Global
X Rare Earth & Critical Materials ETF
(formerly
known as the Global X Disruptive Materials ETF)
NASDAQ:
EART
Prospectus
[
], 2025
The
information in this Prospectus is not complete and may be changed. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities described herein may not be
sold until the registration statement becomes effective. This Prospectus is not
an offer to sell or the solicitation of an offer to buy securities and is not
soliciting an offer to buy these securities in any state in which the offer,
solicitation or sale would be unlawful.
The
Securities and Exchange Commission ("SEC") has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
Shares
in the Fund (defined below) are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other agency of the U.S. Government, nor are shares
deposits or obligations of any bank. Such shares in the Fund involve investment
risks, including the loss of principal.
TABLE
OF CONTENTS
Global
X Rare Earth & Critical Materials ETF
(formerly
known as the Global X Disruptive Materials ETF)
Ticker:
EART Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The
Global X Rare Earth & Critical Materials ETF (formerly known as the Global X
Disruptive Materials ETF) (the "Fund") seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the [Solactive Rare Earth & Critical Materials Index] (the
"Underlying Index").
FEES
AND EXPENSES
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares (“Shares”) of the Fund. You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
|
Management
Fees: |
[0.59%] |
|
Distribution
and Service (12b-1) Fees: |
None |
|
Other
Expenses: |
[0.00%] |
|
Total
Annual Fund Operating Expenses: |
[0.59%] |
Example:
The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other funds. This example does not take
into account customary brokerage commissions that you pay when purchasing or
selling Shares of the Fund in the secondary market. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and then hold or sell
all of your Shares at the end of those periods. The example also assumes that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
| [$60] |
[$189] |
[$329] |
[$738] |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, affect the Fund's performance. During the
most recent fiscal year, the Fund's portfolio turnover rate was [22.42%] of the
average value of its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the [Solactive Rare Earth & Critical
Materials Index] (the "Underlying Index") and in American Depositary Receipts
("ADRs") and Global Depositary Receipts ("GDRs") based on the securities in the
Underlying Index. The Fund's 80% investment policy is non-fundamental and
requires 60 days prior written notice to shareholders before it can be
changed.
The
Underlying Index is designed to provide exposure to companies that produce rare
earth components, metals and other raw or composite materials that have been
identified as being essential to critical technologies such as consumer
electronics, electric vehicles, aircraft engines, energy storage, medical
equipment, oil refining, automotive and chemical products, robotics, and in
military applications such as missiles and radar systems. Each material has been
determined by Solactive AG, the provider of the Underlying Index (the “Index
Provider”) to be a rare earth element and/or a material instrumental to the
development and production of one or more critical technologies. Critical
technologies refer to those technologies that are essential to the development
and production of long-term, structural changes to existing products, services,
industries, or sectors. Specifically, the Underlying Index will include
securities issued by “Rare Earth & Critical Materials Companies” as defined
by the Index Provider. Rare Earth & Critical Materials Companies are those
companies that derive at least 50% of their revenues in aggregate from the
exploration, mining, production and/or enhancement of one or more of the
following ten materials categories: Carbon Fiber,
Cobalt,
Copper, Graphene & Graphite, Lithium, Manganese, Nickel, Platinum &
Palladium, Rare Earth Elements, and Zinc (collectively, “Rare Earth &
Critical Materials Categories”). Companies engaged in exploration and mining
include those companies involved in locating and extracting rare earth elements
and critical materials. Companies engaged in production include those companies
involved in manufacturing, processing, and trading rare earth elements and
critical materials for primary usage. Companies engaged in enhancement include
those companies involved in refining, developing, and/or smelting materials to
extract and purify rare earth elements and critical materials. As of December
31, 2025, the Underlying Index had [ ] constituents.
For
the Lithium category, companies that derive greater than 25% but less than 50%
of revenue from the production and/or processing of lithium are also eligible
for inclusion (collectively, “Diversified Lithium Companies”). In addition,
companies with primary business operations in the exploration, mining,
production and/or enhancement of one or more of the Rare Earth & Critical
Materials Categories, but which are not currently generating revenue, are also
eligible for inclusion (collectively, “Pre-Revenue Rare Earth & Critical
Materials Companies”). To determine whether a company has primary business
operations in the exploration, mining, production and/or enhancement of one or
more of the Rare Earth & Critical Materials Categories, the Index Provider
reviews the public financial disclosures and filings of the company, and
identifies the products and business segments disclosed therein. The Index
Provider then reviews the management discussion and analysis, as well as the
level of investment the company allocates to those products and segments, to
determine whether those business operations are the primary operations of the
company.
In
constructing the Underlying Index, the Index Provider applies a proprietary
natural language processing algorithm to the eligible universe, which seeks to
identify and rank companies involved in each of the Rare Earth & Critical
Materials Categories based on filings, disclosures, and other public information
(e.g., regulatory filings, earnings transcripts, etc.). The highest-ranking
companies identified by the natural language processing algorithm in each Rare
Earth & Critical Materials Category, as of the selection date, are further
reviewed by the Index Provider to confirm they derive at least 50% of their
revenues from one of the Rare Earth & Critical Materials Categories as
described above, derive between 25% and 50% of their revenues from the Lithium
category in the case of Diversified Lithium Companies, or have primary business
operations in the exploration, mining, production and/or enhancement of one or
more of the Rare Earth & Critical Materials Categories but do not currently
generate revenues in the case of Pre-Revenue Rare Earth & Critical Materials
Companies. The five highest-ranking Rare Earth & Critical Materials
Companies and Pre-Revenue Rare Earth & Critical Materials Companies
according to free float market capitalization from each Rare Earth &
Critical Materials Category are included in the Underlying Index. For the
Lithium category, the five highest-ranking Rare Earth & Critical Materials
Companies, Pre-Revenue Rare Earth & Critical Materials Companies and
Diversified Lithium Companies according to free float market capitalization are
included. If fewer than five companies are identified that satisfy the above
criteria within a Rare Earth & Critical Materials Category, all eligible
companies are selected, and the category consists of fewer than five companies.
To
be a part of the eligible universe of the Underlying Index, companies must be
classified in one of the following Economies according to FactSet (a leading
financial data provider that maintains a comprehensive structured taxonomy
designed to offer precise classification of global companies and their
individual business units): Basic Materials, Industrials, or Technology. In
addition, certain minimum market capitalization and liquidity criteria, as
defined by the Index Provider, must be met. As of December 31, 2025, companies
must have a minimum market capitalization of [$100 million] and a minimum
average daily turnover for the last 6 months greater than or equal to [$1
million] in order to be eligible for inclusion in the Underlying Index. As of
December 31, 2025, companies listed in the following countries were eligible for
inclusion in the Underlying Index: [Australia, Austria, Belgium, Brazil, Canada,
Chile, China, Colombia, Czechia, Denmark, Egypt, Finland, France, Germany,
Greece, Hong Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan, Kuwait,
Malaysia, Mexico, Netherlands, New Zealand, Norway, Philippines, Poland,
Portugal, Qatar, Saudi Arabia, Singapore, South Africa, South Korea, Spain,
Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, United States,
and the United Arab Emirates]. As of December 31, 2025, the Underlying Index had
significant exposure to Chinese issuers. The Fund may invest in China A-Shares,
which are issued by companies incorporated in mainland China and traded on
Chinese exchanges. The Fund may invest in securities of issuers located in
emerging markets.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
During each rebalance, the maximum weight of a company is capped at 4%, and all
constituents are subject to a minimum weight of 0.3%. In addition, Diversified
Lithium Companies and Pre-Revenue Rare Earth & Critical Materials Companies
are subject to an aggregate weight cap of 10% at each semi-annual rebalance.
Generally speaking, modified capitalization weighting will limit the amount of
concentration in the largest market capitalization companies and increase
company-level diversification. The Underlying Index may include large-, mid-,
small-, or micro-capitalization companies, and components primarily include
materials companies. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund (the "Adviser"). In addition,
any
determinations
related to the constituents of the Underlying Index are made independent of the
Fund's portfolio managers. The Index Provider determines the relative weightings
of the securities in the Underlying Index and publishes information regarding
the market value of the Underlying Index.
The
Adviser uses an indexing approach to try to achieve the Fund's investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The
Fund concentrates its investments (i.e., holds 25% or more of its total assets)
in a particular industry or group of industries to approximately the same extent
that the Underlying Index is concentrated. As of December 31, 2025, the
Underlying Index was concentrated in the [ ] and had significant exposure to the
[ ]. The Fund is classified as “non-diversified,” which means it may invest a
larger percentage of its assets in a smaller number of issuers than a
diversified fund.
SUMMARY
OF PRINCIPAL RISKS
As
with any investment, you could lose all or part of your investment in the Fund,
and the Fund's performance could trail that of other investments. There is no
guarantee that the Fund will achieve its investment objective. An investment in
the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the principal risks
noted below, any of which may adversely affect the Fund's net asset value
("NAV"), trading price, yield, total return and ability to meet its investment
objective, as well as other risks that are described in greater detail in the
Additional
Information About the Fund
section of the Prospectus and in the Statement of Additional Information
("SAI").
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Depositary
Receipts Risk:
The Fund may invest in depositary receipts, such as ADRs and GDRs. Depositary
receipts may be subject to certain of the risks associated with direct
investments in the securities of foreign companies. For additional details on
these risks, please see Foreign Securities Risk. Moreover, depositary receipts
may not track the price of the underlying foreign securities on which they are
based. A holder of depositary receipts may also be subject to fees and the
credit risk of the financial institution acting as depositary.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Investing in Rare Earth & Critical Materials
Companies:
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of Rare Earth & Critical Materials
Companies. Rare earth and critical materials are considered instrumental to the
development and production of one or more critical technologies. Compared to
base metals, they have more specialized uses. Rare earth elements are a
collection of chemical elements that are crucial to many of the world’s most
advanced technologies. Consequently, the demand for rare earth and critical
materials has strained supply, which has the potential to result in a shortage
of such materials which could adversely affect the companies in the Fund’s
portfolio. A reduction of demand for the technologies that utilize rare earth
and critical materials, or of the materials themselves, would have an adverse
impact on the Fund. Companies involved in the various activities that are
related to the mining, production, recycling, mineral sands, processing and/or
refining of rare earth and critical materials may include medium-, small-, and
micro-capitalization companies with volatile share prices, are highly dependent
on the price of rare earth and critical materials, which may fluctuate
substantially over short periods of time. The value of such companies may be
significantly affected by events relating to international, national and local
political and economic developments, trade policy, energy conservation efforts,
changes to critical materials, the success of exploration projects, changes in
exchange rates, commodity prices, tax and other government regulations,
depletion of resources, labor relations, and mandated expenditures for safety
and pollution control devices. The mining, production, recycling, processing
and/or refining of rare earth and critical materials can be capital intensive
and, if companies involved in such activities are not managed well, the share
prices of such companies could decline even as prices for the underlying rare
earth and critical materials are rising. In addition, companies involved in the
various activities that are related to the mining, production, recycling,
processing and/or refining of rare earth and critical materials may be at risk
for environmental damage claims.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk:
Large-capitalization companies may trail the returns of the overall stock
market. Large-capitalization stocks tend to go through cycles of doing better -
or worse - than the stock market in general. These periods have, in the past,
lasted for as long as several years.
Mid-Capitalization
Companies Risk:
Mid-capitalization companies may have greater price volatility, lower trading
volume and less liquidity than large-capitalization companies. In addition,
mid-capitalization companies may have smaller revenues, narrower product lines,
less management depth and experience, smaller shares of their product or service
markets, fewer financial resources and less competitive strength than
large-capitalization companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Commodity
Exposure Risk:
The Fund will hold securities that are dependent on a single commodity, or are
concentrated on a single commodity sector, that typically exhibit even higher
volatility attributable to commodity prices. Any negative changes in commodity
markets could have a great impact on the Fund. Commodity prices may be
influenced or characterized by unpredictable factors, including, where
applicable, high volatility, changes in supply and demand relationships,
weather, agriculture, trade, changes in interest rates and monetary and other
governmental policies, action and inaction.
Commodity
Price Relationship Risk:
The Underlying Index measures the performance of companies engaged in a
particular industry and not the performance of commodities prices themselves.
Companies may under- or over-perform commodities prices over the short-term or
the long-term.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund. Additionally, the Chinese government
heavily regulates the domestic exchange of foreign currencies and yuan exchange
rates in China, which may adversely affect the operations and financial results
of the Fund’s investments in China.
Shares
purchased through the Stock Connect Programs will be purchased using offshore
yuan, the value of which may differ from and experience greater volatility than
the value of onshore yuan. Offshore yuan cannot be freely remitted into or
transferred out of China, and there is no assurance that there will always be
sufficient amounts of offshore yuan available for the Fund to invest in all
components of the Underlying Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Cybersecurity
Risk:
With the increased use of technologies such as the Internet to conduct business,
the Fund, like all companies, may be susceptible to operational, information
security and related risks. Cybersecurity incidents involving the Fund and its
service providers (including, without limitation, the Adviser, fund accountant,
custodian, transfer agent and financial intermediaries) have the ability to
cause disruptions and impact business operations, potentially resulting in
financial losses, impediments to trading, the inability of Fund shareholders to
transact business, violations of applicable privacy and other laws, regulatory
fines, penalties, reputational damage, reimbursement or other compensation
costs, and/or additional compliance costs. Similar adverse consequences could
result from cybersecurity incidents affecting issuers of securities in which the
Fund invests, counterparties with which the Fund engages, governmental and other
regulatory authorities, exchanges and other financial market operators, banks,
brokers, dealers, insurance companies, other financial institutions and other
parties. The Fund and its shareholders could be negatively impacted as a
result.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. 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 or sectors.
Risks
Related to Investing in the Materials Sector:
Companies in the materials sector are affected by commodity price volatility,
exchange rates, import controls and worldwide competition. At times, worldwide
production of industrial materials has exceeded demand, leading to poor
investment returns or outright losses. Issuers in the materials sector are at
risk of depletion of resources, technological progress, labor relations,
governmental regulations and environmental damage and product liability
claims.
Risks
Related to Investing in the Metals and Mining Industry:
Securities in the Fund's portfolio may be significantly subject to the effects
of competitive pressures in the mining industry and commodity prices generally.
Commodity prices Securities in the Fund's portfolio may be significantly subject
to the effects of competitive pressures in the gold mining industry and the
price of gold bullion. The price of gold may be affected by changes in inflation
rates, interest rates, monetary policy, economic conditions, and political
stability. Commodity prices may fluctuate substantially over short periods of
time; therefore, the Fund’s Share price may be more volatile than other types of
investments. In addition, metals and mining companies may also be significantly
affected by import controls, worldwide competition, liability for environmental
damage, depletion of resources, and mandated expenditures for safety and
pollution control devices. Metals and mining companies may have significant
operations in areas at risk for social and political unrest, security concerns
and environmental damage. These companies may also be at risk for increased
government regulation and intervention. Such risks may adversely affect the
issuers to which the Fund has exposure
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in American Depositary Receipts (“ADRs”) and Global Depositary
Receipts (“GDRs”)) are subject to the risks associated with investing in those
foreign markets, such as heightened risks of inflation or nationalization. The
prices of foreign securities and the prices of U.S. securities have, at times,
moved in opposite directions. In addition, securities of foreign issuers may
lose value due to political, economic and geographic events affecting a foreign
issuer or market. During periods of social, political or economic instability in
a country or region, the value of a foreign security traded on U.S. exchanges
could be affected by, among other factors, increasing price volatility,
illiquidity, or the closure of the primary market on which the security (or the
security underlying the ADR or GDR) is traded. The Fund may lose money due to
political, economic and geographic events affecting a foreign issuer or market.
