and/or utilize this technology.
Similarly, the collection of data from consumers and other sources could face
increased scrutiny as regulators consider how the data is collected, stored,
safeguarded and used. AI and big data companies may face regulatory fines and
penalties, including potential forced break-ups, that could hinder the ability
of the companies to operate on an ongoing basis. The customers and/or suppliers
of AI and big data companies may be concentrated in a particular country, region
or industry. Any adverse event affecting one of these countries, regions or
industries could have a negative impact on AI and big data companies. Country,
government, and/or region-specific regulations or restrictions could have an
impact on AI and big data companies.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the
Fund’s
investment objective. In these instances, the Fund may have investment exposure
to the Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to PANW
and therefore achieve its daily leveraged investment objective. The Fund’s
exposure to PANW is impacted by PANW’s movement. Because of this, it is unlikely
that the Fund will be perfectly exposed to PANW at the end of each day. The
possibility of the Fund being materially over- or under-exposed to PANW
increases on days when PANW is volatile near the close of the trading day.
Market disruptions, regulatory restrictions and high volatility will also
adversely affect the Fund’s ability to adjust exposure to the required
levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) PANW. The Fund may take or refrain from taking positions
in order to improve tax efficiency, comply with regulatory restrictions, or for
other reasons, each of which may negatively affect the Fund’s desired
correlation with PANW. The Fund may be subject to large movements of assets into
and out of the Fund, potentially resulting in the Fund being over- or
under-exposed to PANW. Additionally, the Fund’s underlying investments and/or
reference assets may trade on markets that may not be open on the same day as
the Fund, which may cause a difference between the changes in the daily
performance of the Fund and changes in the performance of PANW. Any of these
factors could decrease the correlation between the performance of the Fund and
PANW and may hinder the Fund’s ability to meet its daily leveraged investment
objective on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security Alto
Networks, Inc. The Underlying Security is assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the software and services
industry.
Software
and Services Industry Risk.
Computer software companies can be significantly affected by competitive
pressures, aggressive pricing, technological developments, changing domestic
demand, the ability to attract and retain skilled employees and availability and
price of components. The market for products produced by software companies is
characterized by rapidly changing technology, rapid product obsolescence,
cyclical market patterns, evolving industry standards and frequent new product
introductions. The success of computer software companies depends in substantial
part on the timely and successful introduction of new products and the ability
to service such products. An unexpected change in one or more of the
technologies affecting an issuer’s products or in the market for products based
on a particular technology could have a material adverse effect on a
participant’s operating results.
Many
computer software companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their proprietary
rights in their products and technologies. There can be no assurance that the
steps taken by computer software companies to protect their proprietary rights
will be adequate to prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such companies’
technology.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Palo Alto Networks, Inc. and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the
security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special
tax
treatment accorded a RIC and its shareholders and were ineligible to or were not
able to cure such failure, the Fund would be taxed in the same manner as an
ordinary corporation subject to U.S. federal income tax on all its income at the
fund level. The resulting taxes could substantially reduce the Fund’s net assets
and the amount of income available for distribution. In addition, in order to
requalify for taxation as a RIC, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long PLTR Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long PLTR Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Palantir Technologies, Inc. (Nasdaq: PLTR)
(“PLTR” or “Underlying Security”). The return for investors that invest for
periods longer or shorter than a trading day should not be expected to be 200%
of the performance of the Underlying Security for the period. The return of the
Fund for a period longer than a trading day will be the result of each trading
day’s compounded return over the period, which will very likely differ from 200%
of the return of the Underlying Security for that period. Longer holding
periods, higher volatility of the Underlying Security and leverage increase the
impact of compounding on an investor’s returns. During periods of higher
Underlying Security volatility, the volatility of the Underlying Security may
affect the Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of PLTR. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.01% |
|
Acquired
Fund Fees and Expenses2 |
| 0.02% |
|
Total
Annual Fund Operating Expenses3 |
| 0.78% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $80 |
$249 |
$433 |
$966 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period April 24, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated U.S. exchanges. Traditional
exchange-traded options contracts have standardized terms, such as the type
(call or put), the reference asset, the strike price and expiration date.
Exchange-listed options contracts are guaranteed for settlement by the Options
Clearing Corporation (“OCC”). FLEX Options are a type of exchange-listed options
contract with uniquely customizable terms that allow investors to customize key
terms like type, strike price and expiration date that are standardized in a
typical options contract. FLEX Options are also guaranteed for settlement by the
OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the software
and services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Palantir
Technologies Inc. is a software company that develops and deploys platforms
designed to enable organizations to integrate, manage and analyze large volumes
of data and to operationalize artificial intelligence across their enterprises.
Palantir Technologies Inc.’s platforms were initially developed to support the
intelligence community in counterterrorism and defense-related operations in the
United States and allied countries and have since been adopted by government
agencies and commercial enterprises across a wide range of industries. The
common stock of Palantir Technologies, Inc. is registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to
or filed with the Securities and Exchange Commission (“SEC”) by Palantir
Technologies, Inc. pursuant to the Exchange Act can be located by reference
to
the SEC file number 001-39540 through the SEC’s website at www.sec.gov. In
addition, information regarding Palantir Technologies, Inc. may be obtained from
other sources including, but not limited to, press releases, newspaper articles
and other publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
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|
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|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical volatility rate for the five-year
period ended December 31, 2025 was 67.91%. The Underlying Security’s
highest volatility rate for any one calendar year during the five-year period
was 72.71% and volatility for a shorter period of time may have been
substantially higher. The Underlying Security’s annualized performance for the
five-year period ended December 31, 2025 was 50.05%. Historical volatility
and performance are not indications of what the Underlying Security volatility
and performance will be in the future.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Palantir
Technologies, Inc. Investing Risk. Issuer-specific attributes may cause an investment held by the Fund
to be more volatile than the market generally. The value of an individual
security or particular type of security may be more volatile than the market as
a whole and may perform differently from the value of the market as a whole. As
of the date of this prospectus, in addition to the risks associated with
companies in the software and services industry, Palantir Technologies, Inc.
faces risks that include, but are not limited to: its reliance on a limited
number of customers, including government agencies, for a substantial portion of
its revenue; long and unpredictable sales cycles; the development, deployment
and adoption of new technologies and artificial intelligence capabilities;
dependence on third-party products and services; the ability to attract, retain,
train and motivate qualified personnel and senior management; intense
competition; cybersecurity incidents and data protection failures; intellectual
property protection; reputational and ethical concerns; and evolving regulatory,
legal and litigation risks. Any of these risks could materially and adversely
affect the company’s business, financial condition and results of
operations.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and
international
political, changes in the actual or implied volatility or the reference asset,
the time remaining until the expiration of the option contract and economic
events. The value of the options contracts in which the Fund invests are
substantially influenced by the value of the Underlying Security. The Fund may
experience substantial downside from specific option positions and certain
option positions held by the Fund may expire worthless. The options held by the
Fund are exercisable at the strike price on their expiration date. As an option
approaches its expiration date, its value typically increasingly moves with the
value of the underlying instrument. However, prior to such date, the value of an
option generally does not increase or decrease at the same rate as the
underlying instrument. There may at times be an imperfect correlation between
the movement in values options contracts and the underlying instrument, and
there may at times not be a liquid secondary market for certain options
contracts. The value of the options held by the Fund will be determined based on
market quotations or other recognized pricing methods. Additionally, as the Fund
intends to continuously maintain indirect exposure to the Underlying Security
through the use of options contracts, as the options contracts it holds are
exercised or expire it will enter into new options contracts, a practice
referred to as “rolling.” If the expiring options contracts do not generate
proceeds enough to cover the cost of entering into new options contracts, the
Fund may experience losses. The use of options to generate leverage introduces
additional risks, including significant potential losses if the market moves
unfavorably. The leverage inherent in options can amplify both gains and losses,
leading to increased volatility and potential for substantial losses,
particularly in periods of market uncertainty or low liquidity. Additionally,
the Fund may incur losses if the value of the Underlying Security moves against
its positions, potentially resulting in a complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Artificial
Intelligence (“AI”) Risk.
The Underlying Security incorporates AI and machine learning capabilities into
its data integration and analytics platforms. Companies engaged in AI and big
data typically face intense competition and potentially rapid product
obsolescence. These companies are also heavily dependent on intellectual
property rights and may be adversely affected by loss or impairment of those
rights. There can be no assurance these companies will be able to successfully
protect their intellectual property to prevent the misappropriation of their
technology, or that competitors will not develop technology that is
substantially similar or superior to such companies’ technology. AI and big data
companies typically engage in significant amounts of spending on research and
development, as well as mergers and acquisitions, and there is no guarantee that
the products or services produced by these companies will be successful. AI and
big data companies are potential targets for cyberattacks, which can have a
materially adverse impact on the performance of these companies. In addition, AI
technology could face increasing regulatory scrutiny in the future, which may
limit the development of this technology and impede the growth of companies that
develop and/or utilize this technology. Similarly, the collection of data from
consumers and other sources could face increased scrutiny as regulators consider
how the data is collected, stored, safeguarded and used. AI and big data
companies may face regulatory fines and penalties, including potential forced
break-ups, that could hinder the ability of the companies to operate on an
ongoing basis. The customers and/or suppliers of AI and big data companies may
be concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on AI and big data companies. Country, government, and/or region-specific
regulations or restrictions could have an impact on AI and big data
companies.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security. is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the software and services
industry.
Software
and Services Industry Risk.
Computer software companies can be significantly affected by competitive
pressures, aggressive pricing, technological developments, changing domestic
demand, the ability to attract and retain skilled employees and availability and
price of components. The market for products produced by software companies is
characterized by rapidly changing technology, rapid product obsolescence,
cyclical market patterns, evolving industry standards and frequent new product
introductions. The success of computer software companies depends in substantial
part on the timely and successful introduction of new products and the ability
to service such products. An unexpected change in one or more
of
the technologies affecting an issuer’s products or in the market for products
based on a particular technology could have a material adverse effect on a
participant’s operating results.
Many
computer software companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their proprietary
rights in their products and technologies. There can be no assurance that the
steps taken by computer software companies to protect their proprietary rights
will be adequate to prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such companies’
technology.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Palantir Technologies, Inc. and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long PYPL Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long PYPL Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of PayPal Holdings, Inc. (Nasdaq: PYPL) (“PYPL” or
“Underlying Security). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of PYPL. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.02% |
|
Total
Annual Fund Operating Expenses3 |
| 0.77% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and expenses. |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
|
|
|
|
| |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $79 |
$246 |
$428 |
$954 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period April 3, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated U.S. exchanges. Traditional
exchange-traded options contracts have standardized terms, such as the type
(call or put), the reference asset, the strike price and expiration date.
Exchange-listed options contracts are guaranteed for settlement by the Options
Clearing Corporation (“OCC”). FLEX Options are a type of exchange-listed
options
contract with uniquely customizable terms that allow investors to customize key
terms like type, strike price and expiration date that are standardized in a
typical options contract. FLEX Options are also guaranteed for settlement by the
OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
financial services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
PayPal
Holdings, Inc. is a global digital payments and commerce platform that enables
consumers and merchants to make and receive payments across online, mobile and
in-store environments. The company provides a range of payment solutions,
including branded and unbranded processing, peer-to-peer payments and
value-added services, and generates revenue primarily through transaction fees
and related services. The common stock of PayPal Holdings, Inc. is registered
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Information provided to or filed with the Securities and Exchange Commission
(“SEC”) by PayPal Holdings, Inc. pursuant to the Exchange Act can be located by
reference to the SEC file number 001-36859 through the SEC’s website at
www.sec.gov. In addition, information regarding PayPal Holdings, Inc. may be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available
documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%.
At
higher ranges of volatility, there is a chance of a significant loss of value in
the Fund, even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate for the
five-year period ended December 31, 2025 was 41.72%. The Underlying
Security’s highest volatility rate for any one calendar year during the
five-year period was 58.75% and volatility for a shorter period of time may have
been substantially higher. The Underlying Security’s annualized performance for
the five-year period ended December 31, 2025 was -24.11%. Historical
volatility and performance are not indications of what the Underlying Security
volatility and performance will be in the future. Volatility for a shorter
period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
PayPal
Holdings, Inc. Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with the financial services
industry, PayPal Holdings, Inc. faces risks that include, but are not limited
to: cybersecurity incidents, payment fraud, privacy and data protection
failures, and system disruptions that could impair the availability or
reliability of its platforms; customer disputes, chargebacks, and associated
losses; declines in transaction volume or user engagement; and its ability to
comply with complex and evolving laws and regulations across multiple
jurisdictions, including those related to payments, consumer protection, data
privacy, and taxation. PayPal is also subject to risks arising from adverse
economic conditions, which may reduce consumer spending and merchant activity,
and from intense competition from existing and emerging payment solutions. Any
of these risks could materially and adversely affect the company’s business,
financial condition, results of operations, and
prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the
value
of the underlying instrument. However, prior to such date, the value of an
option generally does not increase or decrease at the same rate as the
underlying instrument. There may at times be an imperfect correlation between
the movement in values options contracts and the underlying instrument, and
there may at times not be a liquid secondary market for certain options
contracts. The value of the options held by the Fund will be determined based on
market quotations or other recognized pricing methods. Additionally, as the Fund
intends to continuously maintain indirect exposure to the Underlying Security
through the use of options contracts, as the options contracts it holds are
exercised or expire it will enter into new options contracts, a practice
referred to as “rolling.” If the expiring options contracts do not generate
proceeds enough to cover the cost of entering into new options contracts, the
Fund may experience losses. The use of options to generate leverage introduces
additional risks, including significant potential losses if the market moves
unfavorably. The leverage inherent in options can amplify both gains and losses,
leading to increased volatility and potential for substantial losses,
particularly in periods of market uncertainty or low liquidity. Additionally,
the Fund may incur losses if the value of the Underlying Security moves against
its positions, potentially resulting in a complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying
Security
is volatile near the close of the trading day. Market disruptions, regulatory
restrictions and high volatility will also adversely affect the Fund’s ability
to adjust exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the financial services
industry.
Financial
Services Industry Risk.
Financial services companies are subject to extensive governmental regulation
which may limit both the amounts and types of loans and other financial
commitments they can make, the interest rates and fees they can charge, the
scope of their activities, the prices they can charge and the amount of capital
they must maintain. Profitability is largely dependent on the availability and
cost of capital funds and can fluctuate significantly when interest rates change
or due to increased competition. In addition, deterioration of the credit
markets generally may cause an adverse impact in a broad range of markets,
including U.S. and international credit and interbank money markets generally,
thereby affecting a wide range of financial institutions and markets. Certain
events in the financial industry may cause an unusually high degree of
volatility in the financial markets, both domestic and foreign, and cause
certain financial services companies to incur large losses. Securities of
financial services companies may experience a dramatic decline in value when
such companies experience substantial declines in the valuations of their
assets, take action to raise capital (such as the issuance of debt or equity
securities), or cease operations. Credit losses resulting from financial
difficulties of borrowers and financial losses associated with investment
activities can negatively impact the industry. Insurance companies may be
subject to severe price competition. Adverse economic, business or political
developments could adversely affect financial institutions engaged in mortgage
finance or other lending or investing activities directly or indirectly
connected to the value of real
estate.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and
exchanges.
Local, regional or global events such as war, acts of terrorism, natural
disasters, the spread of infectious illness or other public health issues,
conflicts and social unrest or other events could have a significant impact on
the Fund, its investments, and the Fund’s ability to achieve its investment
objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of PayPal Holdings, Inc. and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the
Fund’s
portfolio holdings. Although it is expected that the market price of the shares
of the Fund will approximate the Fund’s NAV, there may be times when the market
price of the shares is more than the NAV intraday (premium) or less than the NAV
intraday (discount). This risk is heightened in times of market volatility,
periods of steep market declines, and periods when there is limited trading
activity for shares in the secondary market, in which case such premiums or
discounts may be significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund
and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk. Daily rebalancing of the Fund’s holdings pursuant to its daily
investment objective causes a much greater number of portfolio transactions when
compared to most ETFs. Additionally, active secondary market trading of the
Shares could cause more frequent creation and redemption activities, which would
increase the number of portfolio transactions. High levels of portfolio
transactions may cause higher transaction costs because of increased broker
commissions resulting from such transactions and increased taxable capital
gains. The Fund calculates portfolio turnover without including the short-term
cash instruments or derivative transactions that comprise most of the Fund’s
trading. As such, if the Fund’s extensive use of derivative instruments were
reflected, the calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and
redeems
Creation Units in exchange for a portfolio of securities (the “Deposit
Securities”) and/or a designated amount of U.S. cash that the Fund specifies
each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long RTX Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long RTX Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of RTX Corporation (NYSE: RTX) (“RTX” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of RTX. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.02% |
|
Total
Annual Fund Operating Expenses3 |
| 0.77% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and expenses. |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
|
|
|
|
| |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $79 |
$246 |
$428 |
$954 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period June 5, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated U.S. exchanges. Traditional
exchange-traded options contracts have standardized terms, such as the type
(call or put), the reference asset, the strike price and expiration date.
Exchange-listed options contracts are guaranteed for settlement by the Options
Clearing Corporation (“OCC”). FLEX Options are a type of exchange-listed
options
contract with uniquely customizable terms that allow investors to customize key
terms like type, strike price and expiration date that are standardized in a
typical options contract. FLEX Options are also guaranteed for settlement by the
OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the capital
goods industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
RTX
Corporation
(formerly
Raytheon Technologies Corporation) is a global aerospace and defense company
that provides advanced systems and services for commercial, military, and
government customers worldwide. RTX Corporation operates through three principal
business segments: Collins Aerospace, which supplies aircraft systems, avionics,
aerostructures, and related services; Pratt & Whitney, which designs,
manufactures, and services aircraft engines for commercial and military
applications; and Raytheon, which provides advanced defense solutions, including
integrated air and missile defense systems, precision weapons, radar, sensors,
and command-and-control systems. A significant portion of the company’s revenue
is derived from contracts with the U.S. government and allied governments. The
common stock of RTX Corporation is registered under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). Information provided to or filed with
the Securities and Exchange Commission (“SEC”) by RTX Corporation pursuant to
the Exchange Act can be located by reference to the SEC file number 001-00812
through the SEC’s website at www.sec.gov. In addition, information regarding RTX
Corporation may be obtained from other sources including, but not limited to,
press releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security Corp from the publicly available
documents described above. Neither the Fund, the Trust, the Adviser nor any
affiliate has participated in the preparation of such documents. Neither the
Fund, the Trust, the Adviser nor any affiliate makes any representation that
such publicly available documents or any other publicly available information
regarding the Underlying Security Corp is accurate or complete. Furthermore, the
Fund cannot give any assurance that all events occurring prior to the date of
the prospectus (including events that would affect the accuracy or completeness
of the publicly available documents described above) that would affect the
trading price of the Underlying Security have been publicly disclosed.
Subsequent disclosure of any such events or the disclosure of, or failure to
disclose, material future events concerning the Underlying Security Corp could
affect the value of the Fund’s investments with respect to the Underlying
Security and therefore the value of the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the
Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate for the
five-year period ended December 31, 2025 was 23.83%. The Underlying
Security’s highest volatility rate for any one calendar year during the
five-year period was 27.29% and volatility for a shorter period of time may have
been substantially higher. The Underlying Security’s annualized performance for
the five-year period ended December 31, 2025 was 21.80%. Historical
volatility and performance are not indications of what the Underlying Security
volatility and performance will be in the future. Volatility for a shorter
period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The
Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s
shares
could widen. Under such circumstances, the Fund may increase its transaction
fee, change its investment objective by, for example, seeking to track an
alternative security, reduce its leverage or
close.
RTX
Corporation Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with companies in the capital goods industry, RTX
Corporation faces risks that include, but are not limited to: significant
dependence on contracts with the U.S. government and allied governments,
including extensive procurement laws and regulations, heightened audit and
oversight requirements, and the risk of contract modification, termination, or
non-renewal; variability in contract performance, program execution, and the
ability to control costs on long-term and fixed-price contracts; reliance on a
global network of suppliers and subcontractors and potential supply chain
disruptions; the successful development and integration of new technologies;
public health events and other disruptions that may affect operations, labor
availability, or demand; risks associated with international sales, including
geopolitical, economic, regulatory, and competitive factors and the protection
of intellectual property; the ability to attract and retain highly skilled
personnel; cybersecurity incidents and other security threats; challenges
associated with acquisitions, divestitures, and integration activities; pension
and other postretirement funding obligations; environmental, health, and safety
regulations and compliance costs; litigation and regulatory proceedings; tax law
changes and tax positions; indebtedness and interest rate exposure; and reliance
on estimates and assumptions in financial reporting and long-term program
accounting. Any of these risks could materially and adversely affect the
company’s business, financial condition, results of operations, and
prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are
influenced
by, among other things, actual and anticipated changes in the value of the
underlying instrument, including the anticipated volatility, which are affected
by fiscal and monetary policies and by national and international political,
changes in the actual or implied volatility or the reference asset, the time
remaining until the expiration of the option contract and economic events. The
value of the options contracts in which the Fund invests are substantially
influenced by the value of the Underlying Security. The Fund may experience
substantial downside from specific option positions and certain option positions
held by the Fund may expire worthless. The options held by the Fund are
exercisable at the strike price on their expiration date. As an option
approaches its expiration date, its value typically increasingly moves with the
value of the underlying instrument. However, prior to such date, the value of an
option generally does not increase or decrease at the same rate as the
underlying instrument. There may at times be an imperfect correlation between
the movement in values options contracts and the underlying instrument, and
there may at times not be a liquid secondary market for certain options
contracts. The value of the options held by the Fund will be determined based on
market quotations or other recognized pricing methods. Additionally, as the Fund
intends to continuously maintain indirect exposure to the Underlying Security
through the use of options contracts, as the options contracts it holds are
exercised or expire it will enter into new options contracts, a practice
referred to as “rolling.” If the expiring options contracts do not generate
proceeds enough to cover the cost of entering into new options contracts, the
Fund may experience losses. The use of options to generate leverage introduces
additional risks, including significant potential losses if the market moves
unfavorably. The leverage inherent in options can amplify both gains and losses,
leading to increased volatility and potential for substantial losses,
particularly in periods of market uncertainty or low liquidity. Additionally,
the Fund may incur losses if the value of the Underlying Security moves against
its positions, potentially resulting in a complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately,
or
may experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the capital goods
industry.
Capital
Goods Industry Risk. The
capital goods industry may be affected by fluctuations in the business cycle and
by other factors affecting manufacturing demands. The capital goods industry
depends heavily on corporate spending. Companies in the capital goods industry
may perform well during times of economic expansion, but as economic conditions
worsen, the demand for capital goods may decrease. Many capital goods are sold
internationally, and companies in this industry may be affected by market
conditions in other countries and regions.
Aerospace
and Defense Industry Risk.
Government aerospace and defense regulation and spending policies can
significantly affect the aerospace and defense industry because many companies
involved in the aerospace and defense industry rely, to a large extent, on U.S.
(and other) government demand for their products and services. There are
significant risks inherent in contracting with the U.S. government that could
have a material adverse effect on the business, financial condition and results
of operations of industry participants. The aerospace industry in particular has
recently been affected by adverse economic conditions and consolidation within
the industry.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security Corporation is not affiliated with the Trust, the
Adviser or any affiliates thereof and is not involved with this offering in any
way, and has no obligation to consider the Fund in taking any corporate actions
that might affect the value of the Fund. The Trust, the Fund and any affiliate
are not responsible for the performance of RTX Corporation and make no
representation as to the performance of the Underlying Security. Investing in
the Fund is not equivalent to investing in the Underlying Security. Fund
shareholders will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the
Fund
may significantly reduce investment results and an investment in shares of the
Fund may not be advisable for investors who anticipate regularly making small
investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single
counterparty
and make the Fund more susceptible to risks associated with a single economic,
political or regulatory occurrence than a diversified
fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long TSLA Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long TSLA Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Tesla, Inc. (Nasdaq: TSLA) (“TSLA” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of TSLA. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.03% |
|
Acquired
Fund Fees and Expenses2 |
| 0.02% |
|
Total
Annual Fund Operating Expenses3 |
| 0.80% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $82 |
$255 |
$444 |
$990 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal year ended October 31, 2025, the Fund’s portfolio turnover
rate was 0% of the average value of its portfolio. The Fund’s
portfolio turnover rate is calculated without regard to transactions in cash
instruments or derivatives. Because the Fund makes extensive use of derivatives,
its portfolio turnover would be significantly higher if such transactions were
included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics, that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the Underlying Security. The Fund will only buy and sell options
contracts that are listed for trading on regulated
U.S.
exchanges. Traditional exchange-traded options contracts have standardized
terms, such as the type (call or put), the reference asset, the strike price and
expiration date. Exchange-listed options contracts are guaranteed for settlement
by the Options Clearing Corporation (“OCC”). FLEX Options are a type of
exchange-listed options contract with uniquely customizable terms that allow
investors to customize key terms like type, strike price and expiration date
that are standardized in a typical options contract. FLEX Options are also
guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure in the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
automotive and components industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease in the value of the Underlying
Security. At the close of the markets each trading day, the Adviser rebalances
the Fund’s portfolio so that its exposure to the Underlying Security is
consistent with the Fund’s investment objective. The impact of the Underlying
Security’s price movements during the day will affect whether the Fund’s
portfolio needs to be rebalanced. For example, if the price of the Underlying
Security has risen on a given day, net assets of the Fund should rise, meaning
that the Fund’s exposure will need to be increased. Conversely, if the price of
the Underlying Security has fallen on a given day, net assets of the Fund should
fall, meaning the Fund’s exposure will need to be reduced. This daily
rebalancing typically results in high portfolio turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Tesla,
Inc. is an automotive and energy company that designs, develops, manufactures,
and sells electric vehicles and energy generation and energy storage products,
and provides related services. It also owns a significant amount of Bitcoin as
part of its corporate treasury. The common stock of Tesla, Inc. is registered
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Information provided to or filed with the Securities and Exchange Commission
(“SEC”) by Tesla, Inc. pursuant to the Exchange Act can be located by reference
to the SEC file number 001-34756 through the SEC’s website at www.sec.gov. In
addition, information regarding Tesla, Inc. may be obtained from other sources
including, but not limited to, press releases, newspaper articles and other
publicly disseminated documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all
disclosures
contained in this document regarding the Underlying Security from the publicly
available documents described above. Neither the Fund, the Trust, the Adviser
nor any affiliate has participated in the preparation of such documents. Neither
the Fund, the Trust, the Adviser nor any affiliate makes any representation that
such publicly available documents or any other publicly available information
regarding the Underlying Security is accurate or complete. Furthermore, the Fund
cannot give any assurance that all events occurring prior to the date of the
prospectus (including events that would affect the accuracy or completeness of
the publicly available documents described above) that would affect the trading
price of the Underlying Security have been publicly disclosed. Subsequent
disclosure of any such events or the disclosure of, or failure to disclose,
material future events concerning the Underlying Security could affect the value
of the Fund’s investments with respect to the Underlying Security and therefore
the value of the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not achieve its leveraged
investment objective and there is a risk that you could lose all of your money
invested in the Fund. Additionally, the Fund presents risks that
are not traditionally associated with other mutual funds and ETFs. Some or all
of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield or total return. For more information about the
risks of investing in the Fund, see the section in the Fund’s prospectus
entitled “Additional Information about the Principal Risks of Investing in the
Funds.” Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the
Underlying Security’s performance. The chart shows estimated Fund returns for a
number of combinations of volatility and performance over a one-year period.
