ck0001499655-20260429
Precidian ETFs
Trust
Prospectus
April 30,
2026
Precidian
ETFs Trust (“Trust”) is a registered investment company consisting of separate
investment portfolios called “Series.” This Prospectus relates solely to the
following Series:
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Series
Name |
Ticker
Symbol |
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Airbus
SE ADRhedged™* |
EADH |
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Anheuser-Busch
InBev SA/NV ADRhedged™* |
BUDH |
| argenx
SE ADRhedged™* |
ARGH |
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Arm
Holdings PLC ADRhedged™ |
ARMH |
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ASE
Technologies Holding Co. Ltd.
ADRhedged™* |
ASXH |
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ASML
Holding NV ADRhedged™ |
ASMH |
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Barclays
PLC ADRhedged™* |
BCSH |
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Banco
Santander S.A. ADRhedged™* |
SANH |
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Bayer
AG ADRhedged™* |
BAYH |
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Bayerische
Motoren Werke AG ADRhedged™* |
BMWH |
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BP
p.l.c. ADRhedged™ |
BPH |
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British
American Tobacco p.l.c. ADRhedged™* |
BTIH |
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Diageo
plc ADRhedged™* |
DEOH |
| Deutsche
Telekom AG ADRhedged™* |
DTEH |
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GSK
plc ADRhedged™ |
GSKH |
| Haleon
plc ADRhedged™* |
HLNH |
| Heineken
NV ADRhedged™* |
HEIH |
| Hermes
International SA ADRhedged™* |
HESH |
| Hitachi
Ltd. ADRhedged™* |
HTHH |
| Honda
Motor Co. Ltd. ADRhedged™* |
HMCH |
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HSBC
Holdings plc ADRhedged™ |
HSBH |
| ING
Groep NV ADRhedged™* |
INGH |
| Lloyds
Banking Group plc ADRhedged™* |
LYGH |
| L’Oreal
SA ADRhedged™* |
LRLH |
| LVMH
Moet Hennessy Louis Vuitton SE ADRhedged™* |
LVH |
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Mitsubishi
UFJ Financial Group, Inc. ADRhedged™* |
MUFH |
| Mizuho
Financial Group Inc. ADRhedged™* |
MFGH |
| National
Grid plc ADRhedged™* |
NGGH |
| Nestle
SA ADRhedged™* |
NSRH |
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Novartis
AG ADRhedged™* |
NVSH |
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Novo
Nordisk A/S (B Shares) ADRhedged™ |
NVOH |
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Rio
Tinto plc ADRhedged™* |
RIOH |
| Roche
Holding AG ADRhedged™* |
RHHH |
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Sanofi
ADRhedged™* |
SNYH |
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SAP
SE ADRhedged™ |
SAPH |
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Shell
plc ADRhedged™ |
SHEH |
| Siemens
AG ADRhedged™* |
SIEH |
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Silicon
Motion Technology Corp. ADRhedged™* |
SIMH |
| Softbank
Group Corp. ADRhedged™* |
SFTH |
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Sony
Group Corp. ADRhedged™* |
SONH |
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STMicroelectronics
NV ADRhedged™ |
STHH |
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Taiwan
Semiconductor Manufacturing Co. Ltd. ADRhedged™* |
TSMH |
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TotalEnergies
SE ADRhedged™* |
TTEH |
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Toyota
Motor Corporation ADRhedged™ |
TMH |
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Unilever
PLC ADRhedged™* |
ULVH |
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United
Microelectronics Corp. ADRhedged™* |
UMCH |
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Vodafone
Group Plc ADRhedged™* |
VODH |
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*The
Series has not commenced operations as of its fiscal year ended December
31, 2025. |
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Each
Series is an exchange-traded fund. This means that Shares of the Series are
listed on NYSE Arca (the “Exchange”) and trade at market prices. The market
price for a Series Shares may be different from its net asset value per share
(“NAV”).
Neither
the U.S. Securities and Exchange Commission nor any state securities commission
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this Prospectus. Any representation to the contrary is a criminal
offense.
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Not
FDIC Insured |
May
Lose Value |
No
Bank Guarantee
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TABLE
OF CONTENTS
AIRBUS SE
ADRhedged™
Investment
Objective
The
Airbus SE ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of Airbus SE in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
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Management
Fee |
0.17 |
% |
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Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
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Other
Expenses |
0.02 |
% |
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Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of Airbus SE (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities markets.
ADRs of the Company are unsponsored, meaning that the ADRs are issued by the
depositary bank without the involvement of the Company. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary’s transaction fees. Under an unsponsored ADR arrangement, the
foreign issuer assumes no obligations and the depositary’s transaction fees are
paid directly by the ADR holders. Because unsponsored ADR arrangements
are organized independently and without the cooperation of the issuer of the
underlying securities, available information concerning the foreign issuer may
not be as current as for sponsored ADRs and voting rights with respect to the
deposited securities are not passed through. With respect to unsponsored
ADRs, foreign issuers (such as the Company) are generally not subject to U.S.
reporting obligations, and they are not required to make filings with the U.S
Securities and Exchange Commission.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges or
over-the-counter markets, they are still subject to currency risk because
changes in foreign currency exchange rates affect their value. The Currency
Hedge Contract is designed to minimize the impact of fluctuations in the
exchange rate between the U.S. dollar and the Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Airbus
SE
Airbus
SE is the largest aeronautics and space company in Europe. Airbus SE designs,
manufactures, and delivers products, services and solutions for the commercials
aircraft, helicopter, defence, and space sectors. Airbus SE is primarily traded
on the Paris Stock Exchange.
Information
regarding Airbus SE may be obtained from publicly available sources including,
but not limited to, the company’s website (www.airbus.com), press releases,
newspaper articles and other publicly disseminated documents. Airbus SE ADRs
trade on the over-the-counter market (“OTC”). Information regarding Airbus SE
may also be obtained from the SEC’s website
(https://www.sec.gov/search-filings/cik-lookup). Investors should be aware that
the SEC’s website has information about the unsponsored ADRs related to the
Company, however, the SEC's website does not have disclosure about the Company
nor is such disclosure about the Company disclosed by the Company. Securities
that trade OTC are not traded on a securities exchange but are purchased from
broker-dealers that make a market in the securities. Broker-dealers that provide
a quote for Airbus SE ADRs are required to comply with Rule 15c2-11 under the
Securities Exchange Act of 1934, as amended (“Exchange Act”). Rule 15c2-11
requires the broker-dealer, prior to providing a quote on an OTC security, to
obtain and review certain publicly available information for the OTC security,
and to have a reasonable basis for believing that the information is accurate
and from a reliable source. Investors are highly encouraged to conduct their own
research on Airbus SE, and seek information form their financial advisor, prior
to investing in the Fund. Neither the Series nor the Manager are responsible for
the content in such other sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding
Airbus SE from the publicly available documents described above. Neither the
Fund, the Trust, the Adviser nor any affiliate has participated in the
preparation of such documents. Neither the Fund, the Trust, the Adviser nor any
affiliate makes any representation that such publicly available documents or any
other publicly available information regarding Airbus SE is accurate or
complete. Furthermore, the Fund cannot give any assurance that all events
occurring prior to the date of the prospectus (including events that would
affect the accuracy or completeness of the publicly available documents
described above) that would affect the trading price of Airbus
SE
have been publicly disclosed. Subsequent disclosure of any such events or the
disclosure of, or failure to disclose, material future events concerning Airbus
SE could affect the value of the Fund’s investments with respect to Airbus SE
and therefore the value of the Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in a
bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risk
of Investing in France.
The Series’ investment in French issuers subjects the Series to legal,
regulatory, political, currency, security, and economic risks specific to
France. Concerns have emerged with respect to the economic outlook for certain
European Union (the “EU”) countries, including France. External demand for
French exports is expected to be negatively impacted by the United Kingdom’s
(the “U.K.”) decision to leave the EU. As a result, the French economy may
experience adverse trends due to concerns about a prolonged economic downturn,
potential weakness in exports, high rates of unemployment and rising government
debt levels. The French economy is dependent on agricultural exports and, as a
result, is susceptible to fluctuations in demand for agricultural products.
France has experienced several terrorist attacks over the past several years,
creating a climate of insecurity that has been detrimental to
tourism.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any other member states
will likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Euronext Paris Stock Exchange may be open
on days when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Airbus
SE Company Risk. Because the Series only invests in ADRs of the Company and the
Currency Hedge Contract, the Series may be adversely affected by the performance
of the Company, subject to increased price volatility and more susceptible to
adverse economic, market, political or regulatory occurrences affecting the
Company. Airbus SE may perform poorly, 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 chain,
shortages of critical materials, labor problems or shortages, corporate
restructurings, fraudulent disclosures or other factors. Issuers may, in times
of distress or at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Airbus
SE Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with operating companies and aerospace and defense industry
companies, Airbus SE faces risks unique to its operations including, among
others, geopolitical instability impacting defense spending, complex and costly
development projects, stringent regulatory environments, cyber security threats,
technological obsolescence, reputational damage from accidents, and potential
for ethical concerns surrounding military technology
development.
Aerospace
and Defense Industry Risk. Government
aerospace and defense regulation and spending policies can significantly affect
the aerospace and defense industry because many companies involved in the
aerospace and defense industry rely to a large extent government demand for
their products and services. There are significant risks inherent in contracting
with governments that could have a material adverse effect on the business,
financial condition and results of operations of industry
participants.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. There is also no guarantee that a financial institution
will continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities if it needs to do so, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the
additional
fees, which it would not pay if investing directly in the foreign securities. In
addition, the underlying issuers of certain depositary receipts are under no
obligation to distribute Shareholder communications or pass through any voting
rights with respect to the deposited securities to the holders of such receipts.
The Series may therefore receive less timely information or have less control
than if it invested directly in the foreign
issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available in English and generally made available to the public in a
manner described above in the Principal Investment Strategies, investors in the
Series may not be able to gather information on which to make investment
decisions. In such circumstances, the Adviser will advise the Board of Trustees
of the Series of the circumstances, and the Board may make a determination to
cease operations of the Series. In such circumstances, the Series may distribute
the underlying ADRs in kind to shareholders, the Fund may liquidate the
positions and distribute cash to shareholders, or the Board may take such other
actions as it deems most appropriate for, and in the best of, shareholders under
the circumstances.
Risks
of Investing in Unsponsored Depositary Receipts.
Unsponsored ADRs carry specific risks compared to sponsored ADRs. Here are some
key risks to consider:
•Lack
of Control by the Foreign Company: Unsponsored ADRs are issued without the
involvement or consent of the foreign company, which means the company may not
provide timely or accurate financial information, potentially leading to a lack
of transparency.
•Limited
Information: Since the foreign issuer is not directly involved, the level of
financial disclosure and corporate governance might be lower. Investors may not
have access to crucial information that would be available with a sponsored
ADR.
•Liquidity
Issues: Unsponsored ADRs can have lower trading volumes compared to sponsored
ADRs, which might lead to wider bid-ask spreads and difficulties in executing
trades.
•Exchange
Rate Risk: Like all foreign investments, unsponsored ADRs are subject to
currency risk. Fluctuations in the exchange rate can significantly impact the
value of the investment.
•Regulatory
Risks: Different regulatory environments may affect the company's operations and
financial health. Unsponsored ADRs may not comply with the same regulatory
standards as sponsored ADRs. The regulatory requirements applicable to a foreign
issuer may be different than those of the United States, and as a result, the
frequency and level of detail of disclosure about the operations of such an
issuer may be less than the requirements imposed on issuers whose securities are
registered in the United States.
•Potential
for Higher Volatility: Due to lower liquidity and less oversight, unsponsored
ADRs may experience higher price
volatility.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series
Shares
have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has not
yet commenced operations and therefore does not have a performance history for a
full calendar year. Performance information for the Series will be provided once
it has annual returns for a full calendar year. Please
remember that the Series past performance (before and after taxes) is not
necessarily an indication of its future performance. It may perform better or
worse in the future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
ANHEUSER-BUSCH INBEV
SA/NV ADRhedged™
Investment
Objective
The
Anheuser-Busch InBev SA/NV ADRhedged™ (the “Series”) seeks to provide investment
results that correspond generally, before fees and expenses, to the total return
of the ordinary shares of Anheuser-Busch InBev SA/NV in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Anheuser-Busch
InBev SA/NV (the “Company”). The Series will not invest directly
in the Company. ADRs are receipts, issued by an American bank or trust issuer,
which evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Anheuser-Busch
InBev SA/NV
Anheuser-Busch
InBev SA/NV is a multinational drink and brewing company based in Leuven,
Belgium.
Anheuser-Busch InBev SA/NV is registered under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). Information provided to or filed
with the SEC by Anheuser-Busch InBev SA/NV pursuant to the Exchange Act can be
located by reference to the SEC file number 001-37911. The SEC maintains an
internet site that contains reports, proxy, and information statements and other
information regarding the issuer at www.sec.gov. In addition, information
regarding Anheuser-Busch InBev SA/NV may be obtained from other sources
including, but not limited to, press releases, newspaper articles and other
publicly disseminated documents. Neither the Series nor the Manager are
responsible for the content in such other sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Belgium. The
risks of investing in the securities of a Belgium company include risks of lack
of natural resources. Any fluctuation or shortage in the commodity markets could
have a negative impact on the Belgian economy.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any other member states
will likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk. Because
non-U.S. exchanges such as the Brussels Stock Exchange may be open on days when
the Series does not price its Shares, the value of the underlying securities of
the ADRs in the Series portfolio may change on days when Shareholders will not
be able to purchase or sell the Series Shares, regardless of whether there is an
active U.S. market for Shares.
Currency
Hedging Risk.
Because changes in foreign currency exchange rates affect the value of ADRs, the
Series enters into the Currency Hedge Contract in order to seek to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching
between
the Currency Hedge Contract and the currencies that the contract intends to
hedge, and there can be no assurance that the Currency Hedge Contract will be
effective. The return of the Currency Hedge Contract will not perfectly offset
the actual fluctuations between the Local Currency and the U.S. dollar. It is
possible that a degree of currency exposure may remain even at the time the
Currency Hedge Contract is implemented. The Series may not be able to structure
the Currency Hedge Contract as anticipated or the Currency Hedge Contract may
not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company, the beverages
industry or Belgium. Any issuer may perform poorly, 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 at their own discretion,
decide to reduce or eliminate dividends, which may also cause their stock prices
to decline.
Beverages
Industry Risk.
The Series is subject to the risks faced by companies in the beverage industry,
including: changes in demand for products, demographic and product trends and
general economic conditions; effects of competitive pricing, environmental
factors, marketing campaigns and consumer boycotts; and adverse effects from
governmental regulation and oversight. The beverage industry may also be
affected by risks that affect the broader consumer staples
industry.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign
currency
exchange rate. Although the ADRs in which the Series invests will be listed on
major U.S. exchanges, there can be no assurance that a market for these
securities will be made or maintained or that any such market will be or remain
liquid. There is also no guarantee that a financial institution will continue to
sponsor a particular ADR. As a result, the Series may have difficulty selling
securities if it needs to do so, or selling them quickly and efficiently at the
prices at which they have been valued. The depositary bank may not have physical
custody of the underlying securities at all times and may charge fees for
various services, including forwarding dividends and interest, and processing
corporate actions. A Series would be expected to pay a share of the additional
fees, which it would not pay if investing directly in the foreign securities. In
addition, the underlying issuers of certain depositary receipts are under no
obligation to distribute Shareholder communications or pass through any voting
rights with respect to the deposited securities to the holders of such receipts.
The Series may therefore receive less timely information or have less control
than if it invested directly in the foreign
issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has not
yet commenced operations and therefore does not have a performance history for a
full calendar year. Performance information for the Series will be provided once
it has annual returns for a full calendar year. Please
remember that the Series past performance (before and after taxes) is not
necessarily an indication of its future performance. It may perform better or
worse in the future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
ARGENX SE
ADRhedged™
Investment
Objective
The
argenx SE ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of argenx SE in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the argenx SE (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities
markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
argenx
SE
argenx
SE, headquartered in the Netherlands, is a global immunology company that
focuses on the development of human antibodies.
argenx SE is listed on Euronext Brussells under the code
NL0010832176.
argenx
SE is
registered under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Information provided to or filed with the SEC by
argenx SE pursuant to the Exchange Act can be located by reference to the SEC
file number 001-38097. The SEC maintains an internet site that contains reports,
proxy, and information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding argenx SE may be obtained from
other sources including, but not limited to, press releases, newspaper articles
and other publicly disseminated documents. Neither the Series nor the Manager
are responsible for the content in such other sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risk
of Investing in the Netherlands. Investments
in Dutch issuers will
subject
the Series to legal, regulatory,
political,
currency, security and
economic
risk specific to the
Netherlands
and the countries that use
the
euro. In addition, because the
economy
of the Netherlands is export
driven,
the Netherlands relies heavily on
its
key trading partners.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any other member states
will likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Euronext Amsterdam Stock Exchange may be
open on days when the Series does not price its Shares, the value of the
underlying securities of the ADRs in the Series portfolio may change on days
when Shareholders will not be able to purchase or sell the Series Shares,
regardless of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Biotechnology
Companies Risk. Biotech
companies invest heavily in research and development which may not necessarily
lead to commercially successful products. These companies are also subject to
increased governmental regulation which may delay or inhibit the release of new
products. Many biotech companies are dependent upon their ability to use and
enforce intellectual property rights and patents. Any impairment of such rights
may have adverse financial consequences. Biotech stocks, especially those of
smaller, less-seasoned companies, tend to be more volatile than the overall
market. Biotech companies can be significantly affected by technological change
and obsolescence, product liability lawsuits and consequential high insurance
costs.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its
assets
in securities of a single company than diversified funds, the performance of
that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has not
yet commenced operations and therefore does not have a performance history for a
full calendar year. Performance information for the Series will be provided once
it has annual returns for a full calendar year. Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
ARM HOLDINGS PLC
ADRhedged™
Investment
Objective
The
Arm Holdings PLC ADRhedged™ (the “Series”) seeks to provide investment results
that correspond generally, before fees and expenses, to the total return of the
ordinary shares of Arm Holdings PLC in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$19 |
$61 |
$107 |
$243 |
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. From March
13, 2025, the date operations commenced, through the fiscal year ended December
31, 2025, the Fund’s portfolio turnover rate was 0.00% of the average
value of its portfolio.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Arm Holdings PLC
(the “Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the British Pound
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Arm
Holdings PLC
Arm
Holdings PLC operates as a holding company, which engages in the licensing,
marketing, research, and development of microprocessors, systems IP, graphics
processing units, physical IP and associated systems IP, software, and
tools. Arm Holdings PLC’s headquarters are located in Cambridge,
England and is listed on the London Stock Exchange under the symbol
“ARM”.
Arm
Holdings PLC
is
registered under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Information provided to or filed with the SEC by
Arm Holdings PLC pursuant to the Exchange Act can be located by
reference to the SEC file number 001-41800. The SEC maintains an internet site
that contains reports, proxy, and information statements and other information
regarding the issuer at www.sec.gov. In addition, information regarding Arm
Holdings PLC may be obtained from other sources including, but not limited to,
press releases, newspaper articles and other publicly disseminated documents.
Neither the Series nor the Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Semiconductor
Industry Risk. Semiconductor
companies may have limited product lines, markets, financial resources or
personnel. Semiconductor companies typically face intense competition,
potentially rapid product obsolescence and high capital costs and are dependent
on third-party suppliers and the availability of materials. They are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. Semiconductor companies are also affected
by the economic performance of their customers.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its
assets
in securities of a single company than diversified funds, the performance of
that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has limited operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series does
not have a full calendar year of performance history. In the future, performance
information will be presented in this section of the
Prospectus. Performance information will contain a bar
chart and table that provide some indication of the risks of investing in the
Series by showing changes in the Series performance from year to year and by
showing the Series average annual returns for certain time periods as compared
to a broad measure of market performance. Investors
should be aware that past performance before and after taxes is not necessarily
an indication of how the Series will perform in the
future.
Updated
performance information for the Series, including its current net asset value
per share, is available by calling toll-free at (844)
954-5333.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
ASE TECHNOLOGIES HOLDING
CO. LTD. ADRhedged™
Investment
Objective
The
ASE Technologies Holding Co. Ltd. ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of ASE Technologies Holding Co. Ltd. in its
local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the ASE Technologies
Holding Co. Ltd. (the “Company”). The Series will not invest
directly in the Company. ADRs are receipts, issued by an American bank or trust
issuer, which evidence ownership of underlying securities issued by a non-U.S.
issuer. Generally, ADRs, issued in registered form, are designed for use in the
U.S. securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the New Taiwan
dollar (“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
ASE
Technologies Holding Co.
Ltd.
ASE
Technologies Holding Co. Ltd.
engages in the provision of semiconductor manufacturing services and is
headquartered in Taiwan.
ASE Technologies Holding Co. Ltd. is listed on the Taiwan Stock Exchange (TWSE
code: 3711).
ASE
Technologies Holding Co. Ltd.
is
registered under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Information provided to or filed with the SEC by
ASE Technologies Holding Co. Ltd. pursuant to the Exchange Act can be
located by reference to the SEC file number 001-16125. The SEC maintains an
internet site that contains reports, proxy, and information statements and other
information regarding the issuer at www.sec.gov. In addition, information
regarding ASE Technologies Holding Co. Ltd. may be obtained from other sources
including, but not limited to, press releases, newspaper articles and other
publicly disseminated documents. Neither the Series nor the Manager are
responsible for the content in such other sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Taiwan
Investing Risk.
Securities of issuers in Taiwan are subject to risks, including, but not limited
to, legal, regulatory,
political,
currency and economic risks that are specific to
Taiwan.
Specifically, Taiwan’s geographic proximity and history
of
political contention with China have resulted in ongoing
tensions
between the two countries, which may materially
affect
the Taiwanese companies. Securities of Taiwanese
companies
are subject to Taiwan’s heavy dependence on
exports.
Reductions in spending on Taiwanese products and
services,
labor shortages, institution of tariffs or other trade
barriers,
or a downturn in any of the economies of Taiwan’s
key
trading partners, including the United States, may have
an
adverse impact on the Taiwanese economy and the values
of
Taiwanese companies.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Taiwan Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching
between
the Currency Hedge Contract and the currencies that the contract intends to
hedge, and there can be no assurance that the Currency Hedge Contract will be
effective. The return of the Currency Hedge Contract will not perfectly offset
the actual fluctuations between the Local Currency and the U.S. dollar. It is
possible that a degree of currency exposure may remain even at the time the
Currency Hedge Contract is implemented. The Series may not be able to structure
the Currency Hedge Contract as anticipated or the Currency Hedge Contract may
not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Semiconductor
Industry Risk. Semiconductor
companies may have limited product lines, markets, financial resources or
personnel. Semiconductor companies typically face intense competition,
potentially rapid product obsolescence and high capital costs and are dependent
on third-party suppliers and the availability of materials. They are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. Semiconductor companies are also affected
by the economic performance of their customers.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series
portfolio,
although the Series enters into the Currency Hedge Contract to seek to minimize
the impact of fluctuations in the foreign currency exchange rate. Although the
ADRs in which the Series invests will be listed on major U.S. exchanges, there
can be no assurance that a market for these securities will be made or
maintained or that any such market will be or remain liquid. There is also no
guarantee that a financial institution will continue to sponsor a particular
ADR. As a result, the Series may have difficulty selling securities if it needs
to do so, or selling them quickly and efficiently at the prices at which they
have been valued. The depositary bank may not have physical custody of the
underlying securities at all times and may charge fees for various services,
including forwarding dividends and interest, and processing corporate actions. A
Series would be expected to pay a share of the additional fees, which it would
not pay if investing directly in the foreign securities. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. The Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series
will be provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future
performance. It may perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
ASML HOLDING NV
ADRhedged™
Investment
Objective
The
ASML Holding NV ADRhedged™ (the “Series”) seeks to provide investment results
that correspond generally, before fees and expenses, to the total return of the
ordinary shares of ASML Holding NV in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$19 |
$61 |
$107 |
$243 |
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. From March
13, 2025, the date operations commenced, through the fiscal year ended December
31, 2025, the Fund’s portfolio turnover rate was 0.00% of the average
value of its portfolio.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the ASML Holding NV
(the “Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
ASML
Holding NV
ASML
Holding NV develops, produces, markets, sells, and services advanced
semiconductor equipment systems for chipmakers.
ASML
Holding NV is headquartered in the Netherlands and is listed on the Euronext
Amsterdam exchange code number NL0010273215.
ASML
Holding NV
is
registered under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Information provided to or filed with the SEC by
ASML Holding NV pursuant to the Exchange Act can be located by
reference to the SEC file number 001-33463. The SEC maintains an internet site
that contains reports, proxy, and information statements and other information
regarding the issuer at www.sec.gov. In addition, information regarding ASML
Holding NV may be obtained from other sources including, but not limited to,
press releases, newspaper articles and other publicly disseminated documents.
Neither the Series nor the Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risk
of Investing in the Netherlands. Investments
in Dutch issuers will
subject
the Series to legal, regulatory,
political,
currency, security and
economic
risk specific to the
Netherlands
and the countries that use
the
euro. In addition, because the
economy
of the Netherlands is export
driven,
the Netherlands relies heavily on
its
key trading partners.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any other member states
will likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Euronext Amsterdam Stock Exchange may be
open on days when the Series does not price its Shares, the value of the
underlying securities of the ADRs in the Series portfolio may change on days
when Shareholders will not be able to purchase or sell the Series Shares,
regardless of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Semiconductor
Industry Risk. Semiconductor
companies may have limited product lines, markets, financial resources or
personnel. Semiconductor companies typically face intense competition,
potentially rapid product obsolescence and high capital costs and are dependent
on third-party suppliers and the availability of materials. They are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. Semiconductor companies are also affected
by the economic performance of their customers.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its
assets
in securities of a single company than diversified funds, the performance of
that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has limited operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series does
not have a full calendar year of performance history. In the future, performance
information will be presented in this section of the
Prospectus. Performance information will contain a bar
chart and table that provide some indication of the risks of investing in the
Series by showing changes in the Series performance from year to year and by
showing the Series average annual returns for certain time periods as compared
to a broad measure of market performance. Investors
should be aware that past performance before and after taxes is not necessarily
an indication of how the Series will perform in the
future.
Updated
performance information for the Series, including its current net asset value
per share, is available by calling toll-free at (844)
954-5333.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
BANCO SANTANDER S.A.
ADRhedged™
Investment
Objective
The Banco Santander S.A. ADRhedged™ (the “Series”) seeks to
provide investment results that correspond generally, before fees and expenses,
to the total return of the ordinary shares of Banco Santander S.A. in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Series has not yet commenced operations and
therefore does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of Banco Santander S.A.
(the “Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Banco
Santander S.A.
Banco
Santander S.A. is a multinational financial services company based in Madrid and
Santander in Spain. Banco Santander S.A. attracts deposits and offers retail,
commercial and private banking, and asset management services. The Bank offers
consumer credit, mortgage loans, lease financing, factoring, mutual funds,
pension funds, insurance, commercial credit, investment banking services,
structured finance, and advice on mergers and acquisitions.
Banco
Santander S.A. is registered under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Information provided to or filed with the SEC by
Banco Santander S.A. pursuant to the Exchange Act can be located by reference to
the SEC file number 001-12518. The SEC maintains an internet site that contains
reports, proxy, and information statements and other information regarding the
issuer at www.sec.gov. In addition, information regarding Banco Santander S.A.
may be obtained from other sources including, but not limited to, press
releases, newspaper articles and other publicly disseminated documents. Neither
the Series nor the Manager are responsible for the content in such other
sources. The ordinary shares underlying the ADRs are traded on the BME Spanish
Exchange (Continuous Market).
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Spain. The
risks of investing in the securities of a Spanish company include legal,
regulatory, political, currency, security, and economic risk specific to Spain.
Among other things, Spain’s economy has been characterized by slow growth over
the past few years due to factors such as low housing sales and construction
declines, and the international credit crisis.
Investing
in the European Union (“EU”) Risk. Investments
in certain countries in the European Union are susceptible to high economic
risks associated with high levels of debt, such as investments in sovereign debt
of Spain. Efforts of member states of the EU to further unify their economic and
monetary policies may increase the potential for the downward movement of one
member state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any member states will
likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Spanish stock exchange may be open on
days when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company, the
banking industry or Spain. Any issuer may perform poorly, 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 at their own discretion,
decide to reduce or eliminate dividends, which may also cause their stock prices
to decline.
Banking
Industry Risk.
Companies within the banking industry can be significantly affected by extensive
governmental regulation, which may limit both the amounts and types of loans and
other financial commitments they can make and the interest rates and fees they
can charge and amount of capital they must maintain. Profitability is largely
dependent on the availability and cost of capital funds and can fluctuate
significantly when interest rates change. Credit losses resulting from financial
difficulties of borrowers can negatively impact the sector. Banks may also be
subject to severe price competition. These risks can be exacerbated if a
particular
region
in which a bank operates experiences economic decline. The regional banking
industry is highly competitive and thus, failure to maintain or increase market
share may result in regional bank failures or mergers with larger, or
multi-national banks.
Non-Diversification
Risk. The
Series is non-diversified and holds Portfolio Securities of only one particular
issuer. As a result, the Series may have greater volatility than other
diversified funds. Because a non-diversified fund may invest a larger percentage
of its assets in securities of a single company than diversified funds, the
performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. Moreover, the price at which the Series securities may be sold and
the value of the Series Shares may be adversely affected if trading markets for
ADRs are limited or absent or if bid/ask spreads are wide. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. A Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk. The
Series intends to take the position that it will be treated as a grantor trust
for U.S. federal income tax purposes. Assuming such treatment is respected, the
Series will not be subject to U.S. federal income tax. Rather, a pro rata
portion of the Series income, gain, losses and deductions will “flow through” to
each beneficial owner of Shares (“Shareholder”). The Series has not requested
and will not request an advance ruling from the U.S. Internal Revenue Service
(“IRS”) as to its status as a grantor trust. If the Series fails to qualify as a
grantor trust for any year (subject to any available curative measures), the
Series likely will be subject to regular corporate level U.S. federal income tax
in that year on all of its taxable income, regardless of whether the Series
makes any distributions to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little trading volume and market
liquidity. Further, increased market volatility may cause increased bid/ask
spreads. In addition, in stressed market conditions, the market for the Series
Shares may become less liquid in response to deteriorating liquidity in the
markets for the Series underlying portfolio holdings in the
ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
BARCLAYS PLC
ADRhedged™
Investment
Objective
The
Barclays PLC ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of Barclays PLC in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Barclays PLC (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities
markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the British Pound
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Barclays
PLC
Barclays
PLC is a British multinational universal bank, headquartered in London, England
that provides various personal and business financial services in the United
Kingdom, Europe, the Americas, Africa, the Middle East, and
Asia.
Barclays PLC is listed on the London Stock Exchange under the ticker symbol
“BARC”.
Barclays
PLC is
registered under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Information provided to or filed with the SEC by
Barclays
PLC
pursuant to the Exchange Act can be located by reference to the SEC file number
001-09246. The SEC maintains an internet site that contains reports, proxy, and
information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding Barclays
PLC may be obtained from other sources including, but not limited to,
press releases, newspaper articles and other publicly disseminated documents.
Neither the Series nor the Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Banking
Companies Risk. The
performance of bank stocks may be affected by extensive governmental regulation,
which may limit the amounts and types of loans and other financial commitments
they can make, the interest rates and fees they can charge, and the amount of
capital they must maintain. The impact of changes in regulations and capital
requirements on a banking company cannot be predicted and may negatively impact
such banking company. Profitability is largely dependent on the availability and
cost of capital funds, and can fluctuate significantly when interest rates
change. Credit losses resulting from financial difficulties of borrowers can
negatively impact banking companies. Banks may also be subject to severe price
competition. Competition is high among banking companies and failure to maintain
or increase market share may result in lost market
value.
Banking
Industry Risk.
Companies within the banking industry can be significantly affected by extensive
governmental regulation, which may limit both the amounts and types of loans and
other financial commitments they can make and the interest rates and fees they
can charge and amount of capital they must maintain. Profitability is largely
dependent on the availability and cost of capital funds and can fluctuate
significantly when interest rates change. Credit losses resulting from financial
difficulties of borrowers can negatively impact the sector. Banks may also be
subject to severe price competition. These risks can be exacerbated if a
particular region in which a bank operates experiences economic decline. The
regional banking industry is highly competitive and thus, failure to maintain or
increase market share may result in regional bank failures or mergers with
larger, or multi-national banks.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the
Series
and no other Authorized Participant is able to step forward to create or redeem
Creation Units, Series Shares may trade at a discount to NAV and possibly face
trading halts and/or delisting. This risk may be more pronounced in volatile
markets, potentially where there are significant redemptions in exchange-traded
funds generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
BAYER AG
ADRhedged™
Investment
Objective
The
Bayer AG ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of Bayer AG in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Bayer AG (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities markets.
ADRs of the Company are unsponsored, meaning that the ADRs are issued by the
depositary bank without the involvement of the Company. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary’s transaction fees. Under an unsponsored ADR arrangement, the
foreign issuer assumes no obligations and the depositary’s transaction fees are
paid directly by the ADR holders. Because unsponsored ADR arrangements
are organized independently and without the cooperation of the issuer of the
underlying securities, available information concerning the foreign issuer may
not be as current as for sponsored ADRs and voting rights with respect to the
deposited securities are not passed through.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges or
over-the-counter markets, they are still subject to currency risk because
changes in foreign currency exchange rates affect their value. The Currency
Hedge Contract is designed to minimize the impact of fluctuations in the
exchange rate between the U.S. dollar and the Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Bayer
AG
Bayer
AG is a German multinational company that develops, manufactures, and sells
products for human health and agriculture. Bayer AG engages in the business of
life science fields of healthcare and nutrition
and its products include prescription and over-the-counter drugs, sees, crop
protection products, and diagnostic imaging equipment. Bayer AG is primarily
traded on the German Stock Exchange.
Information
regarding Bayer
AG
may be obtained from publicly available sources including, but not limited to,
the company’s website (www.bayer.com), press releases, newspaper articles and
other publicly disseminated documents. Bayer AG ADRs trade on the
over-the-counter market (“OTC”). Information regarding Bayer AG may also be
obtained from the SEC’s website
(https://www.sec.gov/search-filings/cik-lookup).Securities that trade OTC are
not traded on a securities exchange but are purchased from broker-dealers that
make a market in the securities. Broker-dealers that provide a quote for Bayer
AG ADRs are required to comply with Rule 15c2-11 under the Securities Exchange
Act of 1934, as amended (“Exchange Act”). Rule 15c2-11 requires the
broker-dealer, prior to providing a quote on an OTC security, to obtain and
review certain publicly available information for the OTC security, and to have
a reasonable basis for believing that the information is accurate and from a
reliable source. A broker-dealer may satisfy Rule 15c2-11, in part, by reviewing
the information made available by Bayer AG in compliance with Rule 12g3-2(b)
under the Exchange Act. Investors are highly encouraged to conduct their own
research on Bayer AG, and seek information from their financial advisor, prior
to investing in the Fund. Neither the Series nor the Manager are responsible for
the content in such sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding Bayer
AG from the publicly available documents described above. Neither the Fund, the
Trust, the Adviser nor any affiliate has participated in the preparation of such
documents. Neither the Fund, the Trust, the Adviser nor any affiliate makes any
representation that such publicly available documents or any other publicly
available information regarding Bayer AG is accurate or complete. Furthermore,
the Fund cannot give any assurance that all events occurring prior to the date
of the prospectus (including events that would affect the accuracy or
completeness of the publicly available documents described above) that would
affect the trading price of Bayer AG have been publicly disclosed. Subsequent
disclosure of any such events or the disclosure of, or failure to disclose,
material
future
events concerning Bayer AG could affect the value of the Fund’s investments with
respect to Bayer AG and therefore the value of the
Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Germany. The
risks of investing in the securities of a German company include risks of
significant demographic challenges to sustained long-term growth; low fertility
rates and declining net immigration putting pressure on the country’s social
welfare system; and the costly and time-consuming modernization and integration
of the eastern German economy. Additionally, the European sovereign-debt crisis
has resulted in a weakened Euro and has put into question the future financial
prospects of Germany and the surrounding region.