Where all or a portion of the Fund's underlying securities trade in a market
that is closed when the market in which the Fund's Shares are listed and trading
is open, there may be differences between the last quote from the security’s
closed foreign
market
and the value of the security during the Fund’s domestic trading day. This, in
turn, could lead to differences between the market price of the Fund’s Shares
and the underlying value of those shares.
Geographic
Risk:
A natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Argentina:
Argentina has experienced high interest rates, economic volatility, severe
inflation, drastic currency devaluations, political instability and high
unemployment rates. The economy is heavily dependent on exports and commodities,
making the economy susceptible to fluctuations in commodity markets and
sensitive to its relationships with key trading partners. Argentina’s default on
its debt in 2001 and 2020 continues to impact the confidence of investors in
Argentina, which might adversely impact returns in the Fund. Further defaults
and related actions by Argentina may continue to impact the confidence of
investors in Argentina, which could limit the government’s ability to borrow in
the future. Argentina has privatized, certain industries, which may lose money
or be re-nationalized.
Risk
of Investing in Chile:
Investments in Chilean issuers involve risks that are specific to Chile,
including legal, regulatory, political, currency, environmental and economic
risks. Among other things, the Chilean economy is heavily dependent on the
export of certain commodities.
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, COVID-19 (Coronavirus), and avian flu. Such health crises could
exacerbate political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory or legal actions, such as purchasing
restrictions, blacklisting, sanctions, tariffs, forced divestment or spin-offs,
or other trade or business restrictions or controls, being contemplated or
imposed in the U.S. or in China that could negatively impact the performance of
companies held by the Fund and/or impact the Fund’s ability to invest in certain
companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or
diseases,
may cause uncertainty in Chinese markets and may adversely affect the Chinese
economy and the Fund’s investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company. Therefore, an investor in the listed shell
company, such as the Fund, will have exposure to the Chinese-based operating
company only through contractual arrangements and has no ownership in the
Chinese-based operating company. Furthermore, because the shell company only has
specific rights provided for in these service agreements with the VIE, its
abilities to control the activities at the Chinese-based operating company are
limited and the operating company may engage in activities that negatively
impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will be
enforced or that U.S. regulatory authorities will continue to feel satisfied
with their access.
Risk
of Investing in Emerging Markets:
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market country. There may
be significant obstacles to obtaining information necessary for investigations
into or litigation against emerging market companies and shareholders may have
limited legal rights and remedies. Emerging markets may be more likely to
experience inflation, political turmoil and rapid changes in economic conditions
than more developed markets. Emerging markets may also face other significant
internal or external risks, including the risk of war, terrorism, or other
social or political conflicts. Emerging market economies’ exposure to specific
industries, such as tourism, and lack of efficient or sufficient health care
systems, could make these economies especially vulnerable to global crises.
Certain emerging market countries may have privatized, or have begun the process
of privatizing, certain entities and industries. Privatized entities may lose
money or be re-nationalized.
Risk
of Investing in Mexico:
Investments in Mexican issuers involve risks that are specific to Mexico,
including legal, regulatory, political, currency, security and economic risks.
In the past, Mexico has experienced high interest rates, economic volatility and
high unemployment rates. Political developments in the U.S. have potential
implications for the trade arrangements between the U.S. and Mexico, which could
negatively affect the value of securities held by the Fund.
Risk
of Investing in South Africa:
Investing in South African securities involves significant risks, including
legal, regulatory and economic risks specific to South Africa. Among other
considerations, South Africa’s economy is heavily dependent on its agriculture
and mining sectors, and, thus, susceptible to fluctuations in the commodity
markets.
Indexing
Strategy Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
International
Closed Market Trading Risk:
To the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds ("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Beginning in early 2025, the U.S. government’s threats to impose
tariffs on goods from Mexico and Canada has heightened tension among trading
partners. Further, in response to the U.S. government’s announcement of tariffs
on goods from China, the Chinese government has countered with tariffs on U.S.
goods, marking the beginning of a potential trade war between the countries.
Tariffs on imported goods may increase the cost of certain products and
household items, which may in turn dampen consumer spending and result in
decreased confidence in the markets. The possibility of additional tariffs being
imposed or the outbreak of a trade war may further adversely impact U.S. and
international markets. Additionally, political uncertainty regarding U.S.
policy, including the U.S. government’s approach to trade, may also impact the
markets. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, raising of interest rates, or other events could have a significant
impact on the Fund and its investments and trading of its Shares. This increases
the risk that monetary policy may provide less support should economic growth
slow. Market risk factors may result in increased volatility and/or decreased
liquidity in the securities markets. The Fund’s NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk 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. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. 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 for those risks that they are intended to
address.
Reliance
on Trading Partners Risk:
The Fund invests in economies which are heavily dependent upon trading with key
partners. Any reduction in this trading, including as a result of adverse
economic conditions in a trading partner’s economy, may cause an adverse impact
on the economies and on the companies in which the Fund invests. Because of this
interdependence and the economies in which the Fund invests, the Fund is
specifically exposed to Asian Economic Risk. Economies in emerging market
countries generally are dependent heavily upon commodity prices and
international trade and, accordingly, may be affected adversely by the economies
of their trading partners, trade barriers, exchange or capital controls, managed
adjustments in relative currency values, and may suffer from extreme and
volatile debt burdens or inflation rates.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk:
Redemptions by large shareholders could have a significant negative impact on
the Fund. If a large shareholder were to redeem all, or a large portion, of its
Shares, there is no guarantee that the Fund will be able to maintain sufficient
assets to continue operations in which case the Board of Trustees may determine
to liquidate the Fund. In addition, transactions by large shareholders may
account for a large percentage of the trading volume on a national securities
exchange and may, therefore, have a material upward or downward effect on the
market price of the Shares.
Listing
Standards Risk:
The Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s Shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Tax
Status 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 gains resulting 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.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on days
when shareholders will not be able to purchase or sell the Fund's
Shares.
[PERFORMANCE
INFORMATION
The
bar chart and table that follow show how the Fund performed on a calendar year
basis and provide an indication of the risks of investing in the Fund by showing
changes in the Fund's performance from year to year and by showing how the
Fund's average annual returns for the indicated periods compare with the Fund's
broad-based benchmark index, which reflects a broad measure of market
performance, and the Underlying Index, which the Fund seeks to track. The Fund's
past performance (before and after
taxes)
is not necessarily indicative of how the Fund will perform in the future.
Updated performance information is available online at www.globalxetfs.com.
[Annual
Total Returns (Years Ended December 31)]
|
|
|
|
|
|
|
|
|
| Best
Quarter: |
[9/30/2024] |
[8.94%] |
| Worst
Quarter: |
[9/30/2023] |
[(11.34)%] |
Average
Annual Total Returns (for the Periods Ended [December 31, 2025])
|
|
|
|
|
|
|
|
|
| |
One
Year Ended December 31, 2025 |
Since
Inception (01/04/2022) |
| Global
X Rare Earth & Critical Materials ETF (formerly known as the Global X
Disruptive Materials ETF): |
|
|
|
·Return
before taxes |
[(7.38)%] |
[(14.70)%] |
|
·Return
after taxes on distributions1 |
[(7.51)%] |
[(15.00)%] |
|
·Return
after taxes on distributions and sale of Fund Shares1 |
[(4.11)%] |
[(10.70)%] |
|
MSCI
ACWI Index (net) (USD)
(Index
returns reflects invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other taxes) |
[17.49%] |
[7.91%] |
|
Solactive
Rare Earth & Critical Materials Index2
(Index
returns reflects invested dividends net of withholding taxes, but reflect
no deduction for fees, expenses, or other taxes) |
[(6.84)%] |
[(14.29)%] |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns will depend on your specific tax situation
and may differ from those shown above. After-tax returns are not relevant to
investors who hold Shares of the Fund through tax-advantaged arrangements, such
as 401(k) plans or individual retirement accounts (IRAs).
2 The
Solactive Disruptive Materials Index changed its name to the Solactive Rare
Earth & Critical Materials Index effective [ ].
]
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Vanessa Yang, CFA; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Yang have been Portfolio
Managers of the Fund since the Fund's inception. Mr. Lu has been a Portfolio
Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
"Authorized Participants" (as defined in the SAI) who have entered into
agreements with the Fund's distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called "Creation Units". The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
This
Prospectus contains information about investing in the Fund. Please read this
Prospectus carefully before you make any investment decisions. Shares of the
Fund are listed for trading on a national securities exchange. The market price
for a Share of the Fund may be different from the Fund's most recent NAV. ETFs
are funds that trade like other publicly-traded securities. The Fund is designed
to track the Underlying Index. Similar to shares of an index mutual fund, each
Share of the Fund represents an ownership interest in an underlying portfolio of
securities. Unlike shares of a mutual fund, which can be bought and redeemed
from the issuing fund by all shareholders at a price based on NAV, Shares of the
Fund may be purchased or redeemed directly from the Fund at NAV solely by
Authorized Participants and only in Creation Unit increments. Also, unlike
shares of a mutual fund, Shares of the Fund are listed on a national securities
exchange and trade in the secondary market at market prices that change
throughout the day. The Fund is designed to be used as part of broader asset
allocation strategies. Accordingly, an investment in the Fund should not
constitute a complete investment program. An index is a financial calculation,
based on a grouping of financial instruments, and is not an investment product,
while the Fund is an actual investment portfolio. The performance of the Fund
and its Underlying Index may vary for a number of reasons, including transaction
costs, non-U.S. currency valuations, asset valuations, corporate actions (such
as mergers and spin-offs), timing variances and differences between the Fund's
portfolio and the Underlying Index resulting from the Fund's legal restrictions
(such as diversification requirements) that apply to the Fund but not to the
Underlying Index.
The
investment objective of the Fund is to seek to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the [Solactive Rare Earth & Critical Materials Index] (the
"Underlying Index"). The Fund invests at least 80% of its total assets, plus
borrowings for investment purposes (if any), in the securities of the Underlying
Index and in American Depositary Receipts ("ADRs") and Global Depositary
Receipts ("GDRs") based on the securities in the Underlying Index. The Fund's
80% investment policy is non-fundamental and requires 60 days prior written
notice to shareholders before it can be changed. The Adviser anticipates that,
generally, the Fund will hold all of the securities that comprise its Underlying
Index in proportion to their weightings in such Underlying Index. However, under
various circumstances, it may not be possible or practicable to purchase all of
those securities in those weightings. In these circumstances, the Fund may
purchase a sample of securities in its Underlying Index. There also may be
instances in which the Adviser may choose to underweight or overweight a
security in the Fund's Underlying Index, purchase securities not in the Fund's
Underlying Index that the Adviser believes are appropriate to substitute for
certain securities in such Underlying Index or utilize various combinations of
other available investment techniques in seeking to replicate, as closely as
possible, before fees and expenses, the price and yield performance of the
Fund's Underlying Index. In addition, the Fund may also invest in equity index
futures for cash flow management purposes and as a portfolio management
technique. The Fund may sell securities that are represented in its Underlying
Index in anticipation of their removal from such Underlying Index or purchase
securities not represented in its Index in anticipation of their addition to
such Underlying Index. The Fund's investment objective and its Underlying Index
may be changed without shareholder approval upon at least 60 days prior written
notice to shareholders.] The Fund concentrates its investments (i.e., holds 25%
or more of its total assets) in a particular industry or group of industries to
approximately the same extent that its Underlying Index is
concentrated.
The
Fund is subject to various risks, including the principal risks noted below, any
of which may adversely affect the Fund's NAV, trading price, yield, total return
and ability to meet its investment objective. You could lose all or part of your
investment in the Fund, and the Fund could underperform other
investments.
Asset
Class Risk
The
returns from the types of securities and/or assets in which the Fund invests may
under-perform returns from the various general securities markets or different
asset classes. The assets in the Underlying Index may under-perform investments
that track other markets, segments, sectors or assets. Different types of assets
tend to go through cycles of out-performance and under-performance in comparison
to the general securities markets.
China
A-Shares Risk
A-Shares
are issued by companies incorporated in mainland China and are traded on Chinese
exchanges. Foreign investors can access A-Shares by obtaining a QFII or a RQFII
license, as well as through the Stock Connect Programs. The Fund currently
intends to gain exposure to A-Shares through the Stock Connect Programs. Trading
suspensions in certain stocks could lead to greater market execution risk,
valuation risks, liquidity risks and costs for the Fund, as well as for
Authorized Participants that create and redeem Creation Units of the Fund. The
SSE and SZSE currently apply a daily limit of the amount of fluctuation
permitted in the prices of A-shares during a single trading day. The daily limit
refers to price movements only and does not restrict trading within the relevant
limit. There can be no assurance that a liquid market on an exchange will exist
for any particular A-share or for any particular time. Additionally, during
instances where aggregate limits on foreign ownership are exceeded. the Fund may
be unable to purchase additional equity securities of a particular
company.
This
could increase the Fund’s tracking error and/or cause the Fund to trade in the
market at greater bid-ask spreads or greater premiums or discounts to the Fund’s
NAV. Given that the A-share market is considered volatile and unstable (with the
risk of widespread trading suspensions or government intervention), the creation
and redemption of Creation Units (as defined below) may also be disrupted. These
risks, among others, could adversely affect the value of the Fund’s
investments.
Depositary
Receipts Risk
The
Fund may invest in depositary receipts, such as ADRs and GDRs. ADRs are
certificates that evidence ownership of shares of a foreign issuer and are
alternatives to purchasing the underlying foreign securities directly in their
national markets and currencies. GDRs are certificates issued by an
international bank that generally are traded and denominated in the currencies
of countries other than the home country of the issuer of the underlying shares.
Depositary receipts may be subject to certain of the risks associated with
direct investments in the securities of foreign companies. For additional
details on these risks, please see Foreign Securities Risk. Moreover, depositary
receipts may not track the price of the underlying foreign securities on which
they are based. Certain countries may limit the ability to convert depositary
receipts into the underlying foreign securities and vice versa, which may cause
the securities of the foreign company to trade at a discount or premium to the
market price of the related depositary receipts. A holder of depositary receipts
may also be subject to fees and the credit risk of the financial institution
acting as depositary.
Equity
Securities Risk
The
Fund may invest in equity securities, which are subject to changes in value that
may be attributable to market perception of a particular issuer, general stock
market fluctuations that affect all issuers, or as a result of such factors as a
company’s business performance, investor perceptions, stock market trends and
general economic conditions. Investments in equity securities may be more
volatile than investments in other asset classes.
Associated
Risks Related to Investing in Rare Earth & Critical Materials
Companies
The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of Rare Earth & Critical Materials Companies. Rare
earth and critical materials are considered instrumental to the development and
production of one or more critical technologies. Compared to base metals, they
have more specialized uses. Rare earth elements are a collection of chemical
elements that are crucial to many of the world’s most advanced technologies.
Consequently, the demand for rare earth and critical materials has strained
supply, which has the potential to result in a shortage of such materials which
could adversely affect the companies in the Fund’s portfolio. A reduction of
demand for the technologies that utilize rare earth
and
critical materials, or of the materials themselves, would have an adverse impact
on the Fund. Companies involved in the various activities that are related to
the mining, production, recycling, mineral sands, processing and/or refining of
rare earth and critical materials may include medium-, small-, and
micro-capitalization companies with volatile share prices, are highly dependent
on the price of rare earth and critical materials, which may fluctuate
substantially over short periods of time. The value of such companies may be
significantly affected by events relating to international, national and local
political and economic developments, trade policy, energy conservation efforts,
changes to critical materials, the success of exploration projects, changes in
exchange rates, commodity prices, tax and other government regulations,
depletion of resources, labor relations, and mandated expenditures for safety
and pollution control devices. The mining, production, recycling, processing
and/or refining of rare earth and critical materials can be capital intensive
and, if companies involved in such activities are not managed well, the share
prices of such companies could decline even as prices for the underlying rare
earth and critical materials are rising. In addition, companies involved in the
various activities that are related to the mining, production, recycling,
processing and/or refining of rare earth and critical materials may be at risk
for environmental damage claims.