Performance shown in the chart assumes that: (i) no dividends were paid with
respect to the Underlying Security; (ii) there were no Fund expenses; and (iii)
borrowing/lending rates (to obtain leveraged exposure) of 0%. If Fund expenses
and/or actual borrowing/lending rates were reflected, the estimated returns
would be different than those shown. Particularly during periods of higher
volatility, compounding will cause results for periods longer than a trading day
to vary from 200% of the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one-year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical volatility rate for the five-year
period ended December 31, 2025 was 60.73%. The Underlying Security’s
highest volatility rate for any one calendar year during the five-year period
was 66.68% and volatility for a shorter period of time may have been
substantially higher. The Underlying Security’s annualized performance for the
five-year period ended December 31, 2025 was 13.08%. Historical volatility
and performance are not indications of what the Underlying Security volatility
and performance will be in the future.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s
shares
could widen. Under such circumstances, the Fund may increase its transaction
fee, change its investment objective by, for example, seeking to track an
alternative security, reduce its leverage or
close.
Tesla,
Inc. Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with companies in the automotive and components industry,
Tesla, Inc. faces risks that include, but are not limited to: supply chain
disruptions, manufacturing and production delays, and increases in raw material,
energy, and labor costs; fluctuations in demand for its vehicles and energy
products; product liability claims and regulatory scrutiny related to vehicle
safety and autonomous driving features; its ability to attract, hire, and retain
highly skilled personnel; and its reliance on key executives, including Elon
Musk, its Chief Executive Officer. The Underlying Security’s stock price has
been and may continue to be highly volatile due to a variety of factors,
including operating performance, market perception, and broader market
conditions. Any of these risks could materially and adversely affect the
company’s business, financial conditions, results of operations, and prospects.
The
Underlying Security holds digital assets, as part of its corporate treasury
operations. The market value of digital assets is highly volatile and may be
subject to significant price fluctuations, which could materially adversely
affect the Underlying Security’s financial condition, results of operations,
liquidity, or stock price. In addition, digital assets may be subject to
evolving regulatory frameworks, cybersecurity risks, custody risks, accounting
treatment risks, and potential impairment charges, any of which could adversely
affect the Underlying Security. Because the Fund seeks daily investment results
that correspond to twice (2X) the daily performance of the Underlying Security’s
common stock, increased volatility in the Underlying Security’s stock may result
in increased volatility of the Fund. The Fund does not invest directly in
digital assets.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
loses value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security rises, the Fund’s net assets
will decline by the same amount as the Fund’s exposure. Therefore, an investor
that purchases shares intraday may experience performance that is greater than,
or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide short
exposure to the industry to which the Underlying Security is assigned). A
portfolio concentrated in a particular industry may present more risks than a
portfolio broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the automotive and components
industry.
Automobiles
and Components Industry Risk. The automobiles and components
industry undergoes rapid transformation driven by technological innovation,
evolving emissions regulations, and shifting consumer preferences. Companies
face substantial competition, including from new market entrants in electric
vehicles (EVs) and mobility services. Capital-intensive research and development
is required to keep pace in electrification, autonomous driving, and
connected-vehicle technologies. Companies developing or deploying autonomous
driving technologies are subject to a range of risks, including technological
failures, cybersecurity breaches, and system malfunctions. Regulatory
requirements and liability frameworks for autonomous vehicles are evolving, and
non-compliance or accidents could result in litigation, financial losses, or
reputational harm. Delays in adoption, competitive pressures, or consumer
resistance could also adversely affect the company’s results of operations and
market position. Supply chain disruptions, such as shortages of semiconductors,
and tariff changes can adversely impact production. Additionally, macroeconomic
factors influencing consumer demand, like interest rates and disposable income,
can materially affect revenues and
earnings.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Tesla, Inc. and make no representation as to
the performance of the Underlying Security. Investing in the Fund is not
equivalent to investing in the Underlying Security. Fund shareholders will not
have voting rights or rights to receive dividends or other distributions or any
other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the
Fund
may significantly reduce investment results and an investment in shares of the
Fund may not be advisable for investors who anticipate regularly making small
investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as the Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue
trading halts on specific securities or financial instruments. The ability to
trade certain securities or financial instruments may be restricted, which
may result in a fund being unable to buy or sell certain securities or
financial instruments. In these circumstances, a fund may be unable
to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The Fund’s pursuit of its investment strategy will potentially be
limited by the Fund’s intention to qualify for such treatment and could
adversely affect the Fund’s ability to so qualify. The Fund may make certain
investments, including gaining exposure to the underlying reference asset
through the use of swaps, the treatment of which for these purposes is unclear.
If, in any year, the Fund were to fail to qualify for the special tax treatment
accorded a RIC and its shareholders and were ineligible to or were not able to
cure such failure, the Fund would be taxed in the same manner as an ordinary
corporation subject to U.S. federal income tax on all its income at the fund
level. The resulting taxes could substantially reduce the Fund’s net assets and
the amount of income available for distribution. In addition, in order to
requalify for taxation as a RIC, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has limited operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single
counterparty
and make the Fund more susceptible to risks associated with a single economic,
political or regulatory occurrence than a diversified
fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Fund’s performance for the most
recent calendar years ended December 31. The table illustrates how the Fund’s
average annual returns for the 1-year and since inception periods compare with
those of a broad measure of market performance and the Index. The
Fund’s past performance, before and after taxes, does not necessarily indicate
how it will perform in the future. Updated performance
information will be available on the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Calendar Year Total
Returns
During
the period of time shown in the bar chart, the Fund’s highest quarterly
return was 79.91% for the quarter ended September 30,
2025, and the lowest quarterly return
was -65.14% for the quarter ended March 31,
2025.
Average Annual
Total Returns for the Period Ended December 31,
2025
|
|
|
|
|
|
|
|
| |
|
Leverage
Shares 2X Long TSLA Daily ETF |
1
Year |
Since
Inception
(December 13,
2024) |
| Return
Before Taxes |
-26.64% |
-32.53% |
| Return
After Taxes on Distributions |
-28.45% |
-34.11% |
|
Return
After Taxes on Distributions and Sale of
Shares |
-15.75% |
-25.36% |
|
S&P
500 Index
(reflects no deduction for
fees, expenses, or taxes) |
17.88% |
13.88% |
After-tax returns are
calculated using the historical highest marginal individual U.S. federal income
tax rates during the period covered by the table above and do not reflect the
impact of state and local taxes. Actual after-tax returns depend
on an investor’s tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Shares through tax-deferred
arrangements such as an individual retirement account (“IRA”) or other
tax-advantaged accounts. In
certain cases, the figure representing “Return After Taxes on Distributions and
Sale of Shares” may be higher than the other return figures for the same period.
A higher after-tax return results when a capital loss occurs upon redemption and
provides an assumed tax deduction that benefits the
investor.
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long TSM Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long TSM Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
American Depositary Receipt (“ADR”) of Taiwan Semiconductor Manufacturing Co.,
Ltd. (NYSE: TSM) (“TSM” or “Underlying Security”). The return for investors that
invest for periods longer or shorter than a trading day should not be expected
to be 200% of the performance of the Underlying Security for the period. The
return of the Fund for a period longer than a trading day will be the result of
each trading day’s compounded return over the period, which will very likely
differ from 200% of the return of the Underlying Security for that period.
Longer holding periods, higher volatility of the Underlying Security and
leverage increase the impact of compounding on an investor’s returns. During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the ADR of TSM. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.01% |
|
Total
Annual Fund Operating Expenses3 |
| 0.76% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
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|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $78 |
$243 |
$422 |
$942 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period January 13, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure in the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
semiconductors and semiconductor equipment
industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, the Adviser rebalances
the Fund’s portfolio so that its exposure to the Underlying Security is
consistent with the Fund’s investment objective. The impact of the Underlying
Security’s price movements during the day will affect whether the Fund’s
portfolio needs to be rebalanced. For example, if the price of the Underlying
Security has risen on a given day, net assets of the Fund should rise, meaning
that the Fund’s exposure will need to be increased. Conversely, if the price of
the Underlying Security has fallen on a given day, net assets of the Fund should
fall, meaning the Fund’s exposure will need to be reduced. This daily
rebalancing typically results in high portfolio turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Taiwan
Semiconductor Manufacturing Co., Ltd. is a Taiwan-based company and the world’s
largest dedicated semiconductor foundry. As a pure-play foundry, Taiwan
Semiconductor Manufacturing Co., Ltd. manufactures integrated circuits based on
proprietary designs provided by its customers. Taiwan Semiconductor
Manufacturing Co., Ltd. is registered as a foreign private issuer under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Information
provided to or filed with the Securities and Exchange Commission (“SEC”) by
Taiwan Semiconductor Manufacturing Co., Ltd. pursuant to the Exchange Act can be
located by reference to the SEC file number 001-14700 through the SEC’s website
at www.sec.gov. In addition, information regarding Taiwan Semiconductor
Manufacturing Co., Ltd. may be obtained from other sources including, but not
limited to, press releases, newspaper articles and other publicly disseminated
documents.
The
Fund will enter into swap agreements based on the Underlying Security, which is
an ADR. ADRs provide U.S. investors access to foreign stocks on domestic
exchanges but can exhibit pricing differences compared to the underlying foreign
stocks. These differences stem from factors such as currency fluctuations,
market dynamics, liquidity variances, and tax implications. Additionally,
corporate actions and ADR fees and expenses can contribute to disparities in
pricing between ADRs and the foreign stocks they represent.
This
document relates only to the securities offered hereby and does not relate to
the ADRs of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not
achieve its leveraged investment objective and there is a risk that you could
lose all of your money invested in the Fund. Additionally, the
Fund presents risks that are not traditionally associated with other mutual
funds and ETFs. Some or all of these risks may adversely affect the Fund’s net
asset value per share (“NAV”), trading price, yield or total return. For more
information about the risks of investing in the Fund, see the section in the
Fund’s prospectus entitled “Additional Information about the Principal Risks of
Investing in the Funds.” Each risk summarized below is considered a “principal
risk” of investing in the Fund, regardless of the order in which it
appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the
Underlying Security’s performance. The chart shows estimated Fund returns for a
number of combinations of volatility and performance over a one-year period.
Performance shown in the chart assumes that: (i) no dividends were paid with
respect to the Underlying Security; (ii) there were no Fund expenses; and (iii)
borrowing/lending rates (to obtain leveraged exposure) of 0%. If Fund expenses
and/or actual borrowing/lending rates were reflected, the estimated returns
would be different than
those
shown. Particularly during periods of higher volatility, compounding will cause
results for periods longer than a trading day to vary from 200% of the
performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will impact each
shareholder differently depending on the period of time an investment in the
Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate for the
five-year period ended December 31, 2025 was 37.39%. The Underlying
Security’s highest volatility rate for any one calendar year during the
five-year period was 41.13% and volatility for a shorter period of time may have
been substantially higher. The Underlying Security’s annualized performance for
the five-year period ended December 31, 2025 was 22.16%. Historical
volatility and performance are not indications of what the Underlying Security
volatility and performance will be in the future. Volatility for a shorter
period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if
the
Underlying Security does not lose all of its value. Leverage will also have the
effect of magnifying any differences in the Fund’s correlation with the
Underlying Security and may increase the volatility of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, the Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Taiwan
Semiconductor Manufacturing Co., Ltd. Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with companies in the
semiconductor and semiconductors equipment industry, Taiwan Semiconductor
Manufacturing Co., Ltd. faces risks that include, but are not limited to:
highly-competitive nature of the semiconductor industry, which large dominant
participants; economic and market uncertainty; reductions in demand for its
products; potential concentration of revenues in a few large clients;
geopolitical events and pandemics; adequate protection of technology or other
intellectual property; exchange rates; reliance on third parties to manufacture
products; possible shortages of equipment or materials needed to manufacture
products; cybersecurity attacks and data breaches; system failures or outages;
potential incompatibility of product with some or all industry standard software
and hardware; increases in costs; adverse government regulations; regulatory
compliance costs; litigation; taxes; indebtedness; and the ability to attract
and retain high quality talent. Any of these risks could have a significant
negative impact on the company’s business.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The Fund will be subject to regulatory constraints relating to the
level of value at risk that the Fund may incur through its derivatives
portfolio. To the extent the Fund exceeds these regulatory thresholds over an
extended period, the Fund may determine that it is necessary to make adjustments
to the Fund’s investment strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Artificial
Intelligence (“AI”) Risk.
A
significant portion of the Underlying Security’s revenues and growth comes from
AI-related semiconductor demand.
Companies
engaged in AI and big data typically face intense competition and potentially
rapid product obsolescence. These companies are also heavily dependent on
intellectual property rights and may be adversely affected by loss or impairment
of those rights. There can be no assurance these companies will be able to
successfully protect their intellectual property to prevent the misappropriation
of their technology, or that competitors will not develop technology that is
substantially similar or superior to such companies’ technology. AI and big data
companies typically engage in significant amounts of spending on research and
development, as well as mergers and acquisitions, and there is no guarantee that
the products or services produced by these companies will be successful. AI and
big data companies are potential targets for cyberattacks, which can have a
materially adverse impact on the performance of these companies. In addition, AI
technology could face increasing regulatory scrutiny in the future, which may
limit the development of this technology and impede the growth of companies that
develop and/or utilize this technology. Similarly, the collection of data from
consumers and other sources could face increased scrutiny as regulators consider
how the data is collected, stored, safeguarded and used. AI and big data
companies may face regulatory fines and penalties, including potential forced
break-ups, that could hinder the ability of the companies to operate on an
ongoing basis. The customers and/or suppliers of AI and big data companies may
be concentrated in a
particular
country, region or industry. Any adverse event affecting one of these countries,
regions or industries could have a negative impact on AI and big data companies.
Country, government, and/or region-specific regulations or restrictions could
have an impact on AI and big data companies.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a part of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with its investment
objective which may lead to greater losses or reduced gains. In these instances,
the Fund may have investment exposure to the Underlying Security that is
significantly greater or significantly less than its stated investment
objective. Additionally, the Fund may close to purchases and sales of Shares
prior to the close of trading on the NYSE or other national securities listing
exchanges where Shares are listed and incur significant
losses.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
loses value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security rises, the Fund’s net assets
will decline by the same amount as the Fund’s exposure. Therefore, an investor
that purchases shares intraday may experience performance that is greater than,
or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide short
exposure to the industry to which the Underlying Security is assigned). A
portfolio concentrated in a particular industry may present more risks than a
portfolio broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the semiconductors and
semiconductor equipment industry.
Semiconductors
and Semiconductor Equipment Industry Risk.
Competitive pressures may have a significant effect on the financial condition
of semiconductor companies and, as product cycles shorten and manufacturing
capacity increases, these companies may become increasingly subject to
aggressive pricing, which hampers profitability. Reduced demand for end-user
products, under-utilization of manufacturing capacity, and other factors could
adversely impact the operating results of semiconductor companies. Semiconductor
companies typically face high capital costs and may be heavily dependent on
intellectual property rights. The semiconductor industry is highly cyclical,
which may cause the operating results of many semiconductor companies to vary
significantly. The stock prices of semiconductor companies have been and likely
will continue to be extremely
volatile.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Taiwan Semiconductor Manufacturing Co., Ltd.
and make no representation as to the performance of the Underlying Security.
Investing in the Fund is not equivalent to investing in the Underlying Security.
Fund shareholders will not have voting rights or rights to receive dividends or
other distributions or any other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as the Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund, and this could lead to
differences between the market price of the shares of the Fund and the
underlying value of those shares.
Early
Close/Trading Halt Risk.
The risk that an exchange or market may close early, close late
or issue trading halts on specific securities or financial instruments. The
ability to trade certain securities or financial instruments may be
restricted, which may result in a fund being unable to buy or sell certain
securities or financial instruments. In these circumstances, a fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90%of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The Fund’s pursuit of its investment strategy will potentially be
limited by the Fund’s intention to qualify for such treatment and could
adversely affect the Fund’s ability to so qualify. The Fund may make certain
investments, including gaining exposure to the underlying reference asset
through the use of swaps, the treatment of which for these purposes is unclear.
If, in any year, the Fund were to fail to qualify for the special tax treatment
accorded a RIC and its shareholders and were ineligible to or were not able to
cure such failure, the Fund would be taxed in the same manner as an ordinary
corporation subject to U.S. federal income tax on all its income at the fund
level. The resulting taxes could substantially reduce the Fund’s net assets and
the amount of income available for distribution. In addition, in order to
requalify for taxation as a RIC, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The Fund is exposed to operational risks arising from a number of
factors, including, but not limited to, human error, processing and
communication errors, errors of the Fund’s service providers, counterparties or
other third parties, failed or inadequate processes and technology or systems
failures. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s
inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at
www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long UNH Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long UNH Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of UnitedHealth Group Inc. (NYSE: UNH) (“UNH” or
“Underlying Security”). The return for investors that invest for periods longer
or shorter than a trading day should not be expected to be 200% of the
performance of the Underlying Security for the period. The return of the Fund
for a period longer than a trading day will be the result of each trading day’s
compounded return over the period, which will very likely differ from 200% of
the return of the Underlying Security for that period. Longer holding periods,
higher volatility of the Underlying Security and leverage increase the impact of
compounding on an investor’s returns. During periods of higher Underlying
Security volatility, the volatility of the Underlying Security may affect the
Fund’s return as much as, or more than, the return of the Underlying
Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of UNH. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.02% |
|
Total
Annual Fund Operating Expenses3 |
| 0.77% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $79 |
$246 |
$428 |
$954 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period July 21, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange®
(“FLEX”) call and put options contracts that are based on the value of the price
returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which UNH is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
healthcare equipment and services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease in the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 – 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Underlying Security moves
more than 50% on a given trading day in a direction adverse to the Fund, the
Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
UnitedHealth
Group Inc. is a diversified healthcare company that operates through two
business platforms: UnitedHealthcare, which provides health benefits and
insurance plans to individuals, employers, and Medicare and Medicaid
beneficiaries in the U.S. and internationally; and Optum, which delivers
healthcare services, technology, pharmacy care services, and data-driven health
solutions to improve care delivery and outcomes. The common stock of
UnitedHealth Group Inc. is registered under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Information provided to or filed with the
Securities and Exchange Commission (“SEC”) by UnitedHealth Group Inc. pursuant
to the Exchange Act can be located by reference to the SEC file number 1-10864
through the SEC’s website at www.sec.gov. In addition, information regarding
UnitedHealth Group Inc. may be obtained from other sources including, but not
limited to, press releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security’s performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not
achieve its leveraged investment objective and there is a risk that you could
lose all of your money invested in the Fund. Additionally, the
Fund presents risks that are not traditionally associated with other mutual
funds and ETFs. Some or all of these risks may adversely affect the Fund’s net
asset value per share (“NAV”), trading price, yield or total return. For more
information about the risks of investing in the Fund, see the section in the
Fund’s prospectus entitled “Additional Information about the Principal Risks of
Investing in the Fund.” Each risk summarized below is considered a “principal
risk” of investing in the Fund, regardless of the order in which it
appears.
Effects
of Compounding and Market Volatility Risk.
The Fund has a daily leveraged investment objective and the Fund’s performance
for periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will
impact
each shareholder differently depending on the period of time an investment in
the Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%.
Areas shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical volatility rate for the five-year
period ended December 31, 2025 was 29.69%. The Underlying Security’s
highest volatility rate for any one calendar year during the five-year period
was 47.54% and volatility for a shorter period of time may have been
substantially higher. The Underlying Security’s annualized performance for the
five-year period ended December 31, 2025 was -1.14%. Historical volatility
and performance are not indications of what the Underlying Security’s volatility
and performance will be in the future.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
UnitedHealth
Group, Inc.
Investing Risk.
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security
may
be more volatile than the market as a whole and may perform differently from the
value of the market as a whole. As of the date of this prospectus, in addition
to the risks associated with healthcare equipment and services industry,
UnitedHealth Group, Inc. faces risks that include, but are not limited to: the
ability to accurately predict, price for, and manage medical costs; protecting
proprietary databases, software and other intellectual property; cybersecurity
threats, data breaches or other privacy and information security incidents;
maintaining satisfactory relationships with healthcare providers, payers, and
service partners; sustaining
or growing enrollments in its health businesses; and exposure to private party
or governmental investigations, claims or litigation. Any of these risks could
materially and adversely affect the company’s business, financial condition,
results of operations, and prospects.
Derivatives
Risk.
Derivatives are financial instruments that derive value from the underlying
reference asset or assets, such as stocks, bonds, or funds (including ETFs),
interest rates or indexes. Investing in derivatives may expose the Fund to
greater risks, and may result in larger losses or small gains, than investing
directly in the reference assets underlying those derivatives, which may prevent
the Fund from achieving its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values of options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by
the
Fund will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk.
The intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment objective.
If
there is a significant intraday market event and/or the Underlying Security
experience a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
(defined below) and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their
application to income items, disruptions, illiquid or high
volatility in the markets for the securities or financial instruments in which
the Fund invests, early and unanticipated closings of the markets on which the
holdings of the Fund trade, resulting in the inability of the Fund to execute
intended portfolio transactions, regulatory and tax considerations, which may
cause the Fund to hold (or not to hold) the Underlying Security. The Fund may
take or refrain from taking positions in order to improve tax efficiency, comply
with regulatory restrictions, or for other reasons, each of which may negatively
affect the Fund’s desired correlation with the Underlying Security. The Fund may
be subject to large movements of assets into and out of the Fund, potentially
resulting in the Fund being over- or under-exposed to the Underlying Security.
Additionally, the Fund’s underlying investments and/or reference assets may
trade on markets that may not be open on the same day as the Fund, which may
cause a difference between the changes in the daily performance of the Fund and
changes in the performance of the Underlying Security. Any of these factors
could decrease the correlation between the performance of the Fund and the
Underlying Security and may hinder the Fund’s ability to meet its daily
leveraged investment objective on or around that
day.
Concentration
Risk.
The Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the healthcare equipment and
services industry.
Healthcare
Equipment and Services Industry Risk.
The healthcare industry can be
significantly affected by changing economic conditions, evolving patient
demographics, and fluctuations in demand for healthcare equipment and services.
Profitability in this industry is often dependent on reimbursement rates from
government programs and private payors, as well as the ability to manage
operational costs effectively. Changes in healthcare regulations and policies,
including those related to insurance coverage and reimbursement, can materially
impact the industry. Companies in the healthcare industry are subject to
extensive and frequently changing government regulation, which may affect the
scope of their activities, the rates they can charge for services, and their
compliance costs. Additionally, the industry faces risks related to litigation,
operational disruptions, and evolving technologies that may alter traditional
service delivery models.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent limitations in such
plans and systems. Furthermore, the Fund cannot control the cybersecurity plans
and systems of the Fund’s Adviser, other service providers, market makers,
Authorized Participants or issuers of securities in which the Fund
invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to
fluctuate.
Indirect
Investment Risk.
The Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of UnitedHealth Group Inc. and make no
representation as to the performance
of
the Underlying Security. Investing in the Fund is not equivalent to investing in
the Underlying Security. Fund shareholders will not have voting rights or rights
to receive dividends or other distributions or any other rights with respect to
the Underlying Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intraday (premium) or less than the NAV intraday (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC (the “Exchange”) and may be traded on U.S.
exchanges other than the Exchange, there can be no assurance that shares of the
Fund will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of shares of the Fund may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of
the
Fund, and this could lead to differences between the market price of the shares
of the Fund and the underlying value of those
shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The Fund will generally effect creations and redemptions for cash rather than
for in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter and meet
annual distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk.
As of the date of this prospectus, the Fund has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all
market
participants’ trades. Therefore, the Fund may have more difficulty transacting
in the securities or financial instruments and the Fund’s transactions could
exacerbate the price changes of the Underlying Security and may impact the
ability of the Fund to achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice President, Portfolio Management of the
Adviser, are jointly and primarily responsible for the day-to-day management of
the Fund and each has served as portfolio manager since the Fund’s inception in
July 2025.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
Leverage
Shares 2X Long XYZ Daily ETF
IMPORTANT
INFORMATION REGARDING THE FUND
The
Leverage Shares 2X Long XYZ Daily ETF (the “Fund”) seeks daily leveraged
investment results and is very different from most other exchange-traded funds.
As a result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify (200%) the daily performance of the
publicly-traded common stock of Block, Inc. (NYSE: XYZ) (“XYZ” or “Underlying
Security”). The return for investors that invest for periods longer or shorter
than a trading day should not be expected to be 200% of the performance of the
Underlying Security for the period. The return of the Fund for a period longer
than a trading day will be the result of each trading day’s compounded return
over the period, which will very likely differ from 200% of the return of the
Underlying Security for that period. Longer holding periods, higher volatility
of the Underlying Security and leverage increase the impact of compounding on an
investor’s returns. During periods of higher Underlying Security volatility, the
volatility of the Underlying Security may affect the Fund’s return as much as,
or more than, the return of the Underlying Security.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by knowledgeable investors who understand the potential consequences of seeking
daily leveraged (2X) investment results, understand the risks associated with
the use of leverage and are willing to monitor their portfolios frequently. The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. For periods longer
than a single day, the Fund will lose money if the Underlying Security’s
performance is flat, and it is possible that the Fund will lose money even if
the Underlying Security’s performance increases over a period longer than a
single day. An investor could lose the full principal value of his/her
investment within a single day if the price of the Underlying Security falls by
more than 50% in one trading day.
Investment
Objective
The
Fund is an exchange traded fund (“ETF”) that seeks daily levered investment
results, before fees and expenses, of two times (200%) of the daily percentage
change in the price of the common stock of XYZ. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
| |
|
Management
Fees1 |
| 0.75% |
| Distribution
and/or Service (12b-1) Fees |
| None |
|
Other
Expenses |
| 0.00% |
|
Acquired
Fund Fees and Expenses2 |
| 0.03% |
|
Total
Annual Fund Operating Expenses3 |
| 0.78% |
|
|
|
|
|
| |
|
1 |
The
Fund’s investment advisory agreement provides that the Fund’s investment
adviser will pay substantially all expenses of the Fund, except for the
fee paid to the Adviser (defined below) pursuant to the investment
advisory agreement, interest charges on any borrowings, taxes, 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, accrued deferred tax liability, extraordinary expenses,
and distribution (12b-1) fees and
expenses. |
|
|
|
|
|
| |
|
2 |
Acquired Fund
Fees and Expenses are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the
expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund
and exclude Acquired Fund Fees and
Expenses. |
|
3 |
The
cost of investing in swaps, including the embedded cost of the swap and
the operating expenses of the referenced assets, is an indirect expense
that is not included in the above fee table and is not reflected in the
expense example. |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $80 |
$249 |
$433 |
$966 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period April 3, 2025 (commencement of operations) through
October 31, 2025, the Fund’s portfolio turnover rate was 0% of the average value of its
portfolio. The Fund’s portfolio turnover rate is calculated without regard to
transactions in cash instruments or derivatives. Because the Fund makes
extensive use of derivatives, its portfolio turnover would be significantly
higher if such transactions were included.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed ETF. The Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in the Underlying Security and
financial instruments with economic characteristics that, in combination,
provide 200% daily leveraged exposure to the price of the Underlying Security,
consistent with the Fund’s investment objective.
The
Fund will enter into one or more swap agreements with major financial
institutions for a specified period ranging from a day to more than one year
whereby the Fund and the financial institution will agree to exchange the return
(or differentials in rates of return) earned or realized on an investment by the
Fund in the Underlying Security that is equal, on a daily basis, to 200% of the
value of the Fund’s net assets. The gross return to be exchanged or “swapped”
between the parties is calculated with respect to a “notional amount,” e.g., the
return on or change in value of a particular dollar amount representing the
Underlying Security.