Investing
in the EU Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any member states will
likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Frankfurt Stock Exchange may be open on
days when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap,
the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Bayer
AG Company Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Bayer AG may perform
poorly, causing the value of its securities to decline. Poor performance may be
caused by poor management decisions, litigation, environment concerns,
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 at their own discretion, decide to
reduce or eliminate dividends, which may also cause their stock prices to
decline.
Bayer
AG Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with operating companies and pharmaceutical companies,
Bayer AG faces risks unique to its operations including, among others, reduced
demand for prescription medicine, growing competition from generic
pharmaceuticals, pharmaceutical fraud, rising consumer expectations, data
breaches, cybersecurity threats, and supply chain
disruptions.
Pharmaceutical
Industry Risk. The
profitability of companies in the pharmaceutical industry is highly dependent on
the development, procurement and marketing of drugs and the development,
protection and exploitation of intellectual property rights and other
proprietary information. These companies may be significantly affected by such
events as the expiration of patents or the loss of, or the inability to enforce,
intellectual property rights. Research and other costs associated with
developing or procuring new drugs and the related intellectual property rights
can be significant, and the results of such research and expenditures are
unpredictable. Many pharmaceutical companies face intense competition from new
products and less costly generic products. In addition, the process for
obtaining regulatory approval from the U.S. Food and Drug Administration or
other governmental regulatory authorities is long and costly and there is no
assurance that the necessary approvals will be obtained or maintained by these
companies.
Additionally,
companies in the pharmaceutical industry may be subject to expenses and losses
from extensive litigation based on intellectual property, product liability and
similar claims. These companies may be adversely affected by government
regulation and changes in reimbursement rates from third-party payors, such as
Medicare, Medicaid and other government-sponsored programs, private health
insurance plans and health maintenance
organizations.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through.
There
is also no guarantee that a financial institution will continue to sponsor a
particular ADR. As a result, the Series may have difficulty selling securities
if it needs to do so, or selling them quickly and efficiently at the prices at
which they have been valued. The depositary bank may not have physical custody
of the underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest, and processing corporate
actions. A Series would be expected to pay a share of the additional fees, which
it would not pay if investing directly in the foreign securities. In addition,
the underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. The Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available in English and generally made available to the public in a
manner described above in the Principal Investment Strategies, investors in the
Series may not be able to gather information on which to make investment
decisions. In such circumstances, the Adviser will advise the Board of Trustees
of the Series of the circumstances, and the Board may make a determination to
cease operations of the Series. In such circumstances, the Series may distribute
the underlying ADRs in kind to shareholders, the Fund may liquidate the
positions and distribute cash to shareholders, or the Board may take such other
actions as it deems most appropriate for, and in the best of, shareholders under
the circumstances.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
BAYERISCHE MOTOREN
WERKE AG ADRhedged™
Investment
Objective
The
Bayerische Motoren Werke AG ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of Bayerische Motoren Werke AG in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Bayerische
Motoren Werke AG (the “Company”). The Series will not invest
directly in the Company. ADRs are receipts, issued by an American bank or trust
issuer, which evidence ownership of underlying securities issued by a non-U.S.
issuer. Generally, ADRs, issued in registered form, are designed for use in the
U.S. securities markets. ADRs of the Company are unsponsored, meaning that the
ADRs are issued by the depositary bank without the involvement of the Company.
In a sponsored ADR arrangement, the foreign issuer assumes the obligation to pay
some or all of the depositary’s transaction fees. Under an unsponsored
ADR arrangement, the foreign issuer assumes no obligations and the
depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. With respect to unsponsored ADRs, foreign issuers (such
as the Company) are generally not subject to U.S. reporting obligations, and
they are not required to make filings with the U.S Securities and Exchange
Commission.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges or
over-the-counter markets, they are still subject to currency risk because
changes in foreign currency exchange rates affect their value. The Currency
Hedge Contract is designed to minimize the impact of fluctuations in the
exchange rate between the U.S. dollar and the Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Bayerische
Motoren Werke AG
Bayerische
Motoren Werke AG, commonly abbreviated to “BMW”, is a German multinational
manufacturer of luxury cars, motorcycles, and other vehicles headquartered in
Munich, Bavaria, Germany. BMW also offers financing and dealership services. BMW
is primarily traded on the Frankfurt
Stock Exchange.
Information
regarding BMW may be obtained from publicly available sources including, but not
limited to, the company’s website (www.bmw.com), press releases, newspaper
articles and other publicly disseminated documents. Bayer AG ADRs trade on the
over-the-counter market (“OTC”). Information regarding BMW may also be obtained
from the SEC’s website (https://www.sec.gov/search-filings/cik-lookup).
Investors should be aware that the SEC’s website has information about the
unsponsored ADRs related to the Company, however, the SEC's website does not
have disclosure about the Company nor is such disclosure about the Company
disclosed by the Company. Securities that trade OTC are not traded on a
securities exchange but are purchased from broker-dealers that make a market in
the securities. Broker-dealers that provide a quote for BMW
ADRs are required to comply with Rule 15c2-11 under the Securities Exchange Act
of 1934, as amended (“Exchange Act”). Rule 15c2-11 requires the broker-dealer,
prior to providing a quote on an OTC security, to obtain and review certain
publicly available information for the OTC security, and to have a reasonable
basis for believing that the information is accurate and from a reliable source.
Investors are highly encouraged to conduct their own research on BMW, and seek
information from their financial advisor, prior to investing in the Fund.
Neither the Series nor the Manager are responsible for the content in such
sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding BMW
from the publicly available documents described above. Neither the Fund, the
Trust, the Adviser nor any affiliate has participated in the preparation of such
documents. Neither the Fund, the Trust, the Adviser nor any affiliate makes any
representation that such publicly available documents or any other publicly
available information regarding BMW is accurate or complete. Furthermore, the
Fund cannot give any assurance that all events occurring prior to the date of
the prospectus (including events that would affect the accuracy or completeness
of the publicly available documents described above) that would affect the
trading price of BMW
have
been publicly disclosed. Subsequent disclosure of any such events or the
disclosure of, or failure to disclose, material future events concerning BMW
could affect the value of the Fund’s investments with respect to BMW and
therefore the value of the Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Germany. The
risks of investing in the securities of a German company include risks of
significant demographic challenges to sustained long-term growth; low fertility
rates and declining net immigration putting pressure on the country’s social
welfare system; and the costly and time-consuming modernization and integration
of the eastern German economy. Additionally, the European sovereign-debt crisis
has resulted in a weakened Euro and has put into question the future financial
prospects of Germany and the surrounding region.
Investing
in the EU Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any member states will
likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Frankfurt Stock Exchange may be open on
days when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s
Currency
Hedge Contract with the Series, which could result in the loss of all value of
the Currency Hedge Contract. By using a swap, the Series assumes the risk that
its counterparty could experience financial hardships. In the event of the
insolvency of the counterparty, the Series may sustain losses or be unable to
liquidate the swap position. Counterparty risk may be somewhat mitigated by the
fact that mark-to-market payments are made on a daily basis. The Series intends
to have only one counterparty, which will expose the Series to greater
counterparty risk and the Series may be unable to enter into the Currency Hedge
Contract on favorable terms, potentially preventing the Series from achieving
its investment objective. The Series is subject to liquidity risk if the Series
is required to reserve its assets against its exposure under the Currency Hedge
Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
BMW
Company
Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. BMW may perform
poorly, causing the value of its securities to decline. Poor performance may be
caused by poor management decisions, competitive pressures, raw materials price
risks, environmental risks, changes in technology, disruptions in supply, labor
problems or shortages, corporate restructurings, fraudulent disclosures or other
factors. Issuers may, in times of distress or at their own discretion, decide to
reduce or eliminate dividends, which may also cause their stock prices to
decline.
BMW
Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with operating companies and automotive companies, BMW
faces risks unique to its operations including, among others, fluctuating market
demand, rapid technological changes, competition for other luxury brands,
evolving regulations, high development costs for new technologies, and potential
damage to brand reputation due to quality issues or
recalls.
Automotive
Industry Risk.
The automotive industry can be highly cyclical, and companies in the industry
may suffer periodic operating losses. The industry can be significantly affected
by labor relations and fluctuating component prices. While most of the major
automotive manufacturers are large companies, certain others may be
non-diversified in both product line and customer base and may be more
vulnerable to certain events that may negatively impact the automotive
industry.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. There is also no guarantee that a financial institution
will continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities if it needs to do so, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute Shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Series may therefore receive less timely information or have
less control than if it invested directly in the foreign
issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available in English and generally made available to the public in a
manner described above in the Principal Investment Strategies, investors in the
Series may not be able to gather information on which to make investment
decisions. In such circumstances, the Adviser will advise the Board of Trustees
of the Series of the circumstances, and the Board may make a determination to
cease operations of the Series. In such circumstances, the Series may distribute
the underlying ADRs in kind to shareholders, the Fund may liquidate the
positions and distribute cash to shareholders, or the Board may take such other
actions as it deems most appropriate for, and in the best of, shareholders under
the circumstances.
Risks
of Investing in Unsponsored Depositary Receipts.
Unsponsored ADRs carry specific risks compared to sponsored ADRs. Here are some
key risks to consider:
•Lack
of Control by the Foreign Company: Unsponsored ADRs are issued without the
involvement or consent of the foreign company, which means the company may not
provide timely or accurate financial information, potentially leading to a lack
of transparency.
•Limited
Information: Since the foreign issuer is not directly involved, the level of
financial disclosure and corporate governance might be lower. Investors may not
have access to crucial information that would be available with a sponsored
ADR.
•Liquidity
Issues: Unsponsored ADRs can have lower trading volumes compared to sponsored
ADRs, which might lead to wider bid-ask spreads and difficulties in executing
trades.
•Exchange
Rate Risk: Like all foreign investments, unsponsored ADRs are subject to
currency risk. Fluctuations in the exchange rate can significantly impact the
value of the investment.
•Regulatory
Risks: Different regulatory environments may affect the company's operations and
financial health. Unsponsored ADRs may not comply with the same regulatory
standards as sponsored ADRs. The regulatory requirements applicable to a foreign
issuer may be different than those of the United States, and as a result, the
frequency and level of detail of disclosure about the operations of such an
issuer may be less than the requirements imposed on issuers whose securities are
registered in the United States.
•Potential
for Higher Volatility: Due to lower liquidity and less oversight, unsponsored
ADRs may experience higher price
volatility.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the “spread” or “bid/ask spread.” The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
BP P.L.C.
ADRhedged™
Investment
Objective
The BP p.l.c. ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of BP p.l.c. in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$19 |
$61 |
$107 |
$243 |
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. From
January 6, 2025, the date operations commenced, through the fiscal year ended
December 31, 2025, the Fund’s portfolio turnover rate was 0.00% of the average value of its
portfolio.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of BP p.l.c. (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities
markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the British pound
(“Local Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
BP
p.l.c.
BP
p.l.c. is a British multinational oil and gas company headquartered in London,
England. BP p.l.c.’s upstream operations include exploration, development and
production of oil and natural gas, field development and production; and
midstream operations include transportation, and marketing and trading of
natural gas, including liquefied natural gas (LNG), and natural gas liquids
(NGLs). BP p.l.c.’s downstream operations include marketing, transportation,
refining, manufacturing, supply and trading of crude oil, petroleum,
petrochemical products and provision of related services to wholesale and retail
customers. BP p.l.c. provides fuel, energy, lubricants and petrochemicals to
customers.
BP
p.l.c. is registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Information provided to or filed with the SEC by BP p.l.c.
pursuant to the Exchange Act can be located by reference to the SEC file number
001-06262. The SEC maintains an internet site that contains reports, proxy, and
information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding BP p.l.c. may be obtained from
other sources including, but not limited to, press releases, newspaper articles
and other publicly disseminated documents. Neither the Series nor the Manager
are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company; the
oil, gas, and consumable fuels industry; or England. Any issuer may perform
poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Oil,
Gas, and Consumable Fuels Industry Risk.
The oil, gas, and consumable fuels industry is affected by worldwide energy
prices and exploration and production costs. Companies in the oil, gas, and
consumable fuels industry may have significant operations in areas at risk for
natural disasters, social unrest and environmental damage. These companies may
also be at risk for increased government regulation and intervention,
litigation, and negative publicity and public
perception.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. Moreover, the price at which the Series securities may be sold and
the value of the Series Shares may be adversely affected if trading markets for
ADRs are limited or absent or if bid/ask spreads are wide. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. A Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk. The Series intends to take the position that it will be treated as
a grantor trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares “Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little trading volume and market
liquidity. Further, increased market volatility may cause increased bid/ask
spreads. In addition, in stressed market conditions, the market for the Series
Shares may become less liquid in response to deteriorating liquidity in the
markets for the Series underlying portfolio holdings in the
ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has limited operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series does
not have a full calendar year of performance history. In the future, performance
information will be presented in this section of the
Prospectus. Performance information will contain a bar
chart and table that provide some indication of the risks of investing in the
Series by showing changes in the Series performance from year to year and by
showing the Series average annual returns for certain time periods as compared
to a broad measure of market performance. Investors
should be aware that past performance before and after taxes is not necessarily
an indication of how the Series will perform in the
future.
Updated
performance information for the Series, including its current net asset value
per share, is available by calling toll-free at (844)
954-5333.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
BRITISH AMERICAN
TOBACCO P.L.C. ADRhedged™
Investment
Objective
The
British American Tobacco p.l.c. ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of British American Tobacco p.l.c. in its
local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Series has not yet commenced operations and
therefore does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the British American
Tobacco p.l.c. (the “Company”). The Series will not invest
directly in the Company. ADRs are receipts, issued by an American bank or trust
issuer, which evidence ownership of underlying securities issued by a non-U.S.
issuer. Generally, ADRs, issued in registered form, are designed for use in the
U.S. securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the English pound
(“Local Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
British
American Tobacco p.l.c.
British
American Tobacco p.l.c. is a British multinational company that
manufactures and sells cigarettes, tobacco and other nicotine
products.
British
American Tobacco p.l.c. is registered under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Information provided to or filed with the SEC
by British American Tobacco p.l.c. pursuant to the Exchange Act can be located
by reference to the SEC file number 001-38159. The SEC maintains an internet
site that contains reports, proxy, and information statements and other
information regarding the issuer at www.sec.gov. In addition, information
regarding British American Tobacco p.l.c. may be obtained from other sources
including, but not limited to, press releases, newspaper articles and other
publicly disseminated documents. Neither the Series nor the Manager are
responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the
Currency
Hedge Contract will be effective. The return of the Currency Hedge
Contract will not perfectly offset the actual fluctuations between the Local
Currency and the U.S. dollar. It is possible that a degree of currency
exposure may remain even at the time the Currency Hedge Contract is implemented.
The Series may not be able to structure the Currency Hedge Contract as
anticipated or the Currency Hedge Contract may not successfully reduce the
currency risk from the Portfolio Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive.
The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company, the
tobacco industry or England. Any issuer may perform poorly, 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 at their own discretion,
decide to reduce or eliminate dividends, which may also cause their stock prices
to decline.
Tobacco
Industry Risk.
The Series is subject to the risks faced by companies in the tobacco industry,
including: changes in demand for products, demographic and product trends and
general economic conditions; effects of competitive pricing, environmental
factors, marketing campaigns and consumer boycotts; and adverse effects from
governmental regulation and oversight. The tobacco industry may also be affected
by additional risks, including: smoking and health litigation; governmental and
private bans and restrictions on smoking; and actual and proposed price controls
on tobacco products. The tobacco industry may also be affected by risks that
affect the broader consumer staples industry.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. Moreover, the price at which the Series securities may be sold and
the value of the Series Shares may be adversely affected if trading markets for
ADRs are limited or absent or if bid/ask spreads are wide. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. A Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected, the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
(“Shareholder”). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little
trading
volume and market liquidity. Further, increased market volatility may cause
increased bid/ask spreads. In addition, in stressed market conditions, the
market for the Series Shares may become less liquid in response to deteriorating
liquidity in the markets for the Series underlying portfolio holdings in the
ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
DEUTSCHE TELEKOM AG
ADRhedged™
Investment
Objective
The
Deutsche Telekom AG ADRhedged™ (the “Series”) seeks to provide investment
results that correspond generally, before fees and expenses, to the total return
of the ordinary shares of Deutsche Telekom AG in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance.As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Deutsche Telekom
AG (the “Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets. ADRs of the Company are sponsored. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary’s transaction fees. Under an unsponsored ADR arrangement, the
foreign issuer assumes no obligations and the depositary’s transaction fees are
paid directly by the ADR holders. Because unsponsored ADR arrangements
are organized independently and without the cooperation of the issuer of the
underlying securities, available information concerning the foreign issuer may
not be as current as for sponsored ADRs and voting rights with respect to the
deposited securities are not passed through.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges or
over-the-counter markets, they are still subject to currency risk because
changes in foreign currency exchange rates affect their value. The Currency
Hedge Contract is designed to minimize the impact of fluctuations in the
exchange rate between the U.S. dollar and the Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Deutsche
Telekom AG
Deutsche
Telekom AG is
a German telecommunications company headquartered in Bonn and is the largest
telecommunications provider in Europe by revenue. Deutsche
Telekom AG provides mobile communications, internet, and fixed networks.
Deutsche Telekom AG also provides information and communication technology
services for business and corporations. Deutsche Telekom AG is listed on the
Frankfurt Stock Exchange.
Information
regarding Deutsche Telekom AG may be obtained from publicly available sources
including, but not limited to, the company’s website (www.telekom.com), press
releases, newspaper articles and other publicly disseminated documents. Deutsche
Telekom AG ADRs trade on the over-the-counter market (“OTC”). Information
regarding Deutsche Telekom AG may also be obtained from the SEC’s website
(https://www.sec.gov/search-filings/cik-lookup). Securities that trade OTC are
not traded on a securities exchange but are purchased from broker-dealers that
make a market in the securities. Broker-dealers that provide a quote for
Deutsche Telekom AG ADRs are required to comply with Rule 15c2-11 under the
Securities Exchange Act of 1934, as amended (“Exchange Act”). Rule 15c2-11
requires the broker-dealer, prior to providing a quote on an OTC security, to
obtain and review certain publicly available information for the OTC security,
and to have a reasonable basis for believing that the information is accurate
and from a reliable source. A broker-dealer may satisfy Rule 15c2-11, in part,
by reviewing the information made available by Deutsche Telekom AG in compliance
with Rule 12g3-2(b) under the Exchange Act, and confirm that other eligibility
standards to be listed on the OTCQX are met. Investors are highly encouraged to
conduct their own research on Deutsche Telekom AG, and seek information from
their financial advisor, prior to investing in the Fund. Neither the Series nor
the Manager are responsible for the content in such other sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding
Deutsche Telekom AG from the publicly available documents described above.
Neither the Fund, the Trust, the Adviser nor any affiliate has participated in
the preparation of such documents. Neither the Fund, the Trust, the Adviser nor
any affiliate makes any representation that such publicly available documents or
any other publicly available information regarding Deutsche Telekom AG is
accurate or complete. Furthermore, the Fund cannot give any assurance that all
events occurring prior to the date of the prospectus (including
events
that would affect the accuracy or completeness of the publicly available
documents described above) that would affect the trading price of Deutsche
Telekom AG have been publicly disclosed. Subsequent disclosure of any such
events or the disclosure of, or failure to disclose, material future events
concerning Deutsche Telekom AG could affect the value of the Fund’s investments
with respect to Deutsche Telekom AG and therefore the value of the
Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Investing
in Germany. The
risks of investing in the securities of a German company include risks of
significant demographic challenges to sustained long-term growth; low fertility
rates and declining net immigration putting pressure on the country’s social
welfare system; and the costly and time-consuming modernization and integration
of the eastern German economy. Additionally, the European sovereign-debt crisis
has resulted in a weakened Euro and has put into question the future financial
prospects of Germany and the surrounding region.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any other member states
will likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Frankfurt Stock Exchange may be open on
days when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Deutsche
Telekom AG Company Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Deutsche Telekom AG
may perform poorly, causing the value of its securities to decline. Poor
performance may be caused by poor management decisions, competitive pressures,
data security issues, economic uncertainty, changes in technology, disruptions
in supply chain, labor problems or shortages, corporate restructurings,
fraudulent disclosures or other factors. Issuers may, in times of distress or at
their own discretion, decide to reduce or eliminate dividends, which may also
cause their stock prices to decline.
Deutsche
Telekom AG Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with operating companies and telecommunications companies,
Deutsche Telekom AG faces risks unique to its operations including, among
others, intense market competition, rapidly
evolving technology causing obsolescence, regulatory pressures, cyber security
threats, data privacy concerns, geopolitical instability, and potential price
reductions enforced by regulators; all of which can impact profitability
and customer retention.
Telecommunications
Sector Risk. Companies
in the telecommunications sector may be affected by industry competition,
substantial capital requirements, government regulation and obsolescence of
telecommunications products and services due to technological
advancement.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. There is also no guarantee that a financial institution
will continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities if it needs to do so, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute Shareholder communications or pass through
any voting rights with respect to
the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available in English and generally made available to the public in a
manner described above in the Principal Investment Strategies, investors in the
Series may not be able to gather information on which to make investment
decisions. In such circumstances, the Adviser will advise the Board of Trustees
of the Series of the circumstances, and the Board may make a determination to
cease operations of the Series. In such circumstances, the Series may distribute
the underlying ADRs in kind to shareholders, the Fund may liquidate the
positions and distribute cash to shareholders, or the Board may take such other
actions as it deems most appropriate for, and in the best of, shareholders under
the circumstances.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where
there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
DIAGEO PLC
ADRhedged™
Investment
Objective
The Diageo plc ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of Diageo plc in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Series has not yet commenced operations and
therefore does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Diageo plc (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities
markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the British pound
(“Local Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Diageo
plc
Diageo
plc British multinational alcoholic beverage company, with its headquarters in
London, England. Diageo plc produces, and markets alcoholic beverages including
vodkas, whiskeys, tequilas, gins, and beer.
Diageo
plc is registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Information provided to or filed with the SEC by Diageo plc
pursuant to the Exchange Act can be located by reference to the SEC file number
001-10691. The SEC maintains an internet site that contains reports, proxy, and
information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding Diageo plc may be obtained from
other sources including, but not limited to, press releases, newspaper articles
and other publicly disseminated documents. Neither the Series nor the Manager
are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the
Currency
Hedge Contract will be effective. The return of the Currency Hedge
Contract will not perfectly offset the actual fluctuations between the Local
Currency and the U.S. dollar. It is possible that a degree of currency
exposure may remain even at the time the Currency Hedge Contract is implemented.
The Series may not be able to structure the Currency Hedge Contract as
anticipated or the Currency Hedge Contract may not successfully reduce the
currency risk from the Portfolio Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company, the
beverages industry or England. Any issuer may perform poorly, 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 at their own discretion,
decide to reduce or eliminate dividends, which may also cause their stock prices
to decline.
Beverages
Industry Risk.
The Series is subject to the risks faced by companies in the beverage industry,
including: changes in demand for products, demographic and product trends and
general economic conditions; effects of competitive pricing, environmental
factors, marketing campaigns and consumer boycotts; and adverse effects from
governmental regulation and oversight. The beverage industry may also be
affected by risks that affect the broader consumer staples
industry.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency
exchange
rate. Although the ADRs in which the Series invest will be listed on major U.S.
exchanges, there can be no assurance that a market for these securities will be
made or maintained or that any such market will be or remain liquid. There is
also no guarantee that a financial institution will continue to sponsor a
particular ADR. As a result, the Series may have difficulty selling securities,
or selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. Moreover, the price at which
the Series securities may be sold and the value of the Series Shares may be
adversely affected if trading markets for ADRs are limited or absent or if
bid/ask spreads are wide. In addition, the underlying issuers of certain
depositary receipts are under no obligation to distribute Shareholder
communications or pass through any voting rights with respect to the deposited
securities to the holders of such receipts. A Series may therefore receive less
timely information or have less control than if it invested directly in the
foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected, the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
(“Shareholder”). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little
trading
volume and market liquidity. Further, increased market volatility may cause
increased bid/ask spreads. In addition, in stressed market conditions, the
market for the Series Shares may become less liquid in response to deteriorating
liquidity in the markets for the Series underlying portfolio holdings in the
ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
GSK PLC
ADRhedged™
Investment
Objective
The GSK plc ADRhedged™ (the “Series”) seeks to provide investment
results that correspond generally, before fees and expenses, to the total return
of the ordinary shares of GSK plc in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$19 |
$61 |
$107 |
$243 |
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. From
January 6, 2025, the date operations commenced, through the fiscal year ended
December 31, 2025, the Fund’s portfolio turnover rate was 0.00% of the average value of its
portfolio.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of GSK plc (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities
markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the British pound
(“Local Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
GSK
plc
GSK
plc British multinational pharmaceutical and biotechnology company with global
headquarters in London. GSK PLC operates as a research-based pharmaceutical
company. GSK plc develops, manufactures, and markets vaccines, prescription, and
over-the-counter medicines, as well as health-related consumer
products.
GSK
plc is registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Information provided to or filed with the SEC by GSK plc
pursuant to the Exchange Act can be located by reference to the SEC file number
001-15170. The SEC maintains an internet site that contains reports, proxy, and
information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding GSK plc may be obtained from
other sources including, but not limited to, press releases, newspaper articles
and other publicly disseminated documents. Neither the Series nor the Manager
are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the
Currency Hedge Contract will not perfectly offset the actual fluctuations
between
the Local Currency and the U.S. dollar. It is possible that a degree of
currency exposure may remain even at the time the Currency Hedge Contract is
implemented. The Series may not be able to structure the Currency Hedge Contract
as anticipated or the Currency Hedge Contract may not successfully reduce the
currency risk from the Portfolio Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company, the
pharmaceutical industry or England. Any issuer may perform poorly, 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 at their own
discretion, decide to reduce or eliminate dividends, which may also cause their
stock prices to decline.
Pharmaceutical
Industry Risk. The
profitability of companies in the pharmaceutical industry is highly dependent on
the development, procurement and marketing of drugs and the development,
protection and exploitation of intellectual property rights and other
proprietary information. These companies may be significantly affected by such
events as the expiration of patents or the loss of, or the inability to enforce,
intellectual property rights. Research and other costs associated with
developing or procuring new drugs and the related intellectual property rights
can be significant, and the results of such research and expenditures are
unpredictable. Many pharmaceutical companies face intense competition from new
products and less costly generic products. In addition, the process for
obtaining regulatory approval from the U.S. Food and Drug Administration or
other governmental regulatory authorities is long and costly and there is no
assurance that the necessary approvals will be obtained or maintained by these
companies.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. Moreover, the price at which the Series securities may be sold and
the value of the Series Shares may be adversely affected if trading markets for
ADRs are limited or absent or if bid/ask spreads are wide. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. A Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected, the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
("Shareholder"). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has limited operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series does
not have a full calendar year of performance history. In the future, performance
information will be presented in this section of the
Prospectus. Performance information will contain a bar
chart and table that provide some indication of the risks of
investing
in the Series by showing changes in the Series performance from year to year and
by showing the Series average annual returns for certain time periods as
compared to a broad measure of market performance. Investors
should be aware that past performance before and after taxes is not necessarily
an indication of how the Series will perform in the
future.
Updated
performance information for the Series, including its current net asset value
per share, is available by calling toll-free at (844)
954-5333.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
HALEON PLC
ADRhedged™
Investment
Objective
The
Haleon plc ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of Haleon plc in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance.As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Haleon plc (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities
markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the British Pound
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Haleon
plc
Haleon
plc is a British multinational consumer healthcare company with headquarters in
Weybridge, England.
Haleon plc is listed on the London Stock Exchange under the ticker symbol
“HLN”.
Haleon
plc
is registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Information provided to or filed with the SEC by Haleon
plc
pursuant to the Exchange Act can be located by reference to the SEC file number
001-41411. The SEC maintains an internet site that contains reports, proxy, and
information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding Haleon
plc may be obtained from other sources including, but not limited to,
press releases, newspaper articles and other publicly disseminated documents.
Neither the Series nor the Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the
Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Healthcare
Sector Risk. The
profitability of companies in the healthcare sector may be affected by
government regulations and government healthcare programs, increases or
decreases in the cost of medical products and services, an increased emphasis on
outpatient services, demand for medical products and services and product
liability claims, among other factors. Many healthcare companies are heavily
dependent on patent protection, and the expiration of a company’s patent may
adversely affect that company’s profitability. Healthcare companies are subject
to competitive forces that may result in price discounting, and may be thinly
capitalized and susceptible to product
obsolescence.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series
portfolio,
although the Series enters into the Currency Hedge Contract to seek to minimize
the impact of fluctuations in the foreign currency exchange rate. Although the
ADRs in which the Series invests will be listed on major U.S. exchanges, there
can be no assurance that a market for these securities will be made or
maintained or that any such market will be or remain liquid. There is also no
guarantee that a financial institution will continue to sponsor a particular
ADR. As a result, the Series may have difficulty selling securities if it needs
to do so, or selling them quickly and efficiently at the prices at which they
have been valued. The depositary bank may not have physical custody of the
underlying securities at all times and may charge fees for various services,
including forwarding dividends and interest, and processing corporate actions. A
Series would be expected to pay a share of the additional fees, which it would
not pay if investing directly in the foreign securities. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. The Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
HEINEKEN NV
ADRhedged™
Investment
Objective
The
Heineken NV ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of Heineken NV in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Heineken NV (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities markets.
ADRs of the Company are sponsored. In a sponsored ADR arrangement, the foreign
issuer assumes the obligation to pay some or all of the depositary’s transaction
fees. Under an unsponsored ADR arrangement, the foreign issuer assumes no
obligations and the depositary’s transaction fees are paid directly by the ADR
holders. Because unsponsored ADR arrangements are organized
independently and without the cooperation of the issuer of the underlying
securities, available information concerning the foreign issuer may not be as
current as for sponsored ADRs and voting rights with respect to the deposited
securities are not passed through.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Heineken
N.V.
Heineken
N.V., also known as The Heineken Company, is a Dutch multinational brewing
company that develops, markets, and sells alcoholic beverages.
Heineken N.V. is traded on the Euronext Amsterdam Exchange.
Information
regarding Heineken
N.V.
may be obtained from publicly available sources including, but not limited to,
the company’s website (www.heineken.com), press releases, newspaper articles and
other publicly disseminated documents. Heineken N.V. ADRs trade on the
over-the-counter market (“OTC”). Information regarding Heineken N.V. may also be
obtained from the SEC’s website (https://www.sec.gov/search-filings/cik-lookup).
Securities that trade OTC are not traded on a securities exchange but are
purchased from broker-dealers that make a market in the securities.
Broker-dealers that provide a quote for Heineken
N.V.
ADRs are required to comply with Rule 15c2-11 under the Securities Exchange Act
of 1934, as amended (“Exchange Act”). Rule 15c2-11 requires the broker-dealer,
prior to providing a quote on an OTC security, to obtain and review certain
publicly available information for the OTC security, and to have a reasonable
basis for believing that the information is accurate and from a reliable source.
A broker-dealer may satisfy Rule 15c2-11, in part, by reviewing the information
made available by Heineken
N.V.
in compliance with Rule 12g3-2(b) under the Exchange Act, and confirm that other
eligibility standards to be listed on the OTCQX are met. Investors are highly
encouraged to conduct their own research on Heineken
N.V.,
and seek information from their financial advisor, prior to investing in the
Fund. Neither the Series nor the Manager are responsible for the content in such
other sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding
Heineken N.V. from the publicly available documents described above. Neither the
Fund, the Trust, the Adviser nor any affiliate has participated in the
preparation of such documents. Neither the Fund, the Trust, the Adviser nor any
affiliate makes any representation that such publicly available documents or any
other publicly available information regarding Heineken N.V. is accurate or
complete. Furthermore, the Fund cannot give any assurance that all events
occurring prior to the date of the prospectus (including events that would
affect the accuracy or completeness of the publicly available documents
described above) that would affect the trading price of Heineken N.V. have been
publicly disclosed. Subsequent disclosure of any such events or the disclosure
of,
or
failure to disclose, material future events concerning Heineken N.V. could
affect the value of the Fund’s investments with respect to Heineken N.V. and
therefore the value of the Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risk
of Investing in the Netherlands. Investments
in Dutch issuers will
subject
the Series to legal, regulatory,
political,
currency, security and
economic
risk specific to the
Netherlands
and the countries that use
the
euro. In addition, because the
economy
of the Netherlands is export
driven,
the Netherlands relies heavily on
its
key trading partners.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any other member states
will likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Euronext Amsterdam Stock Exchange may be
open on days when the Series does not price its Shares, the value of the
underlying securities of the ADRs in the Series portfolio may change on days
when Shareholders will not be able to purchase or sell the Series Shares,
regardless of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated
by
the fact that mark-to-market payments are made on a daily basis. The Series
intends to have only one counterparty, which will expose the Series to greater
counterparty risk and the Series may be unable to enter into the Currency Hedge
Contract on favorable terms, potentially preventing the Series from achieving
its investment objective. The Series is subject to liquidity risk if the Series
is required to reserve its assets against its exposure under the Currency Hedge
Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Heineken
N.V. Company
Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company, the beverages
industry or Belgium. Heineken
N.V.
may perform poorly, causing the value of its securities to decline. Poor
performance may be caused by poor management decisions, competitive pressures,
consumer confidence, changes in technology, disruptions in supply, labor
problems or shortages, corporate restructurings, fraudulent disclosures or other
factors. Issuers may, in times of distress or at their own discretion, decide to
reduce or eliminate dividends, which may also cause their stock prices to
decline.
Heineken
N.V. Investing Risk. Issuer-specific attributes may cause an investment held by the Fund
to be more volatile than the market generally. The value of an individual
security or particular type of security may be more volatile than the market as
a whole and may perform differently from the value of the market as a whole. In
addition to the risks associated generally with operating companies and beverage
industry companies, Heineken NV faces risks unique to its operations including,
among others, food safety risks, economic downturns, dependence on specific
markets, regulatory compliance, and regulatory changes.
Beverages
Industry Risk.
The Series is subject to the risks faced by companies in the beverage industry,
including: changes in demand for products, demographic and product trends and
general economic conditions; effects of competitive pricing, environmental
factors, marketing campaigns and consumer boycotts; and adverse effects from
governmental regulation and oversight. The beverage industry may also be
affected by risks that affect the broader consumer staples
industry.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. There is also no guarantee that a financial institution
will continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities if it needs to do so, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute Shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Series may therefore receive less timely information or have
less control than if it invested directly in the foreign issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available
in English and generally made available to the public in a manner described
above in the Principal Investment Strategies, investors in the Series may not be
able to gather information on which to make investment decisions. In such
circumstances, the Adviser will
advise the Board of Trustees of the Series of the circumstances, and
the Board may make a determination to cease operations of the Series. In such
circumstances, the Series may distribute the underlying ADRs in kind to
shareholders, the Fund may liquidate the positions and distribute cash to
shareholders, or the Board may take such other actions as it deems most
appropriate for, and in the best of, shareholders under the
circumstances.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the “spread” or “bid/ask spread.” The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
HERMES INTERNATIONAL SA
ADRhedged™
Investment
Objective
The
Hermes International SA ADRhedged™ (the “Series”) seeks to provide investment
results that correspond generally, before fees and expenses, to the total return
of the ordinary shares of Hermes International SA in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance.As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Hermes
International SA (the “Company”). The Series will not invest
directly in the Company. ADRs are receipts, issued by an American bank or trust
issuer, which evidence ownership of underlying securities issued by a non-U.S.
issuer. Generally, ADRs, issued in registered form, are designed for use in the
U.S. securities markets. ADRs of the Company are unsponsored, meaning that the
ADRs are issued by the depositary bank without the involvement of the Company.
In a sponsored ADR arrangement, the foreign issuer assumes the obligation to pay
some or all of the depositary’s transaction fees. Under an unsponsored
ADR arrangement, the foreign issuer assumes no obligations and the
depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. With respect to unsponsored ADRs, foreign issuers (such
as the Company) are generally not subject to U.S. reporting obligations, and
they are not required to make filings with the U.S Securities and Exchange
Commission.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges or
over-the-counter markets, they are still subject to currency risk because
changes in foreign currency exchange rates affect their value. The Currency
Hedge Contract is designed to minimize the impact of fluctuations in the
exchange rate between the U.S. dollar and the Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Hermes
International SA
Hermes
International SA (“Hermes”) is a luxury goods company that designs, produces,
and distributes a variety of products including bags, clothing, shoes, and
jewelry. Hermes is primarily traded on the Paris Stock
Exchange.