Capitalization
Risk
Investing
in issuers within the same market capitalization category carries the risk that
the category may be out of favor due to current market conditions or investor
sentiment.
Large-Capitalization
Companies Risk
Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk
Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk
The
Fund may invest a significant percentage of its assets in small-capitalization
companies. If it does so, it may be subject to certain risks associated with
small-capitalization companies. These companies often have greater price
volatility, lower trading volume and less liquidity than larger, more
established companies. In addition, these companies are often subject to less
analyst coverage and may be in early and less predictable periods of their
corporate existences. These companies tend to have smaller revenues, narrower
product lines, less management depth and experience, smaller shares of their
product or service markets, fewer financial resources and less competitive
strength than larger companies.
Cash
Transaction Risk
Unlike
most ETFs, the Fund intends to effect a significant portion of creations and
redemptions for cash, rather than in-kind securities. As a result, an investment
in the Fund may be less tax-efficient than an investment in a more conventional
ETF. ETFs generally are able to make in-kind redemptions and avoid being taxed
on gain on the distributed portfolio securities at the Fund level. Because the
Fund currently intends to effect redemptions for cash, rather than in-kind
distributions, it may be required to sell portfolio securities in order to
obtain the cash needed to distribute redemption proceeds. If the Fund recognizes
gain on these sales, this generally will cause the Fund to recognize gain it
might not otherwise have recognized, or to recognize such gain sooner than would
otherwise be required if it were to distribute portfolio securities in-kind. The
Fund generally intends to distribute these gains to shareholders to avoid being
taxed on this gain at the Fund level and otherwise comply with the special tax
rules that apply to it. This strategy may cause shareholders to be subject to
tax on gains they would not otherwise be subject to, or at an earlier date than,
if they had made an investment in a different ETF. Moreover, cash transactions
may have to be carried out over several days if the securities market is
relatively illiquid and may involve considerable brokerage fees and taxes. These
factors may result in wider spreads between the bid and the offered prices of
the Fund’s Shares than for more conventional ETFs.
To
the extent that the maximum additional variable charge for cash creation or cash
redemption transactions is insufficient to cover the transaction costs of
purchasing or selling portfolio securities, the Fund’s performance could be
negatively impacted.
Commodity
Exposure Risk
To
the extent that its Underlying Index invests in, or otherwise has exposure to,
securities and markets that are susceptible to fluctuations in certain commodity
markets, any negative changes in commodity markets could have a great impact on
the Fund.
Commodity
prices may be influenced or characterized by unpredictable factors, including,
where applicable, high volatility, changes in supply and demand relationships,
weather, agriculture, trade, changes in interest rates and monetary and other
governmental policies, action and inaction. Securities of companies held by the
Fund that are dependent on a single commodity, or are concentrated on a single
commodity sector, may typically exhibit even higher volatility attributable to
commodity prices.
Commodity
Price Relationship Risk
The
Underlying Index measures the performance of companies engaged in a particular
industry and not the performance of commodities prices themselves. Companies may
under- or over-perform commodities prices over the short-term or the long-term.
Currency
Risk
Foreign
currencies are subject to risks, which include changes in the debt level and
trade deficit of the country issuing the foreign currency; inflation rates of
the United States and the country issuing the foreign currency; investors’
expectations concerning inflation rates; interest rates of the United States and
the country issuing the foreign currency; investors’ expectations concerning
interest rates; investment and trading activities of mutual funds, hedge funds
and currency funds; and global or regional political, economic or financial
events and situations.
In
addition, a foreign currency in which the Fund invests may not maintain its
long-term value in terms of purchasing power in the future. When the price of a
foreign currency in which the Fund invests declines, it may have an adverse
impact on the Fund.
Foreign
exchange rates are influenced by the factors identified above and may also be
influenced by: changing supply and demand for a particular currency; monetary
policies of governments (including exchange control programs, restrictions on
local exchanges or markets and limitations on foreign investment in a country or
on investment by residents of a country in other countries); changes in balances
of payments and trade; trade restrictions; and currency devaluations and
revaluations. Also, governments from time to time intervene in the currency
markets, directly and by regulation, in order to influence prices directly.
These events and actions are unpredictable. The resulting volatility in the
USD/foreign currency exchange rate could materially and adversely affect the
performance of the Fund.
Custody
Risk
Custody
risk refers to risks in the process of clearing and settling trades and in the
holding of securities by local banks, agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle. Local agents are held only to the standard of care of the
local markets. Governments or trade groups may compel local agents to hold
securities in designated depositories that are subject to independent
evaluation. Generally, the less developed a country’s securities market, the
greater the likelihood of custody problems occurring.
Cybersecurity
Risk
With
the increased use of technologies such as the Internet to conduct business, the
Fund, like all companies, may be susceptible to operational, information
security and related risks. Cybersecurity incidents involving the Fund,
Authorized Participants, or service providers (including, without limitation,
the Adviser, fund accountant, custodian, transfer agent and financial
intermediaries) have the ability to cause disruptions and impact business
operations, potentially resulting in financial losses, impediments to trading,
the inability of Fund shareholders to transact business, violations of
applicable privacy and other laws, regulatory fines, penalties, reputational
damage, reimbursement or other compensation costs, and/or additional compliance
costs.
Cybersecurity
incidents can result from deliberate cyberattacks or unintentional events and
may arise from external or internal sources. Cyber attacks may include infection
by malicious software or gaining unauthorized access to digital systems,
networks or devices that are used to service the Fund’s operations (e.g., by
“hacking” or “phishing”). Cyber attacks 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). In addition, cyber-attacks may render records of Fund assets
and
transactions, shareholder ownership of Fund Shares, and other data integral to
the functioning of the Fund inaccessible or 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-attacks, there are inherent limitations in such plans and systems,
including the possibility that certain risks have not been identified and that
prevention and remediation efforts will not be successful. Furthermore, the Fund
cannot control the cyber security plans and systems put in place by service
providers to the Fund, issuers in which the Fund invests, market makers or
Authorized Participants.
Similar
adverse consequences could result from cybersecurity incidents affecting issuers
of securities in which the Fund invests, counterparties with which the Fund
engages, governmental and other regulatory authorities, exchanges and other
financial market operators, banks, brokers, dealers, insurance companies, other
financial institutions and other parties. In addition, substantial costs may be
incurred in order to prevent any cybersecurity incidents in the future. Although
the Fund’s service providers may have established business continuity plans and
risk management systems to mitigate cybersecurity risks, there can be no
guarantee or assurance that such plans or systems will be effective, or that all
risks that exist, or may develop in the future, have been completely anticipated
and identified or can be protected against. The Fund and its shareholders could
be negatively impacted as a result.
The
rapid development and increasingly widespread use of artificial intelligence
technologies could increase the effectiveness of cyber attacks and exacerbate
the risks.
Focus
Risk
In
following its methodology, the Underlying Index may be focused to a significant
degree in securities of issuers in a particular industry or group of industries
and/or may have significant exposure to one or more sectors. To the extent that
the Underlying Index focuses in the securities of issuers in such an area, the
Fund will also focus its investments to approximately the same extent. In such
event, the Fund’s performance will be particularly susceptible to adverse events
impacting such industry or sector, and the Fund will face greater risk than if
it were diversified broadly over numerous such areas. Such heightened risks, any
of which may adversely affect the companies in which the Fund invests, may
include, but are not limited to, the following: general economic conditions or
cyclical market patterns that could negatively affect supply and demand;
competition for resources; adverse labor relations; political or world events;
obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular industry or sector. In addition, at times, such industry, group of
industries or sector may be out of favor and underperform other such categories
or the market as a whole.
Risks
Related to Investing in the Materials Sector
Issuers
in the materials sector could be adversely affected by commodity price
volatility, exchange rates, import controls, increased competition, depletion of
resources, technical advances, labor relations, over-production, litigation and
government regulations, among other factors. At times, worldwide production of
industrial materials has exceeded demand as a result of over-building or
economic downturns, leading to poor investment returns or losses. Issuers in the
materials sector are at risk for environmental damage and product liability
claims and may be adversely affected by depletion of resources, technical
progress, labor relations and governmental regulations.
Risks
Related to Investing in the Metals and Mining Industry
Because
the Fund invests in stocks and depositary receipts of U.S. and foreign companies
that are involved in the mining industry, it is subject to certain risks
associated with such companies. Competitive pressures may have a significant
effect on the financial condition of companies in the mining industry. Also,
mining companies are highly dependent on the price of the commodity they
produce. These prices may fluctuate substantially over short periods of time;
therefore the Fund’s Share price may be more volatile than other types of
investments. In particular, a drop in the price of a given commodity could
adversely affect the profitability of mining companies and their ability to
secure financing.
In
addition, metals and mining companies may be significantly affected by changes
in global demand for certain metals, economic developments, energy conservation,
the success of exploration projects, changes in exchange rates, interest rates,
economic conditions, tax treatment, trade treaties, and government regulation
and intervention, and events in the regions that the companies to which the Fund
has exposure operate (e.g., expropriation, nationalization, confiscation of
assets and property, the imposition of restrictions on foreign investments or
repatriation of capital, military coups, social or political unrest, violence
and labor unrest).
Foreign
Securities Risk
The
Fund’s assets may be invested within the equity markets of countries outside of
the United States. These markets are subject to special risks associated with
foreign investment, including, but not limited to: lower levels of liquidity and
market efficiency; greater securities price volatility; exchange rate
fluctuations and exchange controls; less availability of public information
about issuers; limitations on foreign ownership of securities; imposition of
withholding or other taxes; imposition of restrictions on the expatriation of
the assets of the Fund; restrictions placed on U.S. investors by U.S.
regulations governing foreign investments; higher transaction and custody costs
and delays in settlement procedures; difficulties in enforcing contractual
obligations; lower levels of regulation of the securities market; weaker
accounting, disclosure and reporting requirements; and legal principles relating
to corporate governance and directors’ fiduciary duties and liabilities.
Shareholder rights under the laws of some foreign countries may not be as
favorable as U.S. laws. Thus, a shareholder may have more difficulty in
asserting its rights or enforcing a judgment against a foreign company than a
shareholder of a comparable U.S. company. Investment of more than 25% of the
Fund’s total assets in securities located in one country or region will subject
the Fund to increased country or region risk with respect to that country or
region. Where all or a portion of the Fund's underlying securities trade in a
market that is closed when the market in which the Fund's Shares are listed and
trading is open, there may be differences between the last quote from the
security’s closed foreign market and the value of the security during the Fund’s
domestic trading day. This in turn could lead to differences between the market
price of the Fund’s Shares and the underlying value of those shares.
Geographic
Risk
Geographic
risk is the risk that the Fund’s assets may be focused in countries located in
the same geographic region. This investment focus will subject the Fund to risks
associated with that particular region, or a region economically tied to that
particular region, such as a natural, biological or other disaster. Outbreaks of
contagious viruses and diseases may reduce business activity or disrupt market
activity, and have the potential to exacerbate market risks in the countries and
regions in which they occur. The securities in which the Fund invests and,
consequently, the Fund are also subject to specific risks as a result of their
business operations, including, but not limited to:
Risk
of Investing in Argentina
Argentina’s
economy is heavily dependent on exports and commodities, making the economy
susceptible to fluctuations in commodity markets and sensitive to its
relationships with key trading partners. Argentina’s key trading and foreign
investment partners are Brazil, China and the U.S. Reduction in spending on
Argentinean products and services, or changes in China, the U.S., or any of the
Latin American economies, trade regulations or currency exchange rates may
adversely impact the Argentinean economy.
Argentina
has experienced a high level of debt and public spending. Argentina’s default on
its debt in 2001 and 2020 continues to impact the confidence of investors in
Argentina, which might adversely impact returns in the Fund. In 2014, minority
bondholders of Argentina’s previously defaulted debt sought, and won, an
injunction that prohibited Argentina from repaying bonds that had been
renegotiated, unless they simultaneously paid the holdout minority bondholders
their full amount due as well. As a result, the Argentinian government, in 2014,
subsequently entered a technical default on its debt. In 2016, after a series of
court appeals and negotiations, the government and minority bondholders entered
into a settlement to resolve the dispute. Further defaults, potential debt
renegotiations with the IMF or other international creditors, and related
actions by Argentina may continue to impact the confidence of investors in
Argentina, which could limit the government’s ability to borrow in the
future.
Argentina
has experienced periods of significant political instability and certain sectors
and regions of Argentina experience high unemployment, which may cause downturns
in the Argentinean market and adversely impact investments in the Fund.
Uncertainty over direction of Argentina’s economic reforms can emerge abruptly
with the resignation or dismissal of the Minister of Economy. Heavy regulation
of labor and product markets is pervasive in Argentina and may stifle
Argentinean economic growth or contribute to prolonged periods of recession.
Argentina has privatized, certain industries, which may lose money or be
re-nationalized.
In
the past, Argentina’s government decided to partially nationalize YPF S.A.,
Argentina’s largest energy company.
Argentina
has previously imposed capital controls that affected the inflow and
repatriation of capital and the free transfer of securities. If such capital
controls are reinstituted, or if new capital controls are implemented, it could
disrupt the creation/redemption process, which could affect the trading of Fund
shares, resulting in Fund shares trading at a price that is materially different
from NAV. Argentina is currently implementing a system of multiple exchange
rates
in a bid to prevent devaluation of the Argentinian Peso. The addition of new
exchange rates for various purposes or adjustments to tax policies for the
aforementioned rates is subject to change.
Risk
of Investing in Chile
Investment
in Chilean issuers involves risks that are specific to Chile, including, legal,
regulatory, political, environmental and economic risks. Chile’s economy is
export-dependent and relies heavily on trading relationships with certain key
trading partners, including China, Brazil, Japan, South Korea, the U.S.,
Argentina and Germany. Future changes in the price or the demand for Chilean
exported products by China, Brazil, Japan, South Korea, the U.S., Argentina and
Germany, changes in these countries’ economies, trade regulations or currency
exchange rates could adversely impact the Chilean economy and the issuers to
which the Fund has exposure.
Risk
of Investing in China
The
Chinese economy is subject to a considerable degree of economic, political and
social instability.
Political
and Social Risk
The
Chinese government is authoritarian and has periodically used force to suppress
civil dissent. Disparities of wealth and the pace of economic liberalization may
lead to social turmoil, violence and labor unrest. In addition, China continues
to experience disagreements related to integration with Hong Kong and religious
and nationalist disputes in Tibet and Xinjiang. There is also a greater risk in
China than in many other countries of currency fluctuations, currency
nonconvertibility, interest rate fluctuations and higher rates of inflation as a
result of internal social unrest or conflicts with other countries.
Unanticipated
political or social developments may result in sudden and significant investment
losses. China’s growing income inequality, rapidly aging population and
significant environmental issues also are factors that may affect the Chinese
economy.
Concerns
about the rising government and household debt levels could impact the stability
of the Chinese economy.
Heavy
Government Control and Regulation
The
Chinese government has implemented significant economic reforms in order to
liberalize trade policy, promote foreign investment in the economy, reduce
government control of the economy and develop market mechanisms. There can be no
assurance these reforms will continue or that they will be effective. Despite
recent reform and privatizations, government control over certain sectors or
enterprises and significant regulation of investment and industry is still
pervasive, including restrictions on investment in companies or industries
deemed to be sensitive to particular national interests, and the Chinese
government may restrict foreign ownership of Chinese corporations and/or the
repatriation of assets by foreign investors. Chinese companies that maintain
large amounts of sensitive data or produce some form of adverse social cost are
particularly at risk as the government moves forward with the Common Prosperity
agenda. Limitations or restrictions on foreign ownership of securities may have
adverse effects on the liquidity and performance of the Fund and could lead to
higher tracking error. Chinese government intervention in the market may have a
negative impact on market sentiment, which may in turn affect the performance of
the Chinese economy and the Fund’s investments. Chinese markets generally
continue to experience inefficiency, volatility and pricing anomalies that may
be connected to governmental influence, lack of publicly-available information,
and political and social instability.