Depending
on market conditions, market liquidity and operational constraints, the Fund may
either buy deep in-the-money call option contracts, or simultaneously buy an
at-the-money call option contract and sell an at-the-money put option contract
(a strategy generally referred to as synthetic forward). All option contracts
bought and sold will be against the Underlying Security. The Fund will pay the
premium for each call option contract bought and receive the premium for each
put option sold. The Fund’s participation in potential changes in the price of
the Underlying Security is based on the price of the Underlying Security at the
time the Fund buys the call and sells the put option contracts, the strike price
of the call (put) option contract and the Underlying Security price at the time
of the contract’s expiration. The maturity of the option contract bought and
sold may vary from 1-week to 1-month.
As
part of the Fund’s strategy, the Fund may buy a combination of standardized
exchange-traded and FLexible EXchange® (“FLEX”) call and put options contracts
that are based on the value of the price returns of the
Underlying
Security. The Fund will only buy and sell options contracts that are listed for
trading on regulated U.S. exchanges. Traditional exchange-traded options
contracts have standardized terms, such as the type (call or put), the reference
asset, the strike price and expiration date. Exchange-listed options contracts
are guaranteed for settlement by the Options Clearing Corporation (“OCC”). FLEX
Options are a type of exchange-listed options contract with uniquely
customizable terms that allow investors to customize key terms like type, strike
price and expiration date that are standardized in a typical options contract.
FLEX Options are also guaranteed for settlement by the OCC.
In
general, an option is a contract that gives the purchaser (holder) of the
option, in return for a premium, the right to buy from (call) or sell to (put)
the seller (writer) of the option the security or currency underlying (in this
case, the Underlying Security) the option at a specified exercise
price.
An
option is said to be European Style when it can be exercised only at expiration
whereas an American Style option can be exercised at any time prior to
expiration. The Fund may use either European or American style
options.
As
a result of its investment strategy, the Fund will be concentrated in the
industry to which the Underlying Security is assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure to the industry to which the Underlying Security is assigned). As of
the date of this prospectus, the Underlying Security is assigned to the
financial services industry.
The
Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the Underlying
Security. At the close of the markets each trading day, Themes Management
Company, LLC (the “Adviser”) rebalances the Fund’s portfolio so that its
exposure to the Underlying Security is consistent with the Fund’s investment
objective. The impact of the Underlying Security’s price movements during the
day will affect whether the Fund’s portfolio needs to be rebalanced. For
example, if the price of the Underlying Security has risen on a given day, net
assets of the Fund should rise, meaning that the Fund’s exposure will need to be
increased. Conversely, if the price of the Underlying Security has fallen on a
given day, net assets of the Fund should fall, meaning the Fund’s exposure will
need to be reduced. This daily rebalancing typically results in high portfolio
turnover.
On
a day-to-day basis, the Fund is expected to hold collateral for its derivative
positions. For this purpose, the Fund may invest in money market funds, deposit
accounts with institutions with high quality (investment grade) credit ratings,
and/or short-term debt instruments that have terms-to-maturity of less than 397
days and exhibit high quality (investment grade) credit profiles, including U.S.
government securities and repurchase agreements. The Fund is expected to
allocate between 25 - 50% of its assets as collateral for swap agreements or as
premiums for purchased options contracts.
Generally,
the Fund pursues its investment objective regardless of market conditions and
does not generally take defensive positions. If the Fund’s underlying security
moves more than 50% on a given trading day in a direction adverse to the Fund,
the Fund’s investors would lose all of their money.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close of
the markets on one trading day to the close of the markets on the next trading
day.
The
Fund is considered to be non-diversified. Additionally, the Fund’s investment
objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Block,
Inc. is a global financial technology company that provides software, hardware,
and services to enable businesses and individuals to accept payments, manage
operations, and access financial tools. Its offerings include point-of-sale
(POS) systems, business management software, e-commerce solutions, payroll and
appointments management, banking services, and business lending. Block, Inc.
also holds a material amount of digital assets as part of its corporate
treasury. The common stock of Block, Inc. is registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to
or filed with the Securities and Exchange Commission (“SEC”) by Block, Inc.
pursuant to the Exchange Act can be located by reference to the SEC file number
001-37622 through the SEC’s website at www.sec.gov. In addition, information
regarding Block, Inc. may be obtained from other sources including, but not
limited to, press releases, newspaper articles and other publicly disseminated
documents.
This
document relates only to the securities offered hereby and does not relate to
the shares of the Underlying Security or other securities related to the
Underlying Security. The Fund has derived all disclosures contained in this
document regarding the Underlying Security from the publicly available documents
described above. Neither the Fund, the Trust, the Adviser nor any affiliate has
participated in the preparation of such documents. Neither the Fund, the Trust,
the Adviser nor any affiliate makes any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Security is accurate or complete. Furthermore, the Fund cannot give
any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the
Underlying Security have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of, or failure to disclose, material future events
concerning the Underlying Security could affect the value of the Fund’s
investments with respect to the Underlying Security and therefore the value of
the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time, the
return of the Fund for periods longer than a single day will be the result of
each day’s returns compounded over the period, which will very likely differ
from 200% of the return of the Underlying Security over the same period. The
Fund will lose money if the Underlying Security performance is flat over time,
and as a result of daily rebalancing, the Underlying Security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the Underlying Security’s performance increases over a period
longer than a single day.
Principal
Risks of Investing in the Fund
An
investment in the Fund entails risk. The Fund may not
achieve its leveraged investment objective and there is a risk that you could
lose all of your money invested in the Fund. Additionally, the
Fund presents risks that are not traditionally associated with other mutual
funds and ETFs. Some or all of these risks may adversely affect the Fund’s net
asset value per share (“NAV”), trading price, yield or total return. For more
information about the risks of investing in the Fund, see the section in the
Fund’s prospectus entitled “Additional Information about the Principal Risks of
Investing in the Funds.” Each risk summarized below is considered a “principal
risk” of investing in the Fund, regardless of the order in which it
appears.
Effects
of Compounding and Market Volatility Risk. The
Fund has a daily leveraged investment objective and the Fund’s performance for
periods greater than a trading day will be the result of each day’s returns
compounded over the period, which is very likely to differ from 200% of the
Underlying Security’s performance, before fees and expenses. Compounding has a
significant impact on funds that are leveraged and that rebalance daily. The
impact of compounding becomes more pronounced as volatility and holding periods
increase and will impact each shareholder differently depending on the period of
time an investment in the Fund is held and the volatility of the Underlying
Security during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how the Underlying Security volatility and its
return could affect the Fund’s performance. Fund performance for periods greater
than one single day can be estimated given any set of assumptions for the
following factors: a) the Underlying Security volatility; b) the Underlying
Security performance; c) period of time; d) financing rates associated with
leveraged exposure; e) other Fund expenses; and f) dividends or interest paid
with respect to the Underlying Security. The chart below provides examples of
how volatility and its return could affect the Underlying Security’s
performance. The chart shows estimated Fund returns for a number of combinations
of volatility and performance over a one-year period. Performance shown in the
chart assumes that: (i) no dividends were paid with respect to the Underlying
Security; (ii) there were no Fund expenses; and (iii) borrowing/lending rates
(to obtain leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be different
than those shown. Particularly during periods of higher volatility, compounding
will cause results for periods longer than a trading day to vary from 200% of
the performance of the Underlying Security.
During
periods of higher Underlying Security volatility, the volatility of the
Underlying Security may affect the Fund’s return as much as, or more than, the
return of the Underlying Security. The impact of compounding will
impact
each shareholder differently depending on the period of time an investment in
the Fund is held and the volatility of the Underlying Security during a
shareholder’s holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 6.1% if the
Underlying Security provided no return over a one year period during which the
Underlying Security experienced annualized volatility of 25%. At higher ranges
of volatility, there is a chance of a significant loss of value in the Fund,
even if the Underlying Security’s return is flat. For
instance, if the Underlying Security’s annualized volatility is 100%, the Fund
would be expected to lose 63.2% of its value, even if the cumulative return for
the year was 0%. Areas
shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than 200% of the performance of the Underlying Security
and those shaded green (or light gray) represent those scenarios where the Fund
can be expected to return more than 200% of the performance of the Underlying
Security. The table below is not a representation of the Fund’s actual returns,
which may be significantly better or worse than the returns shown below as a
result of any of the factors discussed above or in “Daily Correlation Risk”
below.
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|
| |
| One
Year |
200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
-120% |
-84.2% |
-85.0% |
-87.5% |
-90.9% |
-94.1% |
| -50% |
-100% |
-75.2% |
-76.5% |
-80.5% |
-85.8% |
-90.8% |
| -40% |
-80% |
-64.4% |
-66.2% |
-72.0% |
-79.5% |
-86.8% |
| -30% |
-60% |
-51.5% |
-54.0% |
-61.8% |
-72.1% |
-82.0% |
| -20% |
-40% |
-36.6% |
-39.9% |
-50.2% |
-63.5% |
-76.5% |
| -10% |
-20% |
-19.8% |
-23.9% |
-36.9% |
-53.8% |
-70.2% |
| 0% |
0% |
-1.0% |
-6.1% |
-22.1% |
-43.0% |
-63.2% |
| 10% |
20% |
19.8% |
13.7% |
-5.8% |
-31.1% |
-55.5% |
| 20% |
40% |
42.6% |
35.3% |
12.1% |
-18.0% |
-47.0% |
| 30% |
60% |
67.3% |
58.8% |
31.6% |
-3.7% |
-37.8% |
| 40% |
80% |
94.0% |
84.1% |
52.6% |
11.7% |
-27.9% |
| 50% |
100% |
122.8% |
111.4% |
75.2% |
28.2% |
-17.2% |
| 60% |
120% |
153.5% |
140.5% |
99.4% |
45.9% |
-5.8% |
The
Underlying Security’s annualized historical daily volatility rate for the
five-year period ended December 31, 2025 was 60.36%. The Underlying
Security’s highest volatility rate for any one calendar year during the
five-year period was 89.48% and volatility for a shorter period of time may have
been substantially higher. The Underlying Security’s annualized performance for
the five-year period ended December 31, 2025 was -21.70%. Historical
volatility and performance are not indications of what the Underlying Security
volatility and performance will be in the future. Volatility for a shorter
period of time may have been substantially higher.
For
information regarding the effects of volatility and performance on the long-term
performance of the Fund, see “Additional Information About Investment Techniques
and Policies.”
Leverage
Risk.
The
Fund obtains investment exposure in excess of its net assets by utilizing
leverage and may lose more money in market conditions that are adverse to its
investment objective than a fund that does not utilize leverage. An investment
in the Fund is exposed to the risk that a decline in the daily performance of
the Underlying Security will be magnified. This means that an investment in the
Fund will be reduced by an amount equal to 2% for every 1% daily decline in the
Underlying Security, not including the costs of financing leverage and other
operating expenses, which would further reduce its value. The Fund could lose an
amount greater than its net assets in the event of a security decline of more
than 50%. This would result in a total loss of a shareholder’s investment in one
day even if the Underlying Security subsequently moves in the opposite direction
and eliminates all or a portion of its earlier daily change. A total loss may
occur in a single day even if the Underlying Security does not lose all of its
value. Leverage will also have the effect of magnifying any differences in the
Fund’s correlation with the Underlying Security and may increase the volatility
of the Fund.
To
the extent that the instruments utilized by the Fund are thinly traded or have a
limited market, the Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such
periods,
the Fund’s ability to issue additional Creation Units may be adversely affected.
As a result, the Fund’s shares could trade at a premium or discount to their net
asset value and/or the bid-ask spread of the Fund’s shares could widen. Under
such circumstances, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative security,
reduce its leverage or close.
Block,
Inc. Investing Risk.
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with the financial services
industry, Block, Inc. faces risks that include, but are not limited to: online
security breaches, system reliability failures, privacy violations, customer
disputes, payment fraud, and decreases in website or application traffic. Laws
vary by country, including taxation and financial regulations, which may create
challenges for scaling e-commerce and financial services. Companies in the
financial services industry are also particularly exposed to economic recessions
and competition from new entrants. Any of these risks could materially and
adversely affect the company’s business, financial condition, results of
operations, and prospects.
The
Underlying Security holds digital assets as part of its corporate treasury
operations. The market value of digital assets is highly volatile and may be
subject to significant price fluctuations, which could materially adversely
affect the Underlying Security’s financial condition, results of operations,
liquidity, or stock price. In addition, digital assets may be subject to
evolving regulatory frameworks, cybersecurity risks, custody risks, accounting
treatment risks, and potential impairment charges, any of which could adversely
affect the Underlying Security. Because the Fund seeks daily investment results
that correspond to twice (2X) the daily performance of the Underlying Security’s
common stock, increased volatility in the Underlying Security’s stock may result
in increased volatility of the Fund. The Fund does not invest directly in
digital assets.
Derivatives
Risk. Derivatives
are financial instruments that derive value from the underlying reference asset
or assets, such as stocks, bonds, or funds (including ETFs), interest rates or
indexes. Investing in derivatives may expose the Fund to greater risks, and may
result in larger losses or small gains, than investing directly in the reference
assets underlying those derivatives, which may prevent the Fund from achieving
its investment objective.
Swap
Agreements.
The Fund expects to use swap agreements to achieve its investment objective. The
Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other ordinary
investments, including risk related to the market, imperfect correlation with
underlying investments, higher price volatility, lack of availability,
counterparty risk, liquidity, valuation and legal restrictions. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The use of derivatives may result in larger losses or smaller
gains than directly investing in securities. When the Fund uses derivatives,
there may be an imperfect correlation between the value of the Underlying
Security and the derivative, which may prevent the Fund from achieving its
investment objective. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
those amounts initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering the Fund’s return. Such costs may increase as interest rates
rise.
Swap
agreements are entered into primarily with major global financial institutions
for a specified period which may range from one day to more than one year. In a
standard swap transaction, two parties agree to exchange the return (or
differentials in rates of return) earned or realized on particular predetermined
reference or underlying securities or instruments. The gross return to be
exchanged or swapped between the parties is calculated based on a notional
amount or the return on or change in value of a particular dollar amount
invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment
objective.
Options
Contracts.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The value of the options contracts in
which the Fund invests are substantially influenced by the value of the
Underlying Security. The Fund may experience substantial downside from specific
option positions and certain option positions held by the Fund may expire
worthless. The options held by the Fund are exercisable at the strike price on
their expiration date. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such date, the value of an option generally does not increase
or decrease at the same rate as the underlying instrument. There may at times be
an imperfect correlation between the movement in values options contracts and
the underlying instrument, and there may at times not be a liquid secondary
market for certain options contracts. The value of the options held by the Fund
will be determined based on market quotations or other recognized pricing
methods. Additionally, as the Fund intends to continuously maintain indirect
exposure to the Underlying Security through the use of options contracts, as the
options contracts it holds are exercised or expire it will enter into new
options contracts, a practice referred to as “rolling.” If the expiring options
contracts do not generate proceeds enough to cover the cost of entering into new
options contracts, the Fund may experience losses. The use of options to
generate leverage introduces additional risks, including significant potential
losses if the market moves unfavorably. The leverage inherent in options can
amplify both gains and losses, leading to increased volatility and potential for
substantial losses, particularly in periods of market uncertainty or low
liquidity. Additionally, the Fund may incur losses if the value of the
Underlying Security moves against its positions, potentially resulting in a
complete loss of the premium
paid.
Counterparty/Collateral
Risk. If
a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Rebalancing
Risk. If
for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Intraday
Investment Risk. The
intraday performance of Fund shares traded in the secondary market will be
different from the performance of the Fund when measured from the close of the
market on a given trading day until the close of the market on the subsequent
trading day. The exact exposure of an investment in the Fund intraday in the
secondary market is a function of the difference between the value of the
Underlying Security at the market close on the first trading day and the value
of the Underlying Security at the time of purchase. If the Underlying Security
rises in value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if the Underlying Security declines in value, the Fund’s
net assets will decline by the same amount as the Fund’s exposure. Therefore, an
investor that purchases shares intraday may experience performance that is
greater than, or less than, the Fund’s stated investment
objective.
If
there is a significant intraday market event and/or the Underlying Security
experiences a significant change in value, the Fund may not meet its investment
objective, may not be able to rebalance its portfolio appropriately, or may
experience significant premiums or discounts, or widened bid-ask spreads.
Additionally, the Fund may close prior to the close of trading on the Exchange
and experience significant losses.
Daily
Correlation Risk. There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Security and therefore achieve its daily leveraged investment
objective. The Fund’s exposure to the Underlying Security is impacted by the
Underlying Security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to the Underlying Security at the end of each day. The
possibility of the Fund being materially over- or under-exposed to the
Underlying Security increases on days when the Underlying Security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect the Fund’s ability to adjust
exposure to the required levels.
The
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) the Underlying Security. The Fund may take or refrain from
taking positions in order to improve tax efficiency, comply with regulatory
restrictions, or for other reasons, each of which may negatively affect the
Fund’s desired correlation with the Underlying Security. The Fund may be subject
to large movements of assets into and out of the Fund, potentially resulting in
the Fund being over- or under-exposed to the Underlying Security. Additionally,
the Fund’s underlying investments and/or reference assets may trade on markets
that may not be open on the same day as the Fund, which may cause a difference
between the changes in the daily performance of the Fund and changes in the
performance of the Underlying Security. Any of these factors could decrease the
correlation between the performance of the Fund and the Underlying Security and
may hinder the Fund’s ability to meet its daily leveraged investment objective
on or around that day.
Concentration
Risk. The
Fund is concentrated in the industry to which the Underlying Security is
assigned (i.e.,
hold more than 25% of its total assets in investments that provide long exposure
to the industry to which the Underlying Security is assigned). A portfolio
concentrated in a particular industry may present more risks than a portfolio
that is broadly diversified over several industries. As of the date of this
prospectus, the Underlying Security is assigned to the financial services
industry.
Financial
Services Industry Risk.
Financial services companies are subject to extensive governmental regulation
which may limit both the amounts and types of loans and other financial
commitments they can make, the interest rates and fees they can charge, the
scope of their activities, the prices they can charge and the amount of capital
they must maintain. Profitability is largely dependent on the availability and
cost of capital funds and can fluctuate significantly when interest rates change
or due to increased competition. In addition, deterioration of the credit
markets generally may cause an adverse impact in a broad range of markets,
including U.S. and international credit and interbank money markets generally,
thereby affecting a wide range of financial institutions and markets. Certain
events in the financial industry may cause an unusually high degree of
volatility in the financial markets, both domestic and foreign, and cause
certain financial services companies to incur large losses. Securities of
financial services companies may experience a dramatic decline in value when
such companies experience substantial declines in the valuations of their
assets, take action to raise capital (such as the issuance of debt or equity
securities), or cease operations. Credit losses resulting from financial
difficulties of borrowers and financial losses associated with investment
activities can negatively impact the industry. Insurance companies may be
subject to severe price competition. Adverse economic, business or political
developments could adversely affect financial institutions engaged in mortgage
finance or other lending or investing activities directly or indirectly
connected to the value of real
estate.
Cybersecurity
Risk. Failures
or breaches of the electronic systems of the Fund and/or the Fund’s service
providers, including the Adviser, market makers, Authorized Participants or the
issuers of securities in which the Fund invests, have the ability to cause
disruptions, negatively impact the Fund’s business operations and/or potentially
result in financial losses to the Fund and its shareholders. While the Fund has
established business continuity plans and risk management systems seeking to
address system breaches or failures, there are inherent
limitations
in such plans and systems. Furthermore, the Fund cannot control the
cybersecurity plans and systems of the Fund’s Adviser, other service providers,
market makers, Authorized Participants or issuers of securities in which the
Fund invests.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Equity
Securities Risk. Publicly
issued equity securities, including common stocks, are subject to market risks
that may cause their prices to fluctuate over time. Fluctuations in the value of
equity securities in which the Fund invests, and/or has exposure to, will cause
the net asset value of the Fund to fluctuate.
Indirect
Investment Risk. The
Underlying Security is not affiliated with the Trust, the Adviser or any
affiliates thereof and is not involved with this offering in any way, and has no
obligation to consider the Fund in taking any corporate actions that might
affect the value of the Fund. The Trust, the Fund and any affiliate are not
responsible for the performance of Block, Inc. and make no representation as to
the performance of the Underlying Security. Investing in the Fund is not
equivalent to investing in the Underlying Security. Fund shareholders will not
have voting rights or rights to receive dividends or other distributions or any
other rights with respect to the Underlying
Security.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Other risk factors include credit risk (the
debtor may default), extension risk (an issuer may exercise its right to repay
principal on a fixed rate obligation held by the Fund later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund’s share price and total return
to be reduced and fluctuate more than other types of
investments.
Money
Market Instrument Risk. The
Fund may use a variety of money market instruments for cash management purposes,
including money market funds, depositary accounts and repurchase agreements.
Money market funds may be subject to credit risk with respect to the debt
instruments in which they invest. Depository accounts may be subject to credit
risk with respect to the financial institution in which the depository account
is held. Repurchase agreements may be subject to market and credit risk related
to the collateral securing the repurchase agreement. Money market instruments
may lose money.
Repurchase
Agreements Risk. The
Fund may enter into repurchase agreements. In a repurchase agreement, a party
sells a security, commonly a U.S. government security, and agrees to buy the
security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
ETF
Risks. The
Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers
exit
the business or significantly reduce their business activities and no other
entities step forward to perform their functions.
Costs
of Buying or Selling Shares of the Fund. Due
to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV. As
with all ETFs, shares of the Fund may be bought and sold in the secondary market
at market prices. The price of shares of the Fund, like the price of all traded
securities, will be subject to factors such as supply and demand, as well as the
current value of the Fund’s portfolio holdings. Although it is expected that the
market price of the shares of the Fund will approximate the Fund’s NAV, there
may be times when the market price of the shares is more than the NAV intraday
(premium) or less than the NAV intraday (discount). This risk is heightened in
times of market volatility, periods of steep market declines, and periods when
there is limited trading activity for shares in the secondary market, in which
case such premiums or discounts may be significant.
Trading.
Although
shares of the Fund are listed for trading on a national securities exchange,
such as The Nasdaq Stock Market LLC
(the
“Exchange”) and may be traded on U.S. exchanges other than the Exchange, there
can be no assurance that shares of the Fund will trade with any volume, or at
all, on any stock exchange. In stressed market conditions, the liquidity of
shares of the Fund may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than shares of the
Fund, and this could lead to differences between the market price of the shares
of the Fund and the underlying value of those
shares.
Early
Close/Trading Halt Risk.
The
risk that an exchange or market may close early, close late or issue trading
halts on specific securities or financial instruments. The ability to trade
certain securities or financial instruments may be restricted, which may result
in a fund being unable to buy or sell certain securities or financial
instruments. In these circumstances, a fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Cash
Transaction Risk.
The
Fund will generally effect creations and redemptions for cash rather than for
in-kind securities. As a result, the Fund may not be tax efficient and will
incur brokerage and financing costs related to buying and selling securities or
obtaining derivative exposure to achieve its investment objective thus incurring
additional expenses than if it had effected creations and redemptions in kind.
To the extent that such costs are not offset by transaction fees paid by an AP,
the Fund will bear such costs, which will decrease the Fund’s net asset
value.
Tax
Risk. In
order to qualify for the special tax treatment accorded a regulated investment
company (“RIC”) and its shareholders, the Fund must derive at least 90% of its
gross income for each taxable year from “qualifying income,” meet certain asset
diversification tests at the end of each taxable quarter and meet annual
distribution requirements.
The
Fund’s pursuit of its investment strategy will potentially be limited by the
Fund’s intention to qualify for such treatment and could adversely affect the
Fund’s ability to so qualify. The Fund may make certain investments, including
gaining exposure to the underlying reference asset through the use of swaps, the
treatment of which for these purposes is unclear. If, in any year, the Fund were
to fail to qualify for the special tax treatment accorded a RIC and its
shareholders and were ineligible to or were not able to cure such failure, the
Fund would be taxed in the same manner as an ordinary corporation subject to
U.S. federal income tax on all its income at the fund level. The resulting taxes
could substantially reduce the Fund’s net assets and the amount of income
available for distribution. In addition, in order to requalify for taxation as a
RIC, the Fund could be required to recognize unrealized gains, pay substantial
taxes and interest, and make certain distributions.
New
Fund Risk. As
of the date of this prospectus, the Fund has no operating history and currently
has fewer assets than larger funds. Like other new funds, large inflows and
outflows may impact the Fund’s market exposure for limited periods of time. This
impact may be positive or negative, depending on the direction of market
movement during the period affected.
Non-Diversification
Risk. The
Fund is considered to be non-diversified. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase the Fund’s volatility and increase the
risk that the Fund’s performance will decline based on the performance of a
single issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a diversified fund.
Operational
Risk. The
Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational
risks.
Liquidity
Risk.
Holdings
of the Fund may be difficult to buy or sell or may be illiquid, particularly
during times of market turmoil. Illiquid securities may be difficult to value,
especially in changing or volatile markets. If the Fund is forced to buy or sell
an illiquid security or derivative instrument at an unfavorable time or price,
the Fund may be adversely impacted. Certain market conditions or restrictions
may prevent the Fund from limiting losses, realizing gains or achieving a high
correlation with the Underlying Security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for the Fund. To the extent that
the Underlying Security value increases or decreases significantly, the Fund may
be one of many market participants that are attempting to transact in the
Underlying Security. Under such circumstances, the market for the Underlying
Security may lack sufficient liquidity for all market participants’ trades.
Therefore, the Fund may have more difficulty transacting in the securities or
financial instruments and the Fund’s transactions could exacerbate the price
changes of the Underlying Security and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for the Underlying Security and/or Fund may lack
sufficient liquidity for all market participants’ trades. Therefore, the Fund
may have difficulty transacting in it and/or in correlated investments, such as
swap contracts. Further, the Fund’s transactions could exacerbate illiquidity
and volatility in the price of the Underlying Security and correlated derivative
instruments.
Portfolio
Turnover Risk. Daily
rebalancing of the Fund’s holdings pursuant to its daily investment objective
causes a much greater number of portfolio transactions when compared to most
ETFs. Additionally, active secondary market trading of the Shares could cause
more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly
higher.
Fund
Performance
Performance
information for the Fund is not included because the Fund did not have a full
calendar year of performance prior to the date of this
Prospectus. In the future, performance for the Fund will be
presented in this section. Updated performance information will be available on
the Fund’s website at www.ThemesETFs.com
or by calling the Fund toll-free at 1-866-5Themes (1-866-584-3637).
Management
Investment
Adviser
Themes
Management Company, LLC (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Calvin
Tsang, CFA, Head of Product Management and Development of the Adviser, Dingxun
(Kevin) Shao, Vice President, Product Management and Development of the Adviser
and Paul Bartkowiak, Associate Vice
President,
Portfolio Management of the Adviser, are jointly and primarily responsible for
the day-to-day management of the Fund and each has served as portfolio manager
since the Fund’s inception.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.ThemesETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. 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 website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUNDS
Each
Fund’s ticker symbol appears on the cover of this Prospectus, and references to
specific Funds in the sections below may refer to such Funds by their ticker
symbol.
Additional
Information About Each Fund’s Investment Objective
Each
Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed by the Board of Trustees of Themes ETF Trust (the
“Trust”) without a vote of shareholders upon written notice to shareholders. If
a Fund elects to change its investment objective or 80% Policy, shareholders
will be given at least 60 days’ notice prior to any such change.