Information
regarding Hermes International SA may be obtained from publicly available
sources including, but not limited to, the company’s website (www.hermes.com),
press releases, newspaper articles and other publicly disseminated documents.
Hermes ADRs trade on the over-the-counter market (“OTC”). Information regarding
Hermes may also be obtained from the SEC’s website
(https://www.sec.gov/search-filings/cik-lookup). Investors should be aware that
the SEC’s website has information about the unsponsored ADRs related to the
Company, however, the SEC's website does not have disclosure about the Company
nor is such disclosure about the Company disclosed by the Company. Securities
that trade OTC are not traded on a securities exchange but are purchased from
broker-dealers that make a market in the securities. Broker-dealers that provide
a quote for Hermes ADRs are required to comply with Rule 15c2-11 under the
Securities Exchange Act of 1934, as amended (“Exchange Act”). Rule 15c2-11
requires the broker-dealer, prior to providing a quote on an OTC security, to
obtain and review certain publicly available information for the OTC security,
and to have a reasonable basis for believing that the information is accurate
and from a reliable source. Investors are highly encouraged to conduct their own
research on Hermes, and seek information from their financial advisor, prior to
investing in the Fund. Neither the Series nor the Manager are responsible for
the content in such other sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding
Hermes from the publicly available documents described above. Neither the Fund,
the Trust, the Adviser nor any affiliate has participated in the preparation of
such documents. Neither the Fund, the Trust, the Adviser nor any affiliate makes
any representation that such publicly available documents or any other publicly
available information regarding Hermes is accurate or complete. Furthermore, the
Fund cannot give any assurance that all events occurring prior to the date of
the prospectus (including events that would affect the accuracy or completeness
of the publicly available documents described above) that would affect the
trading price of Hermes have been publicly disclosed. Subsequent disclosure of
any such events or the disclosure of, or failure to disclose, material
future
events concerning Hermes could affect the value of the Fund’s investments with
respect to Hermes and therefore the value of the
Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risk
of Investing in France.
The Series’ investment in French issuers subjects the Series to legal,
regulatory, political, currency, security, and economic risks specific to
France. Concerns have emerged with respect to the economic outlook for certain
European Union (the “EU”) countries, including France. External demand for
French exports is expected to be negatively impacted by the United Kingdom’s
(the “U.K.”) decision to leave the EU. As a result, the French economy may
experience adverse trends due to concerns about a prolonged economic downturn,
potential weakness in exports, high rates of unemployment and rising government
debt levels. The French economy is dependent on agricultural exports and, as a
result, is susceptible to fluctuations in demand for agricultural products.
France has experienced several terrorist attacks over the past several years,
creating a climate of insecurity that has been detrimental to
tourism.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any other member states
will likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Euronext Paris Stock Exchange may be open
on days when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Hermes
International SA Company Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Hermes International
SA may perform poorly, causing the value of its securities to decline. Poor
performance may be caused by poor management decisions, competitive pressures,
consumer sentiment, changes in technology, disruptions in supply chain,
availability of materials, labor problems or shortages, corporate
restructurings, fraudulent disclosures or other factors. Issuers may, in times
of distress or at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Hermes
Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with operating companies and consumer discretionary
industry companies, Hermes faces risks unique to its operations including, among
others, overexposure
and brand dilution due to excessive accessibility, damage to exclusivity through
improper distribution, fluctuations in consumer demand based on economic cycles,
dependence on a limited range of iconic products, counterfeiting issues, supply
chain disruptions impacting access to high-quality materials, and potential
negative impacts on brand image from ethical concerns regarding labor practices
in the supply chain; all while maintaining the delicate balance of
exclusivity and meeting consumer expectations for high quality and
craftsmanship.
Consumer
Discretionary Sector Risk. Because
companies in the consumer discretionary sector manufacture products and provide
discretionary services directly to the consumer, the success of these companies
is tied closely to the performance of the overall domestic and international
economy, including the functioning of the global supply chain, interest rates,
competition and consumer confidence. Success depends heavily on disposable
household income and consumer spending, and may be strongly affected by social
trends and marketing campaigns. Also, companies in the consumer discretionary
sector may be subject to severe competition, which may have an adverse impact on
a company’s profitability. Changes in demographics and consumer tastes also can
affect the demand for, and success of, consumer discretionary products in the
marketplace.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through.
There
is also no guarantee that a financial institution will continue to sponsor a
particular ADR. As a result, the Series may have difficulty selling securities
if it needs to do so, or selling them quickly and efficiently at the prices at
which they have been valued. The depositary bank may not have physical custody
of the underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest, and processing corporate
actions. A Series would be expected to pay a share of the additional fees, which
it would not pay if investing directly in the foreign securities. In addition,
the underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. The Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available in English and generally made available to the public in a
manner described above in the Principal Investment Strategies, investors in the
Series may not be able to gather information on which to make investment
decisions. In such circumstances, the Adviser will advise the Board of Trustees
of the Series of the circumstances, and the Board may make a determination to
cease operations of the Series. In such circumstances, the Series may distribute
the underlying ADRs in kind to shareholders, the Fund may liquidate the
positions and distribute cash to shareholders, or the Board may take such other
actions as it deems most appropriate for, and in the best of, shareholders under
the circumstances.
Risks
of Investing in Unsponsored Depositary Receipts.
Unsponsored ADRs carry specific risks compared to sponsored ADRs. Here are some
key risks to consider:
•Lack
of Control by the Foreign Company: Unsponsored ADRs are issued without the
involvement or consent of the foreign company, which means the company may not
provide timely or accurate financial information, potentially leading to a lack
of transparency.
•Limited
Information: Since the foreign issuer is not directly involved, the level of
financial disclosure and corporate governance might be lower. Investors may not
have access to crucial information that would be available with a sponsored
ADR.
•Liquidity
Issues: Unsponsored ADRs can have lower trading volumes compared to sponsored
ADRs, which might lead to wider bid-ask spreads and difficulties in executing
trades.
•Exchange
Rate Risk: Like all foreign investments, unsponsored ADRs are subject to
currency risk. Fluctuations in the exchange rate can significantly impact the
value of the investment.
•Regulatory
Risks: Different regulatory environments may affect the company's operations and
financial health. Unsponsored ADRs may not comply with the same regulatory
standards as sponsored ADRs. The regulatory requirements applicable to a foreign
issuer may be different than those of the United States, and as a result, the
frequency and level of detail of disclosure about the operations of such an
issuer may be less than the requirements imposed on issuers whose securities are
registered in the United States.
•Potential
for Higher Volatility: Due to lower liquidity and less oversight, unsponsored
ADRs may experience higher price
volatility.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether
Shares
will trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
HITACHI LTD.
ADRhedged™
Investment
Objective
The
Hitachi Ltd. ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of Hitachi Ltd. in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Hitachi Ltd. (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities markets.
ADRs of the Company are sponsored. In a sponsored ADR arrangement, the foreign
issuer assumes the obligation to pay some or all of the depositary’s transaction
fees. Under an unsponsored ADR arrangement, the foreign issuer assumes no
obligations and the depositary’s transaction fees are paid directly by the ADR
holders. Because unsponsored ADR arrangements are organized
independently and without the cooperation of the issuer of the underlying
securities, available information concerning the foreign issuer may not be as
current as for sponsored ADRs and voting rights with respect to the deposited
securities are not passed through.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Japanese Yen
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges or
over-the-counter markets, they are still subject to currency risk because
changes in foreign currency exchange rates affect their value. The Currency
Hedge Contract is designed to minimize the impact of fluctuations in the
exchange rate between the U.S. dollar and the Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Hitachi
Ltd.
Hitachi
Ltd. is a Japanese multinational conglomerate that manufactures and sells a
variety of products and services. Hitachi’s products and services include
digital system and services, energy and railway systems, building systems (e.g.,
elevators and escalators), home appliances, air conditioners, measurement and
analytical systems, water and environmental solutions, mass-produced industrial
equipment, custom-made industrial equipment, healthcare products, construction
machinery, and automotive systems.. Hitachi Ltd. is primarily traded on the
Tokyo and Nagoya Stock Exchanges.
Information
regarding Hitachi Ltd. may be obtained from publicly available sources
including, but not limited to, the company’s website (www.hitachi.com), press
releases, newspaper articles and other publicly disseminated documents. Hitachi
Ltd. ADRs trade on the over-the-counter market (“OTC”). Information regarding
Hitachi Ltd. may also be obtained from the SEC’s website
(https://www.sec.gov/search-filings/cik-lookup). Securities that trade OTC are
not traded on a securities exchange but are purchased from broker-dealers that
make a market in the securities. Broker-dealers that provide a quote for Hitachi
Ltd. ADRs are required to comply with Rule 15c2-11 under the Securities Exchange
Act of 1934, as amended (“Exchange Act”). Rule 15c2-11 requires the
broker-dealer, prior to providing a quote on an OTC security, to obtain and
review certain publicly available information for the OTC security, and to have
a reasonable basis for believing that the information is accurate and from a
reliable source. Investors are highly encouraged to conduct their own research
on Hitachi Ltd., and seek information from their financial advisor, prior to
investing in the Fund. Neither the Series nor the Manager are responsible for
the content in such other sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding
Hitachi Ltd. from the publicly available documents described above. Neither the
Fund, the Trust, the Adviser nor any affiliate has participated in the
preparation of such documents. Neither the Fund, the Trust, the Adviser nor any
affiliate makes any representation that such publicly available documents or any
other publicly available information regarding Hitachi Ltd. is accurate or
complete. Furthermore, the Fund cannot give any assurance that all events
occurring prior to the date of the prospectus (including events that would
affect the accuracy or completeness of the publicly available documents
described above) that would affect the trading price of Hitachi Ltd. have been
publicly disclosed. Subsequent disclosure of any such events or the disclosure
of, or failure to disclose, material
future
events concerning Hitachi Ltd. could affect the value of the Fund’s investments
with respect to Hitachi Ltd. and therefore the value of the
Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Japan. The
risks of investing in the securities of a Japanese company include risks of
natural disasters, lack of natural resources, reliance on trading partners
(including the United States and Asian and European economies), national
security, unpredictable political climate, large government debt, currency
fluctuation and an aging labor force. The realization of such risks could have a
negative impact on the value of securities of Japanese
companies.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Tokyo Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Hitachi
Ltd. Company Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Hitachi Ltd may
perform poorly, causing the value of its securities to decline. Poor performance
may be caused by poor management decisions, competitive pressures, environmental
issues, compliance risks, changes in technology, disruptions in supply, labor
problems or shortages, corporate restructurings, fraudulent disclosures or other
factors. Issuers may, in times of distress or at their own discretion, decide to
reduce or eliminate dividends, which may also cause their stock prices to
decline.
Hitachi
Ltd. Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with operating companies and technology industry companies,
Hitachi Ltd. faces risks unique to its operations including, among others,
intense
global competition in the technology sector, rapid technological change, supply
chain disruptions due to geopolitical factors, fluctuating currency exchange
rates, environmental regulations, potential reputational damage from product
recalls, and maintaining a skilled workforce in a competitive
market.
Technology
Companies Risk. Technology
companies and companies that rely heavily on technological advances may have
limited product lines, markets, financial resources, supply chains and
personnel. These companies typically face intense competition, potentially rapid
product obsolescence and changes in product cycles and customer preferences.
They may face unexpected risks and costs associated with technological
developments, such as artificial intelligence and machine learning. Technology
companies also depend heavily on intellectual property rights and may be
adversely affected by the loss or impairment of those rights. Technology
companies may face increased government scrutiny and may be subject to adverse
government or legal action.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. There is also no guarantee that a financial institution
will continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities if it needs to do so, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute Shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Series may therefore receive less timely information or have
less control than if it invested directly in the foreign issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available
in English and generally made available to the public in a manner described
above in the Principal Investment Strategies, investors in the Series may not be
able to gather information on which to make investment decisions. In such
circumstances, the Adviser will advise the Board of Trustees of the Series of
the circumstances, and the Board may make a determination to cease operations of
the
Series. In such circumstances, the Series may distribute the
underlying ADRs in kind to shareholders, the Fund may liquidate the positions
and distribute cash to shareholders, or the Board may take such other actions as
it deems most appropriate for, and in the best of, shareholders under the
circumstances.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
HONDA
MOTOR CO. LTD.
ADRhedged™
Investment
Objective
The
Honda Motor Co. Ltd. ADRhedged™ (the “Series”) seeks to provide investment
results that correspond generally, before fees and expenses, to the total return
of the ordinary shares of Honda Motor Co. Ltd. in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance.As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Honda Motor Co.
Ltd. (the “Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Japanese Yen
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Honda
Motor Co. Ltd.
Honda
Motor Co., Ltd. is a Japanese public multinational conglomerate manufacturer of
automobiles, motorcycles, and battery-powered equipment, founded in October 1946
by Soichiro Honda and headquartered in Minato, Tokyo, Japan.
Honda Motor Co. Ltd. is listed on the Tokyo Stock Exchange under code number
7267.
Honda Motor Co. Ltd. is registered under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). Information provided to or filed with
the SEC by Honda Motor Co. Ltd. pursuant to the Exchange Act can be located by
reference to the SEC file number 001-07628. The SEC maintains an internet site
that contains reports, proxy, and information statements and other information
regarding the issuer at www.sec.gov. In addition, information regarding Honda
Motor Co. Ltd. may be obtained from other sources including, but not limited to,
press releases, newspaper articles and other publicly disseminated documents.
Neither the Series nor the Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Japan. The
risks of investing in the securities of a Japanese company include risks of
natural disasters, lack of natural resources, reliance on trading partners
(including the United States and Asian and European economies), national
security, unpredictable political climate, large government debt, currency
fluctuation and an aging labor force. The realization of such risks could have a
negative impact on the value of securities of Japanese
companies.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Tokyo Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations
between
the Local Currency and the U.S. dollar. It is possible that a degree of currency
exposure may remain even at the time the Currency Hedge Contract is implemented.
The Series may not be able to structure the Currency Hedge Contract as
anticipated or the Currency Hedge Contract may not successfully reduce the
currency risk from the Portfolio Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Automotive
Industry Risk. The automotive industry can be highly cyclical, and companies in
the industry may suffer periodic operating losses. The industry can be
significantly affected by labor relations and fluctuating component
prices.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank
may
not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute Shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Series may therefore receive less timely information or have
less control than if it invested directly in the foreign
issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
HSBC HOLDINGS PLC
ADRhedged™
Investment
Objective
The HSBC Holdings plc ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of HSBC Holdings plc in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$19 |
$61 |
$107 |
$243 |
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
fiscal year ended December 31, 2025, the Fund’s portfolio turnover rate was
0.00% of the average value of its
portfolio.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of HSBC Holdings plc
(the “Company”). The Series will not invest directly in
the Company. ADRs are receipts, issued by an American bank or trust issuer,
which evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the English pound
(“Local Currency”). The Currency Hedge Contract is with a counterparty
acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
HSBC
Holdings plc
HSBC
Holdings plc is a British universal bank and financial services group
headquartered in London, England. HSBC Holdings plc provides a variety of
international banking and financial services, including retail and corporate
banking, trade, trusteeship, securities, custody, capital markets, treasury,
private and investment banking, and insurance.
HSBC
Holdings plc is registered under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). Information provided to or filed with the SEC by HSBC
Holdings plc pursuant to the Exchange Act can be located by reference to the SEC
file number 001-14930. The SEC maintains an internet site that contains reports,
proxy, and information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding HSBC Holdings plc may be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents. Neither the Series
nor the Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the
Currency
Hedge Contract will be effective. The return of the Currency Hedge
Contract will not perfectly offset the actual fluctuations between the Local
Currency and the U.S. dollar. It is possible that a degree of currency
exposure may remain even at the time the Currency Hedge Contract is implemented.
The Series may not be able to structure the Currency Hedge Contract as
anticipated or the Currency Hedge Contract may not successfully reduce the
currency risk from the Portfolio Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company, the
banking industry or England. Any issuer may perform poorly, 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 at their own discretion,
decide to reduce or eliminate dividends, which may also cause their stock prices
to decline.
Banking
Industry Risk.
Companies within the banking industry can be significantly affected by extensive
governmental regulation, which may limit both the amounts and types of loans and
other financial commitments they can make and the interest rates and fees they
can charge and amount of capital they must maintain. Profitability is largely
dependent on the availability and cost of capital funds and can fluctuate
significantly when interest rates change. Credit losses resulting from financial
difficulties of borrowers can negatively impact the sector. Banks may also be
subject to severe price competition. These risks can be exacerbated if a
particular region in which a bank operates experiences economic decline. The
regional banking industry is highly competitive and thus, failure to maintain or
increase market share may result in regional bank failures or mergers with
larger, or multi-national banks.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. Moreover, the price at which the Series securities may be sold and
the value of the Series Shares may be adversely affected if trading markets for
ADRs are limited or absent or if bid/ask spreads are wide. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. A Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected, the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
(“Shareholder”). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little
trading
volume and market liquidity. Further, increased market volatility may cause
increased bid/ask spreads. In addition, in stressed market conditions, the
market for the Series Shares may become less liquid in response to deteriorating
liquidity in the markets for the Series underlying portfolio holdings in the
ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
Performance
The bar chart and table below provide some indication of the
risks of investing in the Fund. The bar chart shows the Series changes in
performance from year to year, and the table shows how the Series average annual
returns for the time periods indicated as compared with those of a broad measure
of market performance. Investors
should be aware that past performance (before and after taxes) is not
necessarily an indication of how the Series will perform in the
future.
Updated
performance information for the Series, including its current net asset value
per share, is available by calling toll-free at (844)
954-5333.
Annual Total Returns
(calendar year ended 12/31)
During
the period shown, the highest quarterly
return was 19.49% (quarter ended September 30, 2025) and
the lowest quarterly return was 0.93% (quarter ended June 30,
2025).
|
|
|
|
|
|
|
|
| |
|
|
One
Year |
Since
Inception(1) |
|
Return
Before Taxes |
54.36% |
56.95% |
|
Return
After-Taxes on Distributions |
54.36% |
56.40% |
|
Return
After-Taxes on Distributions and Sale of Fund
Shares |
32.18% |
43.62% |
|
S&P
500 Index (reflects no deduction for fees, expenses or
taxes) |
17.88% |
16.54% |
(1)
The Fund commenced
operations on October 4,
2024.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
ING GROEP NV
ADRhedged™
Investment
Objective
The
ING Groep NV ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of ING Groep NV in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance.As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the ING Groep NV (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities
markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract If as a result of a change in the value
of the Local Currency relative to the U.S. dollar, the Currency Hedge Contract
increases in value, the counterparty will pay the Series an amount in U.S.
dollars equal to the increase in the value of the Currency Hedge Contract. If
the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
ING
Groep NV
ING
Groep NV is a Dutch multinational banking and financial services corporation
headquartered in Amsterdam. ING Groep NV engages in the provision of banking,
investments, life and non-life insurance, and retirement and asset management
services. ING Groep NV is listed on the Euronext Amsterdam Exchange code number
NL0011821202.
ING Groep NV is registered under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Information provided to or filed with the SEC
by ING Groep NV pursuant to the Exchange Act can be located by reference to the
SEC file number 001-14642. The SEC maintains an internet site that contains
reports, proxy, and information statements and other information regarding the
issuer at www.sec.gov. In addition, information regarding ING Groep NV may be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents. Neither the Series
nor the Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risk
of Investing in the Netherlands. Investments
in Dutch issuers will
subject
the Series to legal, regulatory,
political,
currency, security and
economic
risk specific to the
Netherlands
and the countries that use
the
euro. In addition, because the
economy
of the Netherlands is export
driven,
the Netherlands relies heavily on
its
key trading partners.
Risk
of Investing in the Netherlands. Investments
in Dutch issuers will
subject
the Series to legal, regulatory,
political,
currency, security and
economic
risk specific to the
Netherlands
and the countries that use
the
euro. In addition, because the
economy
of the Netherlands is export
driven,
the Netherlands relies heavily on
its
key trading partners.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any other member states
will likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Euronext Amsterdam Stock Exchange may be
open on days when the Series does not price its Shares, the value of the
underlying securities of the ADRs in the Series portfolio may change on days
when Shareholders will not be able to purchase or sell the Series Shares,
regardless of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to exchange
rate changes, it can also reduce or eliminate gains, and the Series bears
additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Banking
Industry Risk.
Companies within the banking industry can be significantly affected by extensive
governmental regulation, which may limit both the amounts and types of loans and
other financial commitments they can make and the interest rates and fees they
can charge and amount of capital they must maintain. Profitability is largely
dependent on the availability and cost of capital funds and can fluctuate
significantly when interest rates change. Credit losses resulting from financial
difficulties of borrowers can negatively impact the sector. Banks may also be
subject to severe price competition. These risks can be exacerbated if a
particular
region
in which a bank operates experiences economic decline. The regional banking
industry is highly competitive and thus, failure to maintain or increase market
share may result in regional bank failures or mergers with larger, or
multi-national banks.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
L’OREAL SA
ADRhedged™
Investment
Objective
The
L’Oreal SA ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of L’Oreal SA in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the L’Oreal SA (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities markets.
ADRs of the Company are unsponsored, meaning that the ADRs are issued by the
depositary bank without the involvement of the Company. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary’s transaction fees. Under an unsponsored ADR arrangement, the
foreign issuer assumes no obligations and the depositary’s transaction fees are
paid directly by the ADR holders. Because unsponsored ADR arrangements
are organized independently and without the cooperation of the issuer of the
underlying securities, available information concerning the foreign issuer may
not be as current as for sponsored ADRs and voting rights with respect to the
deposited securities are not passed through. With respect to unsponsored
ADRs, foreign issuers (such as the Company) are generally not subject to U.S.
reporting obligations, and they are not required to make filings with the U.S
Securities and Exchange Commission.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges or
over-the-counter markets, they are still subject to currency risk because
changes in foreign currency exchange rates affect their value. The Currency
Hedge Contract is designed to minimize the impact of fluctuations in the
exchange rate between the U.S. dollar and the Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
L’Oreal
SA
L'Oréal
S.A. (“L’Oréal”) is a French multinational company that develops, manufactures,
and sells cosmetic and personal care products for women and men
worldwide. L’Oréal
is primarily traded on the Paris Stock Exchange.
Information
regarding L'Oréal
S.A.
may be obtained from publicly available sources including, but not limited to,
the company’s website (www.loreal.com), press releases, newspaper articles and
other publicly disseminated documents. L’Oréal
ADRs trade on the over-the-counter market (“OTC”). Information regarding
L’Oréal
may also be obtained from the SEC’s website
(https://www.sec.gov/search-filings/cik-lookup). Investors should be aware that
the SEC’s website has information about the unsponsored ADRs related to the
Company, however, the SEC's website does not have disclosure about the Company
nor is such disclosure about the Company disclosed by the Company. Securities
that trade OTC are not traded on a securities exchange but are purchased from
broker-dealers that make a market in the securities. Broker-dealers that provide
a quote for L’Oréal
ADRs are required to comply with Rule 15c2-11 under the Securities Exchange Act
of 1934, as amended (“Exchange Act”). Rule 15c2-11 requires the broker-dealer,
prior to providing a quote on an OTC security, to obtain and review certain
publicly available information for the OTC security, and to have a reasonable
basis for believing that the information is accurate and from a reliable source.
Investors are highly encouraged to conduct their own research on L’Oréal,
and seek information from their financial advisor, prior to investing in the
Fund. Neither the Series nor the Manager are responsible for the content in such
other sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding
L’Oréal
from the publicly available documents described above. Neither the Fund, the
Trust, the Adviser nor any affiliate has participated in the preparation of such
documents. Neither the Fund, the Trust, the Adviser nor any affiliate makes any
representation that such publicly available documents or any other publicly
available information regarding L’Oréal
is accurate or complete. Furthermore, the Fund cannot give any assurance that
all events occurring prior to the date of the prospectus (including events that
would affect the accuracy or completeness of the publicly available documents
described above) that would affect the trading price of L’Oréal
have been publicly disclosed. Subsequent disclosure of any such events or the
disclosure of, or failure to disclose, material
future
events concerning L’Oréal
could affect the value of the Fund’s investments with respect to L’Oréal
and therefore the value of the Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risk
of Investing in France.
The Series’ investment in French issuers subjects the Series to legal,
regulatory, political, currency, security, and economic risks specific to
France. Concerns have emerged with respect to the economic outlook for certain
European Union (the “EU”) countries, including France. External demand for
French exports is expected to be negatively impacted by the United Kingdom’s
(the “U.K.”) decision to leave the EU. As a result, the French economy may
experience adverse trends due to concerns about a prolonged economic downturn,
potential weakness in exports, high rates of unemployment and rising government
debt levels. The French economy is dependent on agricultural exports and, as a
result, is susceptible to fluctuations in demand for agricultural products.
France has experienced several terrorist attacks over the past several years,
creating a climate of insecurity that has been detrimental to
tourism.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any other member states
will likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Euronext Paris Stock Exchange may be open
on days when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
L’Oréal
SA Company
Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. L’Oréal
may
perform poorly, causing the value of its securities to decline. Poor performance
may be caused by poor management decisions, competitive pressures, environmental
risks, health and safety issues, changes in technology, disruptions in supply
chain, labor problems or shortages, corporate restructurings, fraudulent
disclosures or other factors. Issuers may, in times of distress or at their own
discretion, decide to reduce or eliminate dividends, which may also cause their
stock prices to decline.
L’Oréal
Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with operating companies and consumer discretionary
companies, L’Oréal
faces risks unique to its operations including, among others, negative
publicity due to product safety concerns, regulatory changes impacting
ingredients, reputational damage from ethical sourcing issues, fluctuations in
consumer trends, intense competition in the beauty market, and potential legal
challenges related to product claims or advertising,
all of which can significantly impact sales and brand
image.
Consumer
Discretionary Sector Risk. Because
companies in the consumer discretionary sector manufacture products and provide
discretionary services directly to the consumer, the success of these companies
is tied closely to the performance of the overall domestic and international
economy, including the functioning of the global supply chain, interest rates,
competition and consumer confidence. Success depends heavily on disposable
household income and consumer spending, and may be strongly affected by social
trends and marketing campaigns. Also, companies in the consumer discretionary
sector may be subject to severe competition, which may have an adverse impact on
a company’s profitability. Changes in demographics and consumer tastes also can
affect the demand for, and success of, consumer discretionary products in the
marketplace.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. There is also no guarantee that a financial institution
will continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities if it needs to do so, or selling them quickly and
efficiently at the prices at which they have been valued. The
depositary
bank may not have physical custody of the underlying securities at all times and
may charge fees for various services, including forwarding dividends and
interest, and processing corporate actions. A Series would be expected to pay a
share of the additional fees, which it would not pay if investing directly in
the foreign securities. In addition, the underlying issuers of certain
depositary receipts are under no obligation to distribute Shareholder
communications or pass through any voting rights with respect to the deposited
securities to the holders of such receipts. The Series may therefore receive
less timely information or have less control than if it invested directly in the
foreign issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available in English and generally made available to the public in a
manner described above in the Principal Investment Strategies, investors in the
Series may not be able to gather information on which to make investment
decisions. In such circumstances, the Adviser will advise the Board of Trustees
of the Series of the circumstances, and the Board may make a determination to
cease operations of the Series. In such circumstances, the Series may distribute
the underlying ADRs in kind to shareholders, the Fund may liquidate the
positions and distribute cash to shareholders, or the Board may take such other
actions as it deems most appropriate for, and in the best of, shareholders under
the circumstances.
Risks
of Investing in Unsponsored Depositary Receipts.
Unsponsored ADRs carry specific risks compared to sponsored ADRs. Here are some
key risks to consider:
•Lack
of Control by the Foreign Company: Unsponsored ADRs are issued without the
involvement or consent of the foreign company, which means the company may not
provide timely or accurate financial information, potentially leading to a lack
of transparency.
•Limited
Information: Since the foreign issuer is not directly involved, the level of
financial disclosure and corporate governance might be lower. Investors may not
have access to crucial information that would be available with a sponsored
ADR.
•Liquidity
Issues: Unsponsored ADRs can have lower trading volumes compared to sponsored
ADRs, which might lead to wider bid-ask spreads and difficulties in executing
trades.
•Exchange
Rate Risk: Like all foreign investments, unsponsored ADRs are subject to
currency risk. Fluctuations in the exchange rate can significantly impact the
value of the investment.
•Regulatory
Risks: Different regulatory environments may affect the company's operations and
financial health. Unsponsored ADRs may not comply with the same regulatory
standards as sponsored ADRs. The regulatory requirements applicable to a foreign
issuer may be different than those of the United States, and as a result, the
frequency and level of detail of disclosure about the operations of such an
issuer may be less than the requirements imposed on issuers whose securities are
registered in the United States.
•Potential
for Higher Volatility: Due to lower liquidity and less oversight, unsponsored
ADRs may experience higher price
volatility.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is
often
referred to as the "spread" or "bid/ask spread." The bid/ask spread varies over
time for Shares based on trading volume and market liquidity, and is generally
lower if the Series Shares have more trading volume and market liquidity and
higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
LLOYDS BANKING GROUP
PLC ADRhedged™
Investment
Objective
The
Lloyds Banking Group plc ADRhedged™ (the “Series”) seeks to provide investment
results that correspond generally, before fees and expenses, to the total return
of the ordinary shares of Lloyds Banking Group plc in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Lloyds Banking
Group plc (the “Company”). The Series will not invest directly
in the Company. ADRs are receipts, issued by an American bank or trust issuer,
which evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the British Pound
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Lloyds
Banking Group plc
Lloyds
Banking Group plc, together with its subsidiaries, provides a range of banking
and financial services in the United Kingdom and internationally. Lloyds Banking
Group plc is listed on the London Stock Exchange under ticker symbol
“LLOY”.
Lloyds Banking Group plc is registered under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). Information provided to or filed
with the SEC by Lloyds Banking Group plc pursuant to the Exchange Act can be
located by reference to the SEC file number 001-15246. The SEC maintains an
internet site that contains reports, proxy, and information statements and other
information regarding the issuer at www.sec.gov. In addition, information
regarding Lloyds Banking Group plc may be obtained from other sources including,
but not limited to, press releases, newspaper articles and other publicly
disseminated documents. Neither the Series nor the Manager are responsible for
the content in such other sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the
Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Banking
Industry Risk.
Companies within the banking industry can be significantly affected by extensive
governmental regulation, which may limit both the amounts and types of loans and
other financial commitments they can make and the interest rates and fees they
can charge and amount of capital they must maintain. Profitability is largely
dependent on the availability and cost of capital funds and can fluctuate
significantly when interest rates change. Credit losses resulting from financial
difficulties of borrowers can negatively impact the sector. Banks may also be
subject to severe price competition. These risks can be exacerbated if a
particular region in which a bank operates experiences economic decline. The
regional banking industry is highly competitive and thus, failure to maintain or
increase market share may result in regional bank failures or mergers with
larger, or multi-national banks.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its
assets
in securities of a single company than diversified funds, the performance of
that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
LVMH MOET HENNESSY
LOUIS VUITTON SE ADRhedged™
Investment
Objective
The
LVMH Moet Hennessy Louis Vuitton SE ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of LVMH Moet Hennessy Louis Vuitton SE in
its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the LVMH Moet
Hennessy Louis Vuitton SE (the “Company”). The Series will not
invest directly in the Company. ADRs are receipts, issued by an American bank or
trust issuer, which evidence ownership of underlying securities issued by a
non-U.S. issuer. Generally, ADRs, issued in registered form, are designed for
use in the U.S. securities markets. ADRs of the Company are unsponsored, meaning
that the ADRs are issued by the depositary bank without the involvement of the
Company. In a sponsored ADR arrangement, the foreign issuer assumes the
obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. With respect to unsponsored ADRs, foreign issuers (such
as the Company) are generally not subject to U.S. reporting obligations, and
they are not required to make filings with the U.S Securities and Exchange
Commission.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency
Hedge
Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges or
over-the-counter markets, they are still subject to currency risk because
changes in foreign currency exchange rates affect their value. The Currency
Hedge Contract is designed to minimize the impact of fluctuations in the
exchange rate between the U.S. dollar and the Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
LVMH
Moet Hennessy Louis Vuitton SE
LVMH
Moet Hennessy Louis Vuitton SE (“LVMH”) is
a French multinational holding company and conglomerate headquartered in Paris.
LVMH is a luxury goods company that produces and sells wine, spirits, fashion,
leather goods, perfumes, cosmetics, watches, and jewelry. LVMH
is primarily traded on the Paris Stock Exchange.
Information
regarding LVMH may be obtained from publicly available sources including, but
not limited to, the company’s website (www.lvmh.com), press releases, newspaper
articles and other publicly disseminated documents. LVMH ADRs trade on the
over-the-counter market (“OTC”). Information regarding LVMH
may
also be obtained from the SEC’s website
(https://www.sec.gov/search-filings/cik-lookup). Investors should be aware that
the SEC’s website has information about the unsponsored ADRs related to the
Company, however, the SEC's website does not have disclosure about the Company
nor is such disclosure about the Company disclosed by the Company. Securities
that trade OTC are not traded on a securities exchange but are purchased from
broker-dealers that make a market in the securities. Broker-dealers that provide
a quote for LVMH ADRs are required to comply with Rule 15c2-11 under the
Securities Exchange Act of 1934, as amended (“Exchange Act”). Rule 15c2-11
requires the broker-dealer, prior to providing a quote on an OTC security, to
obtain and review certain publicly available information for the OTC security,
and to have a reasonable basis for believing that the information is accurate
and from a reliable source. Investors are highly encouraged to conduct their own
research on LVMH, and seek information from their financial advisor, prior to
investing in the Fund. Neither the Series nor the Manager are responsible for
the content in such other sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding LVMH
from the publicly available documents described above. Neither the Fund, the
Trust, the Adviser nor any affiliate has participated in the preparation of such
documents. Neither the Fund, the Trust, the Adviser nor any affiliate makes any
representation that such publicly available documents or any other publicly
available information regarding LVMH is accurate or complete. Furthermore, the
Fund
cannot
give any assurance that all events occurring prior to the date of the prospectus
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of LVMH
have been publicly disclosed. Subsequent disclosure of any such events or the
disclosure of, or failure to disclose, material future events concerning LVMH
could affect the value of the Fund’s investments with respect to LVMH and
therefore the value of the Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risk
of Investing in France.
The Series’ investment in French issuers subjects the Series to legal,
regulatory, political, currency, security, and economic risks specific to
France. Concerns have emerged with respect to the economic outlook for certain
European Union (the “EU”) countries, including France. External demand for
French exports is expected to be negatively impacted by the United Kingdom’s
(the “U.K.”) decision to leave the EU. As a result, the French economy may
experience adverse trends due to concerns about a prolonged economic downturn,
potential weakness in exports, high rates of unemployment and rising government
debt levels. The French economy is dependent on agricultural exports and, as a
result, is susceptible to fluctuations in demand for agricultural products.
France has experienced several terrorist attacks over the past several years,
creating a climate of insecurity that has been detrimental to
tourism.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any other member states
will likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Euronext Paris Stock Exchange may be open
on days when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting
both
as principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid; however there is no
guarantee that the swap market will continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
LVMH
Company Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. LVMH Moet Hennessy
Louis Vuitton SE may perform poorly, causing the value of its securities to
decline. Poor performance may be caused by poor management decisions,
competitive pressures, changes in technology, consumer health issues,
disruptions in supply chain, labor problems or shortages, corporate
restructurings, fraudulent disclosures or other factors. Issuers may, in times
of distress or at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
LVMH
Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with operating companies and consumer discretionary
companies, LVMH faces risks unique to its operations including, among others,
overexposure
and brand dilution due to excessive accessibility, damage to exclusivity through
improper distribution, fluctuations in consumer demand based on economic cycles,
dependence on a limited range of iconic products, counterfeiting issues, supply
chain disruptions impacting access to high-quality materials, and potential
negative impacts on brand image from ethical concerns regarding labor practices
in the supply chain; all while maintaining the delicate balance of
exclusivity and meeting consumer expectations for high quality and
craftsmanship.