Economic
Risk
The
Chinese economy has grown rapidly in the recent past and there is no assurance
that this growth rate will be maintained. In fact, the Chinese economy may
experience a significant slowdown as a result of, among other factors, a
deterioration in global demand for Chinese exports, a systemic failure in the
property sector, as well as contraction in spending on domestic goods by Chinese
consumers. In addition, China may experience substantial rates of inflation or
economic recessions, which would have a negative effect on its economy and
securities market. Delays in enterprise restructuring, slow development of
well-functioning financial markets and widespread corruption have also hindered
performance of the Chinese economy. China continues to receive substantial
pressure from trading partners to liberalize official currency exchange rates.
Elevated
geopolitical tensions between China and its trading partners, including the
imposition of U.S. tariffs on certain Chinese goods, the imposition of trade and
non-trade related barriers for certain Chinese companies, and increased
international pressure related to Chinese trade policy, forced technology
transfers and intellectual property protections, may have a substantial impact
on the Chinese economy. The continuation or worsening of the current political
climate between China and the U.S. could result in additional regulatory or
legal actions, such as purchasing restrictions, blacklisting, sanctions,
tariffs, forced divestment or spin-offs, or other trade or business restrictions
or controls,
being
contemplated or imposed in the U.S. or in China that could negatively impact the
performance of companies held by the Fund
and/or
impact the Fund’s ability to invest in certain companies.
Reduction
in spending on Chinese products and services, institution of additional tariffs
or other trade barriers (including as a result of heightened trade tensions
between China and the U.S. or in response to actual or alleged Chinese cyber
activity), or a downturn in any of the economies of China’s key trading partners
may have an adverse impact on the Chinese economy and the Chinese issuers of
securities in which the Fund invests. For example, the U.S. has added certain
foreign technology companies to the U.S. Department of Commerce’s Bureau of
Industry and Security’s “Entity List,” which is a list of companies believed to
pose a national security risk to the U.S. U.S. investors may also be barred by
U.S. authorities from investing in certain companies, including those with ties
to the military, intelligence, and security services in China. Actions like
these may have unanticipated and disruptive effects on the Chinese economy. Any
such response that targets Chinese financial markets or securities exchanges
could interfere with orderly trading, delay settlement or cause market
disruptions. Public health crises or major health-related developments may have
a substantial impact on the Chinese economy or holdings in the Fund. Outbreaks
of contagious viruses and diseases, including the novel viruses commonly known
as SARS, MERS, COVID-19 (Coronavirus), and avian flu, may reduce business
activity or disrupt market activity, and have the potential to exacerbate market
risks such as volatility in exchange rates or the trading of Chinese securities
listed domestically or abroad. Likewise, factories, ports, and critical
infrastructure in China may close to limit contagion risk. Additionally, China’s
shift away from a zero-COVID policy creates both opportunities and risks,
causing uncertainty for global economic growth. Foreign investors’ access to
domestic markets may also be limited during such health crises, especially if
domestic exchanges are closed for an extended period. Market closures could
interfere with the orderly trading or settlement mechanisms of Chinese
securities listed domestically or abroad. The Chinese economy or holdings in the
Fund may also be adversely impacted should health crises create political
uncertainty or social unrest. The implications of such health crises are
difficult to ascertain but may put strain on China’s supply chains, trading
relationships, and international relations.
Expropriation
Risk
The
Chinese government maintains a major role in economic policy making and
investing in China involves risk of loss due to expropriation, nationalization,
confiscation of assets and property or the imposition of restrictions on foreign
investments and on repatriation of capital invested.
Security
Risk
China
has strained international relations with Taiwan, India, Russia and other
neighbors due to territorial disputes, historical animosities, defense concerns
and other security concerns. Relations between China’s Han ethnic majority and
other ethnic groups in China, including Tibetans and Uighurs, are also strained
and have been marked by protests and violence. Additionally, China is alleged to
have participated in state-sponsored cyberattacks against foreign companies and
foreign governments. Actual and threatened responses to such activity, including
purchasing restrictions, sanctions, tariffs or cyberattacks on the Chinese
government or Chinese companies, may impact China’s economy and Chinese issuers
of securities in which the Fund invests.
These
situations may cause uncertainty in the Chinese market and may adversely affect
the Chinese economy. In addition, conflict on the Korean Peninsula could
adversely affect the Chinese economy.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund.
Hong
Kong Political Risk
Hong
Kong reverted to Chinese sovereignty on July 1, 1997 as a Special Administrative
Region (SAR) of the People’s Republic of China under the principle of “one
country, two systems.” Although China is obligated to maintain the current
capitalist economic and social system of Hong Kong through June 30, 2047, the
continuation of economic and social freedoms enjoyed in Hong Kong is dependent
on the government of China. Since 1997, there have been tensions between the
Chinese government and many people in Hong Kong who perceive China as tightening
of control over Hong Kong’s semi-autonomous liberal political, economic, legal,
and social framework. Recent protests and unrest have increased tensions even
further. Due to the interconnected nature of the Hong Kong and Chinese
economies, this instability in Hong Kong may cause uncertainty in the Hong Kong
and Chinese markets. In addition, the Hong Kong dollar trades at a fixed
exchange rate in relation to (or, is “pegged” to) the U.S. dollar, which has
contributed to the growth and stability of the Hong Kong economy. However, it is
uncertain how long the currency peg will continue or what effect the
establishment of an alternative exchange rate system would have on the Hong Kong
economy. Because the Fund’s NAV is denominated in U.S. dollars, the
establishment of an alternative exchange rate system could result in a decline
in the Fund’s NAV.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the government restricts foreign ownership to
raise capital from foreign investors. While the shell company has no equity
ownership of the VIE, these contractual arrangements permit the shell company to
consolidate the VIE’s financial statements with its own for accounting purposes
and provide for economic exposure to the performance of the underlying Chinese
operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value. China considers Taiwan a
breakaway province and has not ruled out the use of force to bring it back under
its control. Any escalation in tension, such as military exercises or threats,
can lead to market volatility.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them
invalid.
If
these contracts were found to be unenforceable under Chinese law, investors in
the listed shell company, such as the Fund, may suffer significant losses with
little or no recourse available. If the Chinese government determines that the
agreements establishing the VIE structures do not comply with Chinese law and
regulations, including those related to restrictions on foreign ownership, it
could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
government will not place similar restrictions on other industries. Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will be
enforced or that U.S. regulatory authorities will continue to feel satisfied
with their access.
Risk
of Investing in Emerging Markets
The
securities markets of emerging market countries may be less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation and not be subject to as extensive and frequent
accounting,
financial
and other reporting requirements as the securities markets of more developed
countries, as has historically been the case.
Issuers
and securities markets in emerging markets are generally not subject to as
extensive and frequent accounting, financial and other reporting requirements or
as comprehensive government regulations as are issuers and securities markets in
the developed markets. In particular, the assets and profits appearing on the
financial statements of emerging market issuers may not reflect their financial
position or results of operations in the same manner as financial statements for
developed market issuers. Substantially less information may be publicly
available about emerging market issuers than is available about issuers in
developed markets. It may be difficult or impossible for the Fund to pursue
claims against an emerging market issuer in the courts of an emerging market
country. There may be significant obstacles to obtaining information necessary
for investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies.
Emerging
markets are generally located in the Asia and Pacific regions, the Middle East,
Eastern Europe, Latin America, and Africa. Emerging markets typically are
classified as such by lacking one or more of the following
characteristics:
sustainability
of
economic
development,
large
and
liquid
securities
markets,
openness
to
foreign
ownership, ease of capital inflows and outflows, efficiency of the market’s
operational framework, and/or stability of the institutional framework. The
Fund’s purchase and sale of portfolio securities in certain emerging market
countries may be constrained by limitations relating to daily changes in the
prices of listed securities, periodic trading or settlement volume and/or
limitations on aggregate holdings of foreign investors. Such limitations may be
computed based on the aggregate trading volume by or holdings of the Fund, the
Adviser, its affiliates and their respective clients and other service
providers. The Fund may not be able to sell securities in circumstances where
price, trading or settlement volume limitations have been reached.
Foreign
investment in the securities markets of certain emerging market countries is
restricted or controlled to varying degrees, which may limit investment in such
countries or increase the administrative costs of such investments.
For
example,
certain
Asian
countries
require
government
approval
prior
to
investments
by
foreign
persons
or
limit
investment by foreign persons to only a specified percentage of an issuer's
outstanding securities or a specific class of securities which may have less
advantageous terms (including price) than securities of the issuer available for
purchase by nationals. In addition, certain countries may restrict or prohibit
investment opportunities in issuers or industries deemed important to national
interests. Such restrictions may affect the market price, liquidity and rights
of securities that may be purchased by the Fund. The repatriation of both
investment income and capital from certain emerging market countries is subject
to restrictions, such as the need for governmental consents. In situations where
a country restricts direct investment in securities (which may occur in certain
Asian, Latin American and other countries), the Fund
may
invest
in
such
countries
through
other
investment
funds
in
such
countries.
Certain
emerging
market
countries may have privatized, or have begun the process of privatizing, certain
entities and industries. Privatized entities may lose money or be
re-nationalized.
Many
emerging market countries have experienced currency devaluations, substantial
(and, in some cases, extremely high) rates of inflation, and economic
recessions. These circumstances have had a negative effect on the economies and
securities markets of those emerging market countries. Economies in emerging
market countries generally are dependent upon commodity prices and international
trade and, accordingly, have been, and may continue to be, affected adversely by
the economies of their trading partners, trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist measures
imposed or negotiated by the countries with which they trade. As a result,
emerging market countries are particularly vulnerable to downturns of the world
economy.
Many
emerging market countries are subject to a substantial degree of economic,
political and social instability. Governments of some emerging market countries
are authoritarian in nature or have been installed or removed as a
result
of
military
coups,
while
governments
in
other
emerging
market
countries
have
periodically
used
force
to
suppress civil dissent. Disparities of wealth, the pace and success of
democratization, and ethnic, religious and racial disaffection, among other
factors, have also led to social unrest, violence and/or labor unrest in some
emerging market countries. Emerging markets may also face other significant
internal or external risks, including the risk of war, terrorism, or other
social or political conflicts. Many emerging market countries have experienced
strained international relations due to border disputes, historical animosities
or other defense concerns. These situations may cause uncertainty in the markets
and may adversely affect the performance of these economies. Unanticipated
political, social, and public health developments may result in sudden and
significant investment losses. Many emerging markets may be underprepared for
global health crises, such as the outbreak of
COVID-19.
These developments may result in increased market volatility, disruptions to
business operations and supply chains, and restrictions on travel.
Investing
in emerging market countries involves greater risk of loss due to expropriation,
nationalization, confiscation of assets and property or the imposition of
restrictions on foreign investments and on repatriation of capital invested. As
an example, in the past some Eastern European governments have expropriated
substantial amounts of private property, and many claims of the property owners
have never been fully settled. There is no assurance that similar expropriations
will not occur in other emerging market countries, including China.
As
a result of heightened geopolitical tensions, various countries have imposed
economic sanctions, imposed non-trade barriers and renewed existing economic
sanctions on specific emerging markets and on issuers within those
markets.
These
non-trade barriers consist of prohibiting certain securities trades, prohibiting
certain private transactions in certain sectors and with respect to certain
companies, asset freezes, and prohibition of all business, against certain
individuals and companies.
The
United States and other nations or international organizations may impose
additional, broader economic sanctions or take other actions that may adversely
affect certain emerging markets in the future. These actions, any future
sanctions or other actions, or even the threat of further sanctions or other
actions, may negatively affect the value and liquidity of the Fund’s
investments. For example, the Fund may be prohibited from investing in
securities issued by companies subject to such sanctions. In addition, sanctions
may require the Fund to freeze its existing investments, prohibiting the Fund
from buying, selling or otherwise transacting in these investments. Also, if an
affected security is included in the Fund's Underlying Index, the Fund may,
where practicable, seek to eliminate its holdings of the affected security by
employing or augmenting its representative sampling strategy to seek to track
the investment results of the Underlying Index. The use of (or increased use of)
a representative sampling strategy may increase the Fund’s tracking error
risk.
Actions
barring some or all transactions with a specific company will likely have a
substantial, negative impact on the value of such company’s
securities.
These
sanctions may also lead
to
changes
in
the
Fund’s
Underlying
Index.
The
Fund’s
index
provider
may
remove
securities
from
the
Underlying Index or implement caps on the securities of certain issuers that
have been subject to recent economic sanctions.
In
such
an
event,
it
is
expected
that
the
Fund
will
rebalance
its
portfolio
to
bring
it
in
line
with
its
Underlying Index as a result of any such changes, which may result in
transaction costs and increased tracking error.
The
Fund’s investment in emerging market countries may also be subject to
withholding or other taxes, which may be significant and may reduce the return
to the Fund from an investment in such countries.
Settlement
and clearance procedures in emerging market countries are frequently less
developed and reliable than those in the United States and may involve the
Fund’s delivery of securities before receipt of payment for their sale. In
addition, significant delays may occur in certain markets in registering the
transfer of securities. Settlement, clearance or registration problems may make
it more difficult for the Fund to value its portfolio securities and could cause
the Fund to miss attractive investment opportunities, to have a portion of its
assets uninvested or to incur losses due to the failure of a counterparty to pay
for securities the Fund has delivered or the Fund’s inability to complete its
contractual obligations because of theft or other reasons. In addition, local
agents and depositories are subject to local standards of care that may not be
as rigorous as developed countries. Governments and other groups may also
require local agents to hold securities in depositories that are not subject to
independent verification. The less developed a country’s securities market, the
greater the risk to the Fund.
The
creditworthiness of the local securities firms used by the Fund in emerging
market countries may not be as sound as the creditworthiness of firms used in
more developed countries. As a result, the Fund may be subject to a greater risk
of loss if a securities firm defaults in the performance of its
responsibilities.
The
Fund’s use of foreign currency management techniques in emerging market
countries may be limited. Due to the limited market for these instruments in
emerging market countries, all or a significant portion of the Fund's currency
exposure in emerging market countries may not be covered by such instruments.
Rising
interest rates, combined with widening credit spreads, could negatively impact
the value of emerging market debt and increase funding costs for foreign
issuers. In such a scenario, foreign issuers might not be able to service their
debt obligations, the market for emerging market debt could suffer from reduced
liquidity, and the Fund could lose money.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer's securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level, for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days
before and, in certain instances, after a shareholder meeting where a vote of
shareholders will be taken. Share blocking may prevent the Fund from buying or
selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Risk
of Investing in Mexico
Investment
in Mexican issuers involves risks that are specific to Mexico, including
regulatory, political, and economic risks. The Mexican economy is dependent upon
external trade with other economies, specifically with the United States and
certain Latin American countries. As a result, Mexico is dependent on, among
other factors, the U.S. economy and any change in the price or demand for
Mexican exports may have an adverse impact on the Mexican economy. For example,
lower oil prices have negatively impacted Petróleos Mexicanos, the Mexican
state-owned petroleum company, which accounts for a significant percentage of
the Mexican government’s tax revenue. Mexico has experienced adverse economic
impacts as a result of earthquakes and hurricanes, as well as outbreaks of
violence. Incidents involving Mexico’s security may have an adverse effect on
the Mexican economy and cause uncertainty in its financial markets. In the past,
Mexico has experienced high interest rates, economic volatility and high
unemployment rates.