Additional
Information About Each Fund’s Principal Investment Strategies
Leverage
Shares 2X Long AAL Daily ETF
The
Leverage Shares 2X Long AAL Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to AAL equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long ADBE Daily ETF
The
Leverage Shares 2X Long ADBE Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to ADBE equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long AMD Daily ETF
The
Leverage Shares 2X Long AMD Daily ETF under normal circumstances, invests in the
Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to AMD equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long ARM Daily ETF
The
Leverage Shares 2X Long ARM Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to ARM equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long ASML Daily ETF
The
Leverage Shares 2X Long ASML Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to ASML equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long AVGO Daily ETF
The
Leverage Shares 2X Long AVGO Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to AVGO equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long BBAI Daily ETF
The
Leverage Shares 2X Long BBAI Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to BBAI equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long BLSH Daily ETF
The
Leverage Shares 2X Long BLSH Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to BLSH equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long BMNR Daily ETF
The
Leverage Shares 2X Long BMNR Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to BMNR equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long BA Daily ETF
The
Leverage Shares 2X Long BA Daily ETF, under normal circumstances, invests in the
Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to BA equal to at least 80% of
its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long BULL Daily ETF
The
Leverage Shares 2X Long BULL Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to BULL equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long COIN Daily ETF
The
Leverage Shares 2X Long COIN Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to COIN equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long COST Daily ETF
The
Leverage Shares 2X Long COST Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to COST equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long CRCL Daily ETF
The
Leverage Shares 2X Long CRCL Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to CRCL equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long CRM Daily ETF
The
Leverage Shares 2X Long CRM Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to CRM equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long CRWV Daily ETF
The
Leverage Shares 2X Long CRWV Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to CRWV equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long FIG Daily ETF
The
Leverage Shares 2X Long FIG Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to FIG equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long FUTU Daily ETF
The
Leverage Shares 2X Long FUTU Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to FUTU equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long GLXY Daily ETF
The
Leverage Shares 2X Long GLXY Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to GLXY equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long HOOD Daily ETF
The
Leverage Shares 2X Long HOOD Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to HOOD equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long MP Daily ETF
The
Leverage Shares 2X Long MP Daily ETF, under normal circumstances, invests in the
Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to MP equal to at least 80% of
its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long NBIS Daily ETF
The
Leverage Shares 2X Long NBIS Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to NBIS equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long NVDA Daily ETF
The
Leverage Shares 2X Long NVDA Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to NVDA equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long PANW Daily ETF
The
Leverage Shares 2X Long PANW Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to PANW equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long PLTR Daily ETF
The
Leverage Shares 2X Long PLTR Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to PLTR equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long PYPL Daily ETF
The
Leverage Shares 2X Long PYPL Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to PYPL equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long RTX Daily ETF
The
Leverage Shares 2X Long RTX Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to RTX equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long TSLA Daily ETF
The
Leverage Shares 2X Long TSLA Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to TSLA equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long TSM Daily ETF
The
Leverage Shares 2X Long TSM Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to TSM equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long UNH Daily ETF
The
Leverage Shares 2X Long UNH Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to UNH equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
Leverage
Shares 2X Long XYZ Daily ETF
The
Leverage Shares 2X Long XYZ Daily ETF, under normal circumstances, invests in
the Underlying Security and financial instruments with economic characteristics
that, in combination, provide 200% daily exposure to XYZ equal to at least 80%
of its net assets (plus any borrowings for investment purposes).
ADDITIONAL
NON-PRINCIPAL INVESTMENT STRATEGY INFORMATION
Cash
Equivalents and Short-Term Investments
Each
Fund may invest in securities with maturities of less than one year or cash
equivalents, or they may hold cash. The percentage of each Fund invested in such
holdings varies and depends on several factors, including market conditions. For
more information on eligible short-term investments, see the SAI.
ADDITIONAL
NON-PRINCIPAL RISK INFORMATION
Cash
Equivalents and Short-Term Investments.
Normally, a Fund invests substantially all of its assets to meet its investment
objective. A Fund may invest the remainder of its assets in securities with
maturities of less than one year or cash equivalents, or each may hold cash. For
more information on eligible short-term investments, see the SAI.
ADDITIONAL
INFORMATION ABOUT INVESTMENT TECHNIQUES AND POLICIES
The
Effects of Fees and Expenses on the Return of a Leveraged Long Fund for a Single
Trading Day. To
create the necessary exposure, each Fund will enter into one or more swap
agreements with major financial institutions, which incur borrowing costs. In
light of these charges and each Fund’s operating expenses, the expected return
of a Fund over one trading day is equal to the gross expected return, which is
the daily
underlying
security return, minus (i) financing charges incurred by the Fund in addition to
the financing cost embedded in the underlying security and (ii) daily operating
expenses. For instance, if the underlying security returned 2% on a given day,
the gross expected return of the Fund would be 4%, but the net expected return,
which factors in the cost of financing the portfolio and the impact of operating
expenses, would be lower. Each Fund will reposition its portfolio at the end of
every trading day. Therefore, if an investor purchases the Leverage Shares 2X
Long AAL Daily ETF, Leverage Shares 2X Long ADBE Daily ETF,
Leverage
Shares 2X Long AMD Daily ETF,
Leverage
Shares 2X Long ARM Daily ETF,
Leverage
Shares 2X Long ASML Daily ETF,
Leverage
Shares 2X Long AVGO Daily ETF, Leverage Shares 2X Long BBAI Daily ETF, Leverage
Shares 2X Long BLSH Daily ETF, Leverage Shares 2X Long BMNR Daily ETF, Leverage
Shares 2X Long BULL Daily ETF, Leverage Shares 2X Long COIN Daily
ETF,
Leverage
Shares 2X Long COST Daily ETF,
Leverage
Shares 2X Long CRCL Daily ETF,
Leverage
Shares 2X Long CRM Daily ETF,
Leverage
Shares 2X Long CRWV Daily ETF,
Leverage
Shares 2X Long FIG Daily ETF,
Leverage
Shares 2X Long FUTU Daily ETF, Leverage Shares 2X Long GLXY Daily
ETF,
Leverage
Shares 2X Long HOOD Daily ETF,
Leverage
Shares 2X Long MP Daily ETF,
Leverage
Shares 2X Long NBIS Daily ETF,
Leverage Shares 2X Long NVDA Daily ETF,
Leverage
Shares 2X Long PANW Daily ETF,
Leverage
Shares 2X Long PLTR Daily ETF,
Leverage
Shares 2X Long PYPL Daily ETF,
Leverage
Shares 2X Long RTX Daily ETF,
Leverage
Shares 2X Long TSLA Daily ETF,
Leverage
Shares 2X Long TSM Daily ETF,
Leverage
Shares 2X Long UNH Daily ETF,
and
Leverage Shares 2X Long XYZ Daily ETF (collectively, the “2X Long ETFs”) shares
at close of the markets on a given trading day, the investor’s exposure to the
underlying security would reflect 200% of the performance of the underlying
security during the following trading day, subject to the charges and expenses
noted above.
A
Cautionary Note to Investors Regarding Dramatic Underlying Security
Movement.
Each Fund could lose an amount greater than its net assets in the event of a
movement of the underlying security in excess of 50% in a direction adverse to
the Fund (meaning a decline in excess of 50% of the value of the underlying
security for the 2X Long ETFs). The
risk of total loss exists.
If
the underlying security has a dramatic adverse move that causes a material
decline in the Fund’s net assets, the terms of a Fund’s swap agreements may
permit the counterparty to immediately close out all swap transactions with the
Fund. In that event, a Fund may be unable to enter into another swap agreement
or invest in other derivatives to achieve exposure consistent with a Fund’s
investment objective. This may prevent a Fund from achieving its leveraged
investment objective, even if the underlying security later reverses all or a
portion the move, and result in significant losses.
Examples
of the Impact of Daily Leverage and Compounding.
Because each Fund’s exposure to the underlying security is repositioned on a
daily basis, for a holding period longer than one day, the pursuit of a daily
investment objective will result in daily leveraged compounding for each Fund.
This means that the return of the underlying security over a period of time
greater than one day multiplied by a Fund’s daily leveraged investment objective
(e.g., 200% or -200%) generally will not equal the Fund’s performance over that
same period. As a consequence, investors should not plan to hold a Fund
unmonitored for periods longer than a single trading day. This deviation
increases with higher volatility in the underlying security and longer holding
periods. Further, the return for investors that invest for periods less than a
full trading day or for a period different than a trading day will not be the
product of the return of a Fund’s stated daily leveraged investment objective
and the performance of the underlying security for the full trading day. The
actual exposure will largely be a function of the performance of the underlying
security from the end of the prior trading day.
Consider
the following examples:
Investor
1 is considering investments in two funds, Funds A and B. Fund A is an ETF which
seeks (before fees and expenses) to match the performance of the underlying
security. Fund B is a leverage ETF and seeks daily leveraged investment results
(before fees and expenses) that correspond to 200% of the daily performance of
the underlying security.
An
investment in Fund A would be expected to gain 5% on Day 1 and lose 4.76% on Day
2, returning the investment to its original value. The following example assumes
a $100 investment in Fund A when the underlying security is also valued at
$100:
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| Day |
The
Underlying
Security
Value |
The
Underlying
Security
Performance |
Value
of Fund A
Investment |
|
| $100.00 |
| $100.00 |
| $1 |
$105.00 |
5.00% |
$105.00 |
| $2 |
$100.00 |
-4.76% |
$100.00 |
The
same $100 investment in Fund B would be expected to gain 10% on Day 1 (200% of
5%) but decline 9.52% on Day 2.
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| |
| Day |
The
Underlying
Security
Performance |
200%
of the Underlying
Security
Performance |
Value
of Fund B
Investment |
|
|
|
| $100.00 |
| 1% |
5.00% |
10.00% |
$110.00 |
| 2% |
-4.76% |
-9.52%% |
$99.52 |
Although
the percentage decline in Fund B is smaller on Day 2 than the percentage gain on
Day 1, the loss is applied to a higher principal amount, so the investment in
Fund B experiences a loss even when the aggregate underlying security value for
the two-day period has not declined (these calculations do not include the
charges for fund fees and expenses).
An
investment in Fund B has additional risks due to the effects of leverage and
compounding.
An
investor who purchases shares of the Fund intraday will generally receive more,
or less, than 200% exposure to the underlying security from that point until the
end of the trading day. The actual exposure will be largely a function of the
performance of the underlying security from the end of the prior trading day. If
the Fund’s shares are held for a period longer than a single trading day, the
Fund’s performance is likely to deviate from 200% or -200% of the return of the
underlying security’s performance for the longer period. This deviation will
increase with higher volatility of the underlying security and longer holding
periods.
Examples
of the Impact of Volatility.
The Fund rebalances its portfolio on a daily basis, increasing exposure in
response to that day’s gains or reducing exposure in response to that day’s
losses. Daily rebalancing will typically cause the Fund to lose money if the
underlying security experience volatility. A volatility rate is a statistical
measure of the magnitude of fluctuations in the underlying security’s returns
over a defined period. For periods longer than a trading day, volatility in the
performance of the underlying security from day to day is the primary cause of
any disparity between the Fund’s actual returns and the returns of the
underlying security for such period. Volatility causes such disparity because it
exacerbates the effects of compounding on the Fund’s returns. In addition, the
effects of volatility are magnified in the Fund due to leverage. Consider the
following three examples that demonstrate the effect of volatility on a
hypothetical fund:
Example
1 – The Underlying Security Experiences Low Volatility
Investor
1 invests $10.00 in one of the 2X Long ETFs at the close of trading on Day 1.
During Day 2, the underlying security rises from 100 to 102, a 2% gain. Mary’s
investment rises 4% to $10.40. Investor 1 holds her investment through the close
of trading on Day 3, during which the underlying security rises from 102 to 104,
a gain of 1.96%. Investor 1’s investment rises to $10.81, a gain during Day 3 of
3.92%. For the two-day period since Investor 1 invested in the Fund, the
underlying security gained 4% although Investor 1’s investment increased by
8.1%. Because the underlying security continued to trend upwards with low
volatility, Investor 1’s return closely correlates to the 200% return of the
return of the underlying security for the period.
Example
2 – The Underlying Security Experiences High Volatility
Investor
1 invests $10.00 in a 2X Long ETF after the close of trading on Day 1. During
Day 2, the underlying security rises from 100 to 102, a 2% gain, and Investor
1’s investment rises 4% to $10.40. Investor 1 continues to hold her investment
through the end of Day 3, during which the underlying security declines from 102
to 98, a loss of 3.92%. Investor 1’s investment declines by 7.84%, from $10.40
to $9.58. For the two-day period since Investor 1 invested in the Fund, the
underlying security lost 2% while Investor 1’s investment decreased from $10 to
$9.58, a 4.2% loss. The volatility of the underlying security affected the
correlation between the underlying security’s return for the two-day period and
Investor 1’s return. In this situation, Investor 1 lost more than two times the
return of the underlying security.
Example
3 – Intraday Investment with Volatility
The
examples above assumed that Investor 1 purchased the Fund at the close of
trading on Day 1 and sold her investment at the close of trading on a subsequent
day. However, if she made an investment intraday, she would have received a beta
determined by the performance of the underlying security from the end of the
prior trading day until her time of purchase on the next trading day. Consider
the following example.
Investor
1 invests $10.00 in a 2X Long ETF at 11 a.m. on Day 2. From the close of trading
on Day 1 until 11 a.m. on Day 2, the underlying security moved from 100 to 102,
a 2% gain. In light of that gain, the Fund beta at the point at which Investor 1
invests is 196%. During the remainder of Day 2, the underlying security rises
from 102 to 110, a gain of 7.84%, and Investor 1’s investment rises 15.4% (which
is the underlying security’s gain of 7.84% multiplied by the 196% beta that she
received) to $11.54. Investor 1 continues to hold her investment through the
close of trading on Day 3, during which the underlying security declines from
110 to 90, a loss of 18.18%. Investor 1’s investment declines by 36.4%, from
$11.54 to $7.34. For the period of Investor 1’s investment, the underlying
security declined from 102 to 90, a loss of 11.76%, while Investor 1’s
investment decreased from $10.00 to $7.34, a 27% loss. The volatility of the
underlying security affected the correlation between the underlying security’s
return for period and Investor 1’s return. In this situation, Investor 1 lost
more than two times the return of the underlying security. Investor 1 was also
hurt because she missed the first 2% move of the underlying security and had a
beta of 196% for the remainder of Day 2.
Market
Volatility.
Each Fund seeks to provide a return which is a multiple of the daily performance
of the underlying security. Neither Fund attempts to, and should not be expected
to, provide returns which are a multiple of the return of the underlying
security for periods other than a single day. Each Fund rebalances its portfolio
on a daily basis, increasing exposure in response to that day’s gains or
reducing exposure in response to that day’s losses.
Daily
rebalancing will impair a Fund’s performance if the underlying security
experiences volatility. For instance, a 2X Long ETF would be expected to lose 4%
(as shown in Table 1 below) if the underlying security provided no return over a
one-year period and experienced annualized volatility of 20%.
Table
1
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| |
| Volatility
Range |
Long
Funds |
| 10% |
-1% |
| 20% |
-4% |
| 30% |
-9% |
| 40% |
-15% |
| 50% |
-23% |
| 60% |
-33% |
| 70% |
-47% |
| 80% |
-55% |
| 90% |
-76% |
| 100% |
-84% |
Note
that at higher volatility levels, there is a chance of a complete loss of Fund
assets even if the underlying security is flat. For instance, if annualized
volatility of the underlying security was 90%, a 2X Long ETF based
on
the underlying security would be expected to lose 76% of its value, even if the
underlying security returned 0% for the year.
Table
2 shows the annualized historical volatility rate for the underlying security
over the five-year (or shorter) period ended December 31, 2025. Since
market volatility has negative implications for funds which rebalance daily,
investors should be sure to monitor and manage their investments in the Funds
particularly in volatile markets. The negative implications of volatility in
Table 1 can be combined with the recent volatility in Table 2 to give investors
some sense of the risks of holding a Fund for longer periods over the past five
years. Historical volatility and performance are not likely indicative of future
volatility and performance.
Table
2 – Annualized Historic Volatility of the Underlying Securities
|
|
|
|
|
| |
| Underlying
Security |
5-Year
Annualized Historical Volatility Rate |
| AALG |
48.13% |
| ADBG |
35.18% |
| AMDG |
52.38% |
| ARMG |
75% |
| ASMG |
41.64% |
| AVGG |
42.32% |
| BAIG |
168.20% |
| BLSG
|
N/A1 |
| BMNG |
419.77% |
| BOEG |
36.88% |
| BULG |
N/A1 |
| COIG |
87.14% |
| COTG |
22.50% |
| CRCG |
N/A1 |
| CRMG |
35.29% |
| CRWG |
N/A1 |
| FIGG |
N/A1 |
| FUTG |
79.38% |
| GLGG |
99.19% |
| HOOG |
74.05% |
| MPG |
71.68% |
| NBIG |
112.58% |
| NVDG |
52.20% |
| PANG |
40.34% |
| PLTG |
67.91% |
| PYPG |
41.72% |
| RTXG |
23.83% |
| TSLG |
60.73% |
| TSMG |
37.39% |
| UNHG |
29.69% |
| XYZG |
60.36% |
|
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| |
|
1 |
The
Underlying Security has not yet traded on a listing exchange for a
one-year calendar period and, therefore, does not have an annualized
historical volatility rate to
report. |
The
Projected Returns of Funds for Intraday Purchases.
Because the Funds rebalance their portfolio once daily, an investor who
purchases shares during a day will likely have more, or less, than 200%
leveraged investment exposure to the underlying security. The exposure to the
underlying security received by an investor
who
purchases a Fund intraday will differ from the Fund’s stated daily leveraged
investment objective (e.g., 200%) by an amount determined by the movement of the
underlying security from their value at the end of the prior day. If the
underlying security moves in a direction favorable to the Fund between the close
of the market on one trading day through the time on the next trading day when
the investor purchases the Fund shares, the investor will receive less exposure
to the underlying security than the stated fund daily leveraged investment
objective (e.g., 200%). Conversely, if the underlying security moves in a
direction adverse to the Fund, the investor will receive more exposure to the
underlying security than the stated fund daily leveraged investment objective
(e.g., 200%).
Table
3 below indicates the exposure to the underlying security that an intraday
purchase of a 2X Long ETF would be expected to provide based upon the movement
in the value of the underlying security from the close of the market on the
prior trading day. Such exposure holds until a subsequent sale on that same
trading day or until the close of the market on that trading day. For instance,
if the underlying security has moved 5% in a direction favorable to the Fund,
the investor would receive exposure to the performance of the underlying
security from that point until the investor sells later that day or the end of
the day equal to approximately 191% of the investor’s investment.
Conversely,
if the underlying security has moved 5% in a direction unfavorable to the Fund,
an investor at that point would receive exposure to the performance of the
underlying security from that point until the investor sells later that day or
the end of the day equal to approximately 211% of the investor’s
investment.
The
table includes a range of the underlying security moves from 20% to -20% for the
Fund. Movement of the underlying security beyond the range noted below will
result in exposure further from the Fund’s daily leveraged investment
objective.
Table
3 – Intraday Leverage of a 2X Long ETF
|
|
|
|
|
| |
| Underlying
Security |
Resulting
Exposure for each 2X Long ETF |
| -20% |
267% |
| -15% |
243% |
| -10% |
225% |
| -5% |
211% |
| 0% |
200% |
| 5% |
191% |
| 10% |
183% |
| 15% |
177% |
| 20% |
171% |
The
Projected Returns of the Fund for Periods Other Than a Single Trading
Day.
The Funds seek leveraged investment results on a daily basis — from the close of
regular trading on one trading day to the close on the next trading day — which
should not be equated with seeking a leveraged investment objective for any
other period. For instance, if the underlying security gains 10% for a week, a
Fund should not be expected to provide a return of 20% for the week even if it
meets its daily leveraged investment objective throughout the week. This is true
because of the financing charges noted above but also because the pursuit of
daily goals may result in daily leveraged compounding, which means that the
return of the underlying security over a period of time greater than one day
multiplied by the Fund’s daily leveraged investment objective (e.g., 200%) will
not generally equal a Fund’s performance over that same period. In addition, the
effects of compounding become greater the longer Shares are held beyond a single
trading day.
The
following tables set out a range of hypothetical daily performances during a
given 10 trading days of a hypothetical the underlying security and demonstrate
how changes in the hypothetical underlying security impacts the hypothetical
Funds’ performance for a trading day and cumulatively up to, and including, the
entire 10 trading day period. The charts are based on a hypothetical $100
investment in the hypothetical Fund over a 10-trading day period and do not
reflect fees or expenses of any kind.
Table
4 – The Underlying Security Lacks a Clear Trend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| The
Underlying Security |
2X
Long ETF |
|
| Value |
Daily
Perfor-mance |
Cumulative
Performance |
NAV |
Daily
Perfor-mance |
Cumulative
Performance |
|
| 100 |
|
| $100.00 |
| |
| Day
1 |
105% |
5.00% |
5.00% |
$110.00% |
10.00% |
10.00% |
| Day
2 |
110% |
4.76% |
10.00% |
$120.48% |
9.52% |
20.47% |
| Day
3 |
100% |
-9.09% |
0.00% |
$98.57% |
-18.18% |
-1.43% |
| Day
4 |
90% |
-10.00% |
-10.00% |
$78.86% |
-20.00% |
-21.14% |
| Day
5 |
85% |
-5.56% |
-15.00% |
$70.10% |
-11.12% |
29.91% |
| Day
6 |
100% |
17.65% |
0.00% |
$94.83% |
35.30% |
-5.17% |
| Day
7 |
95% |
-5.00% |
-5.00% |
$85.35% |
-10.00% |
-14.65% |
| Day
8 |
100% |
5.26% |
0.00% |
$94.34% |
10.52% |
-5.68% |
| Day
9 |
105% |
5.00% |
5.00% |
$103.77% |
10.00% |
3.76% |
| Day
10 |
100% |
-4.76% |
0.00% |
$93.89% |
-9.52% |
-6.12% |
The
cumulative performance of the hypothetical underlying security in Table 4 is 0%
for 10 trading days. The return of the hypothetical 2X Long ETF for the
10-trading day period is -6.12%. The volatility of the hypothetical underlying
security’s performance and lack of a clear trend results in performance for each
hypothetical Fund for the period which bears little relationship to the
performance of the hypothetical underlying security for the 10-trading day
period.
Table
5 – The Underlying Security Rises in a Clear Trend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| The
Underlying Security |
2X
Long ETF |
|
| Value |
Daily
Perfor-mance |
Cumulative
Performance |
NAV |
Daily
Perfor-mance |
Cumulative
Performance |
|
| 100 |
|
| $100.00 |
| |
| Day
1 |
102% |
2.00% |
2.00% |
$104.00% |
4.00% |
4.00% |
| Day
2 |
104% |
1.96% |
4.00% |
$108.08% |
3.92% |
8.08% |
| Day
3 |
106% |
1.92% |
6.00% |
$112.24% |
3.84% |
12.23% |
| Day
4 |
108% |
1.89% |
8.00% |
$116.47% |
3.78% |
16.47% |
| Day
5 |
110% |
1.85% |
10.00% |
$120.78% |
3.70% |
20.78% |
| Day
6 |
112% |
1.82% |
12.00% |
$125.18% |
3.64% |
25.17% |
| Day
7 |
114% |
1.79% |
14.00% |
$129.65% |
3.58% |
29.66% |
| Day
8 |
116% |
1.75% |
16.00% |
$134.20% |
3.50% |
34.19% |
| Day
9 |
118% |
1.72% |
18.00% |
$138.82% |
3.44% |
38.81% |
| Day
10 |
120% |
1.69% |
20.00% |
$143.53% |
3.38% |
43.50% |
The
cumulative performance of the hypothetical underlying security in Table 5 is 20%
for 10 trading days. The return of the hypothetical 2X Long ETF for the
10-trading day period is 43.50%. In this case, because of the positive
hypothetical underlying security trend, the hypothetical 2X Long ETF’s gain is
greater than 200% of the hypothetical underlying security gain for the
10-trading day period.
Table
6 – The Underlying Security Declines in a Clear Trend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| The
Underlying Security |
2X
Long ETF |
|
| Value |
Daily
Perfor-mance |
Cumulative
Performance |
NAV |
Daily
Perfor-mance |
Cumulative
Performance |
|
| 100 |
|
| $100.00 |
| |
| Day
1 |
98% |
-2.00% |
-2.00% |
$96.00% |
4.00% |
-4.00% |
| Day
2 |
96% |
-2.04% |
-4.00% |
$92.08% |
-4.08% |
-7.92% |
| Day
3 |
94% |
-2.08% |
-6.00% |
$88.24% |
-4.16% |
-11.75% |
| Day
4 |
92% |
-2.13% |
-8.00% |
$84.49% |
-4.26% |
-15.51% |
| Day
5 |
90% |
-2.17% |
-10.00% |
$80.82% |
-4.34% |
-19.17% |
| Day
6 |
88% |
-2.22% |
-12.00% |
$77.22% |
-4.44% |
-22.76% |
| Day
7 |
86% |
-2.27% |
-14.00% |
$73.71% |
-4.54% |
-26.27% |
| Day
8 |
84% |
-2.33% |
-16.00% |
$70.29% |
-4.66% |
-29.71% |
| Day
9 |
82% |
-2.38% |
-18.00% |
$66.94% |
-4.76% |
-33.05% |
| Day
10 |
80% |
-2.44% |
-20.00% |
$63.67% |
-4.88% |
-36.32% |
The
cumulative performance of the hypothetical underlying security in Table 6 is
-20% for 10 trading days. The return of the hypothetical 2X Long ETF for the
10-trading day period is -36.32%. In this case, because of the negative
hypothetical underlying security trend, the hypothetical 2X Long ETF’s decline
is less than 200% of the hypothetical underlying security decline for the
10-trading day period.
It
is important that you closely review and understand the risks of investing in a
Fund. A Fund’s NAV and investment return will fluctuate based upon changes in
the value of its portfolio securities. You could lose money on your investment
in a Fund, and each Fund could underperform other investments. There is no
guarantee that a Fund will meet its investment objective. An investment in a
Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Below are some of
the specific risks of investing in the Funds including the risks of the
investment strategies of the underlying security.
Additional
Information about the Principal Risks of Investing in the Funds
This
section provides additional information regarding the principal risks described
under “Principal Risks of Investing in the Fund” in each of Fund Summary. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with other funds. Each risk summarized below
is considered a ‘principal risk’ of investing in the Funds as noted in the
respective Fund Summaries, regardless of the order in which they appear. The
factors below apply to each Fund except where noted otherwise. Each of the
factors below could have a negative impact on the applicable Fund’s performance
and trading prices.
Adobe,
Inc. Investing Risk.
(2X Long ADBE Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
software and services industry, Adobe, Inc. faces risks that include, but are
not limited to: reliance on a limited number of customer accounts for a
substantial portion of its revenue; the development deployment and adoption of
new technologies and products, including AI-enabled solutions; reliance on
third-party products, platforms, and services; ability to hire, retain, train
and motivate qualified personnel and senior management; operational execution,
including scaling, services and support; intense competition across creative,
document, and experience software markets; cybersecurity threats, data breaches,
and privacy compliance; and protection and enforcement of intellectual property
rights. Any of these risks could materially and adversely affect the company’s
business, financial condition, results of operations, and
prospects.
Advanced
Micro Devices, Inc. Investing Risk.