Consumer
Discretionary Sector Risk. Because
companies in the consumer discretionary sector manufacture products and provide
discretionary services directly to the consumer, the success of these companies
is tied closely to the performance of the overall domestic and international
economy, including the functioning of the global supply chain, interest rates,
competition and consumer confidence. Success depends heavily on disposable
household income and consumer spending, and may be strongly affected by social
trends and marketing campaigns. Also, companies in the consumer discretionary
sector may be subject to severe competition, which may have an adverse impact on
a company’s profitability. Changes in demographics and consumer tastes also can
affect the demand for, and success of, consumer discretionary products in the
marketplace.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations
and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. There is also no guarantee that a financial institution
will continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities if it needs to do so, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute Shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Series may therefore receive less timely information or have
less control than if it invested directly in the foreign
issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available in English and generally made available to the public in a
manner described above in the Principal Investment Strategies, investors in the
Series may not be able to gather information on which to make investment
decisions. In such circumstances, the Adviser will advise the Board of Trustees
of the Series of the circumstances, and the Board may make a determination to
cease operations of the Series. In such circumstances, the Series may distribute
the underlying ADRs in kind to shareholders, the Fund may liquidate the
positions and distribute cash to shareholders, or the Board may take such other
actions as it deems most appropriate for, and in the best of, shareholders under
the circumstances.
Risks
of Investing in Unsponsored Depositary Receipts.
Unsponsored ADRs carry specific risks compared to sponsored ADRs. Here are some
key risks to consider:
•Lack
of Control by the Foreign Company: Unsponsored ADRs are issued without the
involvement or consent of the foreign company, which means the company may not
provide timely or accurate financial information, potentially leading to a lack
of transparency.
•Limited
Information: Since the foreign issuer is not directly involved, the level of
financial disclosure and corporate governance might be lower. Investors may not
have access to crucial information that would be available with a sponsored
ADR.
•Liquidity
Issues: Unsponsored ADRs can have lower trading volumes compared to sponsored
ADRs, which might lead to wider bid-ask spreads and difficulties in executing
trades.
•Exchange
Rate Risk: Like all foreign investments, unsponsored ADRs are subject to
currency risk. Fluctuations in the exchange rate can significantly impact the
value of the investment.
•Regulatory
Risks: Different regulatory environments may affect the company's operations and
financial health. Unsponsored ADRs may not comply with the same regulatory
standards as sponsored ADRs. The regulatory requirements applicable to a foreign
issuer may be different than those of the United States, and as a result, the
frequency and level of detail of disclosure about the operations of such an
issuer may be less than the requirements imposed on issuers whose securities are
registered in the United States.
•Potential
for Higher Volatility: Due to lower liquidity and less oversight, unsponsored
ADRs may experience higher price
volatility.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the
Series.
Any of these factors, among others, may lead to the Series Shares trading at a
premium or discount to NAV. Thus, you may pay significantly more (or less) than
NAV when you buy Shares of the Series in the secondary market, and you may
receive significantly less (or more) than NAV when you sell those Shares in the
secondary market. The Manager cannot predict whether Shares will trade above
(premium), below (discount) or at NAV. An active market for the Series Shares
may not develop and market trading may be halted if trading in one or more of
the Series underlying securities is halted. The difference in bid and ask prices
is often referred to as the "spread" or "bid/ask spread." The bid/ask spread
varies over time for Shares based on trading volume and market liquidity, and is
generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
MITSUBISHI UFJ
FINANCIAL GROUP, INC. ADRhedged™
Investment
Objective
The
Mitsubishi UFJ Financial Group, Inc. ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of Mitsubishi UFJ Financial Group, Inc. in
its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Series has not yet commenced operations and
therefore does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Mitsubishi UFJ
Financial Group, Inc. (the “Company”). The Series will not
invest directly in the Company. ADRs are receipts, issued by an American bank or
trust issuer, which evidence ownership of underlying securities issued by a
non-U.S. issuer. Generally, ADRs, issued in registered form, are designed for
use in the U.S. securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Japanese Yen
(“Local Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Mitsubishi
UFJ Financial Group, Inc.
Mitsubishi
UFJ Financial Group, Inc. is a Japanese bank holding and financial services
company headquartered in Chiyoda, Tokyo, Japan. Mitsubishi UFJ Financial Group,
Inc. provides a variety of financial and investment services including
commercial banking, trust banking, international finance, and assets management
services.
Mitsubishi
UFJ Financial Group, Inc. is registered under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Information provided to or filed with the
SEC by Mitsubishi UFJ Financial Group, Inc. pursuant to the Exchange Act can be
located by reference to the SEC file number 000-54189. The SEC maintains an
internet site that contains reports, proxy, and information statements and other
information regarding the issuer at www.sec.gov. In addition, information
regarding Mitsubishi UFJ Financial Group, Inc. may be obtained from other
sources including, but not limited to, press releases, newspaper articles and
other publicly disseminated documents. Neither the Series nor the Manager are
responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Japan. The
risks of investing in the securities of a Japanese company include risks of
natural disasters, lack of natural resources, reliance on trading partners
(including the United States and Asian and European economies), national
security, unpredictable political climate, large government debt, currency
fluctuation and an aging labor force. The realization of such risks could have a
negative impact on the value of securities of Japanese
companies.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Tokyo Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the
Currency Hedge Contract will not perfectly offset the actual fluctuations
between the Local Currency and the U.S. dollar. It is possible that a
degree of currency exposure may remain even at the time the Currency Hedge
Contract is implemented. The Series may not be able to structure the Currency
Hedge Contract as anticipated or the Currency Hedge Contract may not
successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company, the
banking industry or Japan. Any issuer may perform poorly, 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 at their own discretion,
decide to reduce or eliminate dividends, which may also cause their stock prices
to decline.
Banking
Industry Risk.
Companies within the banking industry can be significantly affected by extensive
governmental regulation, which may limit both the amounts and types of loans and
other financial commitments they can make and the interest rates and fees they
can charge and amount of capital they must maintain. Profitability is largely
dependent on the availability and cost of capital funds and can fluctuate
significantly when interest rates change. Credit losses resulting from financial
difficulties of borrowers can negatively impact the sector. Banks may also be
subject to severe price competition. These risks can be exacerbated if a
particular region in which a bank operates experiences economic decline. The
regional banking industry is highly competitive and thus, failure to maintain or
increase market share may result in regional bank failures or mergers with
larger, or multi-national banks.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a
market
for these securities will be made or maintained or that any such market will be
or remain liquid. There is also no guarantee that a financial institution will
continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities, or selling them quickly and efficiently at the
prices at which they have been valued. The depositary bank may not have physical
custody of the underlying securities at all times and may charge fees for
various services, including forwarding dividends and interest, and processing
corporate actions. A Series would be expected to pay a share of the additional
fees, which it would not pay if investing directly in the foreign securities.
Moreover, the price at which the Series securities may be sold and the value of
the Series Shares may be adversely affected if trading markets for ADRs are
limited or absent or if bid/ask spreads are wide. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. A Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected, the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
(“Shareholder”). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little
trading
volume and market liquidity. Further, increased market volatility may cause
increased bid/ask spreads. In addition, in stressed market conditions, the
market for the Series Shares may become less liquid in response to deteriorating
liquidity in the markets for the Series underlying portfolio holdings in the
ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
MIZUHO FINANCIAL GROUP
INC. ADRhedged™
Investment
Objective
The
Mizuho Financial Group Inc. ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of Mizuho Financial Group Inc. in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Mizuho Financial
Group Inc. (the “Company”). The Series will not invest directly
in the Company. ADRs are receipts, issued by an American bank or trust issuer,
which evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Japanese Yen
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Mizuho
Financial Group Inc.
Mizuho
Financial Group Inc. is a Japanese bank holding company that together with its
subsidiaries, engages in banking, trust, securities, and other businesses
related to financial services in Japan, the Americas, Europe, Asia/Oceania, and
internationally. Mizuho Financial Group Inc. is listed on the Tokyo Stock
Exchange code number 8411.
Mizuho Financial Group Inc. is registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to
or filed with the SEC by Mizuho Financial Group Inc. pursuant to the Exchange
Act can be located by reference to the SEC file number 001-33098. The SEC
maintains an internet site that contains reports, proxy, and information
statements and other information regarding the issuer at www.sec.gov. In
addition, information regarding Mizuho Financial Group Inc. may be obtained from
other sources including, but not limited to, press releases, newspaper articles
and other publicly disseminated documents. Neither the Series nor the Manager
are responsible for the content in such other sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Japan. The
risks of investing in the securities of a Japanese company include risks of
natural disasters, lack of natural resources, reliance on trading partners
(including the United States and Asian and European economies), national
security, unpredictable political climate, large government debt, currency
fluctuation and an aging labor force. The realization of such risks could have a
negative impact on the value of securities of Japanese
companies.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Tokyo Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations
between
the Local Currency and the U.S. dollar. It is possible that a degree of currency
exposure may remain even at the time the Currency Hedge Contract is implemented.
The Series may not be able to structure the Currency Hedge Contract as
anticipated or the Currency Hedge Contract may not successfully reduce the
currency risk from the Portfolio Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Banking
Industry Risk.
Companies within the banking industry can be significantly affected by extensive
governmental regulation, which may limit both the amounts and types of loans and
other financial commitments they can make and the interest rates and fees they
can charge and amount of capital they must maintain. Profitability is largely
dependent on the availability and cost of capital funds and can fluctuate
significantly when interest rates change. Credit losses resulting from financial
difficulties of borrowers can negatively impact the sector. Banks may also be
subject to severe price competition. These risks can be exacerbated if a
particular region in which a bank operates experiences economic decline. The
regional banking industry is highly competitive and thus, failure to maintain or
increase market share may result in regional bank failures or mergers with
larger, or multi-national banks.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series
portfolio,
although the Series enters into the Currency Hedge Contract to seek to minimize
the impact of fluctuations in the foreign currency exchange rate. Although the
ADRs in which the Series invests will be listed on major U.S. exchanges, there
can be no assurance that a market for these securities will be made or
maintained or that any such market will be or remain liquid. There is also no
guarantee that a financial institution will continue to sponsor a particular
ADR. As a result, the Series may have difficulty selling securities if it needs
to do so, or selling them quickly and efficiently at the prices at which they
have been valued. The depositary bank may not have physical custody of the
underlying securities at all times and may charge fees for various services,
including forwarding dividends and interest, and processing corporate actions. A
Series would be expected to pay a share of the additional fees, which it would
not pay if investing directly in the foreign securities. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. The Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
NATIONAL GRID PLC
ADRhedged™
Investment
Objective
The
National Grid plc ADRhedged™ (the “Series”) seeks to provide investment results
that correspond generally, before fees and expenses, to the total return of the
ordinary shares of National Grid plc in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the National Grid plc
(the “Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the British Pound
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
National
Grid plc
National
Grid plc is a British multinational electricity and gas utility company
headquartered in London, England.
National Grid plc is listed on the London Stock Exchange under the ticker symbol
“NG”.
National Grid plc is registered under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Information provided to or filed with the
SEC by National Grid plc pursuant to the Exchange Act can be located by
reference to the SEC file number 001-14958. The SEC maintains an internet site
that contains reports, proxy, and information statements and other information
regarding the issuer at www.sec.gov. In addition, information regarding National
Grid plc may be obtained from other sources including, but not limited to, press
releases, newspaper articles and other publicly disseminated documents. Neither
the Series nor the Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the
Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Utility
Companies Risk. The
utilities sector is generally subject to significant government regulation and
oversight, including restrictions on rates as well as environmental and other
regulations. Utility companies also may face risks related to, among other
things, natural disasters, cyber or other attacks, capital project funding,
energy price volatility and increased competition.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series
portfolio,
although the Series enters into the Currency Hedge Contract to seek to minimize
the impact of fluctuations in the foreign currency exchange rate. Although the
ADRs in which the Series invests will be listed on major U.S. exchanges, there
can be no assurance that a market for these securities will be made or
maintained or that any such market will be or remain liquid. There is also no
guarantee that a financial institution will continue to sponsor a particular
ADR. As a result, the Series may have difficulty selling securities if it needs
to do so, or selling them quickly and efficiently at the prices at which they
have been valued. The depositary bank may not have physical custody of the
underlying securities at all times and may charge fees for various services,
including forwarding dividends and interest, and processing corporate actions. A
Series would be expected to pay a share of the additional fees, which it would
not pay if investing directly in the foreign securities. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. The Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
NESTLE SA
ADRhedged™
Investment
Objective
The
Nestle SA ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of Nestle SA in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Nestle SA (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities markets.
ADRs of the Company are sponsored. In a sponsored ADR arrangement, the foreign
issuer assumes the obligation to pay some or all of the depositary’s transaction
fees. Under an unsponsored ADR arrangement, the foreign issuer assumes no
obligations and the depositary’s transaction fees are paid directly by the ADR
holders. Because unsponsored ADR arrangements are organized
independently and without the cooperation of the issuer of the underlying
securities, available information concerning the foreign issuer may not be as
current as for sponsored ADRs and voting rights with respect to the deposited
securities are not passed through.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Swiss Franc
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges or
over-the-counter markets, they are still subject to currency risk because
changes in foreign currency exchange rates affect their value. The Currency
Hedge Contract is designed to minimize the impact of fluctuations in the
exchange rate between the U.S. dollar and the Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Nestle
SA
Nestle
S.A. (“Nestle”) is a Swiss multinational food and beverage conglomerate
corporation headquartered in Switzerland. Nestle S.A. manufactures and sells
products for people and pets. Nestle
is primarily traded on the Swiss Franc Exchange.
Information
regarding Nestle may be obtained from publicly available sources including, but
not limited to, the company’s website (www.nestle.com), press releases,
newspaper articles and other publicly disseminated documents. Nestle ADRs trade
on the over-the-counter market (“OTC”). Information regarding Nestle may also be
obtained from the SEC’s website (https://www.sec.gov/search-filings/cik-lookup).
Securities that trade OTC are not traded on a securities exchange but are
purchased from broker-dealers that make a market in the securities.
Broker-dealers that provide a quote for Nestle ADRs are required to comply with
Rule 15c2-11 under the Securities Exchange Act of 1934, as amended (“Exchange
Act”). Rule 15c2-11 requires the broker-dealer, prior to providing a quote on an
OTC security, to obtain and review certain publicly available information for
the OTC security, and to have a reasonable basis for believing that the
information is accurate and from a reliable source. A broker-dealer may satisfy
Rule 15c2-11, in part, by reviewing the information made available by
Nestle
in
compliance with Rule 12g3-2(b) under the Exchange Act. Investors are highly
encouraged to conduct their own research on Nestle, and seek information from
their financial advisor, prior to investing in the Fund. Neither the Series nor
the Manager are responsible for the content in such other sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding
Nestle from the publicly available documents described above. Neither the Fund,
the Trust, the Adviser nor any affiliate has participated in the preparation of
such documents. Neither the Fund, the Trust, the Adviser nor any affiliate makes
any representation that such publicly available documents or any other publicly
available information regarding Nestle is accurate or complete. Furthermore, the
Fund cannot give any assurance that all events occurring prior to the date of
the prospectus (including events that would affect the accuracy or completeness
of the publicly available documents described above) that would affect the
trading price of Nestle have been publicly disclosed. Subsequent disclosure of
any such events or the disclosure of, or failure to disclose, material future
events concerning Nestle could affect the value of the Fund’s investments with
respect to Nestle and therefore the value of the
Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risk
of Investing in Switzerland. Investments
in Swiss issuers will
subject
the Fund to legal, regulatory,
political,
currency, security, and
economic
risks specific to Switzerland.
International
trade is a large component
of
the Swiss economy and Switzerland
depends
upon exports to generate
economic
growth. The Swiss economy
relies
on certain key trading partners in
order
to sustain continued economic
growth.
Switzerland’s economic growth
generally
mirrors slowdowns and growth
spurts
experienced in other countries,
including
the U.S. and certain Western
European countries.
Foreign
Market Risk.
Because non-U.S. exchanges such as the SIX Swiss Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations
are
unavailable. In addition, changes in government regulation of derivative
instruments could affect the character, timing and amount of the Series taxable
income or gains, and may limit or prevent the Series from using the Currency
Hedge Contract as a part of its investment strategy, which could make the
investment strategy more costly to implement or require the Series to change its
investment strategy.
Nestle
Company Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, causing the value of its securities to decline. Poor performance
may be caused by poor management decisions, competitive pressures, changes in
technology, environmental concerns, disruptions in supply chain, labor problems
or shortages, corporate restructurings, fraudulent disclosures or other factors.
Issuers may, in times of distress or at their own discretion, decide to reduce
or eliminate dividends, which may also cause their stock prices to
decline.
Nestle
Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with operating companies and food and beverage industry
companies, Nestle faces risks unique to its operations including, among others,
negative
public perception due to ethical concerns regarding their sourcing practices,
particularly child labor and environmental impact, fluctuating raw material
costs due to climate change, intense competition in the food and beverage
market, changing consumer preferences towards healthier options, and potential
regulatory issues related to product labeling and marketing; all of which
can significantly impact their sales and brand
reputation.
Food
and Beverage Industry Risk. The
food and beverage
industry
is highly competitive and can be significantly affected by
demographic
and product trends, competitive pricing, food fads,
marketing
campaigns, environmental factors, government regulation,
adverse
changes in general economic conditions, evolving consumer
preferences,
nutritional and health-related concerns, federal, state and
local
food inspection and processing controls, consumer product liability
claims,
consumer boycotts, risks of product tampering and the
availability
and expense of liability insurance.
Non-Diversification
Risk. The Series is non-diversified and holds Portfolio Securities of
only one particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. There is also no guarantee that a financial institution
will continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities if it needs to do so, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute Shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Series may therefore receive less timely information or have
less control than if it invested directly in the foreign issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available
in English and generally made available to the public in a manner described
above in the Principal Investment Strategies, investors in the Series may not be
able to gather information on which to make investment decisions. In such
circumstances, the Adviser will advise the Board of Trustees of the Series of
the circumstances, and the Board may make a determination to cease operations of
the Series. In such circumstances, the Series may distribute the underlying ADRs
in kind to shareholders, the Fund may liquidate the
positions and distribute cash to shareholders, or the Board may take
such other actions as it deems most appropriate for, and in the best of,
shareholders under the circumstances.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
NOVARTIS AG
ADRhedged™
Investment
Objective
The
Novartis AG ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of Novartis AG in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Series has not yet commenced operations and
therefore does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of Novartis AG (the
“Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets. The Series invests in the ADRs of the Company (the
“Portfolio Securities”) and a currency swap (the “Currency Hedge Contract”)
designed to hedge against fluctuations in the exchange rate between the U.S.
dollar and the Swiss Franc (“Local Currency”). The Currency Hedge Contract is
with a counterparty acting as principal. The notional value of the Currency
Hedge Contract is adjusted daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the
Currency
Hedge Contract decreases in value, the Series will pay the counterparty an
amount in U.S. dollars equal to the decrease in the value of the Currency Hedge
Contract. In order to obtain any necessary amount of cash, the Manager may sell
Portfolio Securities. The Series will maintain amounts not invested in ADRs in
cash or cash equivalents, including money market funds. The Currency Hedge
Contract is subject to counterparty risk in that if the counterparty fails to
make any payments, the Series could incur a loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Novartis
AG
Novartis
AG is a Swiss multinational pharmaceutical corporation based in Basel,
Switzerland. Novartis AG manufactures pharmaceutical and consumer healthcare
products.
Novartis
AG is registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Information provided to or filed with the SEC by Novartis AG
pursuant to the Exchange Act can be located by reference to the SEC file number
001-15024. The SEC maintains an internet site that contains reports, proxy, and
information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding Novartis AG may be obtained from
other sources including, but not limited to, press releases, newspaper articles
and other publicly disseminated documents. Neither the Series nor the Manager
are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Switzerland. The
Series is subject to certain risks associated with Switzerland and Europe as a
whole. Although Switzerland is not a member of the European Union (“EU”), the
Swiss economy is dependent on the economies of other European nations as key
trading partners. Any reduction in spending by other European countries could
have a negative effect on the Swiss economy. Additionally, the European
sovereign-debt crisis has resulted in a weakened Euro and has put into question
the future financial prospects of the surrounding region. The ongoing
implementation of the EU provisions and Euro conversion process may materially
impact revenues, expenses or income and increase competition for other European
companies, which could have an effect on the Swiss economy, and in turn, the
securities in which the Series invests.
Foreign
Market Risk.
Because non-U.S. exchanges such as the SIX Swiss Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the
Currency Hedge Contract will not perfectly offset the actual fluctuations
between the Local Currency and the U.S. dollar. It is possible that a
degree of currency exposure may remain even at the time the Currency Hedge
Contract is implemented. The Series may not be able to structure the Currency
Hedge Contract as anticipated or the Currency Hedge Contract may not
successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company, the
pharmaceutical industry or Switzerland. Any issuer may perform poorly, 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 at their own
discretion, decide to reduce or eliminate dividends, which may also cause their
stock prices to decline.
Pharmaceutical
Industry Risk. The
profitability of companies in the pharmaceutical industry is highly dependent on
the development, procurement and marketing of drugs and the development,
protection and exploitation of intellectual property rights and other
proprietary information. These companies may be significantly affected by such
events as the expiration of patents or the loss of, or the inability to enforce,
intellectual property rights. Research and other costs associated with
developing or procuring new drugs and the related intellectual property rights
can be significant, and the results of such research and expenditures are
unpredictable. Many pharmaceutical companies face intense competition from new
products and less costly generic products. In addition, the process for
obtaining regulatory approval from the U.S. Food and Drug Administration or
other governmental regulatory authorities is long and costly and there is no
assurance that the necessary approvals will be obtained or maintained by these
companies.
Additionally,
companies in the pharmaceutical industry may be subject to expenses and losses
from extensive litigation based on intellectual property, product liability and
similar claims. These companies may be adversely affected by government
regulation and changes in reimbursement rates from third-party payors, such as
Medicare, Medicaid and other government-sponsored programs, private health
insurance plans and health maintenance
organizations.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. Moreover, the price at which the Series securities may be sold and
the value of the Series Shares may be adversely affected if trading markets for
ADRs are limited or absent or if bid/ask spreads are wide. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. A Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected, the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
(“Shareholder”). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
NOVO NORDISK A/S (B
SHARES) ADRhedged™
Investment
Objective
The
Novo Nordisk A/S (B Shares) ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of Novo Nordisk A/S (B Shares) in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$19 |
$61 |
$107 |
$243 |
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. From
January 6, 2025, the date operations commenced, through the fiscal year ended
December 31, 2025, the Fund’s portfolio turnover rate was 0.00% of the average value of its
portfolio.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Novo Nordisk A/S
(B Shares) (the “Company”). The Series will not invest directly
in the Company. ADRs are receipts, issued by an American bank or trust issuer,
which evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Danish krone
(“Local Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Novo
Nordisk A/S
Novo
Nordisk A/S a Danish multinational pharmaceutical company headquartered in
Bagsværd, Denmark. Novo Nordisk A/S develops, produces, and markets
pharmaceutical products. Novo Nordisk A/S focuses on diabetes care and offers
insulin delivery systems and other diabetes products. Novo Nordisk A/S also
works in areas such as hemostasis management, growth disorders, and hormone
replacement therapy.
Novo
Nordisk A/S is registered under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). Information provided to or filed with the SEC by Novo
Nordisk A/S pursuant to the Exchange Act can be located by reference to the SEC
file number 333-82318. The SEC maintains an internet site that contains reports,
proxy, and information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding Novo Nordisk A/S may be obtained
from other sources including, but not limited to, press releases, newspaper
articles and other publicly disseminated documents. Neither the Series nor the
Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Denmark. The
risks of investing in the securities of a Danish company include legal,
regulatory, political, currency, security, and economic risks specific to
Denmark. The Danish economy, along with certain other European Union ( “EU”)
economies, experienced a significant economic slowdown during the recent
financial crisis. Denmark’s economy has also been characterized by slow growth
and is facing demographic challenges that could lead to labor supply shortages
in the near future.
Investing
in the EU Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’
markets. Separately, the EU faces issues involving its membership,
structure, procedures and policies. The exit of one or more member states
from the EU would place its currency and banking system in jeopardy. The
exit by any member states will likely result in increased volatility,
illiquidity and potentially lower economic growth in the affected markets, which
may adversely affect the Series investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as Nasdaq Copenhagen may be open on days when
the Series does not price its Shares, the value of the underlying securities of
the ADRs in the Series portfolio may change on days when Shareholders will not
be able to purchase or sell the Series Shares, regardless of whether there is an
active U.S. market for Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the
Currency Hedge Contract will not perfectly offset the actual fluctuations
between the Local Currency and the U.S. dollar. It is possible that a
degree of currency exposure may remain even at the time the Currency Hedge
Contract is implemented. The Series may not be able to structure the Currency
Hedge Contract as anticipated or the Currency Hedge Contract may not
successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company, the
pharmaceutical industry or England. Any issuer may perform poorly, 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 at their own
discretion, decide to reduce or eliminate dividends, which may also cause their
stock prices to decline.
Pharmaceutical
Industry Risk. The
profitability of companies in the pharmaceutical industry is highly dependent on
the development, procurement and marketing of drugs and the development,
protection and exploitation of intellectual property rights and other
proprietary information. These companies may be significantly affected by such
events as the expiration of patents or the loss of, or the inability to enforce,
intellectual property rights. Research and other costs associated with
developing or procuring new drugs and the related intellectual property rights
can be significant, and the results of such research and expenditures are
unpredictable. Many pharmaceutical companies face intense competition from new
products and less costly generic products. In addition, the process for
obtaining regulatory approval from the U.S. Food and Drug Administration or
other governmental regulatory authorities is long and costly and there is no
assurance that the necessary approvals will be obtained or maintained by these
companies.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. Moreover, the price at which the Series securities may be sold and
the value of the Series Shares may be adversely affected if trading markets for
ADRs are limited or absent or if bid/ask spreads are wide. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. A Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected, the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
("Shareholder"). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has limited operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series does
not have a full calendar year of performance history. In the
future, performance information will be presented in this section of the
Prospectus. Performance information will contain a bar chart and table
that provide some indication of the risks of investing in the Series by showing
changes in the Series performance from year to year and by showing the Series
average annual returns for certain time periods as compared to a broad measure
of market performance. Investors
should be aware that past performance before and after taxes is not necessarily
an indication of how the Series will perform in the
future.
Updated
performance information for the Series, including its current net asset value
per share, is available by calling toll-free at (844)
954-5333.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
RIO TINTO PLC
ADRhedged™
Investment
Objective
The
Rio Tinto plc ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of Rio Tinto plc in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance.As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Rio Tinto plc
(the “Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the British Pound
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Rio
Tinto plc
Rio
Tinto plc is a British-Australian multinational mining and metals company based
in the United Kingdom. Rio Tinto plc primarily produces iron ore, aluminum,
copper, diamonds, and other minerals across operations in over 35 countries. Rio
Tinto plc is dual-listed on the London Stock Exchange and the Australian
Securities Exchange (as “Rio Tinto Limited”) under the ticker symbol “RIO” on
both exchanges.
Rio Tinto plc is registered under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Information provided to or filed with the
SEC by Rio Tinto plc pursuant to the Exchange Act can be located by reference to
the SEC file number 001-10533. The SEC maintains an internet site that contains
reports, proxy, and information statements and other information regarding the
issuer at www.sec.gov. In addition, information regarding Rio Tinto plc may be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents. Neither the Series
nor the Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange and Australian
Securities Exchange may be open on days when the Series does not price its
Shares, the value of the underlying securities of the ADRs in the Series
portfolio may change on days when Shareholders will not be able to purchase or
sell the Series Shares, regardless of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Copper
and Metal Ore Mining Companies Risk. Companies
in the copper and metal ore mining industry may be adversely impacted by the
volatility of commodity prices, changes in exchange rates, social and political
unrest, war, events related to energy conservation, the success of exploration
projects, depletion of resources, decreases in demand, over-production,
litigation and changes in government regulations or policies, among other
factors. Investments in copper and metal ore mining companies may be speculative
and may be subject to greater price volatility than investments in other types
of companies.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its
assets
in securities of a single company than diversified funds, the performance of
that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
ROCHE HOLDING AG
ADRhedged™
Investment
Objective
The
Roche Holding AG ADRhedged™ (the “Series”) seeks to provide investment results
that correspond generally, before fees and expenses, to the total return of the
ordinary shares of Roche Holding AG in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Roche Holding AG
(the “Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets. ADRs of the Company are sponsored. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary’s transaction fees. Under an unsponsored ADR arrangement, the
foreign issuer assumes no obligations and the depositary’s transaction fees are
paid directly by the ADR holders. Because unsponsored ADR arrangements
are organized independently and without the cooperation of the issuer of the
underlying securities, available information concerning the foreign issuer may
not be as current as for sponsored ADRs and voting rights with respect to the
deposited securities are not passed through.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Swiss Franc
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges or
over-the-counter markets, they are still subject to currency risk because
changes in foreign currency exchange rates affect their value. The Currency
Hedge Contract is designed to minimize the impact of fluctuations in the
exchange rate between the U.S. dollar and the Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Roche
Holding AG
Roche
Holding AG (“Roche”) engages in the pharmaceuticals and diagnostics businesses
internationally. Roche develops medicines, diagnostics testing and equipment,
and digital health solutions. Roche
is primarily traded on the Swiss Franc Exchange.
Information
regarding Roche may be obtained from publicly available sources including, but
not limited to, the company’s website (www.roche.com), press releases, newspaper
articles and other publicly disseminated documents. Roche AG ADRs trade on the
over-the-counter market (“OTC”). Information regarding Roche
may also be obtained from the SEC’s website
(https://www.sec.gov/search-filings/cik-lookup). Securities that trade OTC are
not traded on a securities exchange but are purchased from broker-dealers that
make a market in the securities. Broker-dealers that provide a quote for Roche
ADRs are required to comply with Rule 15c2-11 under the Securities Exchange Act
of 1934, as amended (“Exchange Act”). Rule 15c2-11 requires the broker-dealer,
prior to providing a quote on an OTC security, to obtain and review certain
publicly available information for the OTC security, and to have a reasonable
basis for believing that the information is accurate and from a reliable source.
A broker-dealer may satisfy Rule 15c2-11, in part, by reviewing the information
made available by Roche
in compliance with Rule 12g3-2(b) under the Exchange Act, and confirm that other
eligibility standards to be listed on the OTCQX are met. Investors are highly
encouraged to conduct their own research on Roche,
and seek information from their financial advisor, prior to investing in the
Fund. Neither the Series nor the Manager are responsible for the content in such
other sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding Roche
from the publicly available documents described above. Neither the Fund, the
Trust, the Adviser nor any affiliate has participated in the preparation of such
documents. Neither the Fund, the Trust, the Adviser nor any affiliate makes any
representation that such publicly available documents or any other publicly
available information regarding Roche is accurate or complete. Furthermore, the
Fund cannot give any assurance that all events occurring prior to the date of
the prospectus (including events that would affect the accuracy or completeness
of the publicly available documents described above) that would affect the
trading price of Roche have been publicly disclosed. Subsequent disclosure of
any such events or the disclosure of, or failure to disclose, material
future
events concerning Roche could affect the value of the Fund’s investments with
respect to Roche and therefore the value of the
Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risk
of Investing in Switzerland. Investments
in Swiss issuers will
subject
the Fund to legal, regulatory,
political,
currency, security, and
economic
risks specific to Switzerland.
International
trade is a large component
of
the Swiss economy and Switzerland
depends
upon exports to generate
economic
growth. The Swiss economy
relies
on certain key trading partners in
order
to sustain continued economic
growth.
Switzerland’s economic growth
generally
mirrors slowdowns and growth
spurts
experienced in other countries,
including
the U.S. and certain Western
European countries.
Foreign
Market Risk.
Because non-U.S. exchanges such as the SIX Swiss Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Roche
Company Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Roche may perform
poorly, causing the value of its securities to decline. Poor performance may be
caused by poor management decisions, competitive pressures, changes in
technology, environmental concerns, disruptions in supply chain, labor problems
or shortages, corporate restructurings, fraudulent disclosures or other factors.
Issuers may, in times of distress or at their own discretion, decide to reduce
or eliminate dividends, which may also cause their stock prices to
decline.
Roche
Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with operating companies and pharmaceutical companies,
Roche faces risks unique to its operations including, among others, intense
competition in the pharmaceutical market, dependence on successful drug
development, regulatory hurdles, potential side effects from new medications,
clinical trial failures, intellectual property challenges, market fluctuations,
reputational damage from adverse events, and changing healthcare policies across
different regions.
Pharmaceutical
Industry Risk. The
profitability of companies in the pharmaceutical industry is highly dependent on
the development, procurement and marketing of drugs and the development,
protection and exploitation of intellectual property rights and other
proprietary information. These companies may be significantly affected by such
events as the expiration of patents or the loss of, or the inability to enforce,
intellectual property rights. Research and other costs associated with
developing or procuring new drugs and the related intellectual property rights
can be significant, and the results of such research and expenditures are
unpredictable. Many pharmaceutical companies face intense competition from new
products and less costly generic products. In addition, the process for
obtaining regulatory approval from the U.S. Food and Drug Administration or
other governmental regulatory authorities is long and costly and there is no
assurance that the necessary approvals will be obtained or maintained by these
companies.
Additionally,
companies in the pharmaceutical industry may be subject to expenses and losses
from extensive litigation based on intellectual property, product liability and
similar claims. These companies may be adversely affected by government
regulation and changes in reimbursement rates from third-party payors, such as
Medicare, Medicaid and other government-sponsored programs, private health
insurance plans and health maintenance
organizations.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. There is also no guarantee that a financial institution
will continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities if it needs to do so, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute Shareholder communications or pass through
any voting rights with respect to
the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available in English and generally made available to the public in a
manner described above in the Principal Investment Strategies, investors in the
Series may not be able to gather information on which to make investment
decisions. In such circumstances, the Adviser will advise the Board of Trustees
of the Series of the circumstances, and the Board may make a determination to
cease operations of the Series. In such circumstances, the Series may distribute
the underlying ADRs in kind to shareholders, the Fund may liquidate the
positions and distribute cash to shareholders, or the Board may take such other
actions as it deems most appropriate for, and in the best of, shareholders under
the circumstances.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
SANOFI
ADRhedged™
Investment
Objective
The
Sanofi ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of Sanofi in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Series has not yet commenced operations and
therefore does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of Sanofi (the
“Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Sanofi
Sanofi is
a French multinational pharmaceutical and healthcare company headquartered in
Paris, France. Sanofi engages in the research, production, and distribution
of pharmaceutical products. Sanofi operates through the following business
segments: Pharmaceuticals, Consumer Healthcare, and Vaccines.
Sanofi
is registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Information provided to or filed with the SEC by Sanofi
pursuant to the Exchange Act can be located by reference to the SEC file number
001-31368. The SEC maintains an internet site that contains reports, proxy, and
information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding Sanofi may be obtained from
other sources including, but not limited to, press releases, newspaper articles
and other publicly disseminated documents. Neither the Series nor the Manager
are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in France. The
risks of investing in the securities of a French company include legal,
regulatory, political, currency, security, and economic risk specific to France.
The French economy is dependent to a significant extent on the economies of
certain key trading partners, including Germany and other Western European
countries. Reduction in spending on French products and services, or changes in
any of the economies may cause an adverse impact on the French economy. In
addition, France may be subject to acts of terrorism. The French economy is
dependent on exports from the agricultural sector. Leading agricultural exports
include dairy products, meat, wine, fruit and vegetables, and fish. As a result,
the French economy is susceptible to fluctuations in demand for agricultural
products. Additionally, the French economy is susceptible to other risks
relating to its membership in the European Union, such as the recent sovereign
debt crisis.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’
markets. Separately, the EU faces issues involving its membership,
structure, procedures and policies. The exit of one or more member states
from the EU would place its currency and banking system in jeopardy. The
exit by any member states will likely result in increased volatility,
illiquidity and potentially lower economic growth in the affected markets, which
may adversely affect the Series investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as Euronext Paris may be open on days when the
Series does not price its Shares, the value of the underlying securities of the
ADRs in the Series portfolio may change on days when Shareholders will not be
able to purchase or sell the Series Shares, regardless of whether there is an
active U.S. market for Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the
Currency Hedge Contract will not perfectly offset the actual fluctuations
between the Local Currency and the U.S. dollar. It is possible that a
degree of currency exposure may remain even at the time the Currency Hedge
Contract is implemented. The Series may not be able to structure the Currency
Hedge Contract as anticipated or the Currency Hedge Contract may not
successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of Company,
subject to increased price volatility and more susceptible to adverse economic,
market, political or regulatory occurrences affecting the Company, the
pharmaceutical industry or France. Any issuer may perform poorly, 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 at their own
discretion, decide to reduce or eliminate dividends, which may also cause their
stock prices to decline.