Political
and Social Risk
Mexico
has been destabilized by local insurrections, social upheavals, drug related
violence, and the public health crisis related to the COVID-19 outbreak.
Recurrence of these or similar conditions may adversely impact the Mexican
economy. Mexican elections have been contentious and have been closely decided.
Changes in political parties or other Mexican political events may affect the
economy and cause instability.
Currency
Instability Risk
Historically,
Mexico has experienced substantial economic instability resulting from, among
other factors, periods of very high inflation and significant devaluations of
the Mexican currency, the peso.
Relations
with the United States
Political
developments in the U.S. have raised potential implications for the trade
arrangements between the U.S. and Mexico, which could negatively affect the
value of securities held by the Fund. The recent judicial reform in Mexico
raises concerns about the erosion of judicial independence, potentially
undermining the rule of law and increasing uncertainty for investors. This could
deter foreign investment and hinder economic growth, as businesses seek more
stable and predictable legal environments.
Risk
of Investing in South Africa
South
Africa’s two-tiered economy, with one rivaling developed countries and the other
exhibiting many characteristics of developing countries, is characterized by
uneven distribution of wealth and income and high rates of unemployment.
Although economic reforms have been enacted to promote growth and foreign
investments, there can be no assurance that these programs will achieve the
desired results. In addition, South Africa’s inadequate currency reserves have
left its currency vulnerable, at times, to devaluation. Despite significant
reform and privatization, the South African government continues to control a
large share of South African economic activity. Heavy regulation of labor and
product markets is pervasive and may stifle South African economic growth or
cause prolonged periods of recession. The agriculture and mining sectors of
South Africa’s economy account for a large portion of its exports, and thus the
South African economy is susceptible to fluctuations in these commodity markets.
In recent years, an unstable electricity supply in South Africa has stifled
economic growth, which may adversely affect the value of the Fund’s investments.
Any resurgence in power outages due to the aging infrastructure and policy
challenges in the energy sector could disrupt businesses and hinder economic
growth. Furthermore, the implementation of land reform policies, particularly
those involving expropriation without compensation, creates legal and economic
uncertainty for investors, potentially deterring capital inflows and impacting
sectors reliant on land.
Indexing
Strategy Risk
The
Fund is not actively managed and may be affected by a general decline in market
segments relating to the Underlying Index. The Fund invests in securities
included in, or representative of, the Underlying Index regardless of their
investment merits, and the Adviser does not otherwise attempt to take defensive
positions in declining markets. Unlike many investment companies, the Fund does
not seek to outperform its Underlying Index. Therefore, the Fund would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk
There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk
The
Fund may not fully replicate its Underlying Index and may hold securities not
included in its Underlying Index. Therefore, the Fund is subject to management
risk. That is, the Adviser’s investment strategy, the implementation of which is
subject to a number of constraints, may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. While the Fund is passively managed,
implementation of the Fund’s principal investment strategy may result in
tracking error risk, which is described below. The ability of the Adviser to
successfully implement the Fund’s investment strategies will influence the
Fund’s performance significantly.
Tracking
Error Risk
Tracking
error is the divergence of the Fund's performance from that of the Underlying
Index. Tracking error may occur because of differences between the securities
and other instruments held in the Fund's portfolio and those included in the
Underlying Index, pricing differences (including differences between a
security's price at the local market close and the Fund's valuation of a
security at the time of calculation of the Fund's NAV), transaction costs
incurred by the Fund, the Fund's holding of uninvested cash, differences in
timing of the accrual of or the valuation of dividends or interest, tax gains or
losses, changes to the Underlying Index or the costs to the Fund of complying
with various new or existing regulatory requirements. This risk may be
heightened during times of increased market volatility or other unusual market
conditions. Tracking error also may result because the Fund incurs fees and
expenses, while the Underlying Index does not. ETFs that track indices with
significant weight in emerging markets issuers may experience higher tracking
error than other ETFs that do not track such indices.
International
Closed Market Trading Risk
To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other ETFs.
Investable
Universe of Companies Risk
The
investable universe of companies in which the Fund may invest may be limited. If
a company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s overall portfolio holdings
and on Fund performance.
Issuer
Risk
Issuer
risk is the risk that any of the individual companies that the Fund invests in
may perform badly, causing the value of its securities to decline. Poor
performance may be caused by poor management decisions, competitive pressures,
changes in technology, disruptions in supply, labor problems or shortages,
corporate restructurings, fraudulent disclosures or other factors. Issuers may,
in times of distress or on their own discretion, decide to reduce or eliminate
dividends, which would also cause their stock prices to decline.
Market
Risk
Market
risk is the risk that the value of the securities in which the Fund invests may
go up or down in response to the prospects of individual issuers and/or general
economic conditions. Turbulence in the financial markets and reduced liquidity
may negatively affect issuers, which could have an adverse effect on the Fund.
If the securities held by the Fund experience poor liquidity, the Fund may be
unable to transact at advantageous times or prices, which may decrease the
Fund’s returns. In addition, there is a risk that policy changes by central
governments and governmental agencies, including the Federal Reserve or the
European Central Bank, which could include increasing interest rates, could
cause increased volatility in financial markets and lead to higher levels of
Fund redemptions from Authorized Participants, which could have a negative
impact on the Fund. Beginning in early 2025, the U.S. government’s threats to
impose tariffs on goods from Mexico and Canada has heightened tension among
trading partners. Further, in response to the U.S. government’s announcement of
tariffs on goods from China, the Chinese government has countered with tariffs
on U.S. goods, marking the beginning of a potential trade war between the
countries. Tariffs on imported goods may increase the cost of certain products
and household items, which may in turn dampen consumer spending and result in
decreased confidence in the markets. The possibility of additional tariffs being
imposed or the outbreak of a trade war may further adversely impact U.S. and
international markets. Additionally, political uncertainty regarding U.S.
policy, including the U.S. government’s approach to trade, may also impact the
markets. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, raising of interest rates, or other events could have a significant
impact on the Fund and its investments and trading of its Shares. This increases
the risk that monetary policy may provide less support should economic growth
slow. Market risk factors may result in increased volatility and/or decreased
liquidity in the securities markets. The Fund’s NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns.
Non-Diversification
Risk
The
Fund is classified as a “non-diversified” investment company under the 1940 Act.
This means that the Fund may invest most of its assets in securities issued by
or representing a small number of companies. As a result, the Fund may be more
susceptible to the risks associated with these particular companies, or to a
single economic, political or regulatory occurrence affecting these
companies.
Operational
Risk
The
Fund is exposed to operational risk 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.
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. Disruptions of
the systems of the Adviser and the Fund’s distributor and other service
providers (including, but not limited to,
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. While the Fund has established business
continuity plans in the event of, and risk management systems to prevent,
technological or other disruptions to the Fund’s operations, there are inherent
limitations in such plans and systems, including the possibility that certain
risks have not been identified and that prevention and remediation efforts will
not be successful. Furthermore, the Fund cannot control the cyber security 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.
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 for those risks that they are intended to address.
Risks
Associated with Exchange-Traded Funds
As
an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk
The
Fund has a limited number of financial institutions that may act as Authorized
Participants. Only Authorized Participants who have entered into agreements with
the Fund's distributor may engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, and no other
Authorized Participant is able to step forward to create and redeem in either of
those cases, Shares may trade like closed-end fund shares at a discount to NAV
and/or at wider intraday bid-ask spreads, and may possibly face trading halts
and/or delisting from the Fund's exchange.
Large
Shareholder Risk
Certain
shareholders, including an Authorized Participant, the Adviser or an affiliate
of the Adviser, may own a substantial amount of the Fund’s Shares. Additionally,
from time to time an Authorized Participant, a third-party investor, the
Adviser, or an affiliate of the Adviser may invest in the Fund and hold its
investment for a specific period of time in order to facilitate commencement of
the Fund’s operations or to allow the Fund to achieve size or scale. Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on the Fund's exchange and may,
therefore, have a material upward or downward effect on the market price of the
Shares.
Listing
Standards Risk
The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's Shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks
Absence
of Active Market
Although
Shares of the Fund are or will be listed for trading on a U.S. exchange and may
be listed on certain foreign exchanges, there can be no assurance that an active
trading market for the Shares will develop or be maintained.
Risks
of Secondary Listings
The
Fund's Shares may be listed or traded on U.S. and non-U.S. exchanges other than
the U.S. exchange where the Fund’s primary listing is maintained. There can be
no assurance that the Fund’s Shares will continue to trade on any such exchange
or in any market or that the Fund's Shares will continue to meet the
requirements for listing or trading on any exchange or in any market. The Fund's
Shares may be less actively traded in certain markets than others, and investors
are subject to the execution and settlement risks and market standards of the
market where they or their brokers direct their trades for execution. Certain
information available to investors who trade Shares on a U.S. exchange during
regular U.S. market hours may not be available to investors who trade in other
markets, which may result in secondary market prices in such markets being less
efficient.
Secondary
Market Trading Risk
Only
Authorized Participants who have entered into agreements with the Fund's
distributor may engage in creation or redemption transactions directly with the
Fund. Shares of the Fund may trade in the secondary market on days when the Fund
does not accept orders to purchase or redeem Shares from Authorized
Participants. On such days, Shares may trade in the secondary market with more
significant premiums or discounts than might be experienced on days when the
Fund accepts purchase and redemption orders.
Secondary
market trading in Fund Shares may be halted by a stock exchange because of
market conditions or other reasons. In addition, trading in Fund Shares on a
stock exchange or in any market may be subject to trading halts caused by
extraordinary market volatility pursuant to "circuit breaker" rules on the stock
exchange or market. There can be no assurance that the requirements necessary to
maintain the listing or trading of Fund Shares will continue to be met or will
remain unchanged.
Shares
of the Fund May Trade at Prices Other Than NAV
Shares
of the Fund may trade at, above or below NAV. The per share NAV of the Fund will
fluctuate with changes in the market value of the Fund’s holdings. The trading
prices of Shares will fluctuate in accordance with changes in the Fund's NAV as
well as market supply and demand. The trading prices of the Fund's Shares may
deviate significantly from NAV during periods of market volatility or when the
Fund has relatively few assets or experiences a lower trading volume. In
stressed market conditions, the market for the Shares may become less liquid in
response to the deteriorating liquidity of the Fund’s portfolio. Any of these
factors may lead to the Fund's Shares trading at a premium or discount to NAV.
While the creation/redemption feature is designed to make it likely that Shares
normally will trade close to the Fund’s NAV, market prices are not expected to
correlate exactly with the Fund's NAV due to timing reasons as well as market
supply and demand factors. In addition, disruptions to creations and redemptions
or the existence of extreme market volatility may result in trading prices that
differ significantly from NAV. If a shareholder purchases at a time when the
market price is at a premium to the NAV or sells at a time when the market price
is at a discount to the NAV, the shareholder may sustain losses.
Since
foreign exchanges may be open on days when the Fund does not price Shares, the
value of the securities in the Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell Shares.
Costs
of Buying or Selling Fund Shares
Buying
or selling Fund Shares involves two types of costs that apply to all securities
transactions. When buying or selling Shares of the Fund through a broker, you
will likely incur a brokerage commission or other charges imposed by brokers as
determined by that broker. In addition, you may incur the cost of the "spread" -
that is, the difference between what professional investors are willing to pay
for Fund Shares (the "bid" price) and the market price at which they are willing
to sell Fund Shares (the "ask" price). Because of the costs inherent in buying
or selling Fund Shares, frequent trading may detract significantly from
investment results and an investment in Fund Shares may not be advisable for
investors who anticipate regularly making small investments.
Risks
Related to Stock Connect Programs
Investing
in securities through Stock Connect Programs is subject to trading, clearance,
settlement and other procedures, which could pose risks to the Fund.
The
Stock Connect Programs are subject to daily and aggregate quota limitations,
which limit the maximum daily net purchases on any particular day by Hong Kong
investors (and foreign investors trading through Hong Kong) trading mainland
Chinese listed securities and mainland Chinese investors trading Hong Kong
listed securities trading through the relevant Stock Connect
Program.
The
daily quota is not specific to the Fund and is utilized on a
first-come-first-serve basis. As such, buy orders via the Stock Connect Programs
could be rejected once the daily quota is exceeded. The daily quota may thereby
restrict the Fund’s ability to invest through Stock Connect Programs on a timely
basis, which could affect the Fund’s ability to effectively pursue its
investment strategy. The daily quota is also subject to change.
It
is possible for securities eligible to be purchased via the Stock Connect
Programs to lose such designation, which could impact the Fund's ability to
pursue its investment strategy.
In
order to comply with applicable local market rules and to facilitate orderly
operations of the Fund, including the timely settlement of Stock Connect Program
trades placed by or on behalf of the Fund, the Fund utilizes an operating model
that may reduce the risks of trade failures; however, it will also allow Stock
Connect Program trades to be settled without the prior verification by the Fund.
Accordingly, this operating model may subject the Fund to additional risks,
including an increased risk of inadvertently exceeding certain trade or other
restrictions or limits placed on the Fund and/or its affiliates, and a
heightened risk of erroneous trades, which may negatively impact the
Fund.
Additionally,
the Shenzen and Shanghai markets
may
operate when the Stock Connect Programs are not active, and consequently the
prices of shares held via Stock Connect Programs may fluctuate at times when the
Fund is unable to add to or exit its positions.
The
Stock Connect Programs are new, and the effect of the introduction of large
numbers of foreign investors on the market for trading Chinese-listed securities
is not well understood. Regulations, such as limitations on redemptions or
suspension of trading, may adversely impact the value of the Fund’s investments.
The Fund's investments in A-Shares though the Stock Connect Program are held by
its custodian in accounts in Central Clearing and Settlement System ("CCASS")
maintained by the Hong Kong Securities Clearing Company Limited ("HKSCC"), which
in turn holds the A-Shares, as the nominee holder, through an omnibus securities
account in its name registered with the CSDCC. The precise nature and rights of
the Fund as the beneficial owner of the SSE Securities or SZSE Securities
through HKSCC as nominee is not well defined under Chinese law. There is no
guarantee that the Shenzen, Shanghai, and Hong Kong Stock Exchanges will
continue to support the Stock Connect Programs in the future.
The
securities regimes and legal systems of China and Hong Kong differ
significantly, and issues may arise based on these differences. Different fees,
costs and taxes are imposed on foreign investors acquiring securities through
Stock Connect Programs, and these fees, costs and taxes may be higher than
comparable fees, costs and taxes imposed on owners of other Chinese securities
providing similar investment exposure.
Securities
Lending Risk
The
Fund may engage in lending its portfolio securities. The Fund may lend its
portfolio securities to the extent noted in the section of the Fund's summary
prospectus titled Principal Investment Strategies. In connection with such
loans, the Fund receives liquid collateral equal to at least 102% of the value
of domestic equity securities and ADRs and 105% of the value of the foreign
equity securities (other than ADRs) being lent. This collateral is
marked-to-market on a daily basis. Although the Fund will receive collateral in
connection with all loans of its securities holdings, the Fund would be exposed
to a risk of loss should a borrower default on its obligation to return the
borrowed securities (e.g., the loaned securities may have appreciated beyond the
value of the collateral held by the Fund). In addition, the Fund will bear the
risk of loss of any cash collateral that it invests. Also, as securities on loan
may not be voted by the Fund, there is a risk that the Fund may not be able to
recall the securities in sufficient time to vote on material proxy
matters.
Tax
Status 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"). 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 gains resulting from selling precious metals and other commodities.
This could make it more difficult for the Fund to qualify as a RIC. If a
portfolio 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 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.
Trading
Halt Risk
An
exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk
The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). Because non-U.S. exchanges may be open on days when the Fund does not
price its Shares, the value of the securities in the Fund's portfolio may change
on days when shareholders will not be able to purchase or sell the Fund's
Shares.