(2X
Long AMD Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from
the
value of the market as a whole. As of the date of this prospectus, in addition
to the risks associated with companies in the semiconductors and semiconductor
equipment industry, Advanced Micro Devices, Inc. faces risks that include, but
are not limited to: intense competition within the semiconductor industry from
large, well-capitalized competitors; economic and market uncertainty that could
reduce demand for its products; potential concentration of revenue among a
limited number of significant customers; risks related to the protection of
intellectual property; fluctuations in foreign exchange rates; reliance on
third-party manufacturers and suppliers, including potential shortages of
manufacturing equipment or materials; cybersecurity incidents, data breaches,
and system failures or outages; potential incompatibility of its products with
industry-standard software or hardware; increases in operating or input costs;
changes in government regulation and the costs of regulatory compliance; and
indebtedness. Any of these risks could materially and adversely affect the
Underlying Security’s business, financial condition, results of operations, and
prospects.
American
Airlines Group, Inc. Investing Risk.
(2X
Long AAL Only) Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with companies in the
transportation industry, American Airlines faces risks that include, but are not
limited to: sensitivity to economic downturns and changes in consumer demand for
air travel; dependence on access to sufficient liquidity and capital markets;
high levels of indebtedness and related debt service obligations; pension and
other postretirement benefit funding requirements; intense competition and
pricing pressure from domestic and international carriers; volatility in
aircraft fuel prices and availability; extensive government regulation of
safety, security, labor, environmental matters, and international operations;
labor relations risks, including union negotiations, employee strikes, work
stoppages, and the availability of qualified pilots and other personnel;
reliance on third-party regional operators, vendors, and service providers;
operational risks arising from network and hub concentration, weather events,
and infrastructure constraints; aircraft safety incidents, accidents, or
perceived failures affecting operations or public confidence; dependence on a
limited number of aircraft and engine manufacturers and suppliers, including
delivery delays and parts availability; risks related to fleet renewal,
execution of operational and strategic initiatives, and residual aircraft
values; technology failures, cybersecurity incidents, and evolving data privacy
requirements; litigation and changes in tax laws or regulations; global
political instability, geopolitical conflicts, terrorist attacks, public health
events, and other external disruptions that may adversely affect travel
behavior; climate change and environmental regulations; and potential damage to
the company’s brand or reputation. Any of these risks could materially and
adversely affect the company’s business, financial condition, results of
operations, and prospects.
Arm
Holdings plc Investing Risk. (2X
Long ARM Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
semiconductors and semiconductor equipment industry, Arm Holdings faces risks
that include, but are not limited to: intense competition from large,
well-capitalized semiconductor and technology companies; economic, market, and
industry conditions that may adversely affect demand for its customers’ products
and, in turn, demand for Arm-based technologies is subject to customer adoption,
shifts in AI and supercomputing trends, and regulatory constraints, including
export controls; concentration of revenue among a limited number of significant
licensees and customers; risks related to its licensing- and royalty-based
business model, including the timing and predictability of revenue; risks
related to the protection and enforcement of intellectual property; fluctuations
in foreign currency exchange rates; reliance on third-party manufacturing
partners and ecosystem participants; supply chain disruptions affecting
customers and partners; compatibility of Arm-based solutions with
industry-standard software and hardware; increases in operating costs; and
changes in government regulation and the cost of compliance. Any of these risks
could materially and adversely affect Arm’s business, financial condition,
results of operations, and prospects. Any of these risks could materially and
adversely affect the company’s business, financial condition, results of
operations, and prospects.
AI
Risk.
(2X
Long NVDA, 2X Long ASML, 2X Long AMD, 2X Long TSM, 2X Long PANW, 2X Long PLTR,
2X Long ADBE, 2X Long CRM, 2X Long FIG, 2X Long BBAI, 2X Long CRWV, and 2X Long
NBIS Only)
Companies engaged in AI and big data typically face intense competition and
potentially rapid product obsolescence. These companies are also heavily
dependent on intellectual property rights and may be adversely affected by loss
or impairment of those rights. There can be no assurance these companies will be
able to successfully protect their intellectual property to prevent the
misappropriation of their technology, or that
competitors
will not develop technology that is substantially similar or superior to such
companies’ technology. AI and big data companies typically engage in significant
amounts of spending on research and development, as well as mergers and
acquisitions, and there is no guarantee that the products or services produced
by these companies will be successful. AI and big data companies are potential
targets for cyberattacks, which can have a materially adverse impact on the
performance of these companies. In addition, AI technology could face increasing
regulatory scrutiny in the future, which may limit the development of this
technology and impede the growth of companies that develop and/or utilize this
technology. Similarly, the collection of data from consumers and other sources
could face increased scrutiny as regulators consider how the data is collected,
stored, safeguarded and used. AI and big data companies may face regulatory
fines and penalties, including potential forced break-ups, that could hinder the
ability of the companies to operate on an ongoing basis. The customers and/or
suppliers of AI and big data companies may be concentrated in a particular
country, region or industry. Any adverse event affecting one of these countries,
regions or industries could have a negative impact on AI and big data companies.
Country, government, and/or region-specific regulations or restrictions could
have an impact on AI and big data companies.
ASML
Holding Investing Risk. (2X
Long ASML Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this Prospectus, in addition to the risks associated with companies in the
semiconductors and semiconductor equipment industry, ASML Holding faces risks
that include, but are not limited to: its ability to successfully develop,
manufacture, and deliver highly complex lithography systems that meet the
evolving technology requirements of semiconductor manufacturers; dependence on a
limited number of customers for a substantial portion of its revenue; long sales
cycles and variability in the timing of revenue recognition; supply chain
constraints and reliance on sole- or limited-source suppliers and third-party
partners for critical components and subsystems; manufacturing, assembly,
integration, and installation delays; potential product quality or performance
issues; the ability to protect intellectual property; fluctuations in operating
results; increased scrutiny regarding environmental, social, and governance
matters; and the ability to attract, retain, and motivate highly skilled
employees. Any of these risks could materially and adversely affect ASML’s
business, financial condition, results of operations, and prospects. Any of
these risks could materially and adversely affect the company’s business,
financial condition, results of operations, and prospects.
BigBear.ai
Holdings, Inc. Investing Risk.
(2X
Long BBAI Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
software and services industry, the Underlying Security faces risks that
include, but are not limited to: dependence on U.S. government customers for a
significant portion of its revenue and the risk of contract delay, modification,
termination, or non-renewal; uncertainty related to U.S. government budgeting,
appropriations, shutdowns, and continuing resolutions; customer and contract
concentration; a limited operating history and history of losses; the ability to
sustain revenue growth and achieve profitability; long, complex, and
unpredictable sales cycles requiring significant time and expense; competition
from larger and better-capitalized companies; execution and integration risks
related to acquisitions; cybersecurity and data protection risks; reliance on
key personnel with specialized expertise and security clearances; and liquidity
and capital-raising risks. Any of these risks could materially and adversely
affect the company’s business, financial condition, and results of
operations.
Bitmine
Immersion Technologies, Inc. Investing Risk. (2X
Long BMNR Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with the software and
services industry, Bitmine Immersion Technologies, Inc. is subject to risks that
include, but are not limited to: volatility in the value of Ethereum and other
digital assets, failures or disruptions in blockchain networks, loss or
compromise of cryptographic keys, cybersecurity breaches, regulatory changes
affecting digital assets or blockchain operations, and the ability to attract
and retain key personnel; the trading price of the Underlying Security has
historically been and is likely to continue to be volatile, and short-seller
activity may further influence market price; and the Underlying Security is a
highly dynamic company, and its operations, including its products and services,
may change. Any of these risks could materially and adversely affect the
company’s business, financial condition, results of operations, and
prospects.
The
Underlying Security holds digital assets as part of its corporate treasury
operations. The market value of digital assets is highly volatile and may be
subject to significant price fluctuations, which could materially adversely
affect the Underlying Security’s financial condition, results of operations,
liquidity, or stock price. In addition, digital assets may be subject to
evolving regulatory frameworks, cybersecurity risks, custody risks, accounting
treatment risks, and potential impairment charges, any of which could adversely
affect the Underlying Security. Because the Fund seeks daily investment results
that correspond to twice (2X) the daily performance of the Underlying Security’s
common stock, increased volatility in the Underlying Security’s stock may result
in increased volatility of the Fund. The Fund does not invest directly in
digital assets.
Block,
Inc. Investing Risk.
(2X
Long XYZ Only)
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with the financial services
industry, Block, Inc. faces the risks of online security, system reliability,
privacy failures, customer disputes, payment fraud, and website traffic
decreases. Laws generally vary by country, including the application of taxes,
which may create challenges for some e-commerce companies seeking to achieve
scale. Companies in the financial services industry are especially subject to
the adverse effects of economic recession and competition from new entrants in
their fields of business. Any of these risks could materially and adversely
affect the company’s business, financial condition, and results of
operations.
The
Underlying Security holds digital assets as part of its corporate treasury
operations. The market value of digital assets is highly volatile and may be
subject to significant price fluctuations, which could materially adversely
affect the Underlying Security’s financial condition, results of operations,
liquidity, or stock price. In addition, digital assets may be subject to
evolving regulatory frameworks, cybersecurity risks, custody risks, accounting
treatment risks, and potential impairment charges, any of which could adversely
affect the Underlying Security. Because the Fund seeks daily investment results
that correspond to twice (2X) the daily performance of the Underlying Security’s
common stock, increased volatility in the Underlying Security’s stock may result
in increased volatility of the Fund. The Fund does not invest directly in
digital assets.
Blockchain Risk. (2X
Long BLSH, 2X Long BMNR, and 2X Long COIN Only) Blockchain companies
may be adversely impacted by government regulations or economic
conditions. Blockchain technology is new and its uses are in many
cases untested or unclear. These companies may also have significant exposure to
fluctuations in the spot prices of digital assets, particularly to the extent
that demand for a company’s hardware or services may increase as the spot price
of digital assets increase. Blockchain companies typically face
intense competition and potentially rapid product obsolescence. In addition,
many blockchain companies store sensitive consumer information and
could be the target of cybersecurity attacks and other types of theft, which
could have a negative impact on these companies. Access to a
given blockchain may require a specific cryptographic key (in effect a
string of characters granting unique access to initiate transactions related to
specific digital assets) or set of keys, the theft, loss, or destruction of
which, either by accident or as a result of the efforts of a third party, could
irrevocably impair a claim to the digital assets stored on that blockchain.
Many blockchain companies currently operate under less regulatory
scrutiny than traditional financial services companies and banks, but there is
significant risk that regulatory oversight could increase in the future. Higher
levels of regulation could increase costs and adversely impact the current
business models of some blockchain companies. For example,
restrictions imposed by foreign governments, including China, on the use and
mining of digital assets, may adversely impact blockchain companies
and in turn the Fund. These companies could be negatively impacted by
disruptions in service caused by hardware or software failure, or by
interruptions or delays in service by third-party data center hosting facilities
and maintenance providers. Blockchain companies involved in digital
assets may face slow adoption rates and be subject to higher levels of
regulatory scrutiny in the future, which could severely impact the viability of
these companies. blockchain companies, especially smaller companies,
tend to be more volatile than companies that do not rely heavily on technology.
The customers and/or suppliers of blockchain companies may be
concentrated in a particular country, region or industry. Any adverse event
affecting one of these countries, regions or industries could have a negative
impact on blockchain companies.
Boeing
Co. Investing Risk. (2X
Long BA Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. In addition to
the risks associated generally with companies in the capital goods industries,
Boeing
Co. faces risks that include, but are not limited to: changing market conditions
that can significantly affect demand for commercial aircraft and related
services; cost overruns and execution challenges on development and production
programs; customer concentration among a limited number of commercial airlines
and government customers; stringent and evolving regulatory oversight, including
ongoing regulatory and compliance matters; the ability to attract and retain a
highly skilled workforce; production quality issues and operational challenges
that may result in delivery delays; supply chain instability and reliance on the
performance and financial condition of subcontractors; changes in U.S. defense
spending levels and delays in government appropriations; intense competition;
and cybersecurity threats. In addition, Boeing derives a substantial portion of
its revenue from customers outside the United States and is therefore subject to
risks associated with international operations, including changes in global
trade policies, fluctuations in foreign currency exchange rates, taxation, and
geopolitical events such as terrorism, armed conflict, and public health crises.
Any of these risks could materially and adversely affect the company’s business,
financial condition, and results of operations.
Broadcom,
Inc. Investing Risk.
(2X Long AVGO Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
semiconductors and semiconductor equipment industry, Broadcom, Inc. faces risks
that include, but are not limited to: intense competition from large,
well-capitalized competitors; its ability to remain competitive depends in part
on the performance of its products in AI workloads and other emerging
technologies; cyclicality and volatility in demand for semiconductor and
infrastructure software products; significant customer concentration and
reliance on a limited number of key customers for a substantial portion of
revenue; risks related to its fabless manufacturing model and dependence on
third-party foundries, suppliers, and subcontractors; supply chain disruptions
and component shortages; risks associated with the integration of acquired
businesses and realization of anticipated synergies; and substantial
indebtedness and related debt-servicing obligations. Any of these risks could
materially and adversely affect the company’s business, financial condition,
results of operations, and prospects.
Bullish,
Inc. Investing Risk. (2X
Long BLSH Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with the financial
services industry, Bullish, Inc. faces risks that include, but are not limited
to: the evolving and increasingly complex regulatory environment and significant
market volatility in the digital assets industry; its ability to operate a
secure, reliable, and high-quality trading platform for digital assets; its
ability to attract, retain, and expand its customer base across its various
businesses; and its ability to anticipate and adapt to rapidly changing market
conditions, technological developments, and competitive dynamics. Bullish, Inc.
operates in a highly competitive industry, including competition from
unregulated or less-regulated entities, and may not be able to adapt quickly or
effectively to changes in the digital assets and regulatory landscape. In
addition, Bullish, Inc.’s ownership and operation of CoinDesk presents
significant risks, including perceived or actual conflicts of interest and
reputational harm. Bullish also expects operating expenses to increase in the
foreseeable future and may not be able to achieve or sustain profitability or
positive cash flow from operations. Any of these risks could materially and
adversely affect the company’s business, financial condition, and results of
operations.
Cash
Transaction Risk.
At certain times, the Fund will effect creations and redemptions for cash rather
than for in-kind securities. As a result, the Fund may not be tax efficient and
may incur brokerage and financing costs related to buying and selling securities
or obtaining derivative exposure to achieve its investment objective thus
incurring additional expenses than if it had effected creations and redemptions
in kind. To the extent that such costs are not offset by transaction fees paid
by an AP, the Fund will bear such costs, which will decrease the Fund’s net
asset value.
Circle
Internet Group, Inc.
Investing Risk.
(2X
Long CRCL Only) Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with companies in the software
and services industry, Circle Internet Group, Inc. faces risks that include, but
are not
limited
to: those arising from its role as the issuer of USDC, a stablecoin designed to
maintain a value pegged to the U.S. dollar; stablecoins are subject to
significant and evolving regulatory scrutiny in the United States and
internationally, including potential legislation, regulation, and enforcement
actions that could restrict the issuance, redemption, or reserve management of
stablecoins and materially adversely affect Circle’s business, financial
condition, and results of operations; its ability to maintain full reserve
backing of USDC with high-quality liquid assets, primarily cash and U.S.
Treasury securities, is critical to market confidence; any perceived
instability, lack of transparency, or reserve deficiency could result in rapid
redemptions and reputational harm; and it is subject to operational,
cybersecurity, and fraud risks, as well as technology risks associated with
reliance on public blockchain networks. Any of these risks could materially and
adversely affect the company’s business, financial condition, and results of
operations.
Coinbase
Global, Inc. Investing Risk. (2X
Long COIN Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
financial services industry, Coinbase Global, Inc. faces risks that include but
are not limited to: significant fluctuations in operating results; dependence of
revenues on the prices of digital assets and transaction volumes on its
platform; concentration of revenues in a limited number of digital assets;
overall demand for and adoption of digital assets; macroeconomic conditions,
including interest rate fluctuations; limitations on the development, growth,
and functionality of digital assets and related technologies; cyberattacks,
security breaches, and failures of information technology systems; a rapidly
evolving and uncertain regulatory landscape; intense competition; material
pending litigation, class actions, investigations, and regulatory enforcement
actions; reliance on third-party service providers; and the potential theft,
loss, or destruction of private keys required to access digital assets held in
custody for customers or the company, which may be irreversible. Any of these
risks could materially and adversely affect the company’s business, financial
condition, results of operations, and prospects.
Concentration
Risk.
Each Fund is concentrated in the industry to which its Underlying Security is
assigned (i.e., hold more than 25% of its total assets in investments that
provide long leveraged, short or short leveraged exposure, as applicable, to the
industry to which its Underlying Security is assigned). A portfolio concentrated
in a particular industry may present more risks than a portfolio broadly
diversified over several industries. As a result, the value of the Fund’s
investments may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries. In
addition, at times, an industry or group of industries in which the Fund is
concentrated may be out of favor and underperform other industries or groups of
industries.
Aerospace
and Defense Industry Risk (2X Long RTX Only) Government
aerospace and defense regulation and spending policies can significantly affect
the aerospace and defense industry because many companies involved in the
aerospace and defense industry rely, to a large extent, on U.S. (and other)
government demand for their products and services. There are significant risks
inherent in contracting with the U.S. government that could have a material
adverse effect on the business, financial condition and results of operations of
industry participants. The aerospace industry in particular has recently been
affected by adverse economic conditions and consolidation within the
industry.
Airline
Industry Risk. (2X Long AAL Only)
Companies in the airline industry may be adversely affected by downturns in
global economic conditions that result in decreased demand for air travel.
Because business and leisure travel are largely discretionary, airline revenues
are highly sensitive to economic conditions in the United States and other
regions of the world. Airline companies are also exposed to significant
volatility in fuel prices, which they may be unable to fully pass on to
customers due to intense competition, as well as to changes in labor relations,
insurance costs, tariffs, and other operating expenses. In addition, airline
companies often rely on a limited number of aircraft and equipment suppliers,
and disruptions affecting the availability, reliability, safety, or
certification of aircraft or related equipment, including aircraft groundings,
may materially adversely affect operations and profitability. The airline
industry is also subject to security risks, including acts of terrorism, and may
be significantly affected by public health emergencies or other global
disruptions, which may result in travel restrictions, reduced passenger demand,
and prolonged adverse impacts on financial performance.
Automobiles
and Components Industry Risk. (2X Long TSLA Only) The
automobiles and components industry undergoes rapid transformation driven by
technological innovation, evolving emissions regulations, and shifting consumer
preferences. Companies face substantial competition, including from
new
market entrants in electric vehicles (EVs) and mobility services.
Capital-intensive research and development is required to keep pace in
electrification, autonomous driving, and connected-vehicle technologies.
Companies developing or deploying autonomous driving technologies are subject to
a range of risks, including technological failures, cybersecurity breaches, and
system malfunctions. Regulatory requirements and liability frameworks for
autonomous vehicles are evolving, and non-compliance or accidents could result
in litigation, financial losses, or reputational harm. Delays in adoption,
competitive pressures, or consumer resistance could also adversely affect the
company’s results of operations and market position. Supply chain disruptions,
such as shortages of semiconductors, and tariff changes can adversely impact
production. Additionally, macroeconomic factors influencing consumer demand,
like interest rates and disposable income, can materially affect revenues and
earnings.
Capital
Goods Industry Risk. (2X Long BA and 2X Long RTX Only) Companies
in the capital goods industry are subject to risks related to cyclicality in
global economic conditions and capital spending by commercial and government
customers; long sales cycles and reliance on large, complex, and often long-term
contracts; exposure to cost inflation and volatility in raw materials, energy,
and logistics; operational and execution risks, including supply chain
disruptions, production delays, quality issues, and cost overruns; dependence on
skilled labor and engineering talent; regulatory and compliance requirements,
including environmental, health, safety, trade, and procurement regulations;
risks associated with government contracting, where applicable, including
audits, oversight, and funding uncertainty; technological change and the need
for ongoing investment in research and development; competitive pressures from
domestic and international manufacturers; exposure to foreign currency
fluctuations and geopolitical events; and risks arising from the use of
estimates and assumptions in long-term contracts and project
accounting.
Consumer
Staples Distribution Industry Risk. (2X Long COST Only)
Companies in the consumer staples distribution industry may be adversely
affected by regulations governing product composition, production methods,
labeling, and marketing practices, as well as by changes in global economic
conditions, consumer spending, and consumer demand. Such companies are also
exposed to volatility in the prices of commodities, packaging, transportation,
and other inputs, which may be driven by unpredictable factors and may not be
fully passed on to customers due to competitive pressures. The consumer staples
distribution industry is highly competitive, with generally thin margins, and
companies may face significant competition from other distributors,
manufacturers, and private-label offerings. In addition, changes in consumer
preferences, marketing effectiveness, and product trends may materially affect
demand for products distributed by companies in this industry.
Financial
Services Industry Risk. (2X Long BULL, 2X Long BLSH, 2X Long COIN, 2X Long FUTU,
2X Long GLXY, 2X Long HOOD, 2X Long PYPL, and 2X Long XYZ Only) Financial
services companies are subject to extensive governmental regulation, which may
limit the types and amounts of financial commitments they can make, the interest
rates and fees they can charge, the scope of their activities, the prices they
can set, and the amount of capital they must maintain. Profitability is often
dependent on the availability and cost of capital and may fluctuate
significantly in response to changes in interest rates or increased competition.
Deterioration in credit markets may adversely affect a broad range of financial
markets, including U.S. and international credit and interbank markets, and may
negatively impact financial institutions. Certain events in the financial
industry may result in heightened volatility in domestic and foreign financial
markets and cause significant losses for financial services companies.
Securities of financial services companies may decline sharply in value if such
companies experience substantial reductions in asset valuations, seek to raise
capital through the issuance of debt or equity securities, or cease operations.
Credit losses arising from borrower defaults and losses associated with
investment activities may adversely affect the industry. In addition, insurance
companies may be subject to severe price competition, and adverse economic,
business, or political developments may negatively affect financial institutions
engaged in mortgage finance or other lending or investment activities related to
real estate.
Healthcare
Equipment and Services Industry Risk. (2X Long UNH Only) The
healthcare equipment and services industry may be significantly affected by
changing economic conditions, evolving patient demographics, and fluctuations in
demand for healthcare products and services. Profitability in the industry is
often dependent on reimbursement rates from government programs and private
payors and on the ability to manage operating costs effectively. Changes in
healthcare laws, regulations, and policies, including those related to insurance
coverage and reimbursement, may materially affect industry participants.
Companies in the healthcare equipment and services industry are subject to
extensive and frequently changing regulatory
requirements,
which may increase compliance costs or limit the scope of their activities or
the rates they may charge. In addition, the industry faces risks related to
litigation, operational disruptions, and evolving technologies that may alter
traditional models for delivering healthcare.
Materials
Industry Risk. (2X
Long MP Only)
Companies in the materials industry are subject to risks inherent in the
exploration, development, production, processing, and sale of raw and
intermediate materials. These risks include volatility in commodity prices
driven by changes in global supply and demand, economic conditions, inflation,
interest rates, and geopolitical events; dependence on energy, transportation,
and other critical inputs, and exposure to fluctuations in their availability
and cost; significant capital intensity and long development timelines, which
may require substantial ongoing investment; operational risks such as equipment
failures, accidents, environmental incidents, and interruptions caused by
weather, natural disasters, or infrastructure constraints; regulatory and
permitting risks, including compliance with environmental, health, safety, and
sustainability regulations that may increase costs or limit operations; risks
related to resource estimation, mine life, and depletion; labor availability and
labor relations; competition from domestic and international producers and from
substitute materials; and risks associated with technological change, recycling,
and shifts in end-market demand.
Metals
and Mining Industry Risk. (2X Long MP Only) Metals
and mining companies can be significantly affected by events relating to
international political and economic developments, energy conservation, the
success of exploration projects, commodity prices, and tax and other government
regulations. Investments in metals and mining companies may be speculative and
may be subject to greater price volatility than investments in other types of
companies. Risks of metals and mining investments include: changes in
international monetary policies or economic and political conditions that can
affect the supply of natural resources and consequently the value of metals and
mining company investments; the United States or foreign governments may pass
laws or regulations limiting metals investments for strategic or other policy
reasons; and increased environmental or labor costs may depress the value of
metals and mining investments. Risks of investing in metals and mining company
stocks also include inaccurate estimates of mineral reserves and future
production levels, varying expectations of mine production costs, unexpected
changes in mineral prices, technological and operational hazards in mining and
mine development activities, uncertainties inherent in the calculation of
mineral reserves, mineral resources and metal recoveries, the timing and
availability of financing, and mandated expenditures for safety and pollution
control devices.
Semiconductors
and Semiconductor Equipment Industry Risk.
(2X
Long AMD,
2X
Long ARM, 2X Long ASML, 2X Long AVGO, 2X Long NVDA, and 2X Long TSM Only)
Competitive
pressures may have a significant effect on the financial condition of
semiconductor companies, and as product life cycles shorten and manufacturing
capacity increases, such companies may be subject to aggressive pricing that can
adversely affect profitability. Reduced demand for end-user products,
under-utilization of manufacturing capacity, or other factors may negatively
impact operating results. Semiconductor companies typically face high capital
requirements and are often heavily dependent on intellectual property rights.
The semiconductor industry is highly cyclical, which may cause operating results
to fluctuate significantly, and the market prices of semiconductor company
securities have been, and may continue to be, highly volatile.
Software
and Services Industry Risk.
(2X
Long ADBE, 2X Long BBAI, 2X Long BMNR, 2X Long CRCL, 2X Long CRM, 2X Long CRWV,
2X Long FIG, 2X Long NBIS, 2X Long PANW, and 2X Long PLTR Only) Computer
software companies may be significantly affected by competitive pressures,
aggressive pricing, technological developments, changing domestic and global
demand, the ability to attract and retain skilled employees, and the
availability and cost of components. The market for software products is
characterized by rapid technological change, short product life cycles, frequent
new product introductions, evolving industry standards, and cyclical market
patterns. The success of software companies depends substantially on the timely
and successful introduction of new products and the ability to provide ongoing
support and service for these products. Unexpected changes in technology or in
the markets for products based on a particular technology could have a material
adverse effect on a company’s operating results. Many computer software
companies rely on patents, copyrights, trademarks, and trade secrets to protect
their proprietary technologies. There can be no assurance that these measures
will prevent misappropriation of technology or that competitors will not
independently develop technologies that are substantially equivalent or
superior.
Transportation
Industry Risk. (2X Long AAL) Companies
in the transportation industry are subject to risks related to fluctuations in
economic conditions and levels of trade and travel, which directly affect demand
for transportation services; exposure to fuel and energy price volatility and
the availability of fuel; dependence on complex infrastructure, fleets, and
equipment that require significant capital investment and ongoing maintenance;
operational risks such as accidents, mechanical failures, labor disruptions,
weather events, and natural disasters; regulatory and compliance requirements,
including safety, environmental, and transportation regulations that may
increase costs or restrict operations; labor availability and labor relations,
including unionized workforces in certain segments; cybersecurity risks
affecting operational systems and logistics networks; intense competition and
pricing pressure; and geopolitical events, public health emergencies, and supply
chain disruptions that may adversely affect volumes, routes, and
profitability.
CoreWeave,
Inc. Investing Risk.