Pharmaceutical
Industry Risk. The
profitability of companies in the pharmaceutical industry is highly dependent on
the development, procurement and marketing of drugs and the development,
protection and exploitation of intellectual property rights and other
proprietary information. These companies may be significantly affected by such
events as the expiration of patents or the loss of, or the inability to enforce,
intellectual property rights. Research and other costs associated with
developing or procuring new drugs
and
the related intellectual property rights can be significant, and the results of
such research and expenditures are unpredictable. Many pharmaceutical companies
face intense competition from new products and less costly generic products. In
addition, the process for obtaining regulatory approval from the U.S. Food and
Drug Administration or other governmental regulatory authorities is long and
costly and there is no assurance that the necessary approvals will be obtained
or maintained by these companies.
Additionally,
companies in the pharmaceutical industry may be subject to expenses and losses
from extensive litigation based on intellectual property, product liability and
similar claims. These companies may be adversely affected by government
regulation and changes in reimbursement rates from third-party payors, such as
Medicare, Medicaid and other government-sponsored programs, private health
insurance plans and health maintenance
organizations.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. Moreover, the price at which the Series securities may be sold and
the value of the Series Shares may be adversely affected if trading markets for
ADRs are limited or absent or if bid/ask spreads are wide. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. A Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected, the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
(“Shareholder”). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little
trading
volume and market liquidity. Further, increased market volatility may cause
increased bid/ask spreads. In addition, in stressed market conditions, the
market for the Series Shares may become less liquid in response to deteriorating
liquidity in the markets for the Series underlying portfolio holdings in the
ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
SAP SE
ADRhedged™
Investment
Objective
The
SAP SE ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of SAP SE in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$19 |
$61 |
$107 |
$243 |
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. From
January 6, 2025, the date operations commenced, through the fiscal year ended
December 31, 2025, the Fund’s portfolio turnover rate was 0.00% of the average value of its
portfolio.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of SAP SE (the
“Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
SAP
SE
SAP
SE is a German multinational software company based in Walldorf,
Baden-Württemberg. SAP SE develops enterprise software to manage business
operations and customer relations.
SAP
SE is registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Information provided to or filed with the SEC by SAP SE
pursuant to the Exchange Act can be located by reference to the SEC file number
001-14251. The SEC maintains an internet site that contains reports, proxy, and
information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding SAP SE may be obtained from
other sources including, but not limited to, press releases, newspaper articles
and other publicly disseminated documents. Neither the Series nor the Manager
are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Germany. The
risks of investing in the securities of a German company include risks of
significant demographic challenges to sustained long-term growth; low fertility
rates and declining net immigration putting pressure on the country’s social
welfare system; and the costly and time-consuming modernization and integration
of the eastern German economy. Additionally, the European sovereign-debt crisis
has resulted in a weakened Euro and has put into question the future financial
prospects of Germany and the surrounding region.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’
markets. Separately, the EU faces issues involving its membership,
structure, procedures and policies. The exit of one or more member states
from the EU would place its currency and banking system in jeopardy. The
exit by any member states will likely result in increased volatility,
illiquidity and potentially lower economic growth in the affected markets, which
may adversely affect the Series investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Frankfurt Stock Exchange may be open on
days when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the
Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the
Currency Hedge Contract will not perfectly offset the actual fluctuations
between the Local Currency and the U.S. dollar. It is possible that a
degree of currency exposure may remain even at the time the Currency Hedge
Contract is implemented. The Series may not be able to structure the Currency
Hedge Contract as anticipated or the Currency Hedge Contract may not
successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company, the software industry
or Germany. Any issuer may perform poorly, 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 at their own discretion, decide to
reduce or eliminate dividends, which may also cause their stock prices to
decline.
Software
Industry Risk.
The software industry faces risks related to competitive pressures, such as
aggressive pricing (including fixed-rate pricing), technological developments
(including product-specific technological change), changing domestic demand, and
the ability to attract and retain skilled employees; availability and price of
components; dependence on intellectual property rights, and potential loss or
impairment of those rights; research and development costs; rapid product
obsolescence; cyclical market patterns; evolving industry standards; and
frequent new product introductions requiring timely and successful introduction
of new products and the ability to service such products. The software industry
may also be affected by risks that affect the broader information technology
industry.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its
assets
in securities of a single company than diversified funds, the performance of
that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. Moreover, the price at which the Series securities may be sold and
the value of the Series Shares may be adversely affected if trading markets for
ADRs are limited or absent or if bid/ask spreads are wide. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. A Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected, the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
("Shareholder"). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little
trading
volume and market liquidity. Further, increased market volatility may cause
increased bid/ask spreads. In addition, in stressed market conditions, the
market for the Series Shares may become less liquid in response to deteriorating
liquidity in the markets for the Series underlying portfolio holdings in the
ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has limited operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series does
not have a full calendar year of performance history. In the
future, performance information will be presented in this section of the
Prospectus. Performance information will contain a bar chart and table
that provide some indication of the risks of investing in the Series by showing
changes in the Series performance from year to year and by showing the Series
average annual returns for certain time periods as compared to a broad measure
of market performance. Investors
should be aware that past performance before and after taxes is not necessarily
an indication of how the Series will perform in the
future.
Updated
performance information for the Series, including its current net asset value
per share, is available by calling toll-free at (844)
954-5333.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
SHELL PLC
ADRhedged™
Investment
Objective
The Shell plc ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of Shell plc in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$19 |
$61 |
$107 |
$243 |
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
fiscal year ended December 31, 2025, the Fund’s portfolio turnover rate was
0.00% of the average value of its
portfolio.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Shell plc (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities
markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Shell
plc
Shell
plc is a British multinational oil and gas company headquartered in London,
England. Shell plc is involved in oil and gas exploration, production,
refining, transportation, and marketing.
Shell
plc is registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Information provided to or filed with the SEC by Shell plc
pursuant to the Exchange Act can be located by reference to the SEC file number
001-32575. The SEC maintains an internet site that contains reports, proxy, and
information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding Shell plc may be obtained from
other sources including, but not Neither the Series nor the Manager are
responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as Euronext Amsterdam may be open on days when
the Series does not price its Shares, the value of the underlying securities of
the ADRs in the Series portfolio may change on days when Shareholders will not
be able to purchase or sell the Series Shares, regardless of whether there is an
active U.S. market for Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the
Currency Hedge Contract will not perfectly offset the actual fluctuations
between the Local Currency and the U.S. dollar. It is possible that a
degree of currency exposure may remain even at the time the
Currency
Hedge Contract is implemented. The Series may not be able to structure the
Currency Hedge Contract as anticipated or the Currency Hedge Contract may not
successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company; the
oil, gas, and consumable fuels industry; or England. Any issuer may perform
poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Oil,
Gas, and Consumable Fuels Industry Risk.
The oil, gas, and consumable fuels industry is affected by worldwide energy
prices and exploration and production costs. Companies in the oil, gas, and
consumable fuels industry may have significant operations in areas at risk for
natural disasters, social unrest and environmental damage. These companies may
also be at risk for increased government regulation and intervention,
litigation, and negative publicity and public
perception.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that
a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. Moreover, the price at which the Series securities may be sold and
the value of the Series Shares may be adversely affected if trading markets for
ADRs are limited or absent or if bid/ask spreads are wide. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. A Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected, the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
(“Shareholder”). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little
trading
volume and market liquidity. Further, increased market volatility may cause
increased bid/ask spreads. In addition, in stressed market conditions, the
market for the Series Shares may become less liquid in response to deteriorating
liquidity in the markets for the Series underlying portfolio holdings in the
ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
Performance
The bar chart and table below provide some indication of the
risks of investing in the Fund. The bar chart shows the Series changes in
performance from year to year, and the table shows how the Series average annual
returns for the time periods indicated as compared with those of a broad measure
of market performance. Investors
should be aware that past performance (before and after taxes) is not
necessarily an indication of how the Series will perform in the
future.
Updated
performance information for the Series, including its current net asset value
per share, is available by calling toll-free at (844)
954-5333.
Annual Total Returns
(calendar year ended 12/31)
During
the period shown, the highest quarterly
return was 13.98% (quarter ended March 31, 2025) and the
lowest quarterly return was -8.29% (quarter ended June 30,
2025)
|
|
|
|
|
|
|
|
| |
|
|
One
Year |
Since
Inception(1) |
|
Return
Before Taxes |
13.01% |
7.43% |
|
Return
After-Taxes on Distributions |
13.01% |
6.78% |
|
Return
After-Taxes on Distributions and Sale of Fund
Shares |
7.70% |
5.37% |
|
S&P
500 Index (reflects no deduction for fees, expenses or
taxes) |
17.88% |
16.54% |
(1)
The
Fund commenced operations on October 4,
2024.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives
any
cash distributions from the Series or cash distributions that differ in amount
from such income. The Series taxable income will generally consist of ordinary
income, capital gains or some combination of both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
SIEMENS AG
ADRhedged™
Investment
Objective
The
Siemens AG ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of Siemens AG in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Siemens AG (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities markets.
ADRs of the Company are sponsored. In a sponsored ADR arrangement, the foreign
issuer assumes the obligation to pay some or all of the depositary’s transaction
fees. Under an unsponsored ADR arrangement, the foreign issuer assumes no
obligations and the depositary’s transaction fees are paid directly by the ADR
holders. Because unsponsored ADR arrangements are organized
independently and without the cooperation of the issuer of the underlying
securities, available information concerning the foreign issuer may not be as
current as for sponsored ADRs and voting rights with respect to the deposited
securities are not passed through.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges or
over-the-counter markets, they are still subject to currency risk because
changes in foreign currency exchange rates affect their value. The Currency
Hedge Contract is designed to minimize the impact of fluctuations in the
exchange rate between the U.S. dollar and the Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Siemens
AG
Siemens
AG is a German multinational technology conglomerate. It is focused on creating
products and services for industrial automation, distributed energy resources,
rail transport and health technology. Siemens
AG is primarily traded on the Frankfurt Stock Exchange.
Information
regarding Siemens AG may be obtained from publicly available sources including,
but not limited to, the company’s website (www.siemens.com), press releases,
newspaper articles and other publicly disseminated documents. Siemens AG ADRs
trade on the over-the-counter market (“OTC”). Information regarding Siemens
AG
may also be obtained from the SEC’s website
(https://www.sec.gov/search-filings/cik-lookup). Securities that trade OTC are
not traded on a securities exchange but are purchased from broker-dealers that
make a market in the securities. Broker-dealers that provide a quote for Siemens
AG ADRs are required to comply with Rule 15c2-11 under the Securities Exchange
Act of 1934, as amended (“Exchange Act”). Rule 15c2-11 requires the
broker-dealer, prior to providing a quote on an OTC security, to obtain and
review certain publicly available information for the OTC security, and to have
a reasonable basis for believing that the information is accurate and from a
reliable source. Investors are highly encouraged to conduct their own research
on Siemens AG, and seek information from their financial advisor, prior to
investing in the Fund. Neither the Series nor the Manager are responsible for
the content in such other sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding
Siemens AG from the publicly available documents described above. Neither the
Fund, the Trust, the Adviser nor any affiliate has participated in the
preparation of such documents. Neither the Fund, the Trust, the Adviser nor any
affiliate makes any representation that such publicly available documents or any
other publicly available information regarding Siemens AG is accurate or
complete. Furthermore, the Fund cannot give any assurance that all events
occurring prior to the date of the prospectus (including events that would
affect the accuracy or completeness of the publicly available documents
described above) that would affect the trading price of Siemens AG have been
publicly disclosed. Subsequent disclosure of any such events or the disclosure
of, or failure to disclose, material future events concerning Siemens AG could
affect the value of the Fund’s investments with respect to Siemens AG and
therefore the value of the Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Investing
in Germany. The
risks of investing in the securities of a German company include risks of
significant demographic challenges to sustained long-term growth; low fertility
rates and declining net immigration putting pressure on the country’s social
welfare system; and the costly and time-consuming modernization and integration
of the eastern German economy. Additionally, the European sovereign-debt crisis
has resulted in a weakened Euro and has put into question the future financial
prospects of Germany and the surrounding region.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any other member states
will likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Frankfurt Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated
by
the fact that mark-to-market payments are made on a daily basis. The Series
intends to have only one counterparty, which will expose the Series to greater
counterparty risk and the Series may be unable to enter into the Currency Hedge
Contract on favorable terms, potentially preventing the Series from achieving
its investment objective. The Series is subject to liquidity risk if the Series
is required to reserve its assets against its exposure under the Currency Hedge
Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Siemens
AG Company Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 chain, labor problems or shortages, human
rights issues, corporate restructurings, fraudulent disclosures or other
factors. Issuers may, in times of distress or at their own discretion, decide to
reduce or eliminate dividends, which may also cause their stock prices to
decline.
Siemens
AG Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole. In addition to the risks
associated generally with operating companies and technology companies, Siemens
AG faces risks unique to its operations including, among others,
geopolitical instability, trade wars, fluctuating economic
conditions, intense competition in the industrial automation market, rapid
technological changes, cybersecurity threats, supply chain disruptions, and
regulatory compliance challenges across different regions where they
operate, particularly in the areas of energy, infrastructure, and industrial
automation.
Technology
Companies Risk. Technology
companies and companies that rely heavily on technological advances may have
limited product lines, markets, financial resources, supply chains and
personnel. These companies typically face intense competition, potentially rapid
product obsolescence and changes in product cycles and customer preferences.
They may face unexpected risks and costs associated with technological
developments, such as artificial intelligence and machine learning. Technology
companies also depend heavily on intellectual property rights and may be
adversely affected by the loss or impairment of those rights. Technology
companies may face increased government scrutiny and may be subject to adverse
government or legal action.
Rail
Transport Risk. Companies that provide rail transport technology and services are
subject to the risks of the rail transport industry as a whole. Such risks
include, but are not limited to, the risk that a company cannot secure or
maintain regulatory qualifications for products and services, non-diverse
customer base due to the industry being dominated by a few large participants,
changes in regulatory standards for services and equipment, natural disasters
that can interrupt railway operations, and obsolete
technology.
Health
Technology Risk. Health technology companies are subject to unique risks related to
intellectual property protection and significant expenditures on research and
development that many not produce profitable results. Companies in the health
technology industry rely heavily on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect rights in their
proprietary products and technologies. There can be no assurance that steps
taken to protect proprietary rights will adequately prevent the misappropriation
of technology. Competitors may also develop technologies that are substantially
equivalent or superior to such companies’ technology. Health technology
companies typically engage in significant amounts of spending on research and
development, and there is no guarantee that the products or services produced by
these companies will be profitable.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. There is also no guarantee that a financial institution
will continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities if it needs to do so, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute Shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Series may therefore receive less timely information or have
less control than if it invested directly in the foreign
issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available in English and generally made available to the public in a
manner described above in the Principal Investment Strategies, investors in the
Series may not be able to gather information on which to make investment
decisions. In such circumstances, the Adviser will advise the Board of Trustees
of the Series of the circumstances, and the Board may make a determination to
cease operations of the Series. In such circumstances, the Series may distribute
the underlying ADRs in kind to shareholders, the Fund may liquidate the
positions and distribute cash to shareholders, or the Board may take such other
actions as it deems most appropriate for, and in the best of, shareholders under
the circumstances.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
SILICON MOTION
TECHNOLOGY CORP. ADRhedged™
Investment
Objective
The
Silicon Motion Technology Corp. ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of Silicon Motion Technology Corp. in its
local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Silicon Motion
Technology Corp. (the “Company”). The Series will not invest
directly in the Company. ADRs are receipts, issued by an American bank or trust
issuer, which evidence ownership of underlying securities issued by a non-U.S.
issuer. Generally, ADRs, issued in registered form, are designed for use in the
U.S. securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the New Taiwan
Dollar (“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Silicon
Motion Technology Corp.
Silicon
Motion Technology Corp. is an American-Taiwanese company that engages in the
development, manufacture, and supply of semiconductor products for the
electronics market.
Silicon Motion Technology Corp. is listed on the NASDAQ Stock Exchange under the
ticker symbol “SIMO”.
Silicon Motion Technology Corp. is registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to
or filed with the SEC by Silicon Motion Technology Corp. pursuant to the
Exchange Act can be located by reference to the SEC file number 000-51380. The
SEC maintains an internet site that contains reports, proxy, and information
statements and other information regarding the issuer at www.sec.gov. In
addition, information regarding Silicon Motion Technology Corp. may be obtained
from other sources including, but not limited to, press releases, newspaper
articles and other publicly disseminated documents. Neither the Series nor the
Manager are responsible for the content in such other sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Taiwan
Investing Risk.
Securities of issuers in Taiwan are subject to risks, including, but not limited
to, legal, regulatory,
political,
currency and economic risks that are specific to
Taiwan.
Specifically, Taiwan’s geographic proximity and history
of
political contention with China have resulted in ongoing
tensions
between the two countries, which may materially
affect
the Taiwanese companies. Securities of Taiwanese
companies
are subject to Taiwan’s heavy dependence on
exports.
Reductions in spending on Taiwanese products and
services,
labor shortages, institution of tariffs or other trade
barriers,
or a downturn in any of the economies of Taiwan’s
key
trading partners, including the United States, may have
an
adverse impact on the Taiwanese economy and the values
of
Taiwanese companies.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Taiwan Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not
necessarily
eliminate the Series exposure to the Local Currency. Currency hedges are
sometimes subject to imperfect matching between the Currency Hedge Contract and
the currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the Currency
Hedge Contract will not perfectly offset the actual fluctuations between the
Local Currency and the U.S. dollar. It is possible that a degree of currency
exposure may remain even at the time the Currency Hedge Contract is implemented.
The Series may not be able to structure the Currency Hedge Contract as
anticipated or the Currency Hedge Contract may not successfully reduce the
currency risk from the Portfolio Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Semiconductor
Industry Risk. Semiconductor
companies may have limited product lines, markets, financial resources or
personnel. Semiconductor companies typically face intense competition,
potentially rapid product obsolescence and high capital costs and are dependent
on third-party suppliers and the availability of materials. They are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. Semiconductor companies are also affected
by the economic performance of their customers.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past
performance (before and after taxes) is not necessarily an
indication of its future performance. It may perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
SOFTBANK GROUP CORP.
ADRhedged™
Investment
Objective
The
Softbank Group Corp. ADRhedged™ (the “Series”) seeks to provide investment
results that correspond generally, before fees and expenses, to the total return
of the ordinary shares of Softbank Group Corp. in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Softbank Group
Corp. (the “Company”). The Series will not invest directly in
the Company. ADRs are receipts, issued by an American bank or trust issuer,
which evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets. ADRs of the Company are unsponsored, meaning that the ADRs
are issued by the depositary bank without the involvement of the Company. In a
sponsored ADR arrangement, the foreign issuer assumes the obligation to pay some
or all of the depositary’s transaction fees. Under an unsponsored
ADR arrangement, the foreign issuer assumes no obligations and the
depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. With respect to unsponsored ADRs, foreign issuers (such
as the Company) are generally not subject to U.S. reporting obligations, and
they are not required to make filings with the U.S Securities and Exchange
Commission.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Japanese Yen
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio
Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges or
over-the-counter markets, they are still subject to currency risk because
changes in foreign currency exchange rates affect their value. The Currency
Hedge Contract is designed to minimize the impact of fluctuations in the
exchange rate between the U.S. dollar and the Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Softbank
Group Corp.
Softbank
Group Corp. (“Softbank”) operates as a holding company, that provides a range of
products and services. Through its subsidiary "SoftBank", businesses include
telecommunication services, technology, finance, and
media. Softbank
is primarily traded on the Tokyo Stock Exchange.
Information
regarding Softbank may be obtained from publicly available sources including,
but not limited to, the company’s website (group.softbank/en), press releases,
newspaper articles and other publicly disseminated documents. Softbank ADRs
trade on the over-the-counter market (“OTC”). Information regarding Softbank may
also be obtained from the SEC’s website
(https://www.sec.gov/search-filings/cik-lookup). Investors should be aware that
the SEC’s website has information about the unsponsored ADRs related to the
Company, however, the SEC's website does not have disclosure about the Company
nor is such disclosure about the Company disclosed by the Company. Securities
that trade OTC are not traded on a securities exchange but are purchased from
broker-dealers that make a market in the securities. Broker-dealers that provide
a quote for Softbank ADRs are required to comply with Rule 15c2-11 under the
Securities Exchange Act of 1934, as amended (“Exchange Act”). Rule 15c2-11
requires the broker-dealer, prior to providing a quote on an OTC security, to
obtain and review certain publicly available information for the OTC security,
and to have a reasonable basis for believing that the information is accurate
and from a reliable source. Investors are highly encouraged to conduct their own
research on Softbank, and seek information from their financial advisor, prior
to investing in the Fund. Neither the Series nor the Manager are responsible for
the content in such other sources.
The
Manager of the Series will monitor on an ongoing basis to verify that the
following material information about the Company underlying the ADRs is
available
in English on its website, through an electronic information delivery system
generally available to the public in its primary trading market of the Company,
or otherwise available on websites accessible to U.S. investors: (a) information
that the Company has made public or been required to make public pursuant to the
laws of the country of its incorporation, organization or domicile; (b)
information that the Company has filed or been required to file with the
principal stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; or (c) information
that the Company has distributed or been required to distribute to its security
holders.
The
Fund has derived all disclosures contained in this document regarding
Softbank from the publicly available documents described above. Neither the
Fund, the Trust, the Adviser nor any affiliate has participated in the
preparation of such documents. Neither the Fund, the Trust, the Adviser nor any
affiliate makes any representation that such publicly available documents or any
other publicly available information regarding Softbank is accurate or complete.
Furthermore, the Fund cannot give any assurance that all events occurring prior
to the date of the prospectus (including events that would affect the accuracy
or completeness of the publicly available documents described above) that would
affect the trading price of Softbank
have
been publicly disclosed. Subsequent disclosure of any such events or the
disclosure of, or failure to disclose, material future events concerning
Softbank could affect the value of the Fund’s investments with respect to
Softbank and therefore the value of the Fund.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Japan. The
risks of investing in the securities of a Japanese company include risks of
natural disasters, lack of natural resources, reliance on trading partners
(including the United States and Asian and European economies), national
security, unpredictable political climate, large government debt, currency
fluctuation and an aging labor force. The realization of such risks could have a
negative impact on the value of securities of Japanese
companies.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Tokyo Exchange may be open on days when
the Series does not price its Shares, the value of the underlying securities of
the ADRs in the Series portfolio may change on days when Shareholders will not
be able to purchase or sell the Series Shares, regardless of whether there is an
active U.S. market for Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
SoftBank
Company Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. SoftBank may perform
poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Softbank
Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and
may perform differently from the value of the market as a whole. In addition to
the risks associated generally with operating companies and telecommunication
services companies, Softbank faces risks unique to its operations including,
among others, market
volatility, dependence on the tech sector, high debt levels, regulatory changes,
geopolitical risks, valuation risks associated with their large investment
portfolio, potential for poor investment decisions, competition from other
investors, and the need to adapt to rapidly changing technological
landscapes.
Telecommunication
Services Industry Risk.
Risks faced by companies in the telecommunications industry include a
telecommunications market characterized by increasing competition and regulation
by the Federal Communications Commission and various state regulatory
authorities; the need to commit substantial capital to meet increasing
competition, particularly in formulating new products and services using new
technology; and technological innovations that may make various products and
services obsolete.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. There is also no guarantee that a financial institution
will continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities if it needs to do so, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute Shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Series may therefore receive less timely information or have
less control than if it invested directly in the foreign issuer.
To
the extent the Manager of the Series determines that material information about
the Company underlying the ADRs is not available
in English and generally made available to the public in a manner described
above in the Principal Investment Strategies, investors in the Series may not be
able to gather information on which to make investment decisions. In such
circumstances, the Adviser will advise the Board of Trustees of the Series of
the circumstances, and the Board may make a determination to cease operations of
the Series. In such circumstances, the Series may distribute the underlying ADRs
in kind to shareholders, the Fund may liquidate the
positions and distribute cash to shareholders, or the Board may take
such other actions as it deems most appropriate for, and in the best of,
shareholders under the circumstances.
Risks
of Investing in Unsponsored Depositary Receipts.
Unsponsored ADRs carry specific risks compared to sponsored ADRs. Here are some
key risks to consider:
•Lack
of Control by the Foreign Company: Unsponsored ADRs are issued without the
involvement or consent of the foreign company, which means the company may not
provide timely or accurate financial information, potentially leading to a lack
of transparency.
•Limited
Information: Since the foreign issuer is not directly involved, the level of
financial disclosure and corporate governance might be lower. Investors may not
have access to crucial information that would be available with a sponsored
ADR.
•Liquidity
Issues: Unsponsored ADRs can have lower trading volumes compared to sponsored
ADRs, which might lead to wider bid-ask spreads and difficulties in executing
trades.
•Exchange
Rate Risk: Like all foreign investments, unsponsored ADRs are subject to
currency risk. Fluctuations in the exchange rate can significantly impact the
value of the investment.
•Regulatory
Risks: Different regulatory environments may affect the company's operations and
financial health. Unsponsored ADRs may not comply with the same regulatory
standards as sponsored ADRs. The regulatory requirements applicable to a foreign
issuer may be different than those of the United States, and as a result, the
frequency and level of detail of disclosure about the operations of such an
issuer may be less than the requirements imposed on issuers whose securities are
registered in the United States.
•Potential
for Higher Volatility: Due to lower liquidity and less oversight, unsponsored
ADRs may experience higher price
volatility.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
SONY GROUP CORP.
ADRhedged™
Investment
Objective
The
Sony Group Corp. ADRhedged™ (the “Series”) seeks to provide investment results
that correspond generally, before fees and expenses, to the total return of the
ordinary shares of Sony Group Corp. in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Sony Group Corp.
(the “Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Japanese Yen
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Sony
Group Corp.
Sony
Group Corp. is a Japanese multinational company that engages in the development,
design, manufacture, and sale of electronic equipment, instruments, devices,
game consoles, and software for consumers, professionals and industrial markets.
Song Group Corp. is listed on the Tokyo Stock Exchange under code number
6758.
Sony Group Corp. is registered under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Information provided to or filed with the
SEC by Sony Group Corp. pursuant to the Exchange Act can be located by reference
to the SEC file number 001-06439. The SEC maintains an internet site that
contains reports, proxy, and information statements and other information
regarding the issuer at www.sec.gov. In addition, information regarding Sony
Group Corp. may be obtained from other sources including, but not limited to,
press releases, newspaper articles and other publicly disseminated documents.
Neither the Series nor the Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Japan. The
risks of investing in the securities of a Japanese company include risks of
natural disasters, lack of natural resources, reliance on trading partners
(including the United States and Asian and European economies), national
security, unpredictable political climate, large government debt, currency
fluctuation and an aging labor force. The realization of such risks could have a
negative impact on the value of securities of Japanese
companies.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Tokyo Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations
between
the Local Currency and the U.S. dollar. It is possible that a degree of currency
exposure may remain even at the time the Currency Hedge Contract is implemented.
The Series may not be able to structure the Currency Hedge Contract as
anticipated or the Currency Hedge Contract may not successfully reduce the
currency risk from the Portfolio Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Technology
Companies Risk. Technology
companies and companies that rely heavily on technological advances may have
limited product lines, markets, financial resources, supply chains and
personnel. These companies typically face intense competition, potentially rapid
product obsolescence and changes in product cycles and customer preferences.
They may face unexpected risks and costs associated with technological
developments, such as artificial intelligence and machine learning. Technology
companies also depend heavily on intellectual property rights and may be
adversely affected by the loss or impairment of those rights. Technology
companies may face increased government scrutiny and may be subject to adverse
government or legal action.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign
currency
exchange rate. Although the ADRs in which the Series invests will be listed on
major U.S. exchanges, there can be no assurance that a market for these
securities will be made or maintained or that any such market will be or remain
liquid. There is also no guarantee that a financial institution will continue to
sponsor a particular ADR. As a result, the Series may have difficulty selling
securities if it needs to do so, or selling them quickly and efficiently at the
prices at which they have been valued. The depositary bank may not have physical
custody of the underlying securities at all times and may charge fees for
various services, including forwarding dividends and interest, and processing
corporate actions. A Series would be expected to pay a share of the additional
fees, which it would not pay if investing directly in the foreign securities. In
addition, the underlying issuers of certain depositary receipts are under no
obligation to distribute Shareholder communications or pass through any voting
rights with respect to the deposited securities to the holders of such receipts.
The Series may therefore receive less timely information or have less control
than if it invested directly in the foreign
issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
STMICROELECTRONICS NV
ADRhedged™
Investment
Objective
The
STMicroelectronics NV ADRhedged™ (the “Series”) seeks to provide investment
results that correspond generally, before fees and expenses, to the total return
of the ordinary shares of STMicroelectronics NV in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$19 |
$61 |
$107 |
$243 |
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. From March
13, 2025, the date operations commenced, through the fiscal year ended December
31, 2025, the Fund’s portfolio turnover rate was 0.00% of the average
value of its portfolio.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the
STMicroelectronics NV (the “Company”). The Series will not
invest directly in the Company. ADRs are receipts, issued by an American bank or
trust issuer, which evidence ownership of underlying securities issued by a
non-U.S. issuer. Generally, ADRs, issued in registered form, are designed for
use in the U.S. securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
STMicroelectronics
NV
STMicroelectronics
NV is a global semiconductor company headquartered in Geneva, Switzerland, which
engages in the business of designing, developing, manufacturing, and marketing
products used in a wide variety of applications for automotive, industrial,
personal electronics and communications equipment, computers, and peripherals.
STMicroelectronics NV is listed on the Euronext Paris Exchange under the ticker
symbol “STMPA”.
STMicroelectronics NV is registered under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). Information provided to or filed
with the SEC by STMicroelectronics NV pursuant to the Exchange Act can be
located by reference to the SEC file number 001-13546. The SEC maintains an
internet site that contains reports, proxy, and information statements and other
information regarding the issuer at www.sec.gov. In addition, information
regarding STMicroelectronics NV may be obtained from other sources including,
but not limited to, press releases, newspaper articles and other publicly
disseminated documents. Neither the Series nor the Manager are responsible for
the content in such other sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’ markets.
Separately, the EU faces issues involving its membership, structure, procedures
and policies. The exit of one or more member states from the EU would place its
currency and banking system in jeopardy. The exit by any other member states
will likely result in increased volatility, illiquidity and potentially lower
economic growth in the affected markets, which may adversely affect the Series
investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Euronext Amsterdam Stock Exchange may be
open on days when the Series does not price its Shares, the value of the
underlying securities of the ADRs in the Series portfolio may change on days
when Shareholders will not be able to purchase or sell the Series Shares,
regardless of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not
necessarily
eliminate the Series exposure to the Local Currency. Currency hedges are
sometimes subject to imperfect matching between the Currency Hedge Contract and
the currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the Currency
Hedge Contract will not perfectly offset the actual fluctuations between the
Local Currency and the U.S. dollar. It is possible that a degree of currency
exposure may remain even at the time the Currency Hedge Contract is implemented.
The Series may not be able to structure the Currency Hedge Contract as
anticipated or the Currency Hedge Contract may not successfully reduce the
currency risk from the Portfolio Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Semiconductor
Industry Risk. Semiconductor
companies may have limited product lines, markets, financial resources or
personnel. Semiconductor companies typically face intense competition,
potentially rapid product obsolescence and high capital costs and are dependent
on third-party suppliers and the availability of materials. They are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. Semiconductor companies are also affected
by the economic performance of their customers.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has limited operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series does
not have a full calendar year of performance history. In the
future, performance information will be presented in this section of the
Prospectus. Performance information will contain a bar chart and table
that provide some indication of the risks of investing in the Series by showing
changes in the Series performance from year to year and by showing the Series
average annual
returns
for certain time periods as compared to a broad measure of market
performance. Investors
should be aware that past performance before and after taxes is not necessarily
an indication of how the Series will perform in the
future.
Updated
performance information for the Series, including its current net asset value
per share, is available by calling toll-free at (844)
954-5333.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
TAIWAN SEMICONDUCTOR
MANUFACTURING CO. LTD. ADRhedged™
Investment
Objective
The
Taiwan Semiconductor Manufacturing Co. Ltd. ADRhedged™ (the “Series”) seeks to
provide investment results that correspond generally, before fees and expenses,
to the total return of the ordinary shares of Taiwan Semiconductor Manufacturing
Co. Ltd. in its local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance.As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Taiwan
Semiconductor Manufacturing Co. Ltd. (the “Company”). The Series
will not invest directly in the Company. ADRs are receipts, issued by an
American bank or trust issuer, which evidence ownership of underlying securities
issued by a non-U.S. issuer. Generally, ADRs, issued in registered form, are
designed for use in the U.S. securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the New Taiwan
Dollar (“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Taiwan
Semiconductor Manufacturing Co. Ltd.
Taiwan
Semiconductor Manufacturing Co., Ltd. is a Taiwanese multinational company that
engages in the research, design, and manufacture of microchips used in different
applications. Twaian Semiconductor Manufacturing Company is listed on the Taiwan
Stock Exchange under code 2330.
Taiwan Semiconductor Manufacturing Co. Ltd.is registered under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Information
provided to or filed with the SEC by Taiwan Semiconductor Manufacturing Co. Ltd.
pursuant to the Exchange Act can be located by reference to the SEC file number
001-14700. The SEC maintains an internet site that contains reports, proxy, and
information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding Taiwan Semiconductor
Manufacturing Co. Ltd.may be obtained from other sources including, but not
limited to, press releases, newspaper articles and other publicly disseminated
documents. Neither the Series nor the Manager are responsible for the content in
such other sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Taiwan
Investing Risk.
Securities of issuers in Taiwan are subject to risks, including, but not limited
to, legal, regulatory,
political,
currency and economic risks that are specific to
Taiwan.
Specifically, Taiwan’s geographic proximity and history
of
political contention with China have resulted in ongoing
tensions
between the two countries, which may materially
affect
the Taiwanese companies. Securities of Taiwanese
companies
are subject to Taiwan’s heavy dependence on
exports.
Reductions in spending on Taiwanese products and
services,
labor shortages, institution of tariffs or other trade
barriers,
or a downturn in any of the economies of Taiwan’s
key
trading partners, including the United States, may have
an
adverse impact on the Taiwanese economy and the values
of
Taiwanese companies.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Taiwan Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the
Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Semiconductor
Industry Risk. Semiconductor
companies may have limited product lines, markets, financial resources or
personnel. Semiconductor companies typically face intense competition,
potentially rapid product obsolescence and high capital costs and are dependent
on third-party suppliers and the availability of materials. They are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. Semiconductor companies are also affected
by the economic performance of their customers.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past
performance (before and after taxes) is not necessarily an
indication of its future performance. It may perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
TOTALENERGIES SE
ADRhedged™
Investment
Objective
The
TotalEnergies SE ADRhedged™ (the “Series”) seeks to provide investment results
that correspond generally, before fees and expenses, to the total return of the
ordinary shares of TotalEnergies SE in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Series has not yet commenced operations and
therefore does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of TotalEnergies SE (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities
markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the euro (“Local
Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
TotalEnergies
SE
TotalEnergies
SE is a France-based oil and gas company. TotalEnergies SE operates through
four segments: Exploration and Production, Gas, Renewables & Power, Refining
& Chemicals and Marketing & Services. Exploration & Production
encompasses the exploration and production activities.
TotalEnergies
SE is registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Information provided to or filed with the SEC by TotalEnergies
SE pursuant to the Exchange Act can be located by reference to the SEC file
number 001-10888. The SEC maintains an internet site that contains reports,
proxy, and information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding TotalEnergies SE may be obtained
from other sources including, but not limited to, press releases, newspaper
articles and other publicly disseminated documents. Neither the Series nor the
Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in France. The
risks of investing in the securities of a French company include legal,
regulatory, political, currency, security, and economic risk specific to France.