The
Fund may also be subject to certain other risks associated with its investments
and investment strategies.
Exclusion
from the Definition of a Commodity Pool Operator Risk
With
respect to the Fund, the Adviser has claimed an exclusion from the definition of
“commodity pool operator” (“CPO”) under the Commodity Exchange Act, as amended
(“CEA”), and the rules of the Commodity Futures Trading Commission (“CFTC”) and,
therefore, is not subject to CFTC registration or regulation as a CPO. In
addition, the Adviser is relying upon a related exclusion from the definition of
“commodity trading advisor” (“CTA”) under the CEA and the rules of the CFTC. The
terms of the CPO exclusion require the Fund, among other things, to adhere to
certain limits on its investments in “commodity interests.” Commodity interests
include commodity futures, commodity options and swaps. Because the Adviser and
the Fund intend to comply with the terms of the CPO exclusion, the Fund may, in
the future, need to adjust its investment strategies, consistent with its
investment objective, to limit its investments in these types of instruments.
The Fund is not intended as a vehicle for trading in the commodity futures,
commodity options or swaps markets. The CFTC has neither reviewed nor approved
the Adviser’s reliance on these exclusions, or the Fund, its investment
strategies or this Prospectus.
Leverage
Risk
Under
the 1940 Act, the Fund is permitted to borrow from a bank up to 33 1/3% of its
net assets for short term or emergency purposes. The Fund may borrow money at
fiscal quarter end to maintain the required level of diversification to qualify
as a regulated investment company ("RIC") for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"). As a result, the Fund may be exposed to
the risks of leverage, which may be considered a speculative investment
technique. Leverage magnifies the potential for gain and loss on amounts
invested and therefore increases the risks associated with investing in the
Fund. If the value of the Fund's assets increases, then leveraging would cause
the Fund's NAV to increase more sharply than it would have had the Fund not
leveraged. Conversely, if the value of the Fund's assets decreases, leveraging
would cause the Fund's NAV to decline more sharply than it otherwise would have
had the Fund not leveraged. The Fund may incur additional expenses in connection
with borrowings.
Qualification
as a Regulated Investment Company Risk
The
Fund must meet a number of diversification requirements to qualify as a RIC
under Section 851 of the Code and, if qualified, to continue to qualify. If the
Fund experiences difficulty in meeting those requirements for any fiscal
quarter, it might enter into borrowings in order to increase the portion of the
Fund’s total assets represented by cash, cash items, and U.S. government
securities shortly thereafter and, as of the close of the following fiscal
quarter, to attempt to meet the requirements. However, the Fund may incur
additional expenses in connection with any such borrowings, and increased
investments by the Fund in cash, cash items, and U.S. government securities
(whether the Fund makes such investments from borrowings) are likely to reduce
the Fund’s return to investors.
Tax
Treaty Reclaims Uncertainty
When
the Fund receives dividend and interest income (if any) from issuers in certain
countries, such distributions may be subject to partial withholding by local tax
authorities in order to satisfy potential local tax obligations. The Fund may
file claims to recover such withholding tax in jurisdictions where withholding
tax reclaim is possible, which may be the case as a result of bilateral treaties
between the United States and local governments. Whether or when the Fund will
receive a withholding tax refund in the future is within the control of the tax
authorities in such countries. The receipt of a refund of withholding tax would
preclude claiming a foreign tax credit, to the extent available or applicable,
with respect to such withholding tax. Where the Fund expects to recover
withholding tax based on a continuous assessment of probability of recovery, the
NAV of the Fund generally includes accruals for such tax refunds. The Fund
continues to evaluate tax developments for potential impact to the probability
of recovery. If the likelihood of receiving refunds materially decreases, for
example due to a change in tax regulation or approach, accruals in the Fund’s
NAV for such refunds may need to be written down partially or in full, which
will adversely affect that Fund’s NAV. Investors in the Fund at the time an
accrual is written down will bear the impact of any resulting reduction in NAV
regardless of whether they were investors during the accrual period. Conversely,
if a Fund receives a tax refund that has not been previously accrued, investors
in the Fund at the time the claim is successful will benefit from any resulting
increase in the Fund’s NAV. Investors who sold their shares prior to such time
will not benefit from such NAV increase.
A
description of the policies and procedures of Global X Funds®
(the "Trust") with respect to the disclosure of the Fund's portfolio securities
is available in the Fund's Statement of Additional Information ("SAI"). The top
holdings of the Fund and Fund Fact Sheets providing information regarding the
Fund's top holdings can be found at www.globalxetfs.com/explore/(click on the
name of your Fund) and may be requested by calling 1-888-493-8631.
Investment
Adviser
Global
X Management Company LLC (the "Adviser") serves as the investment adviser and
the administrator for the Fund. Subject to the supervision of the Board of
Trustees, the Adviser is responsible for managing the investment activities of
the Fund and the Fund's business affairs and other administrative matters. The
Adviser has been a registered investment adviser since 2008. The Adviser is a
Delaware limited liability company with its principal offices located at 605 3rd
Avenue, 43rd Floor, New York, New York 10158. As of [ ], 2025, the Adviser
provided investment advisory services for assets of approximately $[ ]
billion.
Pursuant
to a Supervision and Administration Agreement and subject to the general
supervision of the Board of Trustees, the Adviser provides, or causes to be
furnished, all supervisory, administrative and other services reasonably
necessary for the operation of the Fund and also bears the costs of various
third-party services required by the Fund, including audit, certain custody,
portfolio accounting, legal, transfer agency and printing costs. The Supervision
and Administration Agreement also requires the Adviser to provide investment
advisory services to the Fund pursuant to an Investment Advisory
Agreement.
The
Fund pays the Adviser a fee ("Management Fee") in return for providing
investment advisory, supervisory and administrative services under an all-in fee
structure. For the fiscal year ended [October 31, 2025], the Fund paid a monthly
Management Fee to the Adviser at the annual rate set forth in the table below
(stated as a percentage of the Fund's average daily net assets).
|
|
|
|
|
|
| Fund |
Management
Fee |
|
Global
X Rare Earth & Critical Materials ETF
(formerly
known as the Global X Disruptive Materials ETF) |
0.59% |
In
addition, the Fund bears other fees and expenses that are not covered by the
Supervision and Administration Agreement, which may vary and will affect the
total expense ratio of the Fund, such as taxes, brokerage fees, commissions and
other transaction expenses, interest and extraordinary expenses (such as
litigation and indemnification expenses). The Adviser may earn a profit on the
Management Fee paid by the Fund. Also, the Adviser, and not the shareholders of
the Fund, would benefit from any price decreases in third-party services,
including decreases resulting from an increase in net assets.
The
Adviser or its affiliates may pay compensation out of profits derived from the
Adviser's Management Fee or other resources and not as an additional charge to
the Fund, to certain financial institutions (which may include banks, securities
dealers and other industry professionals) for the sale and/or distribution of
Fund Shares or the retention and/or servicing of Fund investors and Fund Shares
("revenue sharing"). These payments are in addition to any other fees described
in the fee table or elsewhere in the Prospectus or SAI. Examples of "revenue
sharing" payments include, but are not limited to, payments to financial
institutions for "shelf space" or access to a third party platform or fund
offering list or other marketing programs, including, but not limited to,
inclusion of the Fund on preferred or recommended sales lists, mutual fund
"supermarket" platforms and other formal sales programs; granting the Adviser
access to the financial institution's sales force; granting the Adviser access
to the financial institution's conferences and meetings; assistance in training
and educating the financial institution's personnel; and obtaining other forms
of marketing support. The level of revenue sharing payments made to financial
institutions may be a fixed fee or based upon one or more of the following
factors: gross sales, current assets and/or number of accounts of the Fund
attributable to the financial institution, or other factors as agreed to by the
Adviser and the financial institution or any combination thereof. The amount of
these revenue sharing payments is determined at the discretion of the Adviser,
from time to time, may be substantial, and may be different for different
financial institutions depending upon the services provided by the financial
institution. Such payments may provide an incentive for the financial
institution to make Shares of the Fund available to its customers and may allow
the Fund greater access to the financial institution's customers.
Approval
of Advisory Agreement
Discussions
regarding the basis for the Board of Trustees' approval of the Supervision and
Administration Agreement and the related Investment Advisory Agreement for the
Fund are available in the Fund's report filed on Form N-CSR for the period ended
[April 30] or [October 31], respectively.
Portfolio
Management
The
Portfolio Managers who are currently responsible for the day-to-day management
of the Fund's portfolio are Nam To, Wayne Xie, Vanessa Yang and Sandy
Lu.
Nam
To:
Nam To, CFA, Portfolio Manager, joined the Adviser in July 2017. Prior to that,
Mr. To was a Global Economics Research Analyst at Bunge Limited. Mr. To received
his Bachelor of Arts in Philosophy and Economics from Cornell University and is
a CFA charterholder.
Wayne
Xie:
Wayne Xie, Head of Portfolio Management, joined the Adviser in July 2018 as a
Portfolio Management Associate. Previously, Mr. Xie was an Analyst at VanEck
Associates on the Equity ETF Investment Management team from 2010 to 2018. Mr.
Xie received his Bachelor of Science from the State University of New York at
Buffalo in 2002.
Vanessa
Yang:
Vanessa Yang, CFA, Portfolio Manager, joined the Adviser in 2016 as a Portfolio
Administrator. She was appointed to the portfolio management team in June 2019.
Previously, Ms. Yang was a Portfolio Administrator at VanEck Associates from
2011 to 2014. Ms. Yang received her MS in Financial Engineering from Drucker
School of Management and her BS in Economics from Guangdong University of
Foreign Studies. She earned her CFA designation in April 2024.
Sandy
Lu:
Sandy Lu, CFA, Portfolio Manager, joined the Adviser in September 2021.
Previously, Mr. Lu was a Portfolio Analyst and Junior Portfolio Manager at PGIM
Fixed Income from 2014 to 2021. Mr. Lu received his Bachelor of Science in
Economics from the Wharton School of the University of Pennsylvania and is a CFA
charterholder.
The
SAI provides additional information about the Portfolio Managers' compensation
structure, other accounts managed by the Portfolio Managers, and the Portfolio
Managers' ownership of Shares of the Fund.
SEI
Investments Distribution Co. ("Distributor") distributes Creation Units for the
Fund on an agency basis. The Distributor does not maintain a secondary market in
Shares. The Distributor has no role in determining the policies of the Fund or
the securities that are purchased or sold by the Fund. The Distributor's
principal address is One Freedom Valley Drive, Oaks, PA 19456. The Distributor
is not affiliated with the Adviser.
Shares
of the Fund trade on a national securities exchange and in the secondary market
during the trading day. Shares can be bought and sold throughout the trading day
like other shares of publicly-traded securities. There is no minimum investment
for purchases made on a national securities exchange. When buying or selling
Shares through a broker, you will incur customary brokerage commissions and
charges. In addition, you will also incur the cost of the "spread," which is the
difference between what professional investors are willing to pay for Shares
(the "bid" price) and the price at which they are willing to sell Shares (the
"ask" price). The commission is frequently a fixed amount and may be a
significant proportional cost for investors seeking to buy or sell small amounts
of Shares. The spread with respect to Shares varies over time based on the
Fund's trading volume and market liquidity, and is generally lower if the Fund
has significant trading volume and market liquidity and higher if the Fund has
little trading volume and market liquidity. Because of the costs of buying and
selling Shares, frequent trading may reduce investment return.
Shares
of the Fund may be acquired or redeemed directly from the Fund only by
Authorized Participants (as defined in the SAI) and only in Creation Units or
multiples thereof, as discussed in the "Creations and Redemptions" section in
the SAI.
Shares
generally trade in the secondary market in amounts less than a Creation Unit.
Shares of the Fund trade under the trading symbol listed for the Fund in the Fund Summary section of this Prospectus.
The
Fund is listed on a national securities exchange, which is open for trading
Monday through Friday and is closed on weekends and the following holidays, as
observed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Juneteenth National Independence Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day.
Book
Entry
Shares
of the 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 and is recognized as the owner of all Shares for
all purposes.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares.
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 rights 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.
Unlike
frequent trading of shares of a traditional open-end mutual fund (i.e., not
exchange-traded shares), frequent trading of Shares on the secondary market does
not disrupt portfolio management, increase the Fund's trading costs, lead to
realization of capital gains, or otherwise harm Fund shareholders because these
trades do not involve the Fund directly. A few institutional investors are
authorized to purchase and redeem the Fund's Shares directly with the Fund. When
these trades are effected in-kind (i.e., for securities, and not for cash), they
do not cause any of the harmful effects (noted above) that may result from
frequent cash trades. Moreover, the Fund imposes transaction fees on in-kind
purchases and redemptions of the Fund intended to cover the custodial and other
costs incurred by the Fund in effecting in-kind trades. These fees increase if
an investor substitutes cash in part or in whole for securities, reflecting the
fact that the Fund's trading costs increase in those circumstances, although
transaction fees are subject to certain limits and therefore may not cover all
related costs incurred by the Fund. For these reasons, the Board of Trustees has
determined that it is not necessary to adopt policies and procedures to detect
and deter frequent trading and market-timing in Shares of the Fund.
The
Board of Trustees of the Trust has adopted a Distribution and Services Plan
("Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund is
authorized to pay distribution fees in connection with the sale and distribution
of its Shares and pay service fees in connection with the provision of ongoing
services to shareholders of each class and the maintenance of shareholder
accounts in an amount up to 0.25% of its average daily net assets each
year.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no current plans
to impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing Shares subject to distribution fees and service fees, you may pay
more over time than you would by purchasing Shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the rules of
FINRA. The net income attributable to Shares will be reduced by the amount of
distribution fees and service fees and other expenses of the Fund.
Dividends
from net investment income, including any net foreign currency gains, generally
are declared and paid at least annually and any net realized capital gains are
distributed at least annually. In order to improve tracking error or comply with
the distribution requirements of the Code, dividends may be declared and paid
more frequently than annually for the Fund.
Dividends
and other distributions on Shares are distributed on a pro rata basis to
beneficial owners of such Shares. Dividend payments are made through DTC
participants to beneficial owners then of record with proceeds received from the
Fund. Dividends and security gain distributions are distributed in U.S. dollars
and cannot be automatically reinvested in additional Shares.
No
dividend reinvestment service is provided by the Trust. Broker-dealers may make
available the DTC book-entry Dividend Reinvestment Service for use by beneficial
owners of the Fund for reinvestment of their dividend distributions. Beneficial
owners should contact their broker to determine the availability and costs of
the service and the details of participation therein. Brokers may require
beneficial owners to adhere to specific procedures and timetables. If this
service is available and used, dividend distributions of both income and
realized gains will be automatically reinvested in additional whole Shares
purchased in the secondary market.
The
following is a summary of certain tax considerations that may be relevant to an
investor in the Fund. Except where otherwise indicated, the discussion relates
to investors who are individual United States citizens or residents and is based
on current tax law. You should consult your tax advisor for further information
regarding federal, state, local and/or foreign tax consequences relevant to your
specific situation.
Distributions.
The Fund receives income and gains on its investments. The income, less expenses
incurred in the operation of the Fund, constitutes the Fund's net investment
income from which dividends may be paid to you. The Fund intends to qualify as a
RIC under the Code for federal tax purposes and to distribute to shareholders
substantially all of its net investment income and net capital gain each year.
Except as otherwise noted below, you will generally be subject to federal income
tax on the Fund's distributions to you. For federal income tax purposes, Fund
distributions attributable to short-term capital gains and net investment income
are taxable to you as ordinary income. Distributions attributable to net capital
gains (the excess of net long-term capital gains over net short-term capital
losses) of the Fund generally are taxable to you as long-term capital gains.
This is true no matter how long you own your Shares or whether you take
distributions in cash or additional Shares. The maximum long-term capital gain
rate applicable to individuals is 20%.