(2X Long CRWV Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
software and services industry, CoreWeave, Inc. faces risks that include, but
are not limited to: its limited operating history and rapid growth; dependence
on a small number of large customers and concentration of revenues; the
capital-intensive nature of its business and the need for significant ongoing
investment in infrastructure; reliance on a limited number of suppliers for
GPUs, networking equipment, and other critical components; constraints related
to data center capacity, power availability, and energy costs; intense
competition in the cloud infrastructure market; risks associated with rapid
technological change in artificial intelligence and high-performance computing;
system outages, service disruptions, or cybersecurity incidents; reliance on
third-party data centers and service providers; regulatory, environmental, and
energy-related requirements; and general macroeconomic conditions that may
affect customer demand and financing availability. Any of these risks could
materially and adversely affect the company’s business, financial condition, and
results of operations.
Costco
Wholesale Corporation Investing Risk.
(2X
Long COST Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. In addition to
the risks associated generally with companies in the consumer staples
distribution industry, Costco Wholesale Corporation faces risks that include,
but are not limited to: unsuccessful implementation of its growth strategy,
including expansion in existing and new markets; failure to attract and retain
members or maintain membership renewal rates; intense competition from other
retailers and warehouse club operators; fluctuations in merchandise, fuel,
transportation, and labor costs; supply chain disruptions or vendor
concentration; dependence on membership fees to generate a significant portion
of operating income; failure to timely identify or effectively respond to
changing consumer preferences; risks associated with payment processing and
information technology systems, including cybersecurity and data privacy;
regulatory compliance obligations; risks related to international operations and
foreign currency fluctuations; and general economic conditions that may impact
consumer spending and operating costs. Any of these risks could materially and
adversely affect the company’s business, financial condition, results of
operations, and prospects.
Counterparty/Collateral
Risk.
If a counterparty is unwilling or unable to make timely payments to meet its
contractual obligations or fails to return holdings that are subject to the
agreement with the counterparty resulting in the Fund losing money or not being
able to meet its daily leveraged investment objective.
In
addition, because the Fund may enter into swap agreements with a limited number
of counterparties, this increases the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its leveraged investment objective
or rebalance properly, which may result in significant losses to the Fund, or
the Fund may decide to change its leveraged investment objective. The risk that
no suitable counterparties will enter into or continue to provide swap exposure
to the Fund may be increased when there is significant market
volatility.
Collateral
pledged by a counterparty may be insufficient to fully mitigate credit exposure
in the event of a default. This risk may arise from declines in collateral
value, limited marketability, legal or perfection issues, or challenges in
enforcing security interests.
Cybersecurity
Risk.
With the increased use of technologies such as the internet to conduct business,
the Fund, Authorized Participants, service providers and the relevant listing
exchange are susceptible to operational, information security and related
“cyber” risks both directly and through their service providers. Similar types
of cybersecurity risks are also present for issuers of securities in which the
Fund invests, which could result in material adverse consequences for such
issuers and may cause the Fund’s investment in such issuers to lose value. In
general, cyber incidents can result from deliberate attacks or unintentional
events. Cyber incidents include, but are not limited to, gaining unauthorized
access to digital systems (e.g., through “hacking” or malicious software coding)
for purposes of misappropriating assets or sensitive information, corrupting
data, or causing operational disruption. Cyberattacks may also be carried out in
a manner that does not require gaining unauthorized access, such as causing
denial-of-service attacks on websites (i.e., efforts to make network services
unavailable to intended users). Recently, geopolitical tensions may have
increased the scale and sophistication of deliberate attacks, particularly those
from nation-states or from entities with nation-state backing.
Cybersecurity
failures by, or breaches of, the systems of the Fund’s investment adviser,
distributor and other service providers (including, but not limited to, index
and benchmark providers, fund accountants, custodians, transfer agents and
administrators), market makers, Authorized Participants or the issuers of
securities in which the Fund invests have the ability to cause disruptions and
impact business operations, potentially resulting in: financial losses,
interference with the Fund’s ability to calculate its NAV, disclosure of
confidential trading information, impediments to trading, submission of
erroneous trades or erroneous creation or redemption orders, the inability of
the Fund or its service providers to transact business, violations of applicable
privacy and other laws, regulatory fines, penalties, reputational damage,
reimbursement or other compensation costs, or additional compliance costs. In
addition, cyberattacks may render records of Fund assets and transactions,
shareholder ownership of Fund shares, and other data integral to the functioning
of the Fund inaccessible, inaccurate or incomplete. Substantial costs may be
incurred by the Fund in order to resolve or prevent cyber incidents in the
future. While the Fund has established business continuity plans in the event
of, and risk management systems to prevent, such cyber incidents, there are
inherent limitations in such plans and systems, including the possibility that
certain risks have not been identified, that prevention and remediation efforts
will not be successful or that cyberattacks will go undetected. Furthermore, the
Fund cannot control the cybersecurity plans and systems put in place by service
providers to the Fund, issuers in which the Fund invests, the Index Provider,
market makers or Authorized Participants. The Fund and its shareholders could be
negatively impacted as a result.
Daily
Correlation Risk. There
is no guarantee that a Fund will achieve a high degree of correlation to an
Underlying Security and therefore achieve its respective daily leveraged
investment objective. Each Fund’s exposure to an Underlying Security is impacted
by an Underlying Security’s movement. Because of this, it is unlikely that a
Fund will be perfectly exposed to the applicable Underlying Security at the end
of each day. The possibility of a Fund being materially over- or under-exposed
to an Underlying Security increases on days when an Underlying Security is
volatile near the close of the trading day. Market disruptions, regulatory
restrictions and high volatility will also adversely affect a Fund’s ability to
adjust exposure to the required levels.
Each
Fund may have difficulty achieving its daily leveraged investment objective for
many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, investments in ETFs, directly or indirectly,
accounting standards and their application to income items, disruptions,
illiquid or high volatility in the markets for the securities or financial
instruments in which a Fund invests, early and unanticipated closings of the
markets on which the holdings of a Fund trade, resulting in the inability of a
Fund to execute intended portfolio transactions, regulatory and tax
considerations, which may cause a Fund to hold (or not to hold) an Underlying
Security. Each Fund may take or refrain from taking positions in order to
improve tax efficiency, comply with regulatory restrictions, or for other
reasons, each of which may negatively affect each Fund’s correlation with an
Underlying Security. A Fund may be subject to large movements of assets into and
out of each Fund, potentially resulting in each Fund being over- or
under-exposed to the applicable Underlying Security. Additionally, each Fund’s
underlying investments and/or reference assets may trade on markets that may not
be open on the same day as each Fund, which may cause a difference between the
changes in the daily performance of a Fund and changes in the performance of an
Underlying Security. Any of these factors could
decrease
the correlation between the performance of a Fund and an Underlying Security and
may hinder a Fund’s ability to meet its daily investment objective on or around
that day.
Derivatives
Risk.
A Fund may obtain exposure through derivatives by investing in swap agreements.
Investing in derivatives may be considered aggressive and may expose a Fund to
risks different from, and possibly greater than, risks associated with investing
directly in the reference asset(s) underlying the derivative. The use of
derivatives may result in larger losses or smaller gains than investing in the
Underlying Security directly. The use of derivatives may expose a Fund to
additional risks such as counterparty risk, liquidity risk and increased daily
correlation risk. When a Fund uses derivatives, there may be imperfect
correlation between the value of the underlying reference assets and the
derivative, which may prevent a Fund from achieving its investment
objective.
A
Fund expects to use a combination of swaps on the Underlying Security. The
performance of an ETF may not track the performance of its underlying security
due to embedded costs and other factors. If the applicable Underlying Security
has a dramatic move in price that causes a material decline in a Fund’s NAV over
certain stated periods agreed to by the Fund and the counterparty, the terms of
the swap agreement between a Fund and its counterparty may allow the
counterparty to immediately close out of all swap transactions with a Fund. In
such circumstances, a Fund may be unable to enter into another swap agreement or
invest in other derivatives to achieve the desired exposure consistent with a
Fund’s daily leveraged investment objective. This may prevent a Fund from
achieving its daily leveraged investment objective even if the Underlying
Security reverses all or a portion of its price movement. The value of an
investment in the Fund may change quickly and without warning. Any financing,
borrowing or other costs associated with using derivatives may also have the
effect of lowering a Fund’s return. Such costs may increase as interest rates
rise.
Swap
Agreements.
Swap agreements are entered into primarily with major global financial
institutions for a specified period which may range from one day to more than
one year. In a standard swap transaction, two parties agree to exchange the
return (or differentials in rates of return) earned or realized on particular
predetermined reference or underlying securities or instruments. The gross
return to be exchanged or swapped between the parties is calculated based on a
notional amount or the return on or change in value of a particular dollar
amount invested in a reference asset. Swap agreements are generally traded
over-the-counter, and therefore, may not receive regulatory protection, which
may expose investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of value at
risk that the Fund may incur through its derivatives portfolio. To the extent
the Fund exceeds these regulatory thresholds over an extended period, the Fund
may determine that it is necessary to make adjustments to the Fund’s investment
strategy and the Fund may not achieve its investment objective.
Options
Contracts Risk.
The use of options contracts involves investment strategies and risks different
from those associated with ordinary portfolio securities transactions. The
prices of options are volatile and are influenced by, among other things, actual
and anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international political, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. For the Fund, in particular, the value
of the options contracts in which it invests is substantially influenced by the
value of the Underlying Security. The Fund may experience substantial downside
from specific option positions and certain option positions held by the Fund may
expire worthless. As an option approaches its expiration date, its value
typically increasingly moves with the value of the underlying instrument.
However, prior to such a date, the value of an option generally does not
increase or decrease at the same rate at the underlying instrument. There may at
times be an imperfect correlation between the movement in values of options
contracts and the underlying instrument, and there may at times not be a liquid
secondary market for certain options contracts. The value of the options held by
the Fund will be determined based on market quotations or other recognized
pricing methods. Furthermore, when the Fund seeks to trade out of positions,
especially near expiration, there is an added risk that the Fund may be required
to allocate resources unexpectedly to fulfill these obligations. This potential
exposure to physical settlement can significantly impact the Fund’s liquidity
and market exposure, particularly in volatile market conditions. If the Fund
sells non-cash settled options contracts, it would be obligated to receive
shares of the Underlying Security when the option is exercised. Consequently,
there is a risk that the Fund may have to physically acquire the Underlying
Security shares at the strike price, which could result in the Fund holding the
Underlying Security, and an asset that has declined in value.
Digital
Assets Risk.
(2X
Long BLSH and, 2X Long COIN Only)
The Fund is subject to digital assets risk due to its investment exposure to the
Underlying Security. The trading prices of many digital assets, including
Bitcoin, have experienced extreme volatility and may continue to do so. Extreme
volatility in the future, including further declines in the trading prices of
bitcoin, could have a material adverse effect on the Shares. Bitcoins are bearer
instruments and the loss or destruction of a private key required to access a
bitcoin may be irreversible. If a private key is lost, destroyed or otherwise
compromised and no backup of the private key is accessible, the owner would be
unable to access the bitcoin corresponding to that private key and the private
key will not be capable of being restored by the digital asset network. Digital
asset networks and the software used to operate them are in the early stages of
development. Given the recentness of the development of digital asset networks,
bitcoin may not function as intended and parties may be unwilling to use
bitcoin, which would dampen the growth, if any, of digital asset networks.
Governance of many digital asset networks, such as the Bitcoin network, are by
voluntary consensus and open competition. As a result, there may be a lack of
consensus or clarity on the governance of digital asset networks, which may
stymie each such network’s utility and ability to grow and face
challenges.
There
is a lack of consensus regarding the regulation of bitcoin and its market. As a
result of the growth in the size of the bitcoin market, the U.S. Congress and a
number of U.S. federal and state agencies (including FinCEN, SEC, OCC, CFTC,
FINRA, the Consumer Financial Protection Bureau, the Department of Justice, the
Department of Homeland Security, the Federal Bureau of Investigation, the
Internal Revenue Service, state financial institution regulators, and others)
have been examining the operations of digital asset networks, digital asset
users and digital asset markets. Many of these state and federal agencies have
brought enforcement actions or issued consumer advisories regarding the risks
posed by digital assets to investors. Ongoing and future regulatory actions with
respect to digital assets may alter, perhaps to a materially adverse extent, the
nature of an investment in a digital asset.
Early
Close/Trading Halt Risk. Although
an Underlying Security’s shares are listed for trading on an exchange, there can
be no assurance that an active trading market for such shares will be available
at all times. When securities experience a sharp decline in price, an exchange
or market may close entirely or halt for a period of time in accordance with
exchange “circuit breaker” rules or issue trading halts on specific securities
and therefore, a Fund’s ability to buy or sell certain securities or financial
instruments may be restricted. These exchange or market actions may result in a
Fund being unable to buy or sell certain securities or financial instruments. A
Fund may be unable to rebalance its portfolio, may be unable to accurately price
its investments and/or may incur substantial trading losses. If a Fund is unable
to rebalance its portfolio due to a market closure, a trading halt, an
emergency, or other market disrupting event, it may result in a Fund not
achieving its investment objective and a Fund having a significantly larger
leverage multiple than 200%, which may result in significant losses to Fund
shareholders in certain circumstances.
Additionally,
exchange or market closures or trading halts may result in a Fund’s shares
trading at an increasingly large discount to NAV and/or at increasingly wide
bid-ask spreads during part of, or all of, the trading day.
Equity
Securities Risk.
Publicly issued equity securities, including common stocks, are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which the Fund invests, and/or has exposure
to, will cause the net asset value of the Fund to fluctuate.
ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
APs,
Market Makers, and Liquidity Providers Concentration Risk.
The Fund may have a limited number of financial institutions that may act as
APs. In addition, there may be a limited number of market makers and/or
liquidity providers in the marketplace. To the extent either of the following
events occur, Shares of a Fund may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become unable to
process creation and/or redemption orders and no other APs step forward to
perform these services, or (ii) market makers and/or liquidity providers exit
the business or significantly reduce their business activities and no other
entities step forward to perform their functions.
Costs
of Buying or Selling Shares.
Investors buying or selling Shares in the secondary market will pay brokerage
commissions or other charges imposed by brokers, as determined by that broker.
Brokerage commissions are often a fixed amount and may be a significant
proportional cost for investors seeking to buy or sell relatively small amounts
of Shares. In addition, secondary market investors will also incur the cost of
the difference between the price at which an investor is willing to buy Shares
(the “bid” price) and the price at which an investor is willing to sell Shares
(the “ask” price). This difference in bid and ask prices is often referred to as
the “spread” or “bid/ask spread.” The bid/ask spread varies over time for Shares
based on trading volume and market liquidity, and is generally lower if Shares
have more trading volume and market liquidity and higher if Shares have little
trading volume and market liquidity. Further, a relatively small investor base
in the Fund, asset swings in the Fund and/or increased market volatility may
cause increased bid/ask spreads. Due to the costs of buying or selling Shares,
including bid/ask spreads, frequent trading of Shares may significantly reduce
investment results and an investment in Shares may not be advisable for
investors who anticipate regularly making small investments.
Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intraday (premium) or less than the NAV intraday (discount)
due to supply and demand of Shares or during periods of market volatility. This
risk is heightened in times of market volatility, periods of steep market
declines, and periods when there is limited trading activity for Shares in the
secondary market, in which case such premiums or discounts may be significant.
Certain securities held by the Fund may trade on foreign exchanges that are
closed when the Fund’s primary listing exchange is open, and the Fund may
experience premiums and discounts greater than those of ETFs that hold
securities that are traded only in the United States.
Trading.
Although Shares are listed for trading on its applicable exchange and may be
listed or traded on U.S. and non-U.S. stock exchanges other than its applicable
exchange, there can be no assurance that an active trading market for such
Shares will develop or be maintained. Trading in Shares may be halted due to
market conditions or for reasons that, in the view of its applicable exchange,
make trading in Shares inadvisable. In addition, trading in Shares on its
applicable exchange is subject to trading halts caused by extraordinary market
volatility pursuant to each exchange’s “circuit breaker” rules, which
temporarily halt trading on such Exchange when a decline in the S&P 500
Index during a single day reaches certain thresholds (e.g., 7%, 13%, and 20%).
Additional rules applicable to each exchange may halt trading in Shares when
extraordinary volatility causes sudden, significant swings in the market price
of Shares. There can be no assurance that Shares will trade with any volume, or
at all, on any stock exchange. In stressed market conditions, the liquidity of
Shares may begin to mirror the liquidity of a Fund’s underlying portfolio
holdings, which can be significantly less liquid than Shares.
Figma,
Inc.
Investing Risk. (2X
Long FIG Only) Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with the software and services
industry, Figma, Inc., faces risks that include, but are not limited to: intense
competition from companies with greater financial, technical, marketing, and
sales resources, as well as from startups offering innovative solutions; its
ability to retain existing customers and increase adoption of its platform while
attracting new customers; its ability to develop new offerings and functionality
and enhance existing products, including through the integration of artificial
intelligence; risks associated with expanding its business domestically and
internationally; its ability to scale and effectively deploy its sales
organization; risks related to entering new markets and addressing new use
cases; the ability to increase brand awareness; risks related to pricing and
packaging in a rapidly evolving software landscape, including due to advances in
artificial intelligence; cybersecurity incidents and protection of customer
data; reliance on third-party cloud infrastructure and service providers; and
risks associated with identifying, acquiring, or integrating complementary
businesses, products, or technologies. Any of these risks could materially and
adversely affect the company’s business, financial condition, results of
operations, and prospects.
Fixed
Income Securities Risk. When
the Fund invests in fixed income securities, the value of your investment in the
Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities owned by
the Fund. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term
securities.
Other risk factors include credit risk (the debtor may default), extension risk
(an issuer may exercise its right to repay principal on a fixed rate obligation
held by the Fund later than expected), and prepayment risk (the debtor may pay
its obligation early, reducing the amount of interest payments). These risks
could affect the value of a particular investment by the Fund, possibly causing
the Fund’s share price and total return to be reduced and fluctuate more than
other types of investments.
Futu
Holdings Limited Investing Risk.
(2X
Long FUTU Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
financial services industry, Futu Holdings Limited faces risks that include, but
are not limited to: the fact that its historical growth rates may not be
indicative of future performance, making it difficult to evaluate its future
prospects; extensive and evolving regulatory requirements applicable to its
business; historical deficiencies in online client onboarding procedures that
did not strictly follow regulatory requirements in Hong Kong, which may subject
the company to regulatory actions, including reprimands, fines, limitations or
prohibitions on future business activities, and suspension or revocation of
licenses or trading rights, and may adversely affect its business, financial
condition, results of operations, brand reputation, and prospects; the absence
of licenses or permits to provide securities brokerage services in Mainland
China; intense competition in the online brokerage and wealth management
industries; changes in social conditions and political and economic policies of
the People’s Republic of China (“PRC”); uncertainties regarding the
interpretation and enforcement of PRC laws, rules, and regulations; the risk
that its American depositary shares may be delisted or prohibited from trading
in the United States under the Holding Foreign Companies Accountable Act if the
PCAOB is unable to inspect or investigate its auditors; and risks related to
macroeconomic conditions, including uneven economic growth, geopolitical
tensions, global trade disruptions, fluctuations in foreign currency exchange
rates, interest rate changes, and inflation. Any of these risks could materially
and adversely affect the company’s business, financial condition, and results of
operations.
Galaxy
Digital Inc. Investing Risk. (2X
Long GLXY Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
financial services industry Galaxy Digital Inc. faces risks that include, but
are not limited to: significant volatility in digital asset prices and markets,
which may materially impact trading activity, asset values, revenues, and
operating results; dependence on continued development, adoption, and acceptance
of digital assets and blockchain technology; material exposure to market,
credit, liquidity, and counterparty risks arising from its trading, asset
management, lending, staking, and principal investing activities; operating in a
highly regulated and evolving regulatory environment, where changes in laws,
regulations, or enforcement actions related to digital assets could restrict
operations or increase compliance costs; operational, technology, and
cybersecurity risks, including failures of systems or safeguards for digital
assets; reliance on key personnel and the ability to attract and retain
specialized talent; competition from traditional financial institutions,
crypto-native firms, and decentralized platforms; and fluctuations in interest
rates, capital markets activity, and broader economic conditions that could
adversely affect financial performance. Any of these risks could materially and
adversely affect the company’s business, financial condition, and results of
operations.
The
Underlying Security holds digital assets as part of its corporate treasury
operations. The market value of digital assets is highly volatile and may be
subject to significant price fluctuations, which could materially adversely
affect the Underlying Security’s financial condition, results of operations,
liquidity, or stock price. In addition, digital assets may be subject to
evolving regulatory frameworks, cybersecurity risks, custody risks, accounting
treatment risks, and potential impairment charges, any of which could adversely
affect the Underlying Security. Because the Fund seeks daily investment results
that correspond to twice (2X) the daily performance of the Underlying Security’s
common stock, increased volatility in the Underlying Security’s stock may result
in increased volatility of the Fund. The Fund does not invest directly in
digital assets.
Indirect
Investment Risk.
The issuers of the underlying companies are not affiliated with the Trust, the
Adviser, or any affiliates thereof and is not involved with this offering in any
way, and has no obligation to consider the Fund in taking any corporate actions
that might affect the value of the Funds. Investing in a Fund is not equivalent
to investing in a Fund’s Underlying Security. Fund shareholders will not have
voting rights or
rights
to receive dividends or other distributions or any other rights with respect to
a Fund’s Underlying Security.
Intraday
Investment Risk.
Each Fund seeks daily leveraged investment results, which should not be equated
with seeking an investment objective for shorter than a day. Thus, an investor
who purchases Fund shares after the close of the markets on one trading day and
before the close of the markets on the next trading day will likely have more,
or less, than 200% leveraged investment exposure to the applicable Underlying
Security, depending upon the movement of the Underlying Security from the end of
one trading day until the time of purchase. If the Underlying Security moves in
a direction favorable to a Fund, the investor will receive less than 200%
exposure to the Underlying Security. Conversely, if the Underlying Security
moves in a direction adverse to a Fund, the investor will receive exposure to
the Underlying Security greater than 200%. Thus, an investor that purchases
shares intraday may experience performance that is greater than, or less than, a
Fund’s stated multiple of its Underlying Security.
IPO
Risk. (2X
Long BLSH, 2X Long BULL, 2X Long CRCL, and 2X Long CRWV Only) The
market value of shares of an IPO, including those of the Underlying Security,
will fluctuate considerably due to factors such as the absence of a prior public
market, unseasoned trading, the small number of shares available for trading and
limited information about the issuer. The purchase of IPO shares may involve
high transaction costs. IPO shares are subject to market risk and liquidity
risk.
Leverage
Risk. To
achieve its daily investment objective, the Funds employ leverage and are
exposed to the risk that adverse daily performance of the Fund’s Underlying
Security will be magnified. This means that, if a Fund’s underlying security
experiences adverse daily performance (meaning a decline in the value of the
Underlying Security of the Fund for each 2X Long ETF), an investment in the Fund
will be reduced by an amount equal to 2% for every 1% of adverse performance,
not including the costs of financing leverage and other operating expenses,
which would further reduce its value.
A
Fund could theoretically lose an amount greater than its net assets if its
underlying security moves more than 50% in a direction adverse to the Fund
(meaning a decline in the value of the Underlying Security of the Fund for the
2X Long ETFs). This would result in a total loss of a shareholder’s investment
in one day even if its Underlying Security subsequently moves in the opposite
direction and eliminates all or a portion of its earlier daily change. A total
loss may occur in a single day even if its Underlying Security does not lose all
of its value. Leverage will also have the effect of magnifying any differences
in the Fund’s correlation with the Underlying Security or may increase the
Fund’s volatility.
Liquidity
Risk.
The Fund’s investments are subject to liquidity risk, which exists when an
investment is or becomes difficult to purchase or sell at a reasonable time and
price. If a transaction is particularly large or if the relevant market is or
becomes illiquid, it may reduce the potential returns of the Fund because it may
be unable to sell the illiquid securities at an advantageous time or price,
which may cause the Fund to suffer significant losses and difficulties in
meeting redemptions. This is especially true given the limited number of market
participants in certain markets in which the Fund may invest.
Certain
countries in which the Fund may invest may be subject to extended settlement
delays and/or foreign holidays, during which the Fund will unlikely be able to
convert such holdings to cash and may make it additionally difficult for the
Fund to meet redemptions in a timely fashion.
Market
developments may cause the Fund’s investments to become less liquid and subject
to erratic price movements, and may also cause the Fund to encounter
difficulties in timely honoring redemptions, especially if market events cause
an increased incidence of shareholder redemptions. If a number of securities
held by the Fund stop trading or become illiquid, it may have a cascading effect
and cause the Fund to halt trading. Volatility in market prices will increase
the risk of the Fund being subject to a trading halt.
To
the extent that an investment is deemed to be an illiquid investment or a less
liquid investment, the Fund can expect to be exposed to greater liquidity
risk.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth
or recession, changes in interest rates, changes in the actual or perceived
creditworthiness of issuers, general market liquidity, exchange trading
suspensions and closures, and public health risks. The Fund is subject to the
risk that geopolitical events will disrupt markets and adversely affect global
economies, markets, and exchanges. Local, regional or global events such as war,
acts of terrorism, natural disasters, the spread of infectious illness or other
public health issues, conflicts and social unrest or other events could have a
significant impact on the Fund, its investments, and the Fund’s ability to
achieve its investment objective.
Money
Market Instrument Risk.
The Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
MP
Materials Corporation Investing Risk. (2X
Long MP Only) Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with the materials industry, MP
Materials Corporation faces risks that include, but are not limited to: changes
in trade policies and geopolitical conditions in the United States, China, and
other countries, including the imposition of tariffs or other restrictions; its
ability to expand sales of rare earth products in markets outside of China;
uncertainties related to its commercial arrangements with Shenghe Resources
(Singapore) International Trading Pte. Ltd. and its decision to cease shipments
of rare earth concentrate to China, including the ability to resume such
shipments; risks associated with the development and ramp-up of its downstream
operations, including rare earth separation and vertical integration
initiatives; fluctuations in demand for and pricing of rare earth products;
uncertainties regarding the growth of end markets and competition from
substitute materials; intense competition within the rare earth mining,
processing, and magnetics industries; changes in China’s political environment
and industrial policies; unanticipated costs, delays, or technical challenges
related to the expansion of separation and magnetics facilities; operational
risks at the Mountain Pass mine, including power, water, and logistics
constraints; access to raw materials; reserve estimation uncertainties; labor
relations; cybersecurity and information technology risks; capital intensity and
funding requirements; and sustainability-related risks. Any of these risks could
materially and adversely affect the company’s business, financial condition, and
results of operations.
Nebius
Group N.V. Investing Risk.
(2X
Long NBIS Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with the software and
services industry, Nebius Group N.V. faces risks that include, but are not
limited to: significant and evolving competition and the risk that it may be
unable to adapt to rapidly changing technologies, customer requirements, or
specifications; the fact that its business is at an early stage of development
and operates in new and rapidly evolving markets; capital-intensive operations,
a history of losses, and the need to raise additional equity or debt financing
to support ongoing operations and growth; geopolitical and macroeconomic
developments, including protectionist measures, restrictions on foreign
companies, and policies favoring local competitors; technological developments
in generative AI, including the potential for new models to require less
computing power, which could reduce demand for its offerings; dependence on a
limited number of suppliers for sophisticated hardware and infrastructure, and
risks related to supply chain disruptions, delays, or increased costs;
regulatory uncertainty and heightened political scrutiny relating to AI
technologies, data centers, export controls, and related compliance obligations
across multiple jurisdictions; and the risk that failure to comply with
applicable laws and regulations could result in investigations, litigation,
penalties, or limitations on its business model. Any of these risks could
materially and adversely affect the company’s business, financial condition, and
results of operations. Any of these risks could materially and adversely affect
the company’s business, financial condition, and results of
operations.
New
Fund Risk.