The French economy is dependent to a significant extent on the economies of
certain key trading partners, including Germany and other Western European
countries. Reduction in spending on French products and services, or changes in
any of the economies may cause an adverse impact on the French economy. In
addition, France may be subject to acts of terrorism. The French economy is
dependent on exports from the agricultural sector. Leading agricultural exports
include dairy products, meat, wine, fruit and vegetables, and fish. As a result,
the French economy is susceptible to fluctuations in demand for agricultural
products. Additionally, the French economy is susceptible to other risks
relating to its membership in the European Union, such as the recent sovereign
debt crisis.
Investing
in the European Union (“EU”) Risk.
Efforts of member states of the EU to further unify their economic and monetary
policies may increase the potential for the downward movement of one member
state’s market to cause a similar effect on other member states’
markets. Separately, the EU faces issues involving its membership,
structure, procedures and policies. The exit of one or more member states
from the EU would place its currency and banking system in jeopardy. The
exit by any member states will likely result in increased volatility,
illiquidity and potentially lower economic growth in the affected markets, which
may adversely affect the Series investments.
Foreign
Market Risk.
Because non-U.S. exchanges such as Euronext Paris may be open on days when the
Series does not price its Shares, the value of the underlying securities of the
ADRs in the Series portfolio may change on days when Shareholders will not be
able to purchase or sell the Series Shares, regardless of whether there is an
active U.S. market for Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the
Currency Hedge Contract will not perfectly offset the actual fluctuations
between the Local Currency and the U.S. dollar. It is possible that a
degree of currency exposure may remain even at the time the Currency Hedge
Contract is implemented. The Series may not be able to structure the Currency
Hedge Contract as anticipated or the Currency Hedge Contract may not
successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company; the
oil, gas, and consumable fuels industry; or France. Any issuer may perform
poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Oil,
Gas, and Consumable Fuels Industry Risk.
The oil, gas, and consumable fuels industry is affected by worldwide energy
prices and exploration and production costs. Companies in the oil, gas, and
consumable fuels industry may have significant operations in areas at risk for
natural disasters, social unrest and environmental damage. These companies may
also be at risk for increased government regulation and intervention,
litigation, and negative publicity and public
perception.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. Moreover, the price at which the Series securities may be sold and
the value of the Series Shares may be adversely affected if trading markets for
ADRs are limited or absent or if bid/ask spreads are wide. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. A Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected, the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
(“Shareholder”). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little
trading
volume and market liquidity. Further, increased market volatility may cause
increased bid/ask spreads. In addition, in stressed market conditions, the
market for the Series Shares may become less liquid in response to deteriorating
liquidity in the markets for the Series underlying portfolio holdings in the
ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income and will
generally consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
TOYOTA MOTOR
CORPORATION ADRhedged™
Investment
Objective
The
Toyota Motor Corporation ADRhedged™ (the “Series”) seeks to provide investment
results that correspond generally, before fees and expenses, to the total return
of the ordinary shares of Toyota Motor Corporation in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
|
|
|
|
|
|
|
|
|
|
|
| |
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$19 |
$61 |
$107 |
$243 |
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. From March
13, 2025, the date operations commenced, through the fiscal year ended December
31, 2025, the Fund’s portfolio turnover rate was 0.00% of the average
value of its portfolio.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Toyota Motor
Corporation (the “Company”). The Series will not invest directly
in the Company. ADRs are receipts, issued by an American bank or trust issuer,
which evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the Japanese Yen
(“Local Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Toyota
Motor Corporation
Toyota
Motor Corporation is a Japanese multinational automotive manufacturer
headquartered in Toyota City, Aichi, Japan. Toyota Motor Corporation
manufactures, sells, leases, and repairs passenger cars, trucks, buses, and
their related parts worldwide.
Toyota
Motor Corporation is registered under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Information provided to or filed with the SEC by
Toyota Motor Corporation pursuant to the Exchange Act can be located by
reference to the SEC file number 001-14948. The SEC maintains an internet site
that contains reports, proxy, and information statements and other information
regarding the issuer at www.sec.gov. In addition, information regarding Toyota
Motor Corporation may be obtained from other sources including, but not limited
to, press releases, newspaper articles and other publicly disseminated
documents. Neither the Series nor the Manager are responsible for the content in
such other sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in Japan. The
risks of investing in the securities of a Japanese company include risks of
natural disasters, lack of natural resources, reliance on trading partners
(including the United States and Asian and European economies), national
security, unpredictable political climate, large government debt, currency
fluctuation and an aging labor force. The realization of such risks could have a
negative impact on the value of securities of Japanese
companies.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Tokyo Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the
Currency Hedge Contract will not perfectly offset the actual fluctuations
between the Local Currency and the U.S. dollar. It is possible that a
degree of currency exposure may remain even at the time the Currency Hedge
Contract is implemented. The Series may not be able to structure the Currency
Hedge Contract as anticipated or the Currency Hedge Contract may not
successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company, the
automotive industry or Japan. Any issuer may perform poorly, 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 at their own discretion,
decide to reduce or eliminate dividends, which may also cause their stock prices
to decline.
Automotive
Industry Risk.
The automotive industry can be highly cyclical, and companies in the industry
may suffer periodic operating losses. The industry can be significantly affected
by labor relations and fluctuating component prices. While most of the major
automotive manufacturers are large companies, certain others may be
non-diversified in both product line and customer base and may be more
vulnerable to certain events that may negatively impact the automotive
industry.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing
corporate
actions. A Series would be expected to pay a share of the additional fees, which
it would not pay if investing directly in the foreign securities. Moreover, the
price at which the Series securities may be sold and the value of the Series
Shares may be adversely affected if trading markets for ADRs are limited or
absent or if bid/ask spreads are wide. In addition, the underlying issuers of
certain depositary receipts are under no obligation to distribute Shareholder
communications or pass through any voting rights with respect to the deposited
securities to the holders of such receipts. A Series may therefore receive less
timely information or have less control than if it invested directly in the
foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
(“Shareholder”). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little
trading
volume and market liquidity. Further, increased market volatility may cause
increased bid/ask spreads. In addition, in stressed market conditions, the
market for the Series Shares may become less liquid in response to deteriorating
liquidity in the markets for the Series underlying portfolio holdings in the
ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has limited operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series does
not have a full calendar year of performance history. In the
future, performance information will be presented in this section of the
Prospectus. Performance information will contain a bar chart and table
that provide some indication of the risks of investing in the Series by showing
changes in the Series performance from year to year and by showing the Series
average annual returns for certain time periods as compared to a broad measure
of market performance. Investors
should be aware that past performance before and after taxes is not necessarily
an indication of how the Series will perform in the
future.
Updated
performance information for the Series, including its current net asset value
per share, is available by calling toll-free at (844)
954-5333.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
UNILEVER PLC
ADRhedged™
Investment
Objective
The
Unilever PLC ADRhedged™ (the “Series”) seeks to provide investment results that
correspond generally, before fees and expenses, to the total return of the
ordinary shares of Unilever PLC in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance.As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the Unilever PLC (the
“Company”). The Series will not invest directly in the Company.
ADRs are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities
markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the British Pound
(“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a loss.As a
result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Unilever
PLC
Unilever
PLC, headquartered in London, England, is a British multinational consumer goods
company that manufactures and sells a variety of products including food
products, beauty and personal care products, beverages, and home care
products.
Unilever PLC is listed on the London Stock Exchange under the ticker symbol
“UL”.
Unilever PLC is registered under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Information provided to or filed with the
SEC by Unilever PLC pursuant to the Exchange Act can be located by reference to
the SEC file number 001-04546. The SEC maintains an internet site that contains
reports, proxy, and information statements and other information regarding the
issuer at www.sec.gov. In addition, information regarding Unilever PLC may be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents. Neither the Series
nor the Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the
Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not necessarily eliminate the Series
exposure to the Local Currency. Currency hedges are sometimes subject to
imperfect matching between the Currency Hedge Contract and the currencies that
the contract intends to hedge, and there can be no assurance that the Currency
Hedge Contract will be effective. The return of the Currency Hedge Contract will
not perfectly offset the actual fluctuations between the Local Currency and the
U.S. dollar. It is possible that a degree of currency exposure may remain even
at the time the Currency Hedge Contract is implemented. The Series may not be
able to structure the Currency Hedge Contract as anticipated or the Currency
Hedge Contract may not successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Consumer
Discretionary Sector Risk. Because
companies in the consumer discretionary sector manufacture products and provide
discretionary services directly to the consumer, the success of these companies
is tied closely to the performance of the overall domestic and international
economy, including the functioning of the global supply chain, interest rates,
competition and consumer confidence. Success depends heavily on disposable
household income and consumer spending, and may be strongly affected by social
trends and marketing campaigns. Also, companies in the consumer discretionary
sector may be subject to severe competition, which may have an adverse impact on
a company’s profitability. Changes in demographics and consumer tastes also can
affect the demand for, and success of, consumer discretionary products in the
marketplace.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its
assets
in securities of a single company than diversified funds, the performance of
that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
UNITED
MICROELECTRONICS CORP. ADRhedged™
Investment
Objective
The
United Microelectronics Corp. ADRhedged™ (the “Series”) seeks to provide
investment results that correspond generally, before fees and expenses, to the
total return of the ordinary shares of United Microelectronics Corp. in its
local market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Fund has not yet commenced operations and therefore
does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of the United
Microelectronics Corp. (the “Company”). The Series will not
invest directly in the Company. ADRs are receipts, issued by an American bank or
trust issuer, which evidence ownership of underlying securities issued by a
non-U.S. issuer. Generally, ADRs, issued in registered form, are designed for
use in the U.S. securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the New Taiwan
dollar (“Local Currency”). The Currency Hedge Contract is with a
counterparty acting
as principal. The notional value of the Currency Hedge Contract is adjusted
daily based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
United
Microelectronics Corp.
United
Microelectronics Corp., a Taiwanese company, is a semiconductor foundry company
that designs, manufactures, and markets integrated circuits and related
electronic products, focusing on logic and various technologies to serve all
major sectors of the electronics industry. United Microelectronics Corp. is
listed on the Taiwan Stock Exchange under the code
2303.
United Microelectronics Corp. is registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to
or filed with the SEC by United Microelectronics Corp. pursuant to the Exchange
Act can be located by reference to the SEC file number 001-15128. The SEC
maintains an internet site that contains reports, proxy, and information
statements and other information regarding the issuer at www.sec.gov. In
addition, information regarding United Microelectronics Corp. may be obtained
from other sources including, but not limited to, press releases, newspaper
articles and other publicly disseminated documents. Neither the Series nor the
Manager are responsible for the content in such other sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Taiwan
Investing Risk.
Securities of issuers in Taiwan are subject to risks, including, but not limited
to, legal, regulatory,
political,
currency and economic risks that are specific to
Taiwan.
Specifically, Taiwan’s geographic proximity and history
of
political contention with China have resulted in ongoing
tensions
between the two countries, which may materially
affect
the Taiwanese companies. Securities of Taiwanese
companies
are subject to Taiwan’s heavy dependence on
exports.
Reductions in spending on Taiwanese products and
services,
labor shortages, institution of tariffs or other trade
barriers,
or a downturn in any of the economies of Taiwan’s
key
trading partners, including the United States, may have
an
adverse impact on the Taiwanese economy and the values
of
Taiwanese companies.
Foreign
Market Risk.
Because non-U.S. exchanges such as the Taiwan Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of currency
fluctuations on Series returns, it does not
necessarily
eliminate the Series exposure to the Local Currency. Currency hedges are
sometimes subject to imperfect matching between the Currency Hedge Contract and
the currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the Currency
Hedge Contract will not perfectly offset the actual fluctuations between the
Local Currency and the U.S. dollar. It is possible that a degree of currency
exposure may remain even at the time the Currency Hedge Contract is implemented.
The Series may not be able to structure the Currency Hedge Contract as
anticipated or the Currency Hedge Contract may not successfully reduce the
currency risk from the Portfolio Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and the
Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in ADRs of the Company and the Currency Hedge Contract,
the Series may be adversely affected by the performance of the Company, subject
to increased price volatility and more susceptible to adverse economic, market,
political or regulatory occurrences affecting the Company. Any issuer may
perform poorly, 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 at their own discretion, decide to reduce or eliminate dividends,
which may also cause their stock prices to decline.
Semiconductor
Industry Risk. Semiconductor
companies may have limited product lines, markets, financial resources or
personnel. Semiconductor companies typically face intense competition,
potentially rapid product obsolescence and high capital costs and are dependent
on third-party suppliers and the availability of materials. They are also
heavily dependent on intellectual property rights and may be adversely affected
by loss or impairment of those rights. Semiconductor companies are also affected
by the economic performance of their customers.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility than
other diversified funds. Because a non-diversified fund may invest a larger
percentage of its assets in securities of a single company than diversified
funds, the performance of that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of the Series portfolio, although the
Series enters into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invests will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities if it needs to do so, or
selling them quickly and efficiently at the prices at which they have been
valued. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including
forwarding dividends and interest, and processing corporate actions. A Series
would be expected to pay a share of the additional fees, which it would not pay
if investing directly in the foreign securities. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. The Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
Tax
Risk.
The Series intends to take the position that it will be treated as a grantor
trust for U.S. federal income tax purposes. Assuming such treatment is
respected, the Series will not be subject to U.S. federal income tax. Rather, a
pro rata portion of the Series income, gain, losses and deductions will “flow
through” to each beneficial owner of Shares (“Shareholder”). The Series has not
requested and will not request an advance ruling from the U.S. Internal Revenue
Service (“IRS”) as to its status as a grantor trust. If the Series fails to
qualify as a grantor trust for any year (subject to any available curative
measures), the Series likely will be subject to regular corporate level U.S.
federal income tax in that year on all of its taxable income, regardless of
whether the Series makes any distributions to its
Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares will
trade above (premium), below (discount) or at NAV. An active market for the
Series Shares may not develop and market trading may be halted if trading in one
or more of the Series underlying securities is halted. The difference in bid and
ask prices is often referred to as the "spread" or "bid/ask spread." The bid/ask
spread varies over time for Shares based on trading volume and market liquidity,
and is generally lower if the Series Shares have more trading volume and market
liquidity and higher if the Series Shares have little
trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past
performance (before and after taxes) is not necessarily an
indication of its future performance. It may perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
VODAFONE GROUP PLC
ADRhedged™
Investment
Objective
The
Vodafone Group Plc ADRhedged™ (the “Series”) seeks to provide investment results
that correspond generally, before fees and expenses, to the total return of the
ordinary shares of Vodafone Group Plc in its local
market.
Fees and
Expenses
This
table describes the fees and expenses that you may pay if you buy, hold and sell
Shares of the Series (“Shares”). 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 Series
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment):
|
|
|
|
|
| |
|
Management
Fee |
0.17 |
% |
|
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses |
0.02 |
% |
|
Total
Annual Series Operating Expenses |
0.19 |
% |
Example:
This
example is intended to help you compare the cost of investing in the Series with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Series.
The example
assumes that you invest $10,000 in the Series for the time periods indicated and
then redeem all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Series
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your approximate costs would
be:
Portfolio
Turnover
The
Series 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 Series
operating expenses or in the example, affect the Series performance. As of the
date of this Prospectus, the Series has not yet commenced operations and
therefore does not have any portfolio turnover information
available.
Principal Investment
Strategies
The Series, under normal circumstances, invests at least 95% of
its net assets in American Depositary Receipts (“ADRs”) of Vodafone Group Plc
(the “Company”). The Series will not invest directly in the
Company. ADRs are receipts, issued by an American bank or trust issuer, which
evidence ownership of underlying securities issued by a non-U.S. issuer.
Generally, ADRs, issued in registered form, are designed for use in the U.S.
securities markets.
The
Series invests in the ADRs of the Company (the “Portfolio Securities”) and a
currency swap (the “Currency Hedge Contract”) designed to hedge against
fluctuations in the exchange rate between the U.S. dollar and the British pound
(“Local Currency”). The Currency Hedge Contract is with a counterparty acting as
principal. The notional value of the Currency Hedge Contract is adjusted daily
based on the current value of the Portfolio Securities.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize
the impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
The
Currency Hedge Contract will be marked to market and settled daily based on the
notional value of the Currency Hedge Contract as of the settlement time on a
particular day and the change in the value of the Local Currency in relation to
the U.S. dollar (“Exchange Rate”) from the settlement time on the prior business
day to the settlement time on the current business day.
Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of mark to market payments or otherwise, the ratio of Portfolio
Securities to Shares will vary over time. For example, upon formation, a Series
Share might be equal to one Share of the ADR. If the mark to market payments for
the Currency Hedge Contract would require the Series to sell ADRs in order to
make a payment to the counterparty, each Series Share would equal less than one
Share of the ADR. As a result of the sales of an ADR, the net asset value of the
Series and, correspondingly, the fractional amount of ADRs represented by each
Share will decrease over the life of the Series.
The
Series does not seek to replicate the performance of a specified
index.
The
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified Series.
Vodafone
Group Plc
Vodafone
Group Plc is a British multinational telecommunications company. Its registered
office and global headquarters are in Newbury, Berkshire, England. Vodafone
Group PLC provides mobile telecommunications services including voice and data
communications.
Vodafone
Group Plc is registered under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). Information provided to or filed with the SEC by Vodafone
Group Plc pursuant to the Exchange Act can be located by reference to the SEC
file number 001-10086. The SEC maintains an internet site that contains reports,
proxy, and information statements and other information regarding the issuer at
www.sec.gov. In addition, information regarding Vodafone Group Plc may be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents. Neither the Series
nor the Manager are responsible for the content in such other
sources.
Principal
Risks of Investing in the Series
As with any
investment, you could lose all or part of your investment in the Series, and the
Series performance could trail that of other investments. The
Series is subject to the principal risks noted below, any of which may adversely
affect the Series NAV, trading price, yield, total return and ability to meet
its investment objective. An investment in the Series is not a deposit in
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Market
Risk. The
prices of the securities in the Series are subject to the risk associated with
investing in the stock market, including sudden and unpredictable drops in
value. An investment in the Series may lose money.
Risks
of Investing in the United Kingdom (“UK”).
The UK, of which England is a part, has one of the largest economies in Europe,
and the United States and other European countries are substantial trading
partners of the UK. As a result, the British economy may be impacted by changes
to the economic condition of the United States and other European countries. The
British economy, along with certain other European Union (“EU”) economies,
experienced a significant economic slowdown during the recent financial crisis,
and certain British financial institutions suffered significant losses, were
severely under-capitalized and required government intervention to survive. The
British economy relies heavily on the export of financial services to the United
States and other European countries and, therefore, a prolonged slowdown in the
financial services sector may have a negative impact on the British economy.
Continued governmental involvement or control in certain sectors may stifle
competition in certain sectors or cause adverse effects on economic
growth.
Foreign
Market Risk.
Because non-U.S. exchanges such as the London Stock Exchange may be open on days
when the Series does not price its Shares, the value of the underlying
securities of the ADRs in the Series portfolio may change on days when
Shareholders will not be able to purchase or sell the Series Shares, regardless
of whether there is an active U.S. market for
Shares.
Currency
Hedging Risk. Because
changes in foreign currency exchange rates affect the value of ADRs, the Series
enters into the Currency Hedge Contract in order to seek to minimize the impact
of fluctuations in the exchange rate between the U.S. dollar and the Local
Currency. While this approach is designed to minimize the impact of
currency fluctuations on Series returns, it does not necessarily eliminate the
Series exposure to the Local Currency. Currency hedges are sometimes
subject to imperfect matching between the Currency Hedge Contract and the
currencies that the contract intends to hedge, and there can be no assurance
that the Currency Hedge Contract will be effective. The return of the
Currency Hedge Contract will not perfectly offset the actual fluctuations
between the Local Currency and the U.S. dollar. It is possible that a
degree of currency exposure may remain even at the time the Currency Hedge
Contract is implemented. The Series may not be able to structure the Currency
Hedge Contract as anticipated or the Currency Hedge Contract may not
successfully reduce the currency risk from the Portfolio
Securities.
Increased
volatility of the Portfolio Securities or the U.S. dollar relative to the Local
Currency will generally reduce the effectiveness of the Series currency hedging
strategy. Significant differences between U.S. dollar interest rates and
the Local Currency interest rates may impact the effectiveness of the Series
currency hedging strategy.
While currency hedging can reduce or eliminate losses due to
exchange rate changes, it can also reduce or eliminate gains, and the Series
bears additional transaction costs in entering into the Currency Hedge
Contract.
Currency
Swap Risk.
In order to hedge currency risk, the Series enters into a Currency Hedge
Contract. The Currency Hedge Contract is subject to market risk, risk of default
by the other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to receive. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid; however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as the Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. The Series intends to have only one counterparty, which will expose
the Series to greater counterparty risk and the Series may be unable to enter
into the Currency Hedge Contract on favorable terms, potentially preventing the
Series from achieving its investment objective. The Series is subject to
liquidity risk if the Series is required to reserve its assets against its
exposure under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series is subject
to valuation risk as it may improperly value the Currency Hedge Contract if
market quotations are unavailable. In addition, changes in government regulation
of derivative instruments could affect the character, timing and amount of the
Series taxable income or gains, and may limit or prevent the Series from using
the Currency Hedge Contract as a part of its investment strategy, which could
make the investment strategy more costly to implement or require the Series to
change its investment strategy.
Issuer
Concentration Risk. Because
the Series only invests in the ADRs of the Company and the Currency Hedge
Contract, the Series may be adversely affected by the performance of the
Company, subject to increased price volatility and more susceptible to adverse
economic, market, political or regulatory occurrences affecting the Company, the
telecommunication services industry or England. Any issuer may perform poorly,
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 at
their own discretion, decide to reduce or eliminate dividends, which may also
cause their stock prices to decline.
Telecommunication
Services Industry Risk.
Risks faced by companies in the telecommunications industry include a
telecommunications market characterized by increasing competition and regulation
by the Federal Communications Commission and various state regulatory
authorities; the need to commit substantial capital to meet increasing
competition, particularly in formulating new products and services using new
technology; and technological innovations that may make various products and
services obsolete.
Non-Diversification
Risk.
The Series is non-diversified and holds Portfolio Securities of only one
particular issuer. As a result, the Series may have greater volatility
than other diversified funds. Because a non-diversified fund may invest a larger
percentage of its
assets
in securities of a single company than diversified funds, the performance of
that company can have a substantial impact on Share
price.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on major U.S. exchanges, there can be no
assurance that a market for these securities will be made or maintained or that
any such market will be or remain liquid. There is also no guarantee that a
financial institution will continue to sponsor a particular ADR. As a result,
the Series may have difficulty selling securities, or selling them quickly and
efficiently at the prices at which they have been valued. The depositary bank
may not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest,
and processing corporate actions. A Series would be expected to pay a share of
the additional fees, which it would not pay if investing directly in the foreign
securities. Moreover, the price at which the Series securities may be sold and
the value of the Series Shares may be adversely affected if trading markets for
ADRs are limited or absent or if bid/ask spreads are wide. In addition, the
underlying issuers of certain depositary receipts are under no obligation to
distribute Shareholder communications or pass through any voting rights with
respect to the deposited securities to the holders of such receipts. A Series
may therefore receive less timely information or have less control than if it
invested directly in the foreign issuer.
Tax
Risk. The Series intends to take the position that it will be
treated as a grantor trust for U.S. federal income tax purposes. Assuming
such treatment is respected, the Series will not be subject to U.S. federal
income tax. Rather, a pro rata portion of the Series income, gain, losses and
deductions will “flow through” to each beneficial owner of Shares
(“Shareholder”). The Series has not requested and will not request an
advance ruling from the U.S. Internal Revenue Service (“IRS”) as to its status
as a grantor trust. If the Series fails to qualify as a grantor trust for
any year (subject to any available curative measures), the Series likely will be
subject to regular corporate level U.S. federal income tax in that year on all
of its taxable income, regardless of whether the Series makes any distributions
to its Shareholders.
Equity
Securities Risk. The
trading price of equity securities, including the prices of Series Shares and
ADRs, will fluctuate in response to a variety of factors. These factors include
events impacting a single issuer, as well as political, market and economic
developments that affect specific market segments and the market as a whole. The
Series NAV and market price, like stock prices generally, will fluctuate within
a wide range in response to these factors. As a result, an investor could lose
money over short or even long periods.
Management
Risk. The Series
is subject to the risk that the Manager’s investment management strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Market
Trading Risk. The
Series faces numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to the Series Shares
trading at a premium or discount to NAV. Thus, you may pay significantly more
(or less) than NAV when you buy Shares of the Series in the secondary market,
and you may receive significantly less (or more) than NAV when you sell those
Shares in the secondary market. The Manager cannot predict whether Shares
will trade above (premium), below (discount) or at NAV. An active market
for the Series Shares may not develop and market trading may be halted if
trading in one or more of the Series underlying securities is halted. The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little trading volume and market liquidity. Further, increased market
volatility may cause increased bid/ask spreads. In addition, in stressed market
conditions, the market for the Series Shares may become less liquid in response
to deteriorating liquidity in the markets for the Series underlying portfolio
holdings in the ADRs.
Authorized
Participant Concentration Risk. Only
an authorized participant (“Authorized Participant”) may engage in creation or
redemption transactions directly with the Series. The Series has a limited
number of institutions that act as Authorized Participants. To the extent that
these institutions exit the business or are unable to proceed with creation
and/or redemption orders with respect to the Series and no other Authorized
Participant is able to step forward to create or redeem Creation Units, Series
Shares may trade at a discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile markets, potentially
where there are significant redemptions in exchange-traded funds
generally.
New
Series Risk. As
of the date of this prospectus, the Series has no operating history and
currently has fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Series market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
Performance
The Series has
not yet commenced operations and therefore does not have a performance history
for a full calendar year. Performance information for the Series will be
provided once it has annual returns for a full calendar year.
Please remember that the Series past performance (before and
after taxes) is not necessarily an indication of its future performance. It may
perform better or worse in the
future.
Investment
Manager
Precidian
Funds, LLC is the investment manager to the Series.
Portfolio
Managers
Daniel
McCabe, Chief Executive Officer of the Manager, has served as the Series
portfolio manager since inception.
Mark
Criscitello, Founding Principal of the Manager, has served as the Series
portfolio manager since inception.
Purchase
and Sale of Series Shares
Unlike
conventional mutual funds, the Series issues and redeems Shares on a continuous
basis, at NAV, only in blocks of 10,000 Shares or whole multiples thereof
(“Creation Units”) to Authorized Participants. The Series Creation Units
are issued and redeemed principally in-kind for Portfolio Securities (including
any portion of such securities for which cash may be substituted) together with
an amount of cash. Retail investors may purchase or sell Shares only in the
Secondary Market. Shares of the Series trade at market price rather than NAV. As
such, Shares may trade at a price greater than NAV (premium) or less than NAV
(discount). When buying or selling shares through a broker, most investors will
incur customary brokerage commissions and charges and you may pay some or all of
the spread between the bid and the offered prices in the secondary market for
shares. Except when aggregated in Creation Units, the Series shares are not
redeemable securities. Recent information regarding the Series, including
its NAV, market price, premiums and discounts, and bid/ask spreads, is available
on the Series website at www.adrhedged.com.
Tax
Information
Each
Shareholder will be allocated its pro rata share of any income, gain, losses and
deductions of the Series as if the Shareholder directly owned its pro rata share
of the Series assets. Such income will be taxable to a Shareholder regardless of
whether it receives any cash distributions from the Series or cash distributions
that differ in amount from such income. The Series taxable income will generally
consist of ordinary income, capital gains or some combination of
both.
Financial
Intermediary Compensation
If
you purchase Shares of the Series through a broker-dealer or other financial
intermediary (such as a bank), the Manager or other related companies may pay
the intermediary for the sale of Series Shares and related services or promotion
of the Series. These payments may create a conflict of interest by influencing
the broker-dealer or other intermediary and your salesperson to recommend the
Series over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
OVERVIEW
The
Trust is registered under the Investment Company Act of 1940, as amended and
currently consists of 47 ADRhedged™ investment portfolios (each, a “Series,” and
together, the “Series”). Each Series is an exchange traded fund (“ETF”). ETFs
are investment companies the Shares of which are listed on a stock exchange and
traded like equity securities at market prices. Generally, ETFs, allow you to
buy or sell Shares that represent the collective performance of a selected group
of portfolio instruments that are designed to achieve a particular objective.
Unlike other ETFs, none of the Series will be taxed as a regulated investment
company for tax purposes. Instead, each Series intends to qualify as a grantor
trust under the Code. Each Series seeks investment results that correspond
(before fees and expenses) generally to the price and yield performance of the
ADR of a non-U.S. company (each, a “Company,” and together, the “Companies”),
hedged against fluctuations in the exchange rate between the U.S. dollar and the
local currency of the foreign security underlying the ADR (the “Local
Currency”).
Shares
of the Series are listed and trade at market prices on the Exchange. The market
price for a Share of a Series may be different from the Series most recent NAV
per Share. Similar to shares of a mutual fund, each Share of a Series represents
a partial ownership in an underlying portfolio of instruments. 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 Series may be purchased or
redeemed directly from the Series at NAV solely by Authorized Participants.
Also, unlike shares of a mutual fund, Shares of the Series are listed on a
national securities exchange and trade in the Secondary Market at market prices
that change throughout the day. The Trust has entered into a licensing agreement
with the Manager pursuant to which the Trust may use the terms “Precidian” and
“ADRHedged” without payment of a fee to the Manager under the agreement,
provided that the Manager continues to be the Series’ investment manager
pursuant to an investment management agreement with the Trust.
Each
Series investment objective is not fundamental and therefore each Series
investment objective may be changed by the Board of Trustees (the “Board”) of
the Trust without Shareholder approval upon sixty (60) days’ written notice to
Shareholders, provided any such change does not give the Trustees or related
parties the power to vary the investment of the Series. Unless otherwise noted,
all other policies of the Series may be changed without Shareholder approval.
This
Prospectus provides the information you need to make an informed decision about
investing in a Series. It contains important facts about the Trust as a whole
and each Series in particular.
Precidian
Funds, LLC is the investment manager to the Series.
ADDITIONAL
DESCRIPTION OF THE STRATEGIES OF THE SERIES
Each
Series (each, a “Fund”), under normal circumstances, invests at least 95% of its
net assets in ADRs of the issuer identified in the Fund’s name, as set forth
below:
|
|
|
|
|
| |
|
Fund
Name |
Underlying
Issuer |
|
Airbus
SE ADRhedged™ |
Airbus
SE |
|
Anheuser-Busch
InBev SA/NV ADRhedged™ |
Anheuser-Busch
InBev SA/NV |
|
argenx
SE ADRhedged™ |
argenx
SE |
|
Arm
Holdings PLC ADRhedged™ |
Arm
Holdings PLC |
|
ASE
Technologies Holding Co. LTD ADRhedged™ |
ASE
Technologies Holding Co. LTD |
|
ASML
Holding NV ADRhedged™ |
ASML
Holding NV |
|
Banco
Santander S.A. ADRhedged™ |
Banco
Santander S.A. |
|
Barclays
PLC ADRhedged™ |
Barclays
PLC |
|
Bayer
AG ADRhedged™ |
Bayer
AG |
|
Bayerische
Motoren Werke AG ADRhedged™ |
Bayerische
Motoren Werke AG |
|
BP
p.l.c. ADRhedged™ |
BP
p.l.c. |
|
British
American Tobacco p.l.c. ADRhedged™ |
British
American Tobacco p.l.c. |
|
Deutsche
Telekom AG ADRhedged™ |
Deutsche
Telekom AG |
|
Diageo
plc ADRhedged™ |
Diageo
plc |
|
GSK
plc ADRhedged™ |
GSK
plc |
|
Haleon
plc ADRhedged™ |
Haleon
plc |
|
Heineken
NV ADRhedged™ |
Heineken
NV |
|
|
|
|
|
| |
|
Fund
Name |
Underlying
Issuer |
|
Hermes
International SA ADRhedged™ |
Hermes
International SA |
|
Hitachi
Ltd. ADRhedged™ |
Hitachi
Ltd. |
|
Honda
Motor Co. Ltd. ADRhedged™ |
Honda
Motor Co. Ltd. |
|
HSBC
Holdings plc ADRhedged™ |
HSBC
Holdings plc |
|
ING
Groep NV ADRhedged™ |
ING
Groep NV |
|
Lloyds
Banking Group plc ADRhedged™ |
Lloyds
Banking Group plc |
|
L’Oreal
SA ADRhedged™ |
L’Oreal
SA |
|
LVMH
Moet Hennessy Louis Vuitton SE ADRhedged™ |
LVMH
Moet Hennessy Louis Vuitton SE |
|
Mitsubishi
UFJ Financial Group, Inc. ADRhedged™ |
Mitsubishi
UFJ Financial Group, Inc. |
|
Mizuho
Financial Group Inc. ADRhedged™ |
Mizuho
Financial Group Inc. |
|
National
Grid plc ADRhedged™ |
National
Grid plc |
|
Nestle
SA ADRhedged™ |
Nestle
SA |
|
Novartis
AG ADRhedged™ |
Novartis
AG |
|
Novo
Nordisk A/S (B Shares) ADRhedged™ |
Novo
Nordisk A/S (B Shares) |
|
Rio
Tinto plc ADRhedged™ |
Rio
Tinto plc |
|
Roche
Holding AG ADRhedged™ |
Roche
Holding AG |
|
Sanofi
ADRhedged™ |
Sanofi |
|
SAP
SE ADRhedged™ |
SAP
SE |
|
Shell
plc ADRhedged™ |
Shell
plc |
|
Siemens
AG ADRhedged™ |
Siemens
AG |
|
Silicon
Motion Technology Corp. ADRhedged™ |
Silicon
Motion Technology Corp. |
|
Softbank
Group Corp. ADRhedged™ |
Softbank
Group Corp. |
|
Sony
Group Corp. ADRhedged™ |
Sony
Group Corp. |
|
STMicroelectronics
NV ADRhedged™ |
STMicroelectronics
NV |
|
Taiwan
Semiconductor Manufacturing Co. Ltd. ADRhedged™ |
Taiwan
Semiconductor Manufacturing Co. Ltd. |
|
TotalEnergies
SE ADRhedged™ |
TotalEnergies
SE |
|
Toyota
Motor Corporation ADRhedged™ |
Toyota
Motor Corporation |
|
Unilever
PLC ADRhedged™ |
Unilever
PLC |
|
United
Microelectronics Corp. ADRhedged™ |
United
Microelectronics Corp. |
|
Vodafone
Group Plc ADRhedged™ |
Vodafone
Group Plc |
ADRs.
ADRs
are receipts, issued by an American bank or trust issuer, which evidence
ownership of underlying securities issued by a non-U.S. issuer. Generally, ADRs,
issued in registered form, are designed for use in the U.S. securities markets.
Each Series invests in ADRs consistent with the level and market applicable to
that Series. Some Series invest in ADRs that are Level 2 or 3 and listed on a
national securities exchange, while other Series invest in ADRs that are Level 1
and listed on U.S. over-the-counter markets.
Sponsored
ADRs are established jointly by a depositary and the underlying issuer, whereas
unsponsored ADRs may be established by a depositary without participation by the
underlying issuer. The depositary bank may not have physical custody of the
underlying securities at all times and may charge fees for various services,
including forwarding dividends and interest, and processing corporate actions. A
Series would be expected to pay a share of the additional fees, which it would
not pay if investing directly in the foreign securities. Available information
concerning the foreign issuer and voting rights with respect to the deposited
securities may vary depending on whether the ADR is sponsored or
unsponsored.
Currency
Hedge Contract.
Each Series invests in the Portfolio Securities and the Currency Hedge Contract,
which is designed to hedge against fluctuations in the exchange rate between the
U.S. dollar and the Local Currency. The Currency Hedge Contract is a currency
swap, an agreement between two parties to exchange periodic cash flows on a
notional amount of two or more currencies based on the relative value
differential between them.
Although
ADRs are U.S. dollar denominated and traded on U.S. exchanges, they are still
subject to currency risk because changes in foreign currency exchange rates
affect their value. The Currency Hedge Contract is designed to minimize the
impact of fluctuations in the exchange rate between the U.S. dollar and the
Local Currency.
On
each business day at the same time (“Settlement Time”), the Currency Hedge
Contract will be marked to market and settled daily based on the notional value
of the Currency Hedge Contract as of the close of business on the prior business
day and the change in the Exchange Rate from the prior Settlement Time. Changes
in rates of the Local Currency compared to the U.S. dollar may negatively affect
the value of the Currency Hedge Contract. If as a result of a change in the
value of the Local Currency relative to the U.S. dollar, the Currency Hedge
Contract increases in value, the counterparty will pay the Series an amount in
U.S. dollars equal to the increase in the value of the Currency Hedge Contract.