Distributions
of "qualifying dividends" will also generally be taxable to you at long-term
capital gain rates as long as certain requirements are met. In general, if 95%
or more of the gross income of the Fund (other than net capital gain) consists
of dividends received from domestic corporations or "qualified" foreign
corporations ("qualifying dividends"), then all distributions received by
individual shareholders of the Fund will be treated as qualifying dividends. But
if less than 95% of the gross income of the Fund (other than net capital gain)
consists of qualifying dividends, then distributions received by individual
shareholders of the Fund will be qualifying dividends only to the extent they
are derived from qualifying dividends earned by the Fund. For the lower rates to
apply, you must have owned your Shares for at least 61 days during the 121-day
period beginning on the date that is 60 days before the Fund's ex-dividend date
(and the Fund will need to have met a similar holding period requirement with
respect to the Shares of the corporation paying the qualifying dividend). The
amount of the Fund's distributions that qualify for this favorable treatment may
be reduced as a result of the Fund's securities lending activities (if any), a
high portfolio turnover rate or investments in debt securities or
"non-qualified" foreign corporations. In addition, whether distributions
received from foreign corporations are qualifying dividends will depend on
several factors including the country of residence of the corporation making the
distribution. Accordingly, distributions from many of the Fund's holdings may
not be qualifying dividends.
A
portion of distributions paid to shareholders that are corporations may also
qualify for the dividends-received deduction for corporations, subject to
certain holding period requirements and debt financing limitations. The amount
of the dividends qualifying for this deduction may, however, be reduced as a
result of the Fund's securities lending activities, by a high portfolio turnover
rate or by investments in debt securities or foreign corporations.
Distributions
from the Fund will generally be taxable to you in the year in which they are
paid, with one exception. Dividends and distributions declared by the Fund in
October, November or December and paid in January of the following year are
taxed as though they were paid on December 31.
You
should note that if you buy Shares of the Fund shortly before it makes a
distribution, the distribution will be fully taxable to you even though, as an
economic matter, it simply represents a return of a portion of your investment.
This adverse tax result is known as "buying into a dividend."
You
will be informed of the amount of your ordinary income dividends, qualifying
dividend income, and capital gain distributions at the time they are paid, and
you will be advised of the tax status for federal income tax purposes shortly
after the close of each calendar year. If you have not held Shares for a full
year, the Fund may designate and distribute to you, as ordinary income or
capital gain, a percentage of income that is not equal to the actual amount of
such income earned during the period of your investment in the
Fund.
The
Fund's investments in partnerships, including in partnerships defined as
Qualified Publicly Traded Partnerships for tax purposes, may result in the Fund
being subject to state, local or foreign income, franchise or withholding tax
liabilities.
Excise
Tax Distribution Requirements.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
RIC's "required distribution" for the calendar year ending within the RIC's
taxable year over the "distributed amount" for such calendar year. The term
"required distribution" means the sum of (a) 98% of ordinary income (generally
net investment income) for the calendar year, (b) 98.2% of capital gain (both
long-term and short-term) for the one-year period ending on October 31 (or
December 31, if the Fund so elects), and (c) the sum of any untaxed,
undistributed net investment income and net capital gains of the RIC for prior
periods. The term "distributed amount" generally means the sum of (a) amounts
actually distributed by the Fund from its current year's ordinary income and
capital gain net income and (b) any amount on which the Fund pays income tax for
the taxable year ending in the calendar year. Although the Fund intends to
distribute its net investment income and net capital gains so as to avoid excise
tax liability, the Fund may determine that it is in the interest of shareholders
to distribute a lesser amount. The Fund intends to declare and pay these amounts
in December (or in January, which must be treated by you as received in
December) to avoid these excise taxes, but can give no assurances that its
distributions will be sufficient to eliminate all such taxes.
Foreign
Currencies.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency, and the
time the Fund actually collects such receivables or pays such liabilities, are
treated as ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies, from the disposition of debt securities
denominated in a foreign currency, or from the disposition of a forward foreign
currency contract which are attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the asset and the date of
disposition also are treated as ordinary income or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses, increase or
decrease the amount of the Fund's investment company taxable income available to
be distributed to its shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gain.
Foreign
Taxes.
The Fund will be subject to foreign withholding taxes with respect to certain
payments received from sources in foreign countries. If at the close of the
taxable year more than 50% in value of the Fund's assets consists of stock in
foreign corporations, the Fund will be eligible to make an election to treat a
proportionate amount of those taxes as constituting a distribution to each
shareholder, which would allow you either (subject to certain limitations) (1)
to credit that proportionate amount of taxes against your U.S. Federal income
tax liability as a foreign tax credit or (2) to take that amount as an itemized
deduction. If the Fund is not eligible or chooses not to make this election, it
will be entitled to deduct such taxes in computing the amounts it is required to
distribute.
Sales
and Exchanges.
The sale of Shares is a taxable event on which a gain or loss is recognized. The
amount of gain or loss is based on the difference between your tax basis in
Shares and the amount you receive for them upon disposition. Generally, you will
recognize long-term capital gain or loss if you have held your Shares for over
one year at the time you sell or exchange them. Gains and losses on Shares held
for one year or less will generally constitute short-term capital gains, except
that a loss on Shares held six months or less will be re-characterized as a
long-term capital loss to the extent of any long-term capital gain distributions
that you have received on the Shares. A loss realized on a sale or exchange of
Shares may be disallowed under the so-called "wash sale" rules to the extent the
Shares disposed of are replaced with other Shares of that same Fund within a
period of 61 days beginning 30 days before and ending 30 days after the Shares
are disposed of, such as pursuant to a dividend reinvestment in Shares of the
Fund. If disallowed, the loss will be reflected in an adjustment to the basis of
the Shares acquired.
Taxes
on Purchase and Redemption of Creation Units.
An Authorized Participant who exchanges equity securities for Creation Units
generally will recognize a gain or a loss. The gain or loss will be equal to the
difference between the market value of the Creation Units at the time of
purchase (plus any cash received by the Authorized Participant as part of the
issue) and the Authorized Participant's aggregate basis in the securities
surrendered (plus any cash paid by the Authorized Participant as part of the
issue). An Authorized Participant who exchanges Creation Units for equity
securities generally will recognize a gain or loss equal to the difference
between the Authorized Participant's basis in the Creation Units (plus any cash
paid by the Authorized Participant as part of the redemption) and the aggregate
market value of the securities received (plus any cash received by the
Authorized Participant as part of the redemption). The Internal Revenue Service
(the "IRS"), however, may assert that a loss realized upon an exchange of
securities for Creation Units cannot be deducted currently under the rules
governing "wash sales," or on the basis that there has been no significant
change in economic position. Persons exchanging securities should consult their
own tax advisor with respect to whether the wash sale rules apply and when a
loss might be deductible. Under current federal tax laws, any capital gain or
loss realized upon redemption of Creation Units is generally treated as
long-term capital gain or loss if the Shares have been held for more than one
year and as a short-term capital gain or loss if the Shares have been held for
one year or less, assuming such Creation Units are held as a capital
asset.
IRAs
and Other Tax-Qualified Plans.
The one major exception to the preceding tax principles is that distributions
on, and sales, exchanges and redemptions of, Shares held in an IRA or other
tax-qualified plan are not currently taxable but may be taxable when funds are
withdrawn from the tax qualified plan unless the Shares were purchased with
borrowed funds.
Medicare
Tax. An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from the
Fund and net gains from redemptions or other taxable dispositions of Fund
Shares) of U.S. individuals, estates and trusts to the extent that such person's
"modified adjusted gross income" (in the case of an individual) or "adjusted
gross income" (in the case of an estate or trust) exceeds a threshold amount.
This Medicare tax, if applicable, is reported by you on, and paid with, your
federal income tax return.
Backup
Withholding.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury backup withholding at the applicable rate on dividends and gross sales
proceeds paid to any shareholder (i) who has either provided an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the IRS, or (iii) who has failed to certify to the Fund, when
required to do so, that he or she is not subject to backup withholding or is an
"exempt recipient."
Cost
Basis Reporting. Federal
law requires that shareholders' cost basis, gain/loss, and holding period be
reported to the IRS and to shareholders on the Consolidated Form 1099s when
"covered" securities are sold. Covered securities are any RIC and/or dividend
reinvestment plan shares acquired on or after January 1, 2012.
For
those securities defined as "covered" under current IRS cost basis tax reporting
regulations, accurate cost basis and tax lot information must be maintained for
tax reporting purposes. This information is not required for Shares that are not
"covered." The Fund and its service providers do not provide tax advice. You
should consult independent sources, which may include a tax professional, with
respect to any decisions you may make with respect to choosing a tax lot
identification method. Shareholders should contact their financial
intermediaries with respect to reporting of cost basis and available elections
for their accounts.
State
and Local Taxes.
You may also be subject to state and local taxes on income and gain attributable
to your ownership of Shares. You should consult your tax advisor regarding the
tax status of distributions in your state and locality.
U.S.
Tax Treatment of Foreign Shareholders.
A non-U.S. shareholder generally will not be subject to U.S. withholding tax on
gain from the redemption of Shares or on capital gain dividends (i.e., dividends
attributable to long-term capital gains of the Fund) unless, in the case of a
shareholder who is a non-resident alien individual, the shareholder is present
in the United States for 183 days or more during the taxable year and certain
other conditions are met. Non-U.S. shareholders generally will be subject to
U.S. withholding tax at a rate of 30% (or a lower treaty rate, if applicable) on
distributions by the Fund of net investment income, other ordinary income, and
the excess, if any, of net short-term capital gain over net long-term capital
loss for the year, unless the distributions are effectively connected with a
U.S. trade or business of the shareholder. Exemptions from U.S. withholding tax
are provided for certain capital gain dividends paid by the Fund from net
long-term capital gains, if any, interest-related dividends paid by the Fund
from its qualified net interest income from U.S. sources and short-term capital
gain dividends if such amounts are reported by the Fund. Non-U.S. shareholders
are subject to special U.S. tax certification requirements to avoid backup
withholding and claim any treaty benefits. Non-U.S. shareholders should consult
their tax advisors regarding the U.S. and foreign tax consequences of investing
in the Fund.
Other
Reporting and Withholding Requirements. Under
the Foreign Account Tax Compliance Act ("FATCA"), a 30% withholding tax is
imposed on income dividends paid by the Fund to certain foreign entities,
referred to as foreign financial institutions or nonfinancial foreign entities,
that fail to comply (or be deemed compliant) with extensive reporting and
withholding requirements designed to inform the U.S. Department of the Treasury
of U.S.-owned foreign investment accounts. After December 31, 2018, FATCA
withholding also would have applied to certain capital gain distributions,
return of capital distributions and the proceeds arising from the sale of Fund
Shares, however based on proposed regulations issued by the IRS, which may be
relied upon currently, such withholding is no longer required unless final
regulations provide otherwise (which is not expected). Information about a
shareholder in the Fund may be disclosed to the IRS, non-U.S. taxing authorities
or other parties as necessary to comply with FATCA. Withholding also may be
required if a foreign entity that is a shareholder of the Fund fails to provide
the appropriate certifications or other documentation concerning its status
under FATCA.
Consult
Your Tax Professional.
Your investment in the Fund could have additional tax consequences. You should
consult your tax professional for information regarding all tax consequences
applicable to your investments in the Fund. More tax information relating to the
Fund is also provided in the SAI. This short summary is not intended as a
substitute for careful tax planning.
The
Fund calculates its NAV as of the regularly scheduled close of business of The
Nasdaq Stock Market LLC (“NASDAQ” or the "Exchange") (normally 4:00 p.m. Eastern
time) on each day that the Exchange is open for business, based on prices at the
time of closing, provided that any assets or liabilities denominated in
currencies other than the U.S. dollar shall be translated into U.S. dollars at
the prevailing market rates on the date of valuation as quoted by one or more
major banks or dealers that make a two-way market in such currencies (or a data
service provider based on quotations received from such banks or dealers). The
NAV of the Fund is calculated by dividing the value of the net assets of the
Fund (i.e., the value of its total assets less total liabilities) by the total
number of outstanding Shares, generally rounded to the nearest cent. The price
of Fund Shares is based on market price, and because ETF shares trade at market
prices rather than NAV, Shares may trade at a price greater than NAV (a premium)
or less than NAV (a discount).
In
calculating the Fund's NAV, the Fund's investments are generally valued using
market valuations. A market valuation generally means a valuation (i) obtained
from an exchange or a major market maker (or dealer), (ii) based on a price
quotation or other equivalent indication of value supplied by an exchange, a
pricing service, or a major market maker (or dealer), or (iii) based on
amortized cost, provided the amortized cost is approximately the value on
current sale of the security. In the case of shares of funds that are not traded
on an exchange, a market valuation means such fund's published NAV per share.
The Fund may use various pricing services or discontinue the use of any pricing
service.
In
the event that current market valuations are not readily available or such
valuations do not reflect current market values, the affected investments will
be valued using fair value pricing pursuant to the pricing policy and procedures
approved by the Board of Trustees. A price obtained from a pricing service based
on such pricing service's valuation matrix may be used to fair value a security.
The frequency with which the Fund's investments are valued using fair value
pricing is primarily a function of the types of securities and other assets in
which the Fund invests pursuant to its investment objective, strategies and
limitations.
Investments
that may be valued using fair value pricing include, but are not limited to: (i)
an unlisted security related to corporate actions; (ii) a restricted security
(i.e., one that may not be publicly sold without registration under the
Securities Act of 1933, as amended (the "Securities Act")); (iii) a security
whose trading has been suspended or which has been de-listed from its primary
trading exchange; (iv) a security that is thinly traded; (v) a security in
default or bankruptcy proceedings for which there is no current market
quotation; (vi) a security affected by currency controls or restrictions; and
(vii) a security affected by a significant event (i.e., an event that occurs
after the close of the markets on which the security is traded but before the
time as of which the Fund's NAV is computed and that may materially affect the
value of the Fund's investments). Examples of events that may be "significant
events" are government actions, natural disasters, armed conflict, acts of
terrorism, and significant market fluctuations.
Valuing
the Fund's investments using fair value pricing will result in using prices for
those investments that may differ from current market valuations. Use of fair
value prices and certain current market valuations could result in a difference
between the prices used to calculate the Fund's NAV and the prices used by the
Fund's Underlying Index, which, in turn, could result in a difference between
the Fund's performance and the performance of the Fund's Underlying
Index.
Because
foreign markets may be open on different days than the days during which a
shareholder may purchase Shares, the value of the Fund's investments may change
on days when shareholders are not able to purchase Shares. Additionally, due to
varying holiday schedules, redemption requests made on certain dates may result
in a settlement period exceeding seven calendar days.
The
value of assets denominated in foreign currencies is converted into U.S. dollars
using exchange rates deemed appropriate by the Adviser. Any use of a different
rate from the rates used by the Index Provider may adversely affect the Fund's
ability to track its Underlying Index.
The
right of redemption may be suspended or the date of payment postponed with
respect to the Fund (1) for any period during which the Exchange or listing
exchange is closed (other than customary weekend and holiday closings), (2) for
any period during which trading on the Exchange or listing exchange is suspended
or restricted, (3) for any period during which an emergency exists as a result
of which disposal of the Fund's portfolio securities or determination of its NAV
is not reasonably practicable, or (4) in such other circumstances as the SEC
permits.
Subject
to oversight by the Board of Trustees, the Adviser, as “valuation designee,”
performs fair value determinations of Fund investments. In addition, the
Adviser, as the valuation designee, is responsible for periodically assessing
any material risks associated with the determination of the fair value of a
Fund's investments; establishing and applying fair value methodologies; testing
the appropriateness of fair value methodologies; and overseeing and evaluating
third-party pricing services. The Adviser has established a fair value committee
to assist with its designated responsibilities as valuation
designee.