The Funds have recently commenced investment operations. As a result,
prospective investors have no track record or history, or only a limited track
record or history, on which to base their investment decisions. An investment in
a Fund may therefore involve greater uncertainty than an investment in a fund
with
an
established record of performance. In addition, there can be no assurance that a
Fund will grow to or maintain an economically viable size. The Fund’s
distributor does not maintain an active market in Fund shares.
Non-Diversification
Risk.
Although each Fund intends to invest in a variety of securities and instruments,
each Fund is considered to be non- diversified. This means that a Fund may
invest more of its assets in the securities of a single issuer or a smaller
number of issuers than if it were a diversified fund. As a result, a Fund may be
more exposed to the risks associated with and developments affecting an
individual issuer or a smaller number of issuers than a fund that invests more
widely. This may increase a Fund’s volatility and cause the performance of a
relatively smaller number of issuers to have a greater impact on a Fund’s
performance.
Nvidia
Corporation Investing Risk. (2X
Long NVDA Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
semiconductors and semiconductor equipment industry, Nvidia Corporation faces
risks that include, but are not limited to: its ability to meet the evolving
demands of its end markets, including gaming, data center, professional
visualization and automotive; intense competition; changes in customer demand;
supply chain disruptions, manufacturing delays and capacity constraints;
potential mismatches between supply and demand resulting in product shortages or
excess inventory; dependence on third-party manufacturers and suppliers to
fabricate, assemble, test and package its products, which limits control over
production schedules, yields and quality; product defects; international sales
and operations, including adverse economic conditions, geopolitical developments
and trade restrictions; U.S. export controls and other government regulations
that limit or restrict sales to certain countries or customers; impacts of
climate change, including energy and water availability; risks related to
business investments and acquisitions; revenue concentration among a limited
number of customers, partners and distributors; ability to attract and retain
key personnel; cybersecurity and data protection incidents; business disruptions
and failures of information systems; fluctuations in operating results;
increased scrutiny related to environmental, social and governance matters;
risks associated with the development, deployment and regulation of AI;
intellectual property protection; evolving data privacy, security, tax and other
regulatory requirements; and other legal and compliance risks. Any of these
risks could materially and adversely affect the company’s business, financial
condition, and results of operations.
Operational
Risk.
The Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address significant operational risks.
Palantir
Technologies, Inc. Investing Risk.
(2X
Long PLTR Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
software and services industry, Palantir Technologies, Inc. faces risks that
include, but are not limited to: its reliance on a limited number of customers,
including government agencies, for a substantial portion of its revenue; long
and unpredictable sales cycles; the development, deployment and adoption of new
technologies and artificial intelligence capabilities; dependence on third-party
products and services; the ability to attract, retain, train and motivate
qualified personnel and senior management; intense competition; cybersecurity
incidents and data protection failures; intellectual property protection;
reputational and ethical concerns; and evolving regulatory, legal and litigation
risks. Any of these risks could materially and adversely affect the company’s
business, financial condition and results of operations.
Palo
Alto Networks, Inc. Investing Risk. (2X
Long PANW Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
software and services industry, Palo Alto Networks, Inc. faces risks that
include, but are not limited to: its reliance on a limited number of customers
for a significant portion of its revenue; rapid technological change and the
successful development and deployment of new products and services; dependence
on third-party technologies, cloud service providers and channel partners;
intense competition; the ability to
attract,
retain and motivate qualified personnel and senior management; sales execution
and operating complexity; cybersecurity incidents affecting its platforms or
customers; the use of artificial intelligence in its offerings; the protection
of intellectual property; and evolving global regulatory, privacy and litigation
risks. Any of these risks could materially and adversely affect the company’s
business, financial condition and results of operations.
PayPal
Holdings, Inc. Investing Risk.
(2X Long PYPL Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with the financial
services industry, PayPal Holdings, Inc. faces risks that include, but are not
limited to: cybersecurity incidents, payment fraud, privacy and data protection
failures, and system disruptions that could impair the availability or
reliability of its platforms; customer disputes, chargebacks, and associated
losses; declines in transaction volume or user engagement; and its ability to
comply with complex and evolving laws and regulations across multiple
jurisdictions, including those related to payments, consumer protection, data
privacy, and taxation. PayPal is also subject to risks arising from adverse
economic conditions, which may reduce consumer spending and merchant activity,
and from intense competition from existing and emerging payment solutions. Any
of these risks could materially and adversely affect the company’s business,
financial condition, and results of operations.
Portfolio
Turnover Risk.
Daily rebalancing of the Fund’s holdings pursuant to its daily investment
objective causes a much greater number of portfolio transactions when compared
to most ETFs. Additionally, active secondary market trading of the Shares could
cause more frequent creation and redemption activities, which would increase the
number of portfolio transactions. High levels of portfolio transactions may
cause higher transaction costs because of increased broker commissions resulting
from such transactions and increased taxable capital gains. The Fund calculates
portfolio turnover without including the short-term cash instruments or
derivative transactions that comprise most of the Fund’s trading. As such, if
the Fund’s extensive use of derivative instruments were reflected, the
calculated portfolio turnover rate would be significantly higher.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a portion of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with the Fund’s investment
objective. In these instances, the Fund may have investment exposure to the
Underlying Security that is significantly greater or less than its stated
multiple. As a result, the Fund may be more exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment
objective.
Repurchase
Agreements Risk.
The Fund may enter into repurchase agreements. In a repurchase agreement, a
party sells a security, commonly a U.S. government security, and agrees to buy
the security back at a specific price at a specified later time. A repurchase
agreement exposes the Fund to the risk that the party that sells the security
may default on its obligation to repurchase it. The Fund may lose money if it
cannot sell the security at the agreed-upon time and price or the security loses
value before it can be sold.
Robinhood
Markets, Inc. Investing Risk.
(2X
Long HOOD Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
financial services industry. Robinhood Markets, Inc. faces a number of risks
that include, but are not limited to: a history of operating losses and the
potential for continued volatility in results of operations; reliance on
transaction-based revenues, including risks related to reduced trading activity,
pricing compression, changes in relationships with market makers, and regulatory
actions or prohibitions affecting payment for order flow and similar practices;
exposure to fluctuations in interest rates and rapidly changing interest rate
environments; liquidity and capital requirements necessary to support clearing,
settlement, margin lending, and business growth; intense regulatory scrutiny and
enforcement actions, as well as litigation risk; platform reliability, system
capacity, cybersecurity, and operational risks; reputational harm; dependence on
key personnel and the ability to attract and retain highly skilled employees;
international operational and regulatory risks; and risks associated with crypto
asset-related products and services, including regulatory uncertainty, market
volatility, custody, and compliance risks, including those arising from the
pending acquisition and integration of Bitstamp. Any of these risks could
materially and adversely affect the company’s business, financial condition,
results of operations, and prospects.
RTX
Corporation Investing Risk.
(2X Long RTX Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. In addition to
the risks associated generally with companies in the capital goods industry, RTX
Corporation faces risks that include, but are not limited to: significant
dependence on contracts with the U.S. government and allied governments,
including extensive procurement laws and regulations, heightened audit and
oversight requirements, and the risk of contract modification, termination, or
non-renewal; variability in contract performance, program execution, and the
ability to control costs on long-term and fixed-price contracts; reliance on a
global network of suppliers and subcontractors and potential supply chain
disruptions; the successful development and integration of new technologies;
public health events and other disruptions that may affect operations, labor
availability, or demand; risks associated with international sales, including
geopolitical, economic, regulatory, and competitive factors and the protection
of intellectual property; the ability to attract and retain highly skilled
personnel; cybersecurity incidents and other security threats; challenges
associated with acquisitions, divestitures, and integration activities; pension
and other postretirement funding obligations; environmental, health, and safety
regulations and compliance costs; litigation and regulatory proceedings; tax law
changes and tax positions; indebtedness and interest rate exposure; and reliance
on estimates and assumptions in financial reporting and long-term program
accounting. Any of these risks could materially and adversely affect the
company’s business, financial condition, and results of operations.
Salesforce,
Inc. Investing Risk.
(2X
Long CRM Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
software and services industry, Salesforce, Inc. faces risks that include, but
are not limited to: its reliance on a subscription-based business model and the
ability to attract and retain customers and renew and expand customer
subscriptions; concentration of revenue among a limited number of large
customers; intense competition; fluctuations in customer demand and IT spending
due to macroeconomic conditions; risks associated with the development,
deployment, and use of new technologies, including artificial intelligence;
reliance on third-party infrastructure, products, and services; cybersecurity
incidents, data breaches, and data privacy compliance; the ability to attract,
retain, train, and motivate qualified personnel and senior management; risks
related to acquisitions and integration of acquired businesses; protection of
intellectual property; regulatory compliance and litigation; and risks
associated with international operations and foreign currency fluctuations. Any
of these risks could materially and adversely affect the company’s business,
financial condition, and results of operations.
Stablecoin
Risk.
(2X
Long CRCL Only)
The Fund will have significant exposure to stablecoins due to its concentrated
exposure to CRCL, an issuer of stablecoins. Although U.S. dollar- or Euro-pegged
stablecoins are designed to maintain a stable value through backing by fiat
currency reserves or other liquid assets, there is no guarantee that the peg
will be maintained or that the reserves will be sufficient, transparent, or
accessible in times of market stress. The issuer’s ability to honor redemptions
on a 1:1 basis may be impaired by inadequate reserve management, limited
oversight, insolvency or legal restrictions. Stablecoins are subject to an
evolving regulatory environment, and any legislative or enforcement actions
affecting issuers, custodians or reserve assets could adversely affect
functionality, tradability or value. Even where reserves are fully
collateralized, lack of independent audits, or concentration in a single
custodian or asset type (e.g.,
short-term U.S. Treasuries) may expose investors to hidden vulnerabilities.
Stablecoins rely on blockchain infrastructure and smart contracts, which may be
vulnerable to bugs, outages or cyberattacks. A failure to maintain the peg or
loss of market confidence could lead to rapid redemptions, illiquidity, and
significant investor losses. Investors should not assume that exposure to a U.S.
dollar- or Euro-pegged stablecoin is equivalent to holding fiat currency or
other risk-free assets.
Taiwan
Semiconductor Manufacturing Co., Ltd. Investing Risk. (2X
Long TSM Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with companies in the
semiconductor and semiconductors equipment industry, Taiwan Semiconductor
Manufacturing Co., Ltd. faces risks that include, but are not limited to:
highly-competitive nature of the semi-conductor industry, which large dominant
participants; economic and market uncertainty;
reductions
in demand for its products; potential concentration of revenues in a few large
clients; geopolitical events and pandemics; adequate protection of technology or
other intellectual property; exchange rates; reliance on third parties to
manufacture products; possible shortages of equipment or materials needed to
manufacture products; cybersecurity attacks and data breaches; system failures
or outages; potential incompatibility of product with some or all industry
standard software and hardware; increases in costs; adverse government
regulations; regulatory compliance costs; litigation; taxes; indebtedness; and
the ability to attract and retain high quality talent. Any of these risks could
materially and adversely affect the company’s business, financial condition, and
results of operations.
Tax
Risk.
The Fund intends to pay dividends each taxable year to enable it to continue to
satisfy the distribution requirements necessary to qualify for treatment as a
regulated investment company (“RIC”). If the Fund were to distribute to its
shareholders less than the minimum amount required for any year, the Fund would
become subject to federal income tax for that year on all of its taxable income
and recognized gains, even those distributed to its shareholders. In addition,
under the Internal Revenue Code of 1986, as amended (the “Code”), the Fund may
not earn more than 10% of its annual gross income from non-qualifying sources,
such as gains from the sale of commodities and precious metals. This could make
it more difficult for the Fund to pursue its investment strategy and maintain
qualification as a RIC. In lieu of potential disqualification as a RIC, the Fund
is permitted to pay a tax for certain failures to satisfy this income
requirement, which, in general, are limited to those due to reasonable cause and
not willful neglect.
In
addition, to qualify for the favorable tax treatment generally available to
RICs, the Fund must satisfy certain diversification requirements. In particular,
the Fund generally may not acquire a security if, as a result of the
acquisition, more than 50% of the value of the Fund’s assets would be invested
in (a) issuers in which the Fund has, in each case, invested more than 5% of its
assets or (b) issuers more than 10% of whose outstanding voting securities are
owned by the Fund. If the Fund were to fail to satisfy the diversification
requirements, it could incur penalty taxes and be forced to dispose of certain
assets, or it could fail to qualify as a RIC. If the Fund were to fail to
qualify as a RIC, it would be taxed in the same manner as an ordinary
corporation, and distributions to its shareholders would not be deductible by
the Fund in computing its taxable income.
Tesla,
Inc. Investing Risk. (2X
Long TSLA Only)
Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with companies operating in the automotive and components
industry, Tesla, Inc. faces risks that include, but are not limited to: supply
chain disruptions, manufacturing and production delays, and increases in raw
material, energy, and labor costs; fluctuations in demand for its vehicles and
energy products; product liability claims and regulatory scrutiny related to
vehicle safety and autonomous driving features; its ability to attract, hire,
and retain highly skilled personnel; and its reliance on key executives,
including Elon Musk, its Chief Executive Officer. Tesla’s stock price has been
and may continue to be highly volatile due to a variety of factors, including
operating performance, market perception, and broader market conditions. Tesla
has also held Bitcoin as part of its treasury assets, and fluctuations in the
market price of Bitcoin may result in impairment charges, increased earnings
volatility, and changes in investor perception. Any of these risks could
materially and adversely affect the company’s business, financial condition,
results of operations, and prospects.
The
Underlying Security holds digital assets, as part of its corporate treasury
operations. The market value of digital assets is highly volatile and may be
subject to significant price fluctuations, which could materially adversely
affect the Underlying Security’s financial condition, results of operations,
liquidity, or stock price. In addition, digital assets may be subject to
evolving regulatory frameworks, cybersecurity risks, custody risks, accounting
treatment risks, and potential impairment charges, any of which could adversely
affect the Underlying Security. Because the Fund seeks daily investment results
that correspond to twice (2X) the daily performance of the Underlying Security’s
common stock, increased volatility in the Underlying Security’s stock may result
in increased volatility of the Fund. The Fund does not invest directly in
digital assets.
UnitedHealth
Group, Inc.
Investing Risk. (2X
Long UNH Only) Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. As of the date of this
prospectus, in addition to the risks associated with healthcare equipment and
services industry, UnitedHealth Group, Inc. faces risks that include, but are
not
limited
to: the ability to accurately predict, price for, and manage medical costs;
protecting proprietary databases, software and other intellectual property;
cybersecurity threats, data breaches or other privacy and information security
incidents; maintaining satisfactory relationships with healthcare providers,
payers, and service partners; sustaining
or growing enrollments in its health businesses; and exposure to private party
or governmental investigations, claims or litigation. Any of these risks could
materially and adversely affect the company’s business, financial condition,
results of operations, and prospects.
Webull
Corporation Investing Risk.
(2X
Long BULL Only)
Issuer-specific attributes may cause an investment held by the Fund to be more
volatile than the market generally. The value of an individual security or
particular type of security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. As of the date
of this prospectus, in addition to the risks associated with financial services
industry, Webull faces risks that include, but are not limited to: operating in
a heavily regulated and supervised environment, where changes in the
interpretation and enforcement of laws and regulations could materially impact
its operations; exposure to market volatility that may adversely affect trading
activity, customer engagement, and revenues; reliance on complex technology
systems and infrastructure, the failure or disruption of which could materially
impair its operations; cybersecurity, data privacy, and information security
risks; liquidity and counterparty risks associated with clearing, settlement,
and custody arrangements; competitive pressures, including pricing competition
and declining transaction-based revenues; and changes in broader financial
market conditions that could negatively affect investor participation and demand
for its products and services.
Any
of these risks could materially and adversely affect the company’s business,
financial condition, and results of operations.
PORTFOLIO
HOLDINGS INFORMATION
Information
about each Fund’s daily portfolio holdings is available at www.ThemesETFs.com. A
summarized description of each Fund’s policies and procedures with respect to
the disclosure of each Fund’s portfolio holdings is available in the Funds’
SAI.
MANAGEMENT
The
Funds are series of the Trust, a Delaware statutory trust, which is overseen by
a board of trustees (the “Board”).
Investment
Adviser
The
Adviser has overall responsibility for the general management and administration
of the Trust and each of its separate investment portfolios. The Adviser is a
registered investment adviser with offices located at 34 East Putnam Avenue,
Suite 112, Greenwich, Connecticut 06830. The Adviser has managed ETFs since
2023. The Adviser also arranges for transfer agency, custody, fund
administration, securities lending and all other related services necessary for
each Fund to operate. For its services, the Adviser receives a fee from each
Fund, calculated daily and paid monthly, based on a percentage of each Fund’s
average daily net assets, as shown in the following table:
|
|
|
|
|
| |
| Name
of Fund |
Management
Fee |
|
Leverage
Shares 2X Long AAL Daily ETF |
0.75% |
|
Leverage
Shares 2X Long ADBE Daily ETF |
0.75% |
|
Leverage
Shares 2X Long AMD Daily ETF |
0.75% |
|
Leverage
Shares 2X Long ARM Daily ETF |
0.75% |
|
Leverage
Shares 2X Long ASML Daily ETF |
0.75% |
|
Leverage
Shares 2X Long AVGO Daily ETF |
0.75% |
|
Leverage
Shares 2X Long BBAI Daily ETF |
0.75% |
|
Leverage
Shares 2X Long BLSH Daily ETF |
0.75% |
|
Leverage
Shares 2X Long BMNR Daily ETF |
0.75% |
|
Leverage
Shares 2X Long BA Daily ETF |
0.75% |
|
|
|
|
|
| |
|
Leverage
Shares 2X Long BULL Daily ETF |
0.75% |
|
Leverage
Shares 2X Long COIN Daily ETF |
0.75% |
|
Leverage
Shares 2X Long COST Daily ETF |
0.75% |
|
Leverage
Shares 2X Long CRCL Daily ETF |
0.75% |
|
Leverage
Shares 2X Long CRM Daily ETF |
0.75% |
|
Leverage
Shares 2X Long CRWV Daily ETF |
0.75% |
|
Leverage
Shares 2X Long FIG Daily ETF |
0.75% |
|
Leverage
Shares 2X Long FUTU Daily ETF |
0.75% |
|
Leverage
Shares 2X Long GLXY Daily ETF |
0.75% |
|
Leverage
Shares 2X Long HOOD Daily ETF |
0.75% |
|
Leverage
Shares 2X Long MP Daily ETF |
0.75% |
|
Leverage
Shares 2X Long NBIS Daily ETF |
0.75% |
|
Leverage
Shares 2X Long NVDA Daily ETF |
0.75% |
|
Leverage
Shares 2X Long PANW Daily ETF |
0.75% |
|
Leverage
Shares 2X Long PLTR Daily ETF |
0.75% |
|
Leverage
Shares 2X Long PYPL Daily ETF |
0.75% |
|
Leverage
Shares 2X Long RTX Daily ETF |
0.75% |
|
Leverage
Shares 2X Long TSLA Daily ETF |
0.75% |
|
Leverage
Shares 2X Long TSM Daily ETF |
0.75% |
|
Leverage
Shares 2X Long UNH Daily ETF |
0.75% |
|
Leverage
Shares 2X Long XYZ Daily ETF |
0.75% |
Under
the Investment Advisory Agreement between the Adviser and the Trust, on behalf
of the Funds (the “Investment Advisory Agreement”), the Adviser has agreed to
pay all expenses of each Fund, except for the fee paid to the Adviser pursuant
to the Investment Advisory Agreement, interest charges on any borrowings, taxes,
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, accrued deferred tax liability, extraordinary expenses, and
distribution (12b-1) fees and expenses.
A
discussion regarding the basis for the Board’s approval of the Investment
Advisory Agreement for each Fund will be available in such Fund’s first
N-CSR.
A
discussion regarding the basis for the Board’s approval of the Investment
Advisory Agreement for each Fund is available in the Funds’ Annual Financial
Statements and Additional Information dated October 31, 2025, which is
included in the Funds’ Form
N-CSR
and available on the Funds’ website.
Portfolio
Managers
The
Funds’ portfolio managers are Calvin Tsang, Dingxun (Kevin) Shao and Paul
Bartkowiak who are jointly and primarily responsible for the day-to-day
management of each Fund’s portfolio.
Mr. Tsang
joined Themes Management Company LLC in March 2023 and serves as Head of
Product Management and Development. Calvin has over eight years of experience as
a portfolio manager. Prior to joining Themes Management Company LLC, Calvin was
a Portfolio Manager at Cboe Vest from January 2021 to December 2022,
Multi-Asset Portfolio Manager at QS Investors from May 2019 to
December 2020, and Senior Portfolio Analyst at ProShares from
August 2014 to May 2019. Calvin is a CFA charterholder and a certified
FRM. He holds a dual Bachelor’s Degree in Accounting and Economics from
Binghamton University.
Mr. Shao
joined Themes Management Company LLC in July 2023 and serves as Vice
President, Product Management and Development. Dingxun (Kevin) possesses over
nine years of experience in the financial services industry, including more than
seven years dedicated to portfolio management. Prior to joining Themes
Management Company LLC, Dingxun (Kevin) gained most of his portfolio management
experience at
ProShares,
where he started in July 2016 as an Analyst and concluded his tenure as an
Associate Portfolio Manager in June 2023. Dingxun (Kevin) earned his
Bachelor’s Degree with a dual major in Finance and Information Systems from the
University of Maryland, College Park, Robert H. Smith School of
Business.
Mr. Bartkowiak
joined Themes Management Company LLC in April of 2024 and serves as Associate
Vice President, Portfolio Management. Paul has almost a decade of asset
management experience. Paul most recently served as a Senior Portfolio Analyst
at ProShares from 2021 to April 2024. Paul’s time at ProShares was split between
their FICC and Currency, International Equity, and Commodity teams. In addition
to his responsibilities to manage the firm’s ETFs, Paul was a member of
ProShares’ Credit Team. Paul completed his undergraduate studies at the
University of Dayton and MBA at Saint Louis University.
The
SAI provides additional information about the Portfolio Manager’s compensation
structure, other accounts managed by the Portfolio Manager, and the Portfolio
Manager’s ownership of Shares of the Fund for which he is a portfolio
manager.
ADDITIONAL
INFORMATION ON BUYING AND SELLING FUND SHARES
Most
investors will buy and sell Shares of the Funds through brokers. Shares of each
Fund trade on the applicable exchange as listed on the cover of this Prospectus
and elsewhere during the trading day and can be bought and sold throughout the
trading day like other shares of publicly-traded securities. When buying or
selling Shares through a broker, most investors will incur customary brokerage
commissions and charges. Shares of each Fund trade under the trading symbol
listed on the cover of this Prospectus. Only authorized participants
(“Authorized Participants” or “APs”) who have entered into agreements with the
Funds’ distributor may acquire Shares directly from a Fund, and only APs may
tender their Shares for redemption directly to each Fund, at NAV in Creation
Units. Once created, Shares trade in the secondary market in amounts less than a
Creation Unit.
Share
Trading Prices
Transactions
in each Fund’s Shares will be priced at NAV only if you purchase Shares directly
from each Fund in Creation Units. As with other types of securities, the trading
prices of Shares in the secondary market can be affected by market forces such
as supply and demand, economic conditions and other factors. The price you pay
or receive when you buy or sell your Shares in the secondary market may be more
or less than the NAV of such Shares.
Determination
of Net Asset Value
The
NAV of each Fund’s Shares is calculated each day the New York Stock Exchange
(“NYSE”) is open for trading as of the close of regular trading on the NYSE,
generally 4:00 p.m. Eastern Time (the “NAV Calculation Time”). If the NYSE
closes before 4:00 p.m. Eastern Time, as it occasionally does, the NAV
Calculation Time will be the time the NYSE closes. In addition, any U.S.
fixed-income assets may be valued as of the announced closing time of trading in
fixed income instruments on any day that the Securities Industry and Financial
Markets Association announces an early closing time. Each Fund’s NAV per share
is calculated by dividing the Fund’s net assets by the number of Fund Shares
outstanding.
In
calculating its NAV, each Fund generally values its assets on the basis of
market quotations, last sale prices, or estimates of value furnished by a
pricing service or brokers who make markets in such instruments. Debt
obligations with maturities of 60 days or less are valued at amortized
cost.
Fair
Value Pricing
The
Board has adopted procedures and methodologies to fair value Fund investments
whose market prices are not “readily available” or are deemed to be unreliable.
For example, such circumstances may arise when: (i) a security has been delisted
or has had its trading halted or suspended; (ii) a security’s primary pricing
source is unable or unwilling to provide a price; (iii) a security’s primary
trading market is closed during regular market hours; or (iv) a security’s value
is materially affected by events occurring after the close of the security’s
primary trading market. Generally, when fair valuing an investment, the Adviser
will take into account all reasonably available information that may be relevant
to a particular valuation including, but not limited to,
fundamental
analytical data regarding the issuer, information relating to the issuer’s
business, recent trades or offers of the security, general and/or specific
market conditions and the specific facts giving rise to the need to fair value
the security. The Adviser makes fair value determinations in good faith and in
accordance with the fair value methodologies included in the Board-adopted
valuation procedures. Due to the subjective and variable nature of fair value
pricing, there can be no assurance that the Adviser will be able to obtain the
fair value assigned to the investment upon the sale of such
investment.
Dividends
and Distributions
Each
Fund expects to pay out dividends, if any, on an annual basis. Nonetheless, each
Fund may make more frequent dividend payments. Each Fund expects to distribute
its net realized capital gains to investors annually. Each Fund occasionally may
be required to make supplemental distributions at some other time during the
year. Distributions in cash may be reinvested automatically in additional whole
Shares only if the broker through whom you purchased Shares makes such option
available. Your broker is responsible for distributing the income and capital
gain distributions to you.
Book
Entry
Shares
of each Fund are held in book-entry form, which means that no stock certificates
are issued. The Depository Trust Company (“DTC”) or its nominee is the record
owner of all outstanding Shares of each Fund.
Investors
owning Shares of each Fund are beneficial owners as shown on the records of DTC
or its participants. DTC serves as the securities depository for all Shares of
each Fund. Participants include DTC, securities brokers and dealers, banks,
trust companies, clearing corporations, and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any right as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any securities that you hold in
book-entry or “street name” form. Your broker will provide you with account
statements, confirmations of your purchases and sales, and tax
information.
Delivery
of Shareholder Documents – Householding
Householding
is an option available to certain investors of each Fund. Householding is a
method of delivery, based on the preference of the individual investor, in which
a single copy of certain shareholder documents can be delivered to investors who
share the same address, even if their accounts are registered under different
names. Householding for each Fund is available through certain broker-dealers.
If you are interested in enrolling in householding and receiving a single copy
of prospectuses and other shareholder documents, please contact your
broker-dealer. If you are currently enrolled in householding and wish to change
your householding status, please contact your broker-dealer.
Frequent
Purchases and Redemptions of Fund Shares
Each
Fund imposes no restrictions on the frequency of purchases and redemptions of
Fund Shares. In determining not to impose such restrictions, the Board evaluated
the risks of market timing activities by Fund shareholders. Purchases and
redemptions by APs, who are the only parties that may purchase or redeem Shares
directly with a Fund, are an essential part of the ETF process and help keep
Fund share trading prices in line with NAV. As such, each Fund accommodates
frequent purchases and redemptions by APs. However, the Board has also
determined that frequent purchases and redemptions for cash may increase
tracking error and portfolio transaction costs and may lead to the realization
of capital gains. To minimize these potential consequences of frequent purchases
and redemptions, each Fund imposes transaction fees on purchases and redemptions
of Creation Units to cover the custodial and other costs incurred by the Fund in
effecting trades. In addition, each Fund and the Adviser reserve the right to
reject any purchase order at any time.