If the Currency Hedge Contract decreases in value, the Series will pay the
counterparty an amount in U.S. dollars equal to the decrease in the value of the
Currency Hedge Contract. In order to obtain any necessary amount of cash, the
Manager may sell Portfolio Securities. The Series will maintain amounts not
invested in ADRs in cash or cash equivalents, including money market funds. The
Currency Hedge Contract is subject to counterparty risk in that if the
counterparty fails to make any payments, the Series could incur a
loss.
As
a result of these mark-to-market payments, the ratio of Portfolio Securities to
Shares will vary over time. For example, upon formation, a Series Share might be
equal to one share of the ADR. If the mark-to-market payments for the Currency
Hedge Contract would require the Series to sell ADRs in order to make a payment
to the counterparty, each Series Share would equal less than one share of the
ADR. As a result of the sales of an ADR, the net asset value of the Series and,
correspondingly, the fractional amount of ADRs represented by each Share will
decrease over the life of the Series.
The
Series do not seek to replicate the performance of a specified index. Each
Series is non-diversified and therefore may invest a greater percentage of its
assets in a particular issuer than a diversified fund. Because each Series only
invests in the ADRs of a Company and the Currency Hedge Contract, each Series
will concentrate its investments (i.e., invest 25% or more of its total assets)
in the industry or group of industries in which the Company is
classified.
Each
of the policies and strategies described in this Prospectus, including the
investment objective of each Series, constitutes a non-fundamental policy that
may be changed by the Board of Trustees of the Trust without Shareholder
approval. Certain fundamental policies of the Series are set forth in the Series
SAI under “Investment Restrictions.”
ADDITIONAL
DESCRIPTION OF THE RISKS OF THE SERIES
Investors
in a Series should carefully consider the risks of investing in the Series as
set forth in the Series Summary Information section under “Principal Risks.” To
the extent such risks apply, they are discussed hereunder in greater
detail.
All
Series
Market
Trading Risk. The
Series face numerous market trading risks, including the potential lack of an
active market for Series Shares, losses from trading in secondary markets,
periods of high volatility and disruption in the creation/redemption process of
the Series. Any of these factors, among others, may lead to a Series Shares
trading at a premium or discount to NAV. Thus, you may pay more (or less) than
NAV when you buy Shares of a Series in the secondary market, and you may receive
less (or more) than NAV when you sell those Shares in the secondary market. The
Manager cannot predict whether Shares will trade above (premium), below
(discount) or at NAV. An active market for a Series Shares may not develop and
market trading may be halted if trading in the Series underlying securities is
halted.
The
per share NAV of the Series is calculated at the end of each business day and
fluctuates with changes in the market value of the Series holdings since the
most recent calculation. The trading prices of the Series Shares fluctuate
continuously throughout trading hours based on market supply and demand rather
than NAV. The trading prices of the Series Shares may deviate significantly from
NAV during periods of market volatility. The Manager believes that large
discounts or premiums to the NAV of a Series are not likely to be sustained over
the long-term because Shares can be created and redeemed in Creation Units at
NAV (unlike shares of many closed-end funds, which frequently trade at
appreciable discounts from, and sometimes at premiums to, their NAVs). While the
creation/redemption feature is designed to make it likely that the Series Shares
normally will trade on exchanges at prices close to the Series next calculated
NAV, market prices are not expected to correlate exactly with the Series 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.
The
difference in bid and ask prices is often referred to as the "spread" or
"bid/ask spread." The bid/ask spread varies over time for Shares based on
trading volume and market liquidity, and is generally lower if the Series Shares
have more trading volume and market liquidity and higher if the Series Shares
have little
trading
volume and market liquidity. Further, increased market volatility may cause
increased bid/ask spreads. In addition, in stressed market conditions, the
market for the Series Shares may become less liquid in response to deteriorating
liquidity in the markets for the Series underlying portfolio holdings in the
ADRs.
Risk
of Investing in Depositary Receipts. ADRs
involve risk not experienced when investing directly in the equity securities of
an issuer. Changes in foreign currency exchange rates affect the value of ADRs
and, therefore, may affect the value of a Series portfolio, although the Series
enter into the Currency Hedge Contract to seek to minimize the impact of
fluctuations in the foreign currency exchange rate. Although the ADRs in which
the Series invest will be listed on U.S. over-the-counter markets, there can be
no assurance that a market for these securities will be made or maintained or
that any such market will be or remain liquid.
ADRs
may be subject to some of the same risks as direct investment in foreign
companies, which includes international trade, currency, political, regulatory
and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes
the obligation to pay some or all of the depositary’s transaction fees. Under an
unsponsored ADR arrangement, the foreign issuer assumes no obligations and
the depositary’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities, available
information concerning the foreign issuer may not be as current as for sponsored
ADRs and voting rights with respect to the deposited securities are
not passed through. There is also no guarantee that a financial institution
will continue to sponsor a particular ADR. As a result, the Series may have
difficulty selling securities, or selling them quickly and efficiently at the
prices at which they have been valued. The depositary bank may not have physical
custody of the underlying securities at all times and may charge fees for
various services, including forwarding dividends and interest, and processing
corporate actions. A Series would be expected to pay a share of the additional
fees, which it would not pay if investing directly in the foreign securities.
Moreover, the price at which the Series securities may be sold and the value of
the Series Shares may be adversely affected if trading markets for ADRs are
limited or absent or if bid/ask spreads are wide. In addition, the underlying
issuers of certain depositary receipts are under no obligation to distribute
Shareholder communications or pass through any voting rights with respect to the
deposited securities to the holders of such receipts. A Series may therefore
receive less timely information or have less control than if it invested
directly in the foreign issuer.
To
the extent the Manager of the Series determines that material information about
any Company underlying the ADRs is not available
in English and generally made available to the public in a manner described
above in the Principal Investment Strategies, investors in the Series may not be
able to gather information on which to make investment decisions. In such
circumstances, the Adviser will advise the Board of Trustees of the Series of
the circumstances, and the Board may make a determination to cease operations of
the Series. In such circumstances, the Series may distribute the underlying ADRs
in kind to shareholders, the Fund may liquidate the positions and distribute
cash to shareholders, or the Board may take such other actions as it deems most
appropriate for, and in the best of, shareholders under the circumstances.
Under
Rule 12g3-2(b), a foreign private issuer is provided an automatic exemption from
registration under Section 12(g) of the Exchange Act if it meets the following
three conditions: (1) The foreign private issuer is not required to file reports
under Exchange Act Sections 13(a) or 15(d) (such obligations arising generally
as a result of a public offering of securities, a listing on a national
securities exchange, or voluntary registration under the Exchange Act); (2) The
foreign private issuer maintains a listing of the subject class of securities on
one or two exchanges in a non-U.S. jurisdiction(s) that comprise more than 55%
of its worldwide trading volume (its “Primary Trading Market”); and (3) The
foreign private issuer publishes in English on its website (or through an
electronic information delivery system generally available to the public in its
Primary Trading Market) material items of information that: (a) It has made
public or been required to make public pursuant to the laws of the country of
its incorporation, organization or domicile; (b) It has filed or been required
to file with the principal stock exchange in its Primary Trading Market on which
its securities are traded and which has been made public by that exchange; or
(c) It has distributed or been required to distribute to its security holders.
The exemption provided by Rule 12g3-2(b) is self-executing; it does not require
foreign private issuers to make a formal application to the Commission for the
exemption or submit materials to the Commission to maintain the exemption. To
establish the exemption initially, the foreign private issuer must have
published electronically in English its non-U.S. disclosure documents published
since the first day of its most recently completed fiscal year. To maintain the
exemption, the foreign private issuer’s non-U.S. disclosure documents must, on
an on-going basis, be electronically published in English on its website
promptly. Foreign issuers are not required to provide the information required
by Rule 12g3-2 and may cease doing so at any time, which could impact whether an
ADR of the foreign issuer could be quoted in the over-the-counter markets. If
this circumstance were to arise and a depositary bank were not to step in and
become the sponsor of the securities of such foreign issuer, the Series may be
forced to consider whether to liquidate and/or distribute in-kind all of the
assets of the Series.
Currency
Sap Risk. In
order to hedge currency risk, each Series enters into a Currency Hedge Contract.
The Currency Hedge Contract is subject to market risk, risk of default by the
other party to the transaction, known as “counterparty risk,” and risk of
imperfect correlation between profit or loss on the Currency Hedge Contract and
the underlying currency exchange rate. The Currency Hedge Contract does not
involve the delivery of the underlying currencies. Accordingly, the risk of loss
with respect to the Currency Hedge Contract generally is limited to the net
amount of payments that the Series is contractually obligated to make, or in the
case of the other party to the Currency Hedge Contract defaulting, the net
amount of payments that the Series is contractually entitled to
receive.
The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid, however there is no guarantee that the swap market will
continue to provide liquidity.
Changes
in the credit quality of a company that serves as a Series counterparty with
respect to the Currency Hedge Contract will affect the value of that instrument.
A decline in the creditworthiness of the counterparty may impair the value of
that counterparty’s Currency Hedge Contract with the Series, which could result
in the loss of all value of the Currency Hedge Contract. By using a swap, the
Series assumes the risk that its counterparty could experience financial
hardships. In the event of the insolvency of the counterparty, the Series may
sustain losses or be unable to liquidate the swap position. Counterparty risk
may be somewhat mitigated by the fact that mark-to-market payments are made on a
daily basis. To the extent that a Series has only one or a few counterparties,
the Series will be exposed to greater counterparty risk and the Series may be
unable to enter into the Currency Hedge Contract on favorable terms, potentially
preventing the Series from achieving its investment objective. A Series is
subject to liquidity risk if the Series is unable to sell the Currency Hedge
Contract or is otherwise required to reserve its assets against its exposure
under the Currency Hedge Contract.
Compared
to other types of investments, derivatives, such as the Currency Hedge Contract,
may be harder to value and may also be less tax efficient. The Series are
subject to valuation risk as they may improperly value the Currency Hedge
Contract if market quotations are unavailable. In addition, changes in
government regulation of derivative instruments could affect the character,
timing and amount of a Series taxable income or gains, and may limit or prevent
the Series from using the Currency Hedge Contract as a part of its investment
strategy, which could make the investment strategy more costly to implement or
require the Series to change its investment strategy.
Airbus
SE ADRhedged™, Bayerische Motoren Werke AG ADRhedged™, Hermes International SA
ADRhedged™, L’Oreal SA ADRhedged™, LVMH Moet Hennessy Louis Vuitton SE
ADRhedged™, Softbank Group Corp. ADRhedged™
Risks
of Investing in Unsponsored Depositary Receipts.
Unsponsored ADRs carry specific risks compared to sponsored ADRs. Here are some
key risks to consider:
•Lack
of Control by the Foreign Company: Unsponsored ADRs are issued without the
involvement or consent of the foreign company, which means the company may not
provide timely or accurate financial information, potentially leading to a lack
of transparency.
•Limited
Information: Since the foreign issuer is not directly involved, the level of
financial disclosure and corporate governance might be lower. Investors may not
have access to crucial information that would be available with a sponsored
ADR.
•Liquidity
Issues: Unsponsored ADRs can have lower trading volumes compared to sponsored
ADRs, which might lead to wider bid-ask spreads and difficulties in executing
trades.
•Exchange
Rate Risk: Like all foreign investments, unsponsored ADRs are subject to
currency risk. Fluctuations in the exchange rate can significantly impact the
value of the investment.
•Regulatory
Risks: Different regulatory environments may affect the company's operations and
financial health. Unsponsored ADRs may not comply with the same regulatory
standards as sponsored ADRs. The regulatory requirements applicable to a foreign
issuer may be different than those of the United States, and as a result, the
frequency and level of detail of disclosure about the operations of such an
issuer may be less than the requirements imposed on issuers whose securities are
registered in the United States.
•Potential
for Higher Volatility: Due to lower liquidity and less oversight, unsponsored
ADRs may experience higher price volatility.
Anheuser-Busch
InBev SA/NV ADRhedged™
Risks
of Investing in Belgium. Investment
in Belgian issuers may subject the Series to legal, regulatory, political,
currency, security, and economic risk specific to Belgium. Although Belgium has
few natural resources and imports substantial amounts of raw materials, it has
an established industrial sector, which is responsible for exporting large
volume of finished goods to other European countries. Belgium relies heavily on
trade with key trading partners. Most of Belgium’s trade is with fellow EU
members. The Belgian economy, along with certain other EU economies, experienced
a significant economic slowdown during the recent financial crisis. Certain
banks required government support, while a few other banks were nationalized in
order to avoid potential insolvency. The Belgian economy is also heavily
dependent on trade with other European countries. The European financial markets
have recently experienced volatility and adverse trends due to concerns about
economic downturns or rising government debt levels. As a result, certain EU
economies have experienced significant deterioration in market
confidence.
Novo
Nordisk A/S (B Shares) ADRhedged™
Risks
of Investing in Denmark.
Investments in Danish issuers subject the Series to legal, regulatory,
political, currency, security, and economic risks specific to Denmark. The
Danish economy, along with certain other EU economies, experienced a significant
economic slowdown during the recent financial crisis. Denmark’s economy has also
been characterized by slow growth and is facing demographic challenges that
could lead to labor supply shortages in the near future.
Airbus
SE ADRhedged™, Anheuser-Busch InBev SA/NV ADRhedged™, argenx SE ADRhedged™, ASML
Holding NV ADRhedged™, Banco Santander S.A. ADRhedged™, Bayer AG ADRhedged™,
Bayerische Motoren Werke AG ADRhedged™, BP p.l.c. ADRhedged™, British American
Tobacco p.l.c. ADRhedged™, Diageo plc ADRhedged™, Deutsche Telekom AG
ADRhedged™, GSK plc ADRhedged™, Heineken NV ADRhedged™, Hermes International SA
ADRhedged™, HSBC Holdings plc ADRhedged™, L’Oreal SA ADRhedged™, LVMH Moet
Hennessy Louis Vuitton SE ADRhedged™, Novo Nordisk A/S (B Shares) ADRhedged™,
SAP SE ADRhedged™, Sanofi ADRhedged™, Shell plc ADRhedged™, Siemens AG
ADRhedged™, STMicroelectronics NV ADRhedged™, TotalEnergies SE ADRhedged™,
Vodafone Group Plc ADRhedged™
Investing
in the EU Risk.
Investments in certain countries in the EU are susceptible to high economic
risks associated with high levels of debt, such as investments in sovereign debt
of Greece, Italy and Spain. Separately, the European Union faces issues
involving its membership, structure, procedures and policies, including the
adoption, abandonment or adjustment of a new constitutional treaty, the EU’s
enlargement to the south and east, and resolution of the EU’s problematic fiscal
and democratic accountability. Efforts of the member states to further unify
their economic and monetary policies may increase the potential for the downward
movement of one member state’s market to cause a similar effect on other member
states’ markets. European countries that are part of the European Economic and
Monetary Union may be significantly affected by tight fiscal and monetary
controls that the union may seek to impose on its members.
Continuing
uncertainty as to the status of the euro and the EU and the potential for
certain countries to withdraw from the union has created significant volatility
in currency and financial markets generally. Any partial or complete dissolution
of the EU could have significant adverse effects on currency and financial
markets, and on the value of the Series investments. In June 2016, the UK
approved a referendum to leave the European Union (known as “Brexit”). Although
its long-term effects remain uncertain, Brexit’s impact on the UK and European
economies and the broader global economy could be significant and result in
increased volatility, illiquidity and potentially lower economic growth in
markets in the UK, Europe and globally, which may adversely affect the value of
the Series investments. Brexit also may spark additional member states to
contemplate departing the European Union, furthering economic and political
instability in the region.
Airbus
SE ADRhedged™, Hermes International SA ADRhedged™, L’Oreal SA ADRhedged™, LVMH
Moet Hennessy Louis Vuitton SE ADRhedged™, Sanofi ADRhedged™, TotalEnergies SE
ADRhedged™
Risks
of Investing in France.
Investment in French issuers subjects the Fund to legal, regulatory, political,
currency, security, and economic risks specific to France. The French economy is
influenced to a significant extent by the economies of key trading partners,
including Germany and other Western European countries. Changes in demand for
French products and services or adverse economic developments in these trading
partners may negatively impact the French economy.
The
French economy is also dependent on exports from the agricultural sector,
including leading exports such as dairy products, meat, wine, fruit and
vegetables, and fish, making it susceptible to fluctuations in demand for these
products.
Ongoing
concerns regarding the economic health of the European Union (EU) continue to
constrain the economic resilience of certain member states, including France.
Interest rates on French sovereign debt may rise to levels that make it
difficult to service high debt levels without significant financial assistance
from institutions such as the European Central Bank, which could potentially
result in default or other economic stress.
In
addition, France has experienced acts of terrorism, creating a climate of
insecurity that has adversely affected tourism and may lead to further negative
economic consequences. Other EU-related risks, including prior sovereign debt
crises and potential political or monetary instability, may also affect the
French economy and, in turn, the Fund’s investments in French
issuers.
Bayer
AG ADRhedged™, Bayerische Motoren Werke AG ADRhedged™, Deutsche Telekom AG
ADRhedged™, SAP SE ADRhedged™, Siemens AG ADRhedged™
Risks
of Investing in Germany.
Investing in German companies involves additional risks, including, but not
limited to: significant demographic challenges to sustained long-term growth;
low fertility rates and declining net immigration putting pressure on the
country’s social welfare system; and the costly and time-consuming modernization
and integration of the eastern German economy. Additionally, the European
sovereign-debt crisis has resulted in a weakened Euro and has put into question
the future financial prospects of Germany and the surrounding
region.
Hitachi
Ltd. ADRhedged™, Honda Motor Co. Ltd. ADRhedged™, Mitsubishi UFJ Financial
Group, Inc. ADRhedged™, Mizuho Financial Group Inc. ADRhedged™, Softbank Group
Corp. ADRhedged™, Sony Group Corp. ADRhedged™, Toyota Motor Corporation
ADRhedged™
Risks
of Investing in Japan. The
Series invests in the ADRs of a Japanese company. Any of the following risks,
individually or in the aggregate, can impact an investment made in Japan, and
therefore the securities of a Japanese company:
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Geographic
Risk. Japan is located in a part of the world that has historically been
prone to natural disasters such as earthquakes, volcanoes and tsunamis and
is economically sensitive to environmental events. Any such event could
result in a significant adverse impact on the Japanese
economy. |
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Lack
of Natural Resources Risk. Japan is an island state with few natural
resources and limited land area and is reliant on imports for its
commodity needs. In particular, the Japanese economy is dependent on
global sources of petroleum products, including those in the Middle East.
Any disruptions, fluctuations or shortages in the commodity markets could
have a negative impact on the Japanese economy. |
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Reliance
On Trading Partners Risk. The Japanese economy is heavily dependent on
international trade, including trade with the U.S., other Asian countries
and European nations, and has been adversely affected by trade tariffs,
other protectionist measures and rising commodity prices. Japanese
economic growth has generally been dependent on the U.S. and Chinese
economies, with trade increasing with China in recent
years. |
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Asian
Economic Risk. Certain Asian economies have experienced over-extension of
credit, currency devaluations and restrictions, high unemployment, high
inflation, decreased exports and economic recessions. Economic or
political events in any one country can have a significant economic effect
on the entire Asian region as well as on major trading partners outside
Asia and any adverse event in the Asian markets may have a significant
adverse effect on the Japanese economy. |
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U.S.
Economic Risk. The U.S. is a significant trading partner of Japan.
Decreasing U.S. imports, new trade regulations, changes in the U.S. dollar
exchange rates or a recession in the U.S. may have an adverse impact on
the Japanese economy. Weakness in the U.S. economy or the U.S. dollar
could adversely affect Japanese trade with the U.S. |
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European
Economic Risk. The Economic and Monetary Union of the European Union
(“EU”) requires compliance with restrictions on inflation rates, deficits,
interest rates, debt levels and fiscal and monetary controls, each of
which may significantly affect every country in Europe. Decreasing imports
or exports, changes in governmental or EU regulations on trade, changes in
the exchange rate of the euro, the default or threat of default by an EU
member country on its sovereign debt, and recessions in EU economies may
have a significant adverse effect on the economies of EU member countries.
The European financial markets recently experienced volatility and adverse
trends due to concerns about rising government debt levels of several
European countries, including Greece, Spain, Ireland, Italy and Portugal.
Continuation of these trends could adversely affect Japanese trade with
Europe. |
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National
Security Risk. Japan’s relations with its neighbors, particularly China,
North Korea, South Korea and Russia, have at times been strained due to
territorial disputes, historical animosities and defense concerns. Most
recently, the Japanese government has shown concern over the increased
nuclear and military activity of North Korea and about maritime
territorial claims asserted by China. Strained relations may cause
uncertainty in the Japanese markets and adversely affect the overall
Japanese economy in times of crisis. |
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Structural
Risks. Japan may be subject to risks relating to political, economic and
labor risks. Any of these risks, individually or in the aggregate, could
adversely affect investments in the
Series: |
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Economic
Risk. The growth of Japan’s economy has recently lagged that of its Asian
neighbors and other major developed economies. Since the year 2000,
Japan’s economic growth rate has remained relatively low, and it may
remain low in the future. The Japanese economy is heavily dependent on
international trade and has been adversely affected by trade tariffs,
other protectionist measures, competition from emerging economies and the
economic conditions of its trading partners. Japan is also heavily
dependent on oil imports, and higher commodity prices could therefore have
a negative impact on the Japanese economy. |
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Political
Risk. Historically, Japan has been subject to unpredictable national
politics and may experience frequent political turnover. Future political
developments may lead to changes in policy that might adversely affect the
Series investments. In addition, China has become an important trading
partner with Japan. Japan’s political relationship with China, however,
has become strained. Should political tension increase, it could adversely
affect the Japanese economy and destabilize the region as a
whole. |
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Large
Government Debt Risk. The Japanese economy faces several concerns,
including a financial system with large levels of nonperforming loans,
over-leveraged corporate balance sheets, extensive cross-ownership by
major corporations, a changing corporate governance structure, and large
government deficits. These issues may cause a slowdown of the Japanese
economy. |
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Currency
Risk. The Japanese Yen has fluctuated widely at times and any increase in
its value may cause a decline in exports that could weaken the economy.
Japan has, in the past, intervened in the currency markets to attempt to
maintain or reduce the value of the yen. Japanese intervention in the
currency markets could cause the value of the yen to fluctuate sharply and
unpredictably and could cause losses to investors. The Japanese Yen may
not maintain its long-term value in terms of purchasing power in the
future. |
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Labor
Risk. Japan has an aging workforce. Its labor market is undergoing
fundamental structural changes, as traditional lifetime employment clashes
with the need for increased labor mobility, which may adversely affect
Japan’s economic competitiveness. |
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Nuclear
Energy Risk. The nuclear power plant catastrophe in Japan in March 2011
may have long-term effects on the Japanese economy and its nuclear energy
industry, the extent of which are currently
unknown. |
argenx
SE ADRhedged™, ASML Holding NV ADRhedged™, Heineken NV ADRhedged™, ING Groep NV
ADRhedged™
Risk
of Investing in the Netherlands. Investment
in Dutch issuers will subject the Series to regulatory, political, currency,
security, and economic risk specific to the Netherlands and the countries that
use the euro. Among other things, the Netherlands’ economy is heavily dependent
on trading relationships with certain key trading partners, including Germany,
Belgium, the U.K., France and Italy. Future changes in the price or the demand
for Dutch products or services by these countries or changes in these countries’
economies, trade regulations or currency exchange rates could adversely impact
the Dutch economy and the issuers to which the Series has exposure. The Dutch
economy relies on export of financial services to other European countries.
European financial markets have from time to time been adversely affected by
fiscal crises in other European nations, including Greece, Ireland, Italy,
Portugal and Spain. As a result, the Netherlands may have trouble accessing
capital markets and may be forced to pay higher interest rates on its debt than
if it did not use the euro as its currency. In addition, the Netherlands may be
indirectly exposed to the debt of the aforementioned countries through its
banking sector. Any default by a country that uses the euro may therefore have a
material adverse effect on the Dutch economy.
Banco
Santander S.A. ADRhedged™
Risks
of Investing in Spain.
Investment in Spanish issuers involves risks that are specific to Spain,
including, legal, regulatory, political, currency, security and economic risks.
The Spanish economy, along with certain other EU economies, experienced a
significant economic slowdown during the financial crisis that began in 2007. In
reaction to the crisis, the Spanish government introduced austerity reforms
aimed at reducing its fiscal deficit to sustainable levels. Austerity reforms
included, among other things, reduction in government employees’ salaries,
freezing of pension funds, and suspension of public work projects. Such
austerity reforms, while directed at stimulating the Spanish economy in the
long-term, may have a negative short-term effect on Spain’s financial markets.
Due largely to outstanding bad loans to construction companies and real estate
developers, Spanish banks underwent a series of mergers to increase liquidity
and made efforts to shift debt off of their balance sheets. However, reports
indicate that debt levels remain high, although bank lending has contracted. In
addition, unemployment rates remain high. These factors could adversely impact
growth potential of Spanish stocks in which the Series invests. In addition, the
Spanish government is engaged in a long-running campaign against terrorism. Acts
of terrorism on Spanish soil or against Spanish interests abroad may cause
uncertainty in the Spanish financial markets and adversely affect the
performance of the issuers to which the Series has exposure.
In
addition, any of the following risks, individually or in the aggregate, can
impact an investment made in Spain, and therefore the securities of a Spanish
company:
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Geographic
Risk. Spain is located in a part of the world that has historically been
prone to natural disasters such as droughts and occasional flooding, and
is economically sensitive to environmental events. Any such event may
adversely impact the Spanish economy, causing an adverse impact on the
value of the Series. |
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Reliance
on Trading Partners Risk. The Spanish economy is dependent on the
economies of Europe. Reduction in spending by these economies on Spanish
products and services or negative changes in any of these economies may
cause an adverse impact on the Spanish
economy. |
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Security
Risk. Spain has historically experienced acts of terrorism and strained
international relations related to border disputes, historical
animosities, separatist tensions, defense concerns and other security
concerns. These situations may cause uncertainty in the Spanish market and
may adversely affect the Spanish economy. |
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Structural
Risk. Spain is subject to labor, political and economic risks, any of
which could adversely affect investments in the
Series: |
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Political
and Social Risk. Certain regions and sectors of Spain have experienced
periods of high unemployment and labor and social unrest. Continuing
nationalist and terrorist group activities may adversely impact the
Spanish economy. |
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Heavy
Governmental Controls and Regulation. The Spanish government continues to
control a large share of Spanish economic activity. Extensive regulation
of labor and product markets is pervasive and may stifle Spanish economic
growth or cause prolonged periods of recession. |
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Labor
and Economic Risk. Spain’s export strength has eroded due to its
relatively high labor costs. In addition, Spain continues to face high
levels of unemployment, inflation and low productivity compared to other
European countries. |
Nestle
SA ADRhedged™, Novartis AG ADRhedged™, Roche Holding AG ADRhedged™
Risks
of Investing in Switzerland. The
Series is subject to certain risks associated with Switzerland and Europe as a
whole. Although Switzerland is not a member of the EU, the Swiss economy is
dependent on the economies of other European nations as key trading partners.
Any reduction in spending by other European countries could have a negative
effect on the Swiss economy. Additionally, the European sovereign-debt crisis
has resulted in a weakened Euro and has put into question the future financial
prospects of the surrounding region. The ongoing implementation of the EU
provisions and Euro conversion process may materially impact revenues, expenses
or income and increase competition for other European companies, which could
have an effect on the Swiss economy, and in turn, the securities in which the
Series invests.
ASE
Technologies Holding Co. Ltd. ADRhedged™, Silicon Motion Technology Corp.
ADRhedged™, Taiwan Semiconductor Manufacturing Co. Ltd. ADRhedged™, United
Microelectronics Corp. ADRhedged™
Taiwan
Investing Risk.
Investments in Taiwanese issuers will subject the Fund to legal, regulatory,
political, currency and economic risks that are specific to Taiwan.
Specifically, Taiwan’s geographic proximity and history of political contention
with China have resulted in ongoing tensions between the two countries. These
tensions may materially affect the Taiwanese economy and its securities market.
Taiwan’s economy is export-oriented, so it depends on an open world trade regime
and remains vulnerable to fluctuations in the world economy. Rising labor costs
and increasing environmental consciousness have led some labor-intensive
industries to relocate to countries with cheaper work forces, and continued
labor outsourcing may adversely affect the Taiwanese economy.
Arm
Holdings PLC ADRhedged™, Barclays PLC ADRhedged™, BP p.l.c. ADRhedged™, British
American Tobacco p.l.c. ADRhedged™, Diageo plc ADRhedged™, GSK plc ADRhedged™,
Haleon plc ADRhedged™, HSBC Holdings plc ADRhedged™, Lloyds Banking Group plc
ADRhedged™, National Grid plc ADRhedged™, Rio Tinto plc ADRhedged™, Shell plc
ADRhedged™, Unilever PLC ADRhedged™, Vodafone Group Plc ADRhedged™
Risks
of Investing in the UK.
The UK has one of the largest economies in Europe, and the United States and
other European countries are substantial trading partners of the UK. As a
result, the British economy may be impacted by changes to the economic condition
of the United States and other European countries. The British economy, along
with certain other EU economies, experienced a significant economic slowdown
during the recent financial crisis, and certain British financial institutions
suffered significant losses, were severely under-capitalized and required
government intervention to survive. The British economy relies heavily on the
export of financial services to the United States and other European countries
and, therefore, a prolonged slowdown in the financial services sector may have a
negative impact on the British economy. Continued governmental involvement or
control in certain sectors may stifle competition in certain sectors or cause
adverse effects on economic growth. In the past, the UK has been a target of
terrorism. Acts of terrorism in the UK or against British interests abroad may
cause uncertainty in the British financial markets and adversely affect the
performance of the issuers to which a Series has exposure.
Airbus
SE ADRhedged™
Aerospace
and Defense Industry Risk. The
aerospace and defense industry can be significantly affected by government
regulation and spending policies because companies involved in this industry
rely, to a significant extent, on government demand for their products and
services. The financial condition of these companies is heavily influenced by
government defense spending, which may
be
reduced in efforts to control government budgets. The aerospace industry in
particular has recently been affected by adverse economic conditions and
consolidation within the industry.
Bayerische
Motoren Werke AG ADRhedged™, Honda Motor Co. Ltd. ADRhedged™, Toyota Motor
Corporation ADRhedged™
Automotive
Industry Risk.
The automotive industry can be highly cyclical, and companies in the industry
may suffer periodic operating losses. The industry can be significantly affected
by labor relations and fluctuating component prices. While most of the major
automotive manufacturers are large companies, certain others may be
non-diversified in both product line and customer base and may be more
vulnerable to certain events that may negatively impact the automotive
industry.
Banco
Santander S.A. ADRhedged™, Barclays PLC ADRhedged™, HSBC Holdings plc
ADRhedged™, ING Groep NV ADRhedged™, Lloyds Banking Group plc ADRhedged™, Mizuho
Financial Group Inc. ADRhedged™, Mitsubishi UFJ Financial Group, Inc.
ADRhedged™
Banking
Industry Risk. Investments
in securities issued by, and/or having exposure to, companies engaged in the
banking industry can be significantly affected by extensive governmental
regulation, which may limit both the amounts and types of loans and other
financial commitments they can make, and the interest rates and fees they can
charge and amount of capital they must maintain. Profitability is largely
dependent on the availability and cost of capital funds and can fluctuate
significantly when interest rates change. Credit losses resulting from financial
difficulties of borrowers can negatively impact the sector. Banks may also be
subject to severe price competition. The regional banking industry is highly
competitive and thus, failure to maintain or increase market share may result in
regional bank failures or mergers with larger, or multi-national
banks.
Anheuser-Busch
InBev SA/NV ADRhedged™, British American Tobacco p.l.c. ADRhedged™, Diageo plc
ADRhedged™
Beverage
and Tobacco Industry Risk. The
Series is subject to the risks faced by companies in the beverage and tobacco
industry, including: changes in demand for products, demographic and product
trends and general economic conditions; effects of competitive pricing,
environmental factors, marketing campaigns and consumer boycotts; and adverse
effects from governmental regulation and oversight. The tobacco industry may
also be affected by additional risks, including: smoking and health litigation;
governmental and private bans and restrictions on smoking; and actual and
proposed price controls on tobacco products. The beverage and tobacco industry
may also be affected by risks that affect the broader consumer staples
industry.
Heineken
NV ADRhedged™
Beverages
Industry Risk. The
Series is subject to the risks faced by companies in the beverage industry,
including: changes in demand for products, demographic and product trends and
general economic conditions; effects of competitive pricing, environmental
factors, marketing campaigns and consumer boycotts; and adverse effects from
governmental regulation and oversight. The beverage industry may also be
affected by risks that affect the broader consumer staples
industry.
argenx
SE ADRhedged™
Biotechnology
Companies Risk. Biotech
companies invest heavily in research and development which may not necessarily
lead to commercially successful products. These companies are also subject to
increased governmental regulation which may delay or inhibit the release of new
products. Many biotech companies are dependent upon their ability to use and
enforce intellectual property rights and patents. Any impairment of such rights
may have adverse financial consequences. Biotech stocks, especially those of
smaller, less-seasoned companies, tend to be more volatile than the overall
market. Biotech companies can be significantly affected by technological change
and obsolescence, product liability lawsuits and consequential high insurance
costs.
Hermes
International SA ADRhedged™, L’Oreal SA ADRhedged™, LVMH Moet Hennessy Louis
Vuitton SE ADRhedged™, Unilever PLC ADRhedged™
Consumer
Discretionary Sector Risk. Because
companies in the consumer discretionary sector manufacture products and provide
discretionary services directly to the consumer, the success of these companies
is tied closely to the performance of the overall domestic and international
economy, including the functioning of the global supply chain, interest rates,
competition and consumer confidence. Success depends heavily on disposable
household income and consumer spending, and may be strongly affected by social
trends and marketing campaigns. Also, companies in the consumer discretionary
sector may be subject to severe competition, which may have an adverse impact on
a company’s profitability. Changes in demographics and consumer tastes also can
affect the demand for, and success of, consumer discretionary products in the
marketplace.
Rio
Tinto plc ADRhedged™
Copper
and Metal Ore Mining Companies Risk. Companies
in the copper and metal ore mining industry may be adversely impacted by the
volatility of commodity prices, changes in exchange rates, social and political
unrest, war, events related to energy conservation, the success of exploration
projects, depletion of resources, decreases in demand, over-production,
litigation and changes in government regulations or policies, among other
factors. Investments in copper and metal ore mining companies may be speculative
and may be subject to greater price volatility than investments in other types
of companies.
Nestle
SA ADRhedged™
Food
and Beverage Industry Risk. The
food and beverage
industry
(including, but not limited to the food products industry) is
highly
competitive and can be significantly affected by demographic and
product
trends, competitive pricing, food fads, marketing campaigns,
environmental
factors, government regulation, adverse changes in
general
economic conditions, evolving consumer preferences, nutritional
and
health-related concerns, federal, state and local food inspection
and
processing controls, consumer product liability claims, consumer
boycotts,
risks of product tampering, and the availability and expense of
liability
insurance. Product recalls require companies in the food and
beverage
industry to withdraw contaminated or mislabeled products
from
the market. In addition, there are risks pertaining to raw materials
and
the suppliers of such raw materials that include changing market
prices.
The prices for raw materials fluctuate in response to a number of
factors,
including, but not limited to, changes in international agricultural and
trading
policies,
weather and other conditions during the growing and
harvesting
seasons.
Haleon
plc ADRhedged™
Healthcare
Sector Risk. The
profitability of companies
in
the healthcare sector may be affected by extensive, costly
and
uncertain government regulation, restrictions on
government
reimbursement for medical expenses, rising
costs
of medical products and services, pricing pressure
(including
price discounting), changes in the demand for
medical
products and services, an increased emphasis on
outpatient
services, limited product lines, industry innovation
and/or
consolidation, changes in technologies and other
market
developments. Many healthcare companies are heavily
dependent
on obtaining and defending patents, which may
be
time consuming and costly. The expiration of patents
may
adversely affect the profitability of these companies.