Once
available, information regarding how often the Shares of the Fund traded on a
national securities exchange at a price above (i.e., at a premium to) or below
(i.e., at a discount to) the NAV of the Fund; the Fund’s per share NAV, and the
median bid-ask spread of the Shares can be found at
www.globalxetfs.com.
TOTAL
RETURN INFORMATION
The
tables that follow present information about the total returns of the Fund's
Underlying Index and the total returns of the Fund. The information presented
for the Fund is as of its fiscal year ended [October 31, 2025].
“Annualized
Total Returns” or "Cumulative Total Returns" represent the total change in value
of an investment over the periods indicated.
The
Fund’s per share NAV is the value of one share of the Fund as calculated in
accordance with the standard formula for valuing mutual fund Shares. The NAV
return is based on the NAV of each Fund and the market return is based on the
market prices of the Fund. The price used to calculate market prices is
determined by using the midpoint between the bid and the ask on the primary
stock exchange on which Shares of the Fund are listed for trading, as of the
time that the Fund’s NAV is calculated. Market and
NAV
returns assume that dividends and capital gain distributions have been
reinvested in the Fund at market prices and NAV, respectively.
An
index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the Underlying Index does not actually hold a portfolio
of securities and therefore does not incur the expenses incurred by the Fund.
These expenses negatively impact the performance of the Fund. Also, market
returns do not include brokerage commissions that may be payable on secondary
market transactions. If brokerage commissions were included, market returns
would be lower. The returns shown in the tables below do not reflect the
deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund Shares. The investment return and principal value of
Shares of the Fund will vary with changes in market conditions. Shares of the
Fund may be worth more or less than their original cost when they are redeemed
or sold in the market. The Fund’s past performance is no guarantee of future
results.
Annualized
Total Returns
Inception
on 1/24/22 to [10/31/25]
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV |
MARKET |
UNDERLYING
INDEX |
|
Global
X Rare Earth & Critical Materials ETF (formerly known as the Global X
Disruptive Materials ETF) |
[(11.79)%] |
[(11.74)%] |
[(11.35)%] |
Cumulative
Total Returns
Inception
to [10/31/25]
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV |
MARKET |
UNDERLYING
INDEX |
|
Global
X Rare Earth & Critical Materials ETF (formerly known as the Global X
Disruptive Materials ETF) |
[(29.35)%] |
[(29.25)%] |
[(28.38)%] |
[Solactive
Rare Earth & Critical Materials Index]
[The
Solactive Rare Earth & Critical Materials Index (the "Underlying Index") is
designed to provide exposure to companies that produce rare earth components,
metals and other raw or composite materials that have been identified as being
essential to critical technologies such as consumer electronics, electric
vehicles, aircraft engines, energy storage, medical equipment, oil refining,
automotive and chemical products, robotics and in military applications such as
missiles and radar systems . Each material has been determined by Solactive AG,
the provider of the Underlying Index (the “Index Provider”) to be a rare earth
element and/or a material instrumental to the development and production of one
or more critical technologies. Critical technologies refer to those technologies
that are essential to the development and production of long-term, structural
changes to existing products, services, industries, or sectors. Specifically,
the Underlying Index will include securities issued by “Rare Earth &
Critical Materials Companies” as defined by the Index Provider. Rare Earth &
Critical Materials Companies are those companies that derive at least 50% of
their revenues in aggregate from the exploration, mining, production and/or
enhancement of one or more of the following ten materials categories: Carbon
Fiber, Cobalt, Copper, Graphene & Graphite, Lithium, Manganese, Nickel,
Platinum & Palladium, Rare Earth Elements, and Zinc (collectively, “Rare
Earth & Critical Materials Categories”). Companies engaged in exploration
and mining include those companies involved in locating and extracting rare
earth elements and critical materials. Companies engaged in production include
those companies involved in manufacturing, processing, and trading rare earth
elements and critical materials for primary usage. Companies engaged in
enhancement include those companies involved in refining, developing, and/or
smelting materials to extract and purify rare earth elements and critical
materials. As of [ ], 2025, the Underlying Index had [ ] constituents.
For
the Lithium category, companies that derive greater than 25% but less than 50%
of revenue from the production and/or processing of lithium are also eligible
for inclusion (collectively, “Diversified Lithium Companies”). In addition,
companies with primary business operations in the exploration, mining,
production and/or enhancement of one or more of the Rare Earth & Critical
Materials Categories, but which are not currently generating revenue, are also
eligible for inclusion (collectively, “Pre-Revenue Rare Earth & Critical
Materials Companies”). To determine whether a company has primary business
operations in the exploration, mining, production and/or enhancement of one or
more of the Rare Earth & Critical Materials Categories, the Index Provider
reviews the public financial disclosures and filings of the company, and
identifies the products and business segments disclosed therein. The Index
Provider then reviews the management discussion and analysis, as well as the
level of investment the company allocates to those products and segments, to
determine whether those business operations are the primary operations of the
company.
In
constructing the Underlying Index, the Index Provider applies a proprietary
natural language processing algorithm to the eligible universe, which seeks to
identify and rank companies involved in each of the Rare Earth & Critical
Materials Categories based on
filings,
disclosures, and other public information (e.g., regulatory filings, earnings
transcripts, etc.). The highest-ranking companies identified by the natural
language processing algorithm in each Rare Earth & Critical Materials
Category, as of the selection date, are further reviewed by the Index Provider
to confirm they derive at least 50% of their revenues from one of the Rare Earth
& Critical Materials Categories as described above, derive between 25% and
50% of their revenues from the Lithium category in the case of Diversified
Lithium Companies, or have primary business operations in the exploration,
mining, production and/or enhancement of one or more of the Rare Earth &
Critical Materials Categories but do not currently generate revenues in the case
of Pre-Revenue Rare Earth & Critical Materials Companies. The five
highest-ranking Rare Earth & Critical Materials Companies and Pre-Revenue
Rare Earth & Critical Materials Companies according to free float market
capitalization from each Rare Earth & Critical Materials Category are
included in the Underlying Index. For the Lithium category, the five
highest-ranking Rare Earth & Critical Materials Companies, Pre-Revenue Rare
Earth & Critical Materials Companies and Diversified Lithium Companies
according to free float market capitalization are included. If fewer than five
companies are identified that satisfy the above criteria within a Rare Earth
& Critical Materials Category, all eligible companies are selected, and the
category consists of fewer than five companies.
To
be a part of the eligible universe of the Underlying Index, companies must be
classified in one of the following Economies according to FactSet (a leading
financial data provider that maintains a comprehensive structured taxonomy
designed to offer precise classification of global companies and their
individual business units): Basic Materials, Industrials, or Technology. In
addition, certain minimum market capitalization and liquidity criteria, as
defined by the Index Provider, must be met. As of [ ], 2025, companies must have
a minimum market capitalization of $100 million and a minimum average daily
turnover for the last 6 months greater than or equal to $1 million in order to
be eligible for inclusion in the Underlying Index. As of [ ], 2025, companies
listed in the following countries were eligible for inclusion in the Underlying
Index: Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia,
Czechia, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Kuwait, Malaysia, Mexico, Netherlands,
New Zealand, Norway, Philippines, Poland, Portugal, Qatar, Saudi Arabia,
Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan,
Thailand, Turkey, United Kingdom, United States, and the United Arab Emirates.
As of [ ], 2025, the Underlying Index had significant exposure to Chinese
issuers. The Fund may invest in China A-Shares, which are issued by companies
incorporated in mainland China and traded on Chinese exchanges. The Fund may
invest in securities of issuers located in emerging markets.
The
Underlying Index is weighted according to a modified capitalization weighting
methodology and is reconstituted and re-weighted semi-annually. Modified
capitalization weighting seeks to weight constituents primarily based on market
capitalization, but subject to caps on the weights of the individual securities.
During each rebalance, the maximum weight of a company is capped at 4%, and all
constituents are subject to a minimum weight of 0.3%. In addition, Diversified
Lithium Companies and Pre-Revenue Rare Earth & Critical Materials Companies
are subject to an aggregate weight cap of 10% at each semi-annual rebalance.
Generally speaking, modified capitalization weighting will limit the amount of
concentration in the largest market capitalization companies and increase
company-level diversification. The Underlying Index may include large-, mid-,
small-, or micro-capitalization companies, and components primarily include
materials companies.]
Disclaimer
Solactive
AG is a leading company in the structuring and indexing business for
institutional clients. Solactive AG runs the Solactive index platform. Solactive
indices are used by issuers worldwide as underlying indices for financial
products. Solactive AG does not sponsor, endorse or promote any Funds and is not
in any way connected to them and does not accept any liability in relation to
their issue, operation and trading.
SEI
Investments Global Funds Services is the sub-administrator for the
Fund.
Bank
of New York Mellon is the custodian and transfer agent for the
Fund.
Stradley
Ronon Stevens & Young, LLP serves as counsel for the Trust and the Trust's
Independent Trustees.
[
] serves as the Fund's independent registered public accounting firm and has
audited the financial statements for the Fund for the fiscal year ending
[October 31, 2022, 2023, 2024 and 2025, as applicable] and for subsequent
periods.
The
Trust enters into contractual arrangements with various parties, including among
others, the Funds’ Adviser, sub-adviser(s) (as applicable), custodian(s), and
transfer agent(s) who provide services to the Funds. Shareholders are not
parties to any such contractual arrangements and are not intended beneficiaries
of those contractual arrangements, and those contractual arrangements
are
not intended to create in any shareholder any right to enforce them against the
service providers or to seek any remedy under them against the service
providers, either directly or on behalf of the Trust.
This
Prospectus provides information concerning the Fund that investors should
consider in determining whether to purchase Fund Shares. Neither this Prospectus
nor the SAI is intended, or should be read, to be or give rise to an agreement
or contract between the Trust or the Fund and any investor, or to give rise to
any rights in any shareholder or other person other than any rights under
federal or state law that may not be waived.
The
Fund has commenced operations and has financial highlights for the fiscal year
ended [October 31, 2025]. The financial highlights tables are intended to help
investors understand the Fund’s financial performance since the Fund's
inception. Certain information reflects financial results for a single Share of
a Fund. 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.
[
] serves as the Fund's independent registered public accounting firm and has
audited the financial statements of the Funds for the fiscal years ended
[October 31, 2022, 2023, 2024 and 2025] as applicable. The Fund's financial
statements are available without charge upon request. The most recent report
appears in the Fund's October 31, 2025 annual reports to shareholders, which is
available without charge upon request.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
Asset Value, Beginning of Period ($) |
Net
Investment Income (Loss) ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of
Capital ($) |
Total
from Distributions ($) |
Net
Asset Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income (Loss) to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
| Global
X Rare Earth & Critical Materials ETF (formerly known as the Global X
Disruptive Materials ETF) |
| 2025 |
[
] |
[
] |
[
] |
[
] |
[
] |
|
|
[
] |
[
] |
[
] |
[
] |
[
] |
[
] |
[
] |
| 2024 |
14.23
|
0.12
|
1.95
|
2.07 |
(0.18) |
— |
— |
(0.18) |
16.12 |
14.61 |
5,965 |
0.59 |
0.83 |
22.42 |
| 2023 |
18.07
|
0.34
|
(3.88) |
(3.54) |
(0.30) |
— |
— |
(0.30) |
14.23 |
(19.96) |
7,684 |
0.59 |
1.84 |
36.55 |
|
2022(1) |
23.75
|
0.45
|
(5.88) |
(5.43) |
(0.25) |
— |
— |
(0.25) |
18.07 |
(22.98) |
3,433 |
0.60
† |
2.72
† |
25.34 |
|
|
|
|
|
|
| *
|
Per
share data calculated using average shares method. |
| **
|
Total
Return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay
on Fund distributions or the redemption of Fund shares. |
| †
|
Annualized. |
| ††
|
Portfolio
turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers. |
| (1) |
The
Fund commenced operations on January 24,
2022. |
Amounts
designated as "—" are either $0 or have been rounded to $0.
The
Fund is not sponsored, endorsed, sold or promoted by any national securities
exchange. No national securities exchange makes any representation or warranty,
express or implied, to the owners of Shares or any member of the public
regarding the advisability of investing in securities generally or in the Fund
particularly or the ability of the Fund to achieve its objective. No national
securities exchange has any obligation or liability in connection with the
administration, marketing or trading of the Fund.
For
purposes of the 1940 Act, shares that are issued by a registered investment
company and purchases of such shares by investment companies and companies
relying on Sections 3(c)(1) or 3(c)(7) of the 1940 Act are subject to the
restrictions set forth in Section 12(d)(1) of the 1940 Act. Registered
investment companies may be permitted to invest in the Fund beyond the limits
set forth in section 12(d)(1), subject to certain conditions set forth in Rule
12d1-4 under the 1940 Act, including that such investment companies enter into
an agreement with the Fund.
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Fund on an ongoing basis, a "distribution," as such term is used in the
Securities Act, may occur at any point. Broker-dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker-dealers
who are not "underwriters" but are participating in a distribution (as
contrasted with ordinary secondary trading transactions), and thus dealing with
Shares that are part of an "unsold allotment" within the meaning of Section
4(a)(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(a)(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that
dealers who are not underwriters but are participating in a distribution (as
contrasted with ordinary secondary market transactions) and thus dealing with
the Shares that are part of an overallotment within the meaning of Section
4(a)(3)(A) of the Securities Act would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
Firms that incur a prospectus delivery obligation with respect to Shares are
reminded that, under Rule 153 of the Securities Act, a prospectus delivery
obligation under Section 5(b)(2) of the Securities Act owed to an exchange
member in connection with a sale on NASDAQ is satisfied by the fact that the
prospectus is available at NASDAQ upon request. The prospectus delivery
mechanism provided in Rule 153 is only available with respect to transactions on
an exchange.
For
more information visit our website at
www.globalxetfs.com
or
call 1-888-493-8631
|
|
|
|
|
|
|
Investment
Adviser and Administrator
Global
X Management Company LLC
605 3rd Avenue, 43rd Floor
New York, NY
10158
|
|
|
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
|
|
|
Custodian
and Transfer Agent
The
Bank of New York Mellon
240
Greenwich Street
New
York, New York 10286 |
|
|
Sub-Administrator
SEI
Investments Global Funds Services
One
Freedom Valley Drive
Oaks,
PA 19456
|
|
|
Legal
Counsel to the Global X Funds®
and Independent Trustees
Stradley
Ronon Stevens & Young, LLP
2000
K Street N.W., Suite 700
Washington,
DC 20006
|
|
|
Independent
Registered Public Accounting Firm
[
] |
|
A
Statement of Additional
Information
dated [ ], 2025, which contains more details about the Fund, is incorporated by
reference in its entirety into this Prospectus, which means that it is legally
part of this Prospectus.
Additional
information about each Fund that has commenced operations and its investments is
available in its annual and semi-annual reports to shareholders and in Form
N-CSR. The annual report explains the market conditions and investment
strategies affecting each Fund’s performance during its last fiscal year. In
Form N-CSR you will find each Fund’s annual and semi-annual financial
statements.
You
can ask questions or obtain a free copy of each such Fund’s semi-annual and
annual report, the Statement of Additional Information, or other information,
such as Fund financial statements, by calling 1-888-493-8631. Free copies of a
Fund’s semi-annual and annual report and the Statement of Additional Information
are available from our website at www.globalxetfs.com.
Information
about each Fund, including its semi-annual and annual reports and the Statement
of Additional Information, has been filed with the SEC. It can be reviewed and
copied on the EDGAR database on the SEC’s internet site (http://www.sec.gov).
You can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC’s e-mail address
([email protected]).
PROSPECTUS
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
[
], 2025
Investment
Company Act File No.: 811-22209