Investments
by Registered Investment Companies
Section 12(d)(1)
of the 1940 Act restricts investments by registered investment companies in the
securities of other investment companies, including Shares. Registered
investment companies are permitted to invest in a
Fund
beyond the limits set forth in section 12(d)(1) subject to certain terms
and conditions set forth in Rule 12d1-4 under the 1940 Act, including that
such investment companies enter into an agreement with the Fund.
Provisions
in the Trust’s Governing Documents Regarding Shareholder Derivative
Claims
As
described further in the Trust’s Agreement and Declaration of Trust, no person,
other than a Trustee, who is not a Shareholder of a particular Series (or class)
shall be entitled to bring any derivative action, suit or other proceeding on
behalf of the Trust with respect to such Series (or class). No Shareholder of a
Series or (or class) may maintain a derivative action on behalf of the Trust
with respect to such Series (or class) unless holders of a least ten percent
(10%) of the outstanding Shares of such Series (or class) join in the bringing
of such action; except that this provision will not apply to claims brought
under the U.S. federal securities laws. In addition to the requirements set
forth in Section 3816 of the Delaware Act, a Shareholder may bring a
derivative action on behalf of the Trust with respect to a Series (or class)
only if the following conditions are met: (i) the Shareholder or Shareholders
must make a pre-suit demand upon the Trustees to bring the subject action unless
an effort to cause the Trustees to bring such an action is not likely to
succeed; and a demand on the Trustees shall only be deemed not likely to succeed
and therefore excused if a majority of the Trustees, or a majority of any
committee established to consider the merits of such action, has a personal
financial interest in the transaction at issue, and a Trustee shall not be
deemed interested in a transaction or otherwise disqualified from ruling on the
merits of a Shareholder demand by virtue of the fact that such Trustee receives
remuneration for his service as a Trustee of the Trust or as a trustee or
director of one or more investment companies that are under common management
with or otherwise affiliated with the Trust; and (ii) unless a demand is not
required under clause (i) of this paragraph, the Trustees must be afforded a
reasonable amount of time to consider such Shareholder request and to
investigate the basis of such claim; and the Trustees shall be entitled to
retain counsel or other advisors in considering the merits of the request and
may require an undertaking by the Shareholders making such request to reimburse
the Trust for the expense of any such advisors in the event that the Trustees
determine not to bring such action (except that the provision allowing the
Trustees to require an undertaking by the Shareholders to reimburse the Trust
for the expense of any such advisors will not apply to claims brought under the
U.S. federal securities laws).
ADDITIONAL
TAX INFORMATION
The
following information is meant as a general summary for U.S. shareholders.
Additional tax information appears in the SAI. Shareholders should rely on their
own tax advisers for advice about the particular U.S. federal, state and local
tax consequences to them of investing in a Fund.
The
Funds will distribute substantially all of their income and gains to their
shareholders every year. Dividends paid by the Funds derived from net investment
income, if any, will generally be paid annually and capital gains distributions,
if any, will be made at least annually. Although the Funds will not be taxed on
amounts they distribute, shareholders will generally be taxed on distributions,
regardless of whether distributions are paid by the Funds in cash or are
reinvested in additional Fund shares.
Distributions
generally will be taxable as qualified dividend income, long-term capital gain,
or ordinary income. Qualified dividend income generally includes dividends paid
by U.S. corporations and certain qualifying foreign corporations, provided the
foreign corporation is not a passive foreign investment company. Any
distribution resulting from such qualified dividend income received by a Fund
generally will be designated as qualified dividend income. If a Fund designates
a distribution as qualified dividend income, it generally will be taxable to
individual shareholders at the long-term capital gains tax rate provided certain
holding period and other requirements are met. If a Fund designates a
distribution as a capital gains distribution, it generally will be taxable to
shareholders as long-term capital gain, regardless of how long the shareholders
have held their Fund shares. Short-term capital gains may be realized and any
distribution resulting from such gains will be taxed at ordinary income tax
rates. All taxable dividends paid by a Fund other than those designated as
qualified dividend income or capital gain distributions will be taxable as
ordinary income to shareholders.
Taxable
distributions paid by a Fund to corporate shareholders will be taxed at
corporate U.S. federal income tax rates. Corporate shareholders may be entitled
to a dividends-received deduction (“DRD”) for a portion of the dividends paid
and designated by the Fund as qualifying for the DRD provided certain holding
period requirements are met.
If
a Fund declares a dividend in October, November or December but pays it in
January, it will be taxable to shareholders as if the dividend had been received
in the year in which it was declared. Every year, each shareholder will receive
a statement detailing the tax status of any Fund distributions for that year.
Distributions may be subject to U.S. state and local taxes, as well as U.S.
federal income taxes.
In
general, a shareholder who sells or redeems shares will realize a capital gain
or loss, which will be long-term or short-term depending upon the shareholder’s
holding period for the Fund shares. An exchange of shares may be treated as a
sale and may be subject to tax.
Each
Fund may be required to backup withhold U.S. federal income tax for all taxable
distributions payable to shareholders who fail to provide the applicable Fund
with their correct taxpayer identification numbers or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Backup withholding is not an additional tax. Rather, it is a
way in which the IRS ensures it will collect taxes otherwise due. Any amounts
backup withheld may be credited against a shareholder’s U.S. federal income tax
liability.
Shareholders
should consult with their own tax advisers to ensure that distributions and sale
of Fund shares are treated appropriately on their U.S. federal income tax and
other returns.
At
the time that this prospectus was being prepared, various administrative and
legislative changes to the U.S. federal tax laws are under consideration, but it
is not possible at this time to determine whether any of these changes will take
place or what the changes might entail.
The
foregoing discussion summarizes some of the possible consequences under current
U.S. federal tax law of an investment in the Fund. It is not a substitute for
personal tax advice. Consult your personal tax adviser about the potential tax
consequences of an investment in the shares under all applicable tax laws. See
“Federal Income Taxes” in the SAI for more information.
DISTRIBUTION
The
Funds’ distributor, ALPS Distributors, Inc. (the “Distributor”), is a
broker-dealer registered with the SEC. The Distributor distributes Creation
Units for each Fund on an agency basis and does not maintain a secondary market
in Shares. The Distributor has no role in determining the policies of each Fund
or the securities that are purchased or sold by each Fund. The Distributor’s
principal address is 1290 Broadway, Suite 1000, Denver, Colorado
80203.
For
all Funds, the Board has adopted a Distribution and Service Plan (the “Plan”)
pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Plan,
each Fund is authorized to pay an amount up to 0.25% of its average daily net
assets each year for certain distribution-related activities and shareholder
services.
No
Rule 12b-1 fees are currently paid by the Funds, and there are no plans to
impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because the fees are paid out of a Fund’s assets, over time these fees
will increase the cost of your investment and may cost you more than certain
other types of sales charges.
PREMIUM/DISCOUNT
INFORMATION
Information
regarding how often Shares of the Funds traded on the Exchange at a price above
(i.e.,
at a premium) or below (i.e.,
at a discount) the NAV of the applicable Fund is available on the Funds’ website
at www.ThemesETFs.com.
FINANCIAL
HIGHLIGHTS
The
financial highlights tables are intended to help you understand each Fund’s
financial performance for each Fund’s five most recent fiscal years (or the life
of the Fund, if shorter). Certain information reflects financial results for a
single Share. The total returns in the tables represent the rate that an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by Cohen & Company, Ltd., the Funds’ independent registered public
accounting firm, whose
report,
along with the Funds’ financial statements, is included in the Funds’ Annual
Financial Statements and Additional Information, which is available upon request
and as part of the Funds’ most recent Form
N-CSR,
which can be located on the SEC’s website.
LEVERAGE
SHARES 2X LONG AAL DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.01) |
|
| Net
realized and unrealized gain (loss) on investments |
(1.18) |
|
|
Total
from investment operations
|
(1.19) |
|
|
Net
asset value, end of period
|
$ |
13.81 |
|
|
Total
return(c) |
-7.94 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
898 |
|
|
Ratio
of expenses to average net assets(d) |
0.76 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.01 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.31) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was July 10, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG ADBE DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.02) |
|
| Net
realized and unrealized gain (loss) on investments |
(5.03) |
|
|
Total
from investment operations
|
(5.05) |
|
|
Net
asset value, end of period
|
$ |
9.95 |
|
|
Total
return(c) |
-33.64 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
31,903 |
|
|
Ratio
of expenses to average net assets(d) |
0.76 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.01 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.31) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was March 20, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG AMD DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.03) |
|
| Net
realized and unrealized gain (loss) on investments |
30.06 |
|
|
Total
from investment operations
|
30.03 |
|
|
Net
asset value, end of period
|
$ |
45.03 |
|
|
Total
return(c) |
200.22 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
27,470 |
|
|
Ratio
of expenses to average net assets(d) |
0.76 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.01 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.16) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was January 23, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG ARM DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.03) |
|
| Net
realized and unrealized gain (loss) on investments |
0.09 |
|
|
Total
from investment operations
|
0.06 |
|
|
Net
asset value, end of period
|
$ |
15.06 |
|
|
Total
return(c) |
0.42 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
19,507 |
|
|
Ratio
of expenses to average net assets(d) |
0.76 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.01 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.30) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was January 13, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG ASML DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.04) |
|
| Net
realized and unrealized gain (loss) on investments |
10.61 |
|
|
Total
from investment operations
|
10.57 |
|
|
Net
asset value, end of period
|
$ |
25.57 |
|
|
Total
return(c) |
70.49 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
13,554 |
|
|
Ratio
of expenses to average net assets(d) |
0.76 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.01 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.31) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was January 13, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG AVGO DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
|
| PER
SHARE DATA: |
| |
| Net
asset value, beginning of period |
$ |
15.00 |
| |
| INVESTMENT
OPERATIONS: |
| |
|
Net
investment loss(b) |
(0.04) |
| |
| Net
realized and unrealized gain (loss) on investments |
18.66 |
| |
|
Total
from investment operations
|
18.62 |
| |
|
Net
asset value, end of period
|
$ |
33.62 |
| |
|
Total
return(c) |
124.15 |
% |
|
| SUPPLEMENTAL
DATA AND RATIOS: |
| |
| Net
assets, end of period (in thousands) |
$ |
14,962 |
| |
|
Ratio
of expenses to average net assets(d) |
0.75 |
% |
|
|
Ratio
of interest expense to average net assets(d) |
0.00 |
% |
(e) |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.29) |
% |
|
|
Portfolio
turnover rate(c)(f) |
— |
% |
|
(a) Inception
date of the Fund was May 15, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Amount
represents less than 0.005%.
(f) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG BA DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.01) |
|
| Net
realized and unrealized gain (loss) on investments |
(1.53) |
|
|
Total
from investment operations
|
(1.54) |
|
|
Net
asset value, end of period
|
$ |
13.46 |
|
|
Total
return(c) |
-10.29 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
2,355 |
|
|
Ratio
of expenses to average net assets(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.09) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was June 12, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG BBAI DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.02) |
|
| Net
realized and unrealized gain (loss) on investments |
3.87 |
|
|
Total
from investment operations
|
3.85 |
|
|
Net
asset value, end of period
|
$ |
18.85 |
|
|
Total
return(c) |
25.66 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
23,184 |
|
|
Ratio
of expenses to average net assets(d) |
0.77 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.02 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.54) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was August 20, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG BLSH DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
|
| PER
SHARE DATA: |
| |
| Net
asset value, beginning of period |
$ |
15.00 |
| |
| INVESTMENT
OPERATIONS: |
| |
|
Net
investment income (loss)(b) |
0.00 |
|
(c) |
| Net
realized and unrealized gain (loss) on investments |
(2.07) |
| |
|
Total
from investment operations
|
(2.07) |
| |
|
Net
asset value, end of period
|
$ |
12.93 |
| |
|
Total
return(d) |
-13.78 |
% |
|
| SUPPLEMENTAL
DATA AND RATIOS: |
| |
| Net
assets, end of period (in thousands) |
$ |
259 |
| |
|
Ratio
of expenses to average net assets(e) |
0.75 |
% |
|
|
Ratio
of net investment income (loss) to average net assets(e) |
0.20 |
% |
|
|
Portfolio
turnover rate(d)(f) |
— |
% |
|
(a) Inception
date of the Fund was October 24, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Amount
represents less than $0.005 per share.
(d) Not
annualized for periods less than one year.
(e) Annualized
for periods less than one year.
(f) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG BMNR DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
|
| PER
SHARE DATA: |
| |
| Net
asset value, beginning of period |
$ |
15.00 |
| |
| INVESTMENT
OPERATIONS: |
| |
|
Net
investment income (loss)(b) |
(0.00 |
) |
(c) |
| Net
realized and unrealized gain (loss) on investments |
(2.49) |
| |
|
Total
from investment operations
|
(2.49) |
| |
|
Net
asset value, end of period
|
$ |
12.51 |
| |
|
Total
return(d) |
-16.59 |
% |
|
| SUPPLEMENTAL
DATA AND RATIOS: |
| |
| Net
assets, end of period (in thousands) |
$ |
375 |
| |
|
Ratio
of expenses to average net assets(e) |
0.75 |
% |
|
|
Ratio
of net investment income (loss) to average net assets(e) |
(0.17) |
% |
|
|
Portfolio
turnover rate(d)(f) |
— |
% |
|
(a) Inception
date of the Fund was October 24, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Amount
represents less than $0.005 per share.
(d) Not
annualized for periods less than one year.
(e) Annualized
for periods less than one year.
(f) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG BULL DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.01) |
|
| Net
realized and unrealized gain (loss) on investments |
(8.12) |
|
|
Total
from investment operations
|
(8.13) |
|
|
Net
asset value, end of period
|
$ |
6.87 |
|
|
Total
return(c) |
-54.22 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
17,340 |
|
|
Ratio
of expenses to average net assets(d) |
0.86 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.11 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.46) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was August 8, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG COIN DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.09) |
|
| Net
realized and unrealized gain (loss) on investments |
21.75 |
|
|
Total
from investment operations
|
21.66 |
|
|
Net
asset value, end of period
|
$ |
36.66 |
|
|
Total
return(c) |
144.41 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
8,066 |
|
|
Ratio
of expenses to average net assets(d) |
0.77 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.02 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.38) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was March 13, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG COST DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
|
| PER
SHARE DATA: |
| |
| Net
asset value, beginning of period |
$ |
15.00 |
| |
| INVESTMENT
OPERATIONS: |
| |
|
Net
investment income (loss)(b) |
(0.00 |
) |
(c) |
| Net
realized and unrealized gain (loss) on investments |
(1.80) |
| |
|
Total
from investment operations
|
(1.80) |
| |
|
Net
asset value, end of period
|
$ |
13.20 |
| |
|
Total
return(d) |
-12.00 |
% |
|
| SUPPLEMENTAL
DATA AND RATIOS: |
| |
| Net
assets, end of period (in thousands) |
$ |
5,874 |
| |
|
Ratio
of expenses to average net assets(e) |
0.75 |
% |
|
|
Ratio
of interest expense to average net assets(e) |
0.00 |
% |
(f) |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
|
Ratio
of net investment income (loss) to average net assets(e) |
(0.15) |
% |
|
|
Portfolio
turnover rate(d)(g) |
— |
% |
|
(a) Inception
date of the Fund was September 17, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Amount
represents less than $0.005 per share.
(d) Not
annualized for periods less than one year.
(e) Annualized
for periods less than one year.
(f) Amount
represents less than 0.005%.
(g) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG CRCL DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.01) |
|
| Net
realized and unrealized gain (loss) on investments |
(7.14) |
|
|
Total
from investment operations
|
(7.15) |
|
|
Net
asset value, end of period
|
$ |
7.85 |
|
|
Total
return(c) |
-47.67 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
66,244 |
|
|
Ratio
of expenses to average net assets(d) |
0.77 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.02 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.56) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was August 8, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG CRM DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.02) |
|
| Net
realized and unrealized gain (loss) on investments |
(1.28) |
|
|
Total
from investment operations
|
(1.30) |
|
|
Net
asset value, end of period
|
$ |
13.70 |
|
|
Total
return(c) |
-8.69 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
25,543 |
|
|
Ratio
of expenses to average net assets(d) |
0.76 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.01 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.23) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was April 3, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG CRWV DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.01) |
|
| Net
realized and unrealized gain (loss) on investments |
(2.71) |
|
|
Total
from investment operations
|
(2.72) |
|
|
Net
asset value, end of period
|
$ |
12.28 |
|
|
Total
return(c) |
-18.16 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
88,325 |
|
|
Ratio
of expenses to average net assets(d) |
0.76 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.01 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.53) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was August 8, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG FIG DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
|
| PER
SHARE DATA: |
| |
| Net
asset value, beginning of period |
$ |
15.00 |
| |
| INVESTMENT
OPERATIONS: |
| |
|
Net
investment income (loss)(b) |
(0.00 |
) |
(c) |
| Net
realized and unrealized gain (loss) on investments |
(6.27) |
| |
|
Total
from investment operations
|
(6.27) |
| |
|
Net
asset value, end of period
|
$ |
8.73 |
| |
|
Total
return(d) |
-41.83 |
% |
|
| SUPPLEMENTAL
DATA AND RATIOS: |
| |
| Net
assets, end of period (in thousands) |
$ |
6,020 |
| |
|
Ratio
of expenses to average net assets(e) |
0.75 |
% |
|
|
Ratio
of net investment income (loss) to average net assets(e) |
(0.60) |
% |
|
|
Portfolio
turnover rate(d)(f) |
— |
% |
|
(a) Inception
date of the Fund was October 13, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Amount
represents less than $0.005 per share.
(d) Not
annualized for periods less than one year.
(e) Annualized
for periods less than one year.
(f) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG FUTU DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.01) |
|
| Net
realized and unrealized gain (loss) on investments |
7.30 |
|
|
Total
from investment operations
|
7.29 |
|
|
Net
asset value, end of period
|
$ |
22.29 |
|
|
Total
return(c) |
48.60 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
2,563 |
|
|
Ratio
of expenses to average net assets(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.75) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was October 13, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind
transactions.
LEVERAGE
SHARES 2X LONG GLXY DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.03) |
|
| Net
realized and unrealized gain (loss) on investments |
11.02 |
|
|
Total
from investment operations
|
10.99 |
|
|
Net
asset value, end of period
|
$ |
25.99 |
|
|
Total
return(c) |
73.27 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
4,548 |
|
|
Ratio
of expenses to average net assets(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.56) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was August 20, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG HOOD DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.14) |
|
| Net
realized and unrealized gain (loss) on investments |
100.69 |
|
|
Total
from investment operations
|
100.55 |
|
|
Net
asset value, end of period
|
$ |
115.55 |
|
|
Total
return(c) |
670.33 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
101,683 |
|
|
Ratio
of expenses to average net assets(d) |
0.83 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.08 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.33) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was March 20, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG MP DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
|
| PER
SHARE DATA: |
| |
| Net
asset value, beginning of period |
$ |
15.00 |
| |
| INVESTMENT
OPERATIONS: |
| |
|
Net
investment income (loss)(b) |
(0.00 |
) |
(c) |
| Net
realized and unrealized gain (loss) on investments |
(3.22) |
| |
|
Total
from investment operations
|
(3.22) |
| |
|
Net
asset value, end of period
|
$ |
11.78 |
| |
|
Total
return(d) |
-21.46 |
% |
|
| SUPPLEMENTAL
DATA AND RATIOS: |
| |
| Net
assets, end of period (in thousands) |
$ |
530 |
| |
|
Ratio
of expenses to average net assets(e) |
0.75 |
% |
|
|
Ratio
of net investment income (loss) to average net assets(e) |
(0.19) |
% |
|
|
Portfolio
turnover rate(d)(f) |
— |
% |
|
(a) Inception
date of the Fund was October 24, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Amount
represents less than $0.005 per share.
(d) Not
annualized for periods less than one year.
(e) Annualized
for periods less than one year.
(f) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG NBIS DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
|
| PER
SHARE DATA: |
| |
| Net
asset value, beginning of period |
$ |
15.00 |
| |
| INVESTMENT
OPERATIONS: |
| |
|
Net
investment income (loss)(b) |
(0.00 |
) |
(c) |
| Net
realized and unrealized gain (loss) on investments |
3.45 |
| |
|
Total
from investment operations
|
3.45 |
| |
|
Net
asset value, end of period
|
$ |
18.45 |
| |
|
Total
return(d) |
23.03 |
% |
|
| SUPPLEMENTAL
DATA AND RATIOS: |
| |
| Net
assets, end of period (in thousands) |
$ |
1,292 |
| |
|
Ratio
of expenses to average net assets(e) |
0.75 |
% |
|
|
Ratio
of net investment income (loss) to average net assets(e) |
(0.36) |
% |
|
|
Portfolio
turnover rate(d)(f) |
— |
% |
|
(a) Inception
date of the Fund was October 24, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Amount
represents less than $0.005 per share.
(d) Not
annualized for periods less than one year.
(e) Annualized
for periods less than one year.
(f) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG NVDA DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.04) |
|
| Net
realized and unrealized gain (loss) on investments |
8.14 |
|
|
Total
from investment operations
|
8.10 |
|
|
Net
asset value, end of period
|
$ |
23.10 |
|
|
Total
return(c) |
54.01 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
22,871 |
|
|
Ratio
of expenses to average net assets(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.32) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was December 12, 2024.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG PANW DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.03) |
|
| Net
realized and unrealized gain (loss) on investments |
3.28 |
|
|
Total
from investment operations
|
3.25 |
|
|
Net
asset value, end of period
|
$ |
18.25 |
|
|
Total
return(c) |
21.67 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
4,289 |
|
|
Ratio
of expenses to average net assets(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.29) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was March 20, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG PLTR DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.04) |
|
| Net
realized and unrealized gain (loss) on investments |
27.08 |
|
|
Total
from investment operations
|
27.04 |
|
|
Net
asset value, end of period
|
$ |
42.04 |
|
|
Total
return(c) |
180.23 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
30,896 |
|
|
Ratio
of expenses to average net assets(d) |
0.76 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.01 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.29) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was April 24, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind
transactions.
LEVERAGE
SHARES 2X LONG PYPL DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
|
| PER
SHARE DATA: |
| |
| Net
asset value, beginning of period |
$ |
15.00 |
| |
| INVESTMENT
OPERATIONS: |
| |
|
Net
investment loss(b) |
(0.02) |
| |
| Net
realized and unrealized gain (loss) on investments |
1.14 |
| |
|
Total
from investment operations
|
1.12 |
| |
|
Net
asset value, end of period
|
$ |
16.12 |
| |
|
Total
return(c) |
7.46 |
% |
|
| SUPPLEMENTAL
DATA AND RATIOS: |
| |
| Net
assets, end of period (in thousands) |
$ |
39,330 |
| |
|
Ratio
of expenses to average net assets(d) |
0.75 |
% |
|
|
Ratio
of interest expense to average net assets(d) |
0.00 |
% |
(e) |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.24) |
% |
|
|
Portfolio
turnover rate(c)(f) |
— |
% |
|
(a) Inception
date of the Fund was April 3, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Amount
represents less than 0.005%.
(f) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG RTX DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.02) |
|
| Net
realized and unrealized gain (loss) on investments |
8.24 |
|
|
Total
from investment operations
|
8.22 |
|
|
Net
asset value, end of period
|
$ |
23.22 |
|
|
Total
return(c) |
54.81 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
1,858 |
|
|
Ratio
of expenses to average net assets(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.27) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was June 5, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG TSLA DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.01) |
|
| Net
realized and unrealized gain (loss) on investments |
(4.20) |
|
|
Total
from investment operations
|
(4.21) |
|
|
Net
asset value, end of period
|
$ |
10.79 |
|
|
Total
return(c) |
-28.09 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
50,213 |
|
|
Ratio
of expenses to average net assets(d) |
0.78 |
% |
|
Ratio
of interest expense to average net assets(d) |
0.03 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.23) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was December 12, 2024.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG TSM DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.04) |
|
| Net
realized and unrealized gain (loss) on investments |
11.67 |
|
|
Total
from investment operations
|
11.63 |
|
|
Net
asset value, end of period
|
$ |
26.63 |
|
|
Total
return(c) |
77.54 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
13,449 |
|
|
Ratio
of expenses to average net assets(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.29) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was January 13, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG UNH DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment loss(b) |
(0.01) |
|
| Net
realized and unrealized gain (loss) on investments |
5.38 |
|
|
Total
from investment operations
|
5.37 |
|
|
Net
asset value, end of period
|
$ |
20.37 |
|
|
Total
return(c) |
35.82 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
233,166 |
|
|
Ratio
of expenses to average net assets(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
(0.11) |
% |
|
Portfolio
turnover rate(c)(e) |
— |
% |
(a) Inception
date of the Fund was July 21, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Portfolio
turnover rate excludes in-kind transactions.
LEVERAGE
SHARES 2X LONG XYZ DAILY ETF
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
| |
|
|
Period
Ended October 31, 2025(a) |
| PER
SHARE DATA: |
|
| Net
asset value, beginning of period |
$ |
15.00 |
|
| INVESTMENT
OPERATIONS: |
|
|
Net
investment income(b) |
0.01 |
|
| Net
realized and unrealized gain (loss) on investments |
7.62 |
|
|
Total
from investment operations
|
7.63 |
|
|
Net
asset value, end of period
|
$ |
22.63 |
|
|
Total
return(c) |
50.83 |
% |
| SUPPLEMENTAL
DATA AND RATIOS: |
|
| Net
assets, end of period (in thousands) |
$ |
3,733 |
|
|
Ratio
of expenses to average net assets(d) |
0.75 |
% |
|
Ratio
of interest expense to average net assets(d)(e) |
0.00 |
% |
|
Ratio
of expenses to average net assets excluding interest expense(d) |
0.75 |
% |
|
Ratio
of net investment income (loss) to average net assets(d) |
0.07 |
% |
|
Portfolio
turnover rate(c)(f) |
— |
% |
(a) Inception
date of the Fund was April 3, 2025.
(b) Net
investment income per share has been calculated based on average shares
outstanding during the period.
(c) Not
annualized for periods less than one year.
(d) Annualized
for periods less than one year.
(e) Amount
represents less than 0.005%
(f) Portfolio
turnover rate excludes in-kind transactions.
The
Funds’ current SAI, dated February 27, 2026, as supplemented from time to
time, provides additional detailed information about each Fund. The SAI is on
file with the SEC and is herein incorporated by reference into this
Prospectus.
Additional
information about each Fund’s investments is available in the Funds’ annual and
semi-annual reports to shareholders (when available). In the annual report you
will find a discussion of the market conditions and investment strategies that
significantly affected each Fund’s performance.
To
make shareholder inquiries, for more detailed information on each Fund, or to
request the SAI or annual or semi- annual shareholder reports (once available)
free of charge, please:
|
|
|
|
|
| |
| Call: |
1-866-5Themes
(1-866-584-3637) |
|
|
Monday
through Friday
8:00
a.m. – 5:00 p.m. (Central time) |
|
| |
| Visit: |
www.ThemesETFs.com |
Shareholder
reports and other information about the Funds are also available:
|
|
|
|
|
|
|
|
| |
|
| ● |
Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov; or |
No
person is authorized to give any information or to make any representations
about each Fund and its Shares not contained in this Prospectus and you should
not rely on any other information. Read and keep this Prospectus for future
reference.
The
Trust’s SEC Investment Company Act file number is 811-23872.