Many
healthcare companies are subject to extensive litigation
based
on product liability and similar claims. In addition,
their
products can become obsolete due to industry
innovation,
changes in technologies or other market
developments.
Many new products in the health care sector
require
significant research and development and may be
subject
to regulatory approvals, all of which may be time
consuming
and costly with no guarantee that any product
will
come to market.
BP
p.l.c. ADRhedged™, Shell plc ADRhedged™, TotalEnergies SE
ADRhedged™
Oil,
Gas and Consumable Fuels Industry Risk.
The Series is also subject to risks faced by companies in the oil, gas and
consumable fuels industry, including: effects on profitability from changes in
worldwide energy prices and exploration, and production spending; adverse
effects from changes in exchange rates, government regulation, world events and
economic conditions; market, economic and political risks of the countries where
oil, gas and consumable fuels companies are located or do business; and risk for
environmental damage claims.
Bayer
AG ADRhedged™, GSK plc ADRhedged™, Novartis AG ADRhedged™, Novo Nordisk A/S (B
Shares) ADRhedged™, Roche Holding AG ADRhedged™, Sanofi ADRhedged™
Pharmaceutical
Industry Risk. The
profitability of securities of companies in the pharmaceutical industry is
highly dependent on the development, procurement and marketing of drugs and the
development, protection and exploitation of intellectual property rights and
other proprietary information. These companies may be significantly affected by
such events as the expiration of patents or the loss of, or the inability to
enforce, intellectual property rights. Research and other costs associated with
developing or procuring new drugs and the related intellectual property rights
can be significant, and the results of such research and expenditures is
unpredictable. Many pharmaceutical companies face intense competition from new
products and less costly generic products. In addition, the process for
obtaining regulatory approval from the U.S. Food and Drug Administration or
other governmental regulatory authorities is long and costly and there is no
assurance that the necessary approvals will be obtained or maintained by these
companies.
Additionally,
companies in the pharmaceutical industry may be subject to expenses and losses
from extensive litigation based on intellectual property, product liability and
similar claims. These companies may be adversely affected by government
regulation and changes in reimbursement rates from third-party payors, such as
Medicare, Medicaid and other government-sponsored programs, private health
insurance plans and health maintenance organizations. The ability of
pharmaceutical companies to commercialize current and any future products also
depends in part on the extent reimbursement for the cost of such products and
related treatments are available from these third-party payors. A pharmaceutical
company’s valuation may also be affected if one of its products proves
to
be unsafe, ineffective or unprofitable. The stock prices of companies in this
sector have been, and will likely continue to be, volatile.
Arm
Holdings PLC ADRhedged™, ASE Technologies Holding Co. Ltd. ADRhedged™, ASML
Holding NV ADRhedged™, Silicon Motion Technology Corp. ADRhedged™,
STMicroelectronics NV ADRhedged™, Taiwan Semiconductor Manufacturing Co. Ltd.
ADRhedged™, United Microelectronics Corp. ADRhedged™
Semiconductor
Industry Risk.
Semiconductor
companies may face intense competition,
both
domestically and internationally, and such competition
may
have an adverse effect on their profit margins.
Semiconductor
companies may have limited product lines,
markets,
financial resources or personnel. Semiconductor
companies’
supply chain and operations are dependent on
the
availability of materials that meet exacting standards
and
the use of third parties to provide components and
services.
Semiconductor companies may rely on a limited
number
of suppliers, or upon suppliers in a single location,
for
certain materials, equipment or tools. Finding and
qualifying
alternate or additional suppliers can be a lengthy
process
that can cause production delays or impose unforeseen
costs,
and such alternatives may not be available at all.
Production
can be disrupted by the unavailability of resources,
such
as water, silicon, electricity, gases and other materials.
Suppliers
may also increase prices or encounter cybersecurity
or
other issues that can disrupt production or increase
production
costs.
The
products of semiconductor companies may face
obsolescence
due to rapid technological developments and
frequent
new product introduction, unpredictable changes
in
growth rates and competition for the services of qualified
personnel.
Capital equipment expenditures could be
substantial,
and equipment generally suffers from rapid
obsolescence.
Companies in the semiconductor industry are
heavily
dependent on patent and intellectual property rights.
The
loss or impairment of these rights, would adversely affect
the
profitability of these companies.
SAP
SE ADRhedged™
Software
Industry Risk.
The Series is subject to the risks faced by companies in the software industry
to the same extent as the Index is so concentrated, including: competitive
pressures, such as aggressive pricing (including fixed-rate pricing),
technological developments (including product-specific technological change),
changing domestic demand, and the ability to attract and retain skilled
employees; availability and price of components; dependence on intellectual
property rights, and potential loss or impairment of those rights; research and
development costs; rapid product obsolescence; cyclical market patterns;
evolving industry standards; and frequent new product introductions requiring
timely and successful introduction of new products and the ability to service
such products. The software industry may also be affected by risks that affect
the broader information technology industry.
Hitachi
Ltd. ADRhedged™, Siemens AG ADRhedged™ , Sony Group Corp.
ADRhedged™
Technology
Sector Risk. The
market prices of technology-related securities tend to exhibit a greater degree
of market risk and sharp price fluctuations than other types of securities.
These securities may fall in and out of favor with investors rapidly, which may
cause sudden selling and dramatically lower market prices. Technology securities
may be affected by intense competition, obsolescence of existing technology,
general economic conditions and government regulation and may have limited
product lines, markets, financial resources or personnel. Technology companies
may experience dramatic and often unpredictable changes in growth rates and
competition for qualified personnel. These companies are also heavily dependent
on patent and intellectual property rights, the loss or impairment of which may
adversely impact a company’s profitability. A small number of companies
represent a large portion of the technology industry. In addition, a rising
interest rate environment tends to negatively affect technology companies, those
technology companies seeking to finance expansion would have increased borrowing
costs, which may negatively impact earnings. Technology companies having high
market valuations may appear less attractive to investors, which may cause sharp
decreases in their market prices. Companies in the application software
industry, in particular, may also be negatively affected by the risk that
subscription renewal rates for their products and services decline or fluctuate,
leading to declining revenues. Companies in the systems software industry may be
adversely affected by, among other things, actual or perceived security
vulnerabilities in their products and services, which may result in individual
or class action lawsuits, state or federal enforcement actions and other
remediation costs. Companies in the computer software industry may also be
affected by the availability and price of computer software technology
components.
Deutsche
Telekom AG ADRhedged™, Softbank
Group Corp.
ADRhedged™, Vodafone Group Plc ADRhedged™
Telecommunications
Services Industry Risk.
The Series is subject to risks faced by companies in the telecommunications
industry, including: a telecommunications market characterized by increasing
competition and regulation by the Federal Communications Commission and various
state regulatory authorities; the need to commit substantial capital to meet
increasing competition, particularly in formulating new products and services
using new technology; and technological innovations that may make various
products and services obsolete.
National
Grid plc ADRhedged™
Utility
Companies Risk. The
utilities sector is generally subject to significant government regulation and
oversight, including restrictions on rates as well as environmental and other
regulations. Utility companies also may face risks related to, among other
things, natural disasters, cyber or other attacks, capital project funding,
energy price volatility and increased competition.
EXCLUSION
OF MANAGER FROM COMMODITY POOL OPERATOR DEFINITION
With
respect to the Series, the Manager has claimed an exclusion from the definition
of “commodity pool operator” (“CPO”) under the Commodity Exchange Act (“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, with respect to the Series, the Manager 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 Series, among other things, to adhere to
certain limits on their investments in commodity futures, commodity options and
swaps, which in turn include non-deliverable currency forward contracts. These
limits do not apply to transactions used for bona fide hedging purposes, as
defined by the CFTC. Because the Manager and the Series intend to comply with
the terms of the CPO exclusion, the Series may, in the future, need to adjust
their investment strategies, consistent with their investment objectives, to
limit their investments in these types of instruments. The Series are not
intended as a vehicle for trading in the commodity futures, commodity options,
or swaps markets. The CFTC has neither reviewed nor approved the Manager’s
reliance on these exclusions, or the Series, their investment strategies or its
prospectus.
CONTINUOUS
OFFERING
The
method by which Creation Units are purchased and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Series on an ongoing basis, at any point a “distribution,” as such term
is used in the Securities Act of 1933, as amended (the “Securities Act”), may
occur. 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 individual 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 categorization as an underwriter.
Broker-dealer
firms should also note that dealers who are not “underwriters” but are effecting
transactions in Shares, whether or not participating in the distribution of
Shares, are generally required to deliver a prospectus. This is because the
prospectus delivery exemption in Section 4(3) of the Securities Act is not
available with respect to such transactions as a result of Section 24(d) of the
Investment Company 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
Shares that are part of an over-allotment within the meaning of Section 4(3)(a)
of the Securities Act would be unable to take advantage of the prospectus
delivery exemption provided by Section 4(3) of the Securities Act. Firms that
incur a prospectus delivery obligation with respect to Shares of the Series 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 the Exchange is satisfied by the fact that
the Series prospectus is available at the Exchange upon request. The prospectus
delivery mechanism provided in Rule 153 is only available with respect to
transactions on an exchange.
CREATION
AND REDEMPTION OF CREATION UNITS
The
Series issue and redeem Shares only in bundles of a specified number of Shares.
These bundles are known as “Creation Units.” For each Series, a Creation Unit is
comprised of 10,000 Shares. The number of Shares in a Creation Unit will not
change, except in the event of a share split, reverse split or similar
revaluation. The Series may not issue or redeem Shares in fractional Creation
Units.
To
create or redeem a Creation Unit, you must be an “Authorized Participant” (“AP”)
or you must do so through a broker, dealer, bank or other entity that is an AP.
An AP is either (1) a “Participating Party,” (i.e., a broker-dealer or other
participant in the clearing process of the Continuous Net Settlement System of
the NSCC) (“Clearing Process”) or (2) a participant of DTC (“DTC Participant”),
and, in each case, must have executed an agreement with Foreside Fund Services,
LLC, the Series distributor (the “Distributor”) with respect to creations and
redemptions of Creation Units (“Participation Agreement”). All other persons or
entities transacting in Shares must do so in the Secondary Market. It is
expected that only large institutional investors will create and redeem Shares
directly with a Series in the form of Creation Units. In turn, it is expected
that institutional investors who purchase Creation Units will break up their
Creation Units and offer and sell individual Shares in the Secondary
Market.
Shares
are listed on the Exchange and are publicly traded. Retail investors may
purchase or sell Shares in the Secondary Market (not from a Series) through a
broker or dealer. For information about acquiring or selling Shares in the
Secondary Market, please contact your broker or dealer or financial
advisor.
When
you buy or sell Shares in the Secondary Market, your broker or dealer may charge
you a commission, market premium or discount or other transaction charge, and
you may pay some or all of the spread between the bid and the offered price for
each purchase or sale transaction. Unless imposed by your broker or dealer,
there is no minimum dollar amount you must invest and no minimum number of
Shares you must buy in the Secondary Market. In addition, because transactions
in the Secondary Market occur at market prices, you may pay more than NAV when
you buy Shares and receive less than NAV when you sell those Shares. Under
normal circumstances, a Series will make an in-kind distribution or pay out
redemption proceeds to a redeeming AP within two days after the AP’s redemption
request is received, in accordance with the process set forth in the Series SAI
and in the agreement between the AP and the Series distributor. However, the
Series reserves the right, including under stressed market conditions, to take
up to seven days after the receipt of a redemption request to pay an AP, all as
permitted by the 1940 Act. The Series anticipates regularly meeting redemption
requests primarily through in-kind redemptions. However, a Series reserves the
right to pay all of the redemption proceeds to an AP in cash. Cash used for
redemptions will be raised from the sale of ADRs and from existing holdings of
cash or cash equivalents, including money market funds.
The
creation and redemption processes set forth herein are summaries, and the
summaries only apply to Shareholders who purchase or redeem Creation Units (they
do not relate to Shareholders who purchase or sell Shares in the Secondary
Market). APs should refer to their Participant Agreements for the precise
instructions that must be followed in order to create or redeem Creation
Units.
BUYING
AND SELLING SHARES IN THE SECONDARY MARKET
Most
investors will buy and sell Shares of the Series in Secondary Market
transactions through broker-dealers. Shares of the Series are listed for trading
in the Secondary Market on the Exchange and may also trade on other exchanges or
in the over-the-counter market. Shares can be bought and sold throughout the
trading day like other publicly-traded shares. There is no minimum investment.
Although Shares are generally purchased and sold in “round lots” of 100 Shares,
brokerage firms typically permit investors to purchase or sell Shares in smaller
“odd lots.” When buying or selling Shares through a broker, you will likely
incur customary brokerage commissions and charges, and you may pay some or all
of the spread between the bid and the offered price in the Secondary Market on
each leg of a round trip (purchase and sale) transaction.
Share
prices are reported in U.S. dollars and cents per Share. For information about
buying and selling Shares in the Secondary Market, please contact your broker or
dealer or financial advisor.
The
Series Shares trade under the following trading symbols:
|
|
|
|
|
| |
|
Company
Name |
Ticker |
|
Airbus
ADRhedged™ |
EADH |
|
Anheuser-Busch
InBev SA/NV ADRhedged™ |
BUDH |
|
argenx
SE ADRhedged™ |
ARGH |
|
Arm
Holdings PLC ADRhedged™ |
ARMH |
|
ASE
Technologies Holding Co. Ltd. ADRhedged™ |
ASXH |
|
ASML
Holding NV ADRhedged™ |
ASMH |
|
Banco
Santander S.A. ADRhedged™ |
SANH |
|
Barclays
PLC ADRhedged™ |
BCSH |
|
Bayer
AG ADRhedged™ |
BAYH |
|
Bayerische
Motoren Werke AG ADRhedged™ |
BMWH |
|
BP
p.l.c. ADRhedged™ |
BPH |
|
British
American Tobacco p.l.c. ADRhedged™ |
BTIH |
|
Diageo
plc ADRhedged™ |
DEOH |
|
Deutsche
Telekom AG ADRhedged™ |
DTEH |
|
GSK
plc ADRhedged™ |
GSKH |
|
Haleon
plc ADRhedged™ |
HLNH |
|
Heineken
NV ADRhedged™ |
HEIH |
|
Hermes
International SA ADRhedged™ |
HESH |
|
Hitachi
Ltd. ADRhedged™ |
HTHH |
|
Honda
Motor Co. Ltd. ADRhedged™ |
HMCH |
|
HSBC
Holdings plc ADRhedged™ |
HSBH |
|
ING
Groep NV ADRhedged™ |
INGH |
|
|
|
|
|
| |
|
Company
Name |
Ticker |
|
L’Oreal
SA ADRhedged™ |
LRLH |
|
Lloyds
Banking Group plc ADRhedged™ |
LYGH |
|
LVMH
Moet Hennessy Louis Vuitton SE ADRhedged™ |
LVH |
|
Mizuho
Financial Group Inc. ADRhedged™ |
MFGH |
|
Mitsubishi
UFJ Financial Group, Inc. ADRhedged™ |
MUFH |
|
Nestle
SA ADRhedged™ |
NSRH |
|
National
Grid plc ADRhedged™ |
NGGH |
|
Novartis
AG ADRhedged™ |
NVSH |
|
Novo
Nordisk A/S (B Shares) ADRhedged™ |
NVOH |
|
Rio
Tinto plc ADRhedged™ |
RIOH |
|
Roche
Holding AG ADRhedged™ |
RHHH |
|
SAP
SE ADRhedged™ |
SAPH |
|
Sanofi
ADRhedged™ |
SNYH |
|
Siemens
AG ADRhedged™ |
SIEH |
|
Silicon
Motion Technology Corp. ADRhedged™ |
SIMH |
|
Shell
plc ADRhedged™ |
SHEH |
|
Softbank
Group Corp. ADRhedged™ |
SFTH |
|
Sony
Group Corp. ADRhedged™ |
SONH |
|
STMicroelectronics
NV ADRhedged™ |
STHH |
|
Taiwan
Semiconductor Manufacturing Co. Ltd. ADRhedged™ |
TSMH |
|
TotalEnergies
SE ADRhedged™ |
TTEH |
|
Toyota
Motor Corporation ADRhedged™ |
TMH |
|
Unilever
PLC ADRhedged™ |
ULVH |
|
United
Microelectronics Corp. ADRhedged™ |
UMCH |
|
Vodafone
Group Plc ADRhedged™ |
VODH |
Book
Entry
Shares
of the Series are held in book-entry form and no stock certificates are issued.
The Depository Trust Company (“DTC”), through its nominee, is the record owner
of all outstanding Shares.
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 in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any right as an owner of
Shares, you must rely upon the procedures of DTC and its
participants.
These
procedures are the same as those that apply to any securities that you hold in
book entry or “street name” form for any publicly-traded company. Specifically,
in the case of a Shareholder meeting of a Series, DTC assigns applicable Cede
& Co. voting rights to its participants that have Shares credited to their
accounts on the record date, issues an omnibus proxy and forwards the omnibus
proxy to the Series. The omnibus proxy transfers the voting authority from Cede
& Co. to the DTC Participant. This gives the DTC Participant through whom
you own Shares (namely, your broker, dealer, bank, trust company or other
nominee) authority to vote the Shares, and, in turn, the DTC Participant is
obligated to follow the voting instructions you provide.
MANAGEMENT
The
Board of Trustees of the Trust is responsible for the general oversight of the
management of the Series, including general supervision of the Manager and other
service providers, but it is not involved in the day-to-day management of the
Trust. The Board of Trustees appoints officers who are responsible for the
day-to-day operations of the Series. A list of the Trustees and Trust Officers,
and their present and principal occupations, is provided in the Series
SAI.
Investment
Manager
The
Manager is a Delaware limited liability company formed in 2010. The Manager has
been registered as an investment manager with the SEC since 2011 and
maintains its principal office at 301 S. State Street, N002, Newtown,
Pennsylvania 18940.
The
Manager serves as manager to each Series pursuant to an Investment Management
Agreement (“Management Agreement”). Subject at all times to the supervision and
approval of the Board, the Manager is responsible for the overall management and
oversight of the Trust and each of the Series, including determining what
investments should be purchased and sold, and placing orders for all such
purchases and sales, on behalf of the Series. The Manager has arranged for
distribution, custody, fund administration, transfer agency and all other
services necessary for the Series to operate.
As
compensation for its services and its assumption of certain expenses, each
Series pays the Manager a management fee of 0.17% of the Series’ average daily
net assets, which accrues daily and is paid monthly.
The
Manager may voluntarily waive any portion of its management fee from time to
time and may discontinue or modify any such voluntary limitations in the future
at its discretion.
A
discussion regarding the basis for the Board of Trustees approving the
Management Agreement is available in the Series report on N-CSR for the period
ending June 30, 2026.
Other
Expenses. Under
the Management Agreement, the Manager is not responsible for any expenses of the
Trust. However, the Manager and/or other service providers to the Trust may
waive some or all of its fee and/or reimburse expenses to limit the total
operating expenses of a Series. The Manager and/or other service providers to
the Trust may voluntarily reimburse expenses of a Series from time to time to
help it maintain competitive expense ratios or for other business reasons. Any
voluntary arrangements may be terminated at any time.
The
Manager and its affiliates may deal, trade and invest for their own accounts in
the types of securities in which the Series also may invest. The Manager does
not use inside information in making investment decisions on behalf of the
Series.
Portfolio
Management
The
individual portfolio managers responsible for the day-to-day management of the
portfolio of the Series operate as a team and are:
Daniel
McCabe, Chief
Executive Officer of the Manager, has served as each Series portfolio manager
since their inception in 2024. Prior to that Mr. McCabe served as CEO of Bear
Hunter Structured Products LLC, an NYSE and AMEX specialist firm. McCabe joined
Bear Hunter in 1997 as Vice President of Structured and Derivative Products,
where he ran portfolio trading and managed the firm’s overall exposure in ETFs.
He has a background in institutional sales, options trading and index arbitrage
with Walsh Greenwood, Merrill Lynch and WG Trading.
Mark
Criscitello, Founding
Principal of the Manager, has served as each Series portfolio manager since
their inception in 2024. Prior to that Mr. Criscitello served as CFO and COO of
the Clearance and Execution division of Bear Hunter. Prior to Bear Hunter, Mr.
Criscitello spent 18 years at Kalb Voorhis & Co. as an Option trader, COO
and CFO, and was responsible for risk management, data systems, self-clearance
operations and all financing activities. He has 40 years of experience in the
financial industry.
More
Information
For
more information about the portfolio managers’ compensation, other accounts
managed by the portfolio managers and the portfolio managers’ ownership of
securities in the Series, see the SAI.
OTHER
SERVICE PROVIDERS
Series
Co-Administrator, Custodian, Accounting and Transfer Agent
The
Bank of New York Mellon (“BNY Mellon”) serves as fund accounting,
co-administrator, custodian, transfer agent and dividend disbursing agent of the
Trust and the Series. BNY Mellon is located at 240 Greenwich Street, New York,
New York 10286.
Pursuant
to a Fund Administration and Accounting Agreement with the Trust, BNY Mellon
provides administrative, regulatory, tax, financial reporting and fund
accounting services for the maintenance and operation of the Trust and the
Series. In addition, BNY Pursuant to the Transfer Agency and Services Agreement
with the Trust, BNY Mellon acts as transfer agent for the Series authorized and
issued Shares of beneficial interest and as dividend disbursing agent of the
Trust.
BNY
Mellon makes office space, equipment, personnel and facilities available to
provide such services.
Pursuant
to the Custody Agreement with the Trust, BNY Mellon maintains cash, securities
and other assets of the Trust and the Series in separate accounts, keeps all
required books and records and provides other necessary services. BNY Mellon is
required, upon the order of the Trust, to deliver securities held by it and to
make payments for securities purchased by the Series.
Co-Administrator
Commonwealth
Fund Services, LLC (“CFS”) serves as co-administrator to the Trust and the
Series. CFS is located at 8730 Stony Point Parkway, Suite 205, Richmond,
Virginia 23235. CFS is responsible for providing certain administrative services
to the Trust and the Series, including coordination of meetings of the Board of
Trustees and services related thereto and the provision of certain Trust
officers. CFS has also assumed the responsibility for, and it pays, all of the
Series operating expenses other than the Series management fee, interest,
distribution fees pursuant to Rule 12b-1 plans, taxes, acquired series fees and
expenses, brokerage commissions, dividend expenses on short sales, other
expenditures which are capitalized in accordance with generally accepted
accounting principles, and other extraordinary expenses not incurred in the
ordinary course of business.
Distributor
Foreside
Fund Services, LLC, the Series distributor (the “Distributor”), a Delaware
limited liability company, serves as the distributor of Creation Units for the
Series 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 Series
or the securities that are purchased or sold by the Series. The Distributor’s
principal address is 190 Middle Street, Suite 301, Portland, Maine
04101.
Independent
Registered Public Accounting Firm
KPMG
LLP, 191 West Nationwide Blvd., Suite 500, Columbus, Ohio 43215, serves as the
independent registered public accounting firm for the Trust.
Legal
Counsel
Practus,
LLP, 11300 Tomahawk Creek Parkway, Suite 310, Leawood, Kansas 66211, serves as
legal counsel for the Series.
FREQUENT
TRADING
The
Trust’s Board of Trustees has not adopted policies and procedures with respect
to frequent purchases and redemptions of Series Shares by Series Shareholders
(“market timing”). In determining not to adopt market timing policies and
procedures, the Board noted that the Series are expected to be attractive to
active institutional and retail investors interested in buying and selling
Series Shares on a short-term basis. In addition, the Board considered that,
unlike traditional mutual funds, the Series Shares can only be purchased and
redeemed directly from the Series in Creation Units by Authorized Participants,
and that the vast majority of trading in the Series Shares occurs on the
Secondary Market. Because Secondary Market trades do not involve the Series
directly, it is unlikely those trades would cause many of the harmful effects of
market timing, including dilution, disruption of portfolio management, increases
in the Series trading costs and the realization of capital gains. With respect
to trades directly with the Series, to the extent effected in-kind (namely, for
securities), those trades do not cause any of the harmful effects that may
result from frequent cash trades. To the extent trades are effected in whole or
in part in cash, the Board noted that those trades could result in dilution to
the Series and increased transaction costs (Series may impose higher transaction
fees to offset these increased costs), which could negatively impact the Series
ability to achieve its investment objective. However, the Board noted that
direct trading on a short-term basis by Authorized Participants is critical to
ensuring that a Series Shares trade at or close to NAV. Given this structure,
the Board determined that it is not necessary to adopt market timing policies
and procedures. The Series reserve the right to reject any purchase order at any
time and reserves the right to impose restrictions on disruptive or excessive
trading in Creation Units.
DISTRIBUTION
PLAN
The
Board of Trustees has adopted a Distribution Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, each Series is authorized
to pay an amount up to 0.25% of its average daily net assets each year for
certain distribution-related activities and Shareholder services. No Rule 12b-1
fees are currently paid by the Series, and there are no current plans to impose
these fees. However, in the event Rule 12b-1 fees are charged in the future,
because the fees are paid out of each Series assets, over time these fees will
increase the cost of your investment and may cost you more than certain other
types of sales charges.
The
Manager and its affiliates may, out of their own resources, pay amounts to third
parties for distribution or marketing services on behalf of a Series. The making
of these payments could create a conflict of interest for a financial
intermediary receiving such payments.
DETERMINATION
OF NET ASSET VALUE (NAV)
The
NAV of the Shares for a Series is equal to the Series total assets minus the
Series total liabilities divided by the total number of Shares outstanding.
Portfolio Securities are generally valued at the last quoted sale price or
official closing price of the exchange on which they trade, which is deemed to
be the principal market on which the securities are traded, or if there is no
last quoted sale price or official closing price on the day of valuation, a
security is valued at the mean of the bid and ask prices. The Currency Hedge
Contract will be valued using the prevailing exchange rate of the relevant
non-U.S. currency at the time that NAV is calculated. The exchange rate will be
established by an independent pricing service approved by the Board. Expenses
and fees of the Series accrue daily and are included in the Series total
liabilities. The NAV that is published is rounded to the nearest cent; however,
for purposes of determining the price of Creation Units, the NAV is calculated
to five decimal places.
The
securities and other assets of a Series are valued pursuant to the pricing
policy and procedures approved by the Board. In calculating NAV, a Series
investments are valued using market quotations when available. When market
quotations are not readily available, are deemed unreliable or do not reflect
material events occurring between the close of local markets and the time of
valuation, investments are valued using fair value pricing as determined in good
faith by the Valuation Designee (as defined below) under procedures established
by and under the general supervision and responsibility of the Trust’s Board of
Trustees. Investments that may be valued using fair value pricing include, but
are not limited to: (1) securities that are not actively traded, including
“restricted” securities and securities received in private placements for which
there is no public market; (2) securities of an issuer that becomes bankrupt or
enters into a restructuring; and (3) securities whose trading has been halted or
suspended.
The
frequency with which a Series investments are valued using fair value pricing is
primarily a function of the types of securities and other assets in which the
respective Series invests pursuant to its investment objective, strategies and
limitations.
Investments
for which market quotations are not readily available are valued at fair
value as determined in good faith pursuant to Rule 2a-5 under the 1940 Act.
As a general principle, the fair value of a security or other asset is the
price that would be received upon the sale of the security or asset in an
orderly transaction between market participants at the measurement date and
time. Pursuant to Rule 2a-5, the Board has designated the Manager as the
valuation designee (“Valuation Designee”) for the Series to perform fair
value determinations relating to all Series investments. The Manager may
carry out its designated responsibilities as Valuation Designee through a
fair valuation committee and may apply fair valuation methodologies approved by
the Board, or utilize prices or inputs from pricing services, quotation
reporting systems, valuation agents and other third-party sources that have been
approved by the Board.
The
NAV is calculated by the administrator and determined each business day as of
the close of regular trading on the NYSE (ordinarily 4:00 p.m. Eastern
time).
DISTRIBUTIONS
AND TAXES
Distributions
The
Series typically earn income from ADR dividends, payments on the Currency Hedge
Contract, and the sale of Portfolio Securities when required to do so. All such
income will be deposited into the account used to settle the Currency Hedge
Contract (“Settlement Account”). Each Shareholder will be allocated yearly its
pro rata share of any income, gain, losses and deductions of the Series as if
the Shareholder directly owned its pro rata share of the Series assets. This
information will be reported to Shareholders on Forms 1099 and a WHFIT
Additional Written Statement. Such income generally will be taxable to a
Shareholder regardless of whether it receives any cash distributions from the
Series or cash distributions that differ in amount from such income. The Series
taxable income will generally consist of ordinary income, capital gains or some
combination of both. To the extent a Series has assets in its Settlement Account
in excess of 2% of the Series total assets on any quarterly distribution
determination date, such Series will distribute such excess pro rata to its
Shareholders. Such quarterly distribution determination date shall be on the
last day of each calendar quarter (subject to the next business day in the case
of a holiday or weekend) with payment occurring, if a payment is due, the next
business day. No distribution reinvestment service is provided by the Series.
Broker-dealers may make available the DTC book-entry Distribution Reinvestment
Service for use by beneficial owners of the Series for reinvestment of their
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, distributions will be
automatically reinvested by the Broker in additional whole Shares of the Series
purchased in the secondary market. Regarding the sale of Portfolio Securities,
Portfolio Securities may be sold in such amounts only to cover then existing
Series expenses and cash redemption, which such expenses shall be immediately
paid after the sale of such Portfolio Securities.
U.S.
Federal Income Taxes
The
following discussion of the material U.S. federal income tax consequences
generally applies to the purchase, ownership and disposition of Shares by a
“U.S. Shareholder” (as defined below). The discussion below is based on the
Code, Treasury Regulations promulgated under the Code and judicial and
administrative interpretations of the Code, all as in effect on the date of this
Prospectus. No assurance can be given that future legislation, regulations,
court decisions and/or administrative pronouncements will not significantly
change applicable law and materially affect the conclusions expressed herein,
and any such change, even though made after a U.S. Shareholder has invested in a
Series, could be applied retroactively.
The
tax treatment of Shareholders may vary depending upon their own particular
circumstances. Certain Shareholders, including banks, thrift institutions,
certain other financial institutions, insurance companies, tax-exempt
organizations, brokers and dealers in securities or currencies, certain
securities traders, Shareholders holding Shares as a position in a “hedging,”
“straddle,” “conversion” or “constructive sale” transaction (as those terms are
defined in the authorities mentioned above), qualified pension and
profit-sharing plans, individual retirement accounts, certain other tax-deferred
accounts, U.S. expatriates, Shareholders whose “functional currency” is not the
U.S. dollar, Shareholders subject to the U.S. federal alternative minimum tax,
non-U.S. Shareholders and other Shareholders with special circumstances, may be
subject to special rules not discussed below. In addition, the following
discussion applies only to U.S. Shareholders who hold Shares as “capital
assets.” This discussion does not purport to be complete or to address all
aspects of U.S. federal income taxation that may be relevant to a Shareholder in
light of its particular circumstances. Moreover, the discussion below does not
address the effect of any U.S. state, local or foreign tax law on any
Shareholder. Shareholders are urged to consult their own tax advisors with
respect to all U.S. federal, state, local and foreign tax law considerations
potentially applicable to their investment in Shares.
For
purposes of this discussion, a “U.S. Shareholder” is a beneficial owner of
Shares that is:
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An
individual who is treated as a citizen or resident of the United States
for U.S. federal income tax purposes; |
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A
corporation or other entity treated as a corporation for U.S. federal
income tax purposes that is created or organized in or under the laws of
the United States, any state thereof or the District of
Columbia; |
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An
estate, the income of which is subject to U.S. federal income taxation
regardless of its source; or |
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A
trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust. |
For
U.S. federal income tax purposes, the treatment of any partner in a partnership,
including any entity treated as a partnership for U.S. federal income tax
purposes, will generally depend upon the status of the partner and upon the
activities of the partnership. Partnerships and partners in partnerships are
urged to consult their own tax advisors about the U.S. federal income tax
consequences of purchasing, owning and disposing of Shares.
The
Series have not requested and will not request an advance ruling from the U.S.
Internal Revenue Service (“IRS”) as to the U.S. federal income tax matters
described below. There is no assurance that the IRS will agree with the
conclusions set forth in this section. The IRS could adopt positions contrary to
those discussed below and such positions could be sustained. Prospective
investors should consult their own tax advisors with regard to the U.S. federal
tax consequences of the purchase, ownership and disposition of Shares, as well
as the tax consequences arising under the laws of any U.S. state, foreign
country or other taxing jurisdiction.
Tax
Treatment of the Series
Each
Series intends to qualify as a “grantor trust” for U.S. federal income tax
purposes. There can be no assurance that the IRS will agree with this treatment,
and it is possible that the IRS or another tax authority could assert a position
contrary thereto and that a court could sustain that contrary position. As a
“grantor trust” for U.S. federal income tax purposes, the Series will not pay
U.S. federal income tax. Instead, the income and expenses of a Series will be
allocated on a pro rata basis to Shareholders, and a Series will report its
income, gains, losses and deductions to the IRS and Shareholders on that
basis.
If
a Series fails to qualify as a grantor trust for any year (subject to any
available curative measures), the Series likely will be subject to regular
corporate level U.S. federal income tax in that year on all of its taxable
income, regardless of whether the Series makes any distributions to its
Shareholders. In addition, distributions would be taxable to Shareholders
generally as ordinary dividends to the extent of the Series' current and
accumulated earnings and profits.
The
grantor trust structure of each Series is intended to be treated as a widely
held fixed investment trust (“WHFIT”), and should be subject to what is commonly
referred to as the WHFIT Treasury Regulations. A WHFIT must satisfy certain
detailed reporting requirements. Trustees of fixed investment trusts frequently
do not know the identities of the beneficial owners of the trust interests and
are unable to communicate tax information directly to them because trust
interests often are held in street name, i.e., in the name of a middleman. The
WHFIT Treasury Regulations provide rules that specifically require the sharing
of tax information among trustees, middlemen, and beneficial owners of fixed
investment trusts that meet the definition of a WHFIT.
Each Series expects
that
it will exceed the yearly threshold for simplified WHFIT tax reporting.
Therefore, each Series intends to provide the necessary information to middlemen
so that they can provide yearly complex WHFIT tax reporting to U.S.
shareholders. Prospective U.S. shareholders should understand that computing
taxable income from a WHFIT investment may be different and more complicated
than such computations for other investment types. Prospective U.S. shareholders
should consult their own tax advisors to better understand how complex WHFIT
reporting will affect the completion of their own tax returns.
Taxation
of U.S. Shareholders
U.S.
Shareholders generally will be treated, for U.S. federal income tax purposes, as
if they directly own a pro rata share of the underlying assets held in the
Series. U.S. Shareholders also will be treated as if they directly received
their respective pro rata shares of a Series income, if any, regardless of
whether they receive any distributions from the Series. U.S. Shareholders will
also be treated as if they directly incurred their respective pro rata shares of
the Series expenses. The income from Series assets that is reportable by a U.S.
Shareholder is not reduced by amounts used to pay expenses of the Series.
Instead, a U.S. Shareholder may deduct its respective pro rata share of each
expense incurred by the Series to the same extent as if it directly incurred
such expense. U.S. Shareholders that are individuals, estates or trusts,
however, may be required to treat some or all of the expenses of the Series as
miscellaneous itemized deductions. An individual U.S. Shareholder generally may
not deduct miscellaneous itemized deductions. Generally, any cash distributed by
a Series to a U.S. Shareholder is the net of cash income and expenses reported.
There may be circumstances under which a U.S. Shareholder is required to
recognize income for a taxable year with respect to the Series even if it does
not receive a corresponding distribution from the Series.
In
the case of a U.S. Shareholder that purchases Shares for cash, its initial tax
basis in its pro rata share of the assets held by the Series at the time Shares
are acquired will be equal to its cost of acquiring the Shares. In the case of a
U.S. Shareholder that acquires its Shares by delivering Portfolio Securities and
any cash to the Series, the delivery of the Portfolio Securities and any cash in
exchange for the underlying assets represented by the Shares will not be a
taxable event to the U.S. Shareholder, and the U.S. Shareholder’s tax basis and
holding period for the U.S. Shareholder’s pro rata share of the assets held in
the Series will be the same as its tax basis and holding period for the
Portfolio Securities and any cash delivered by the U.S. Shareholder in exchange
therefor.
When
a Series sells Portfolio Securities, for example to pay expenses, a U.S.
Shareholder generally will recognize gain or loss in an amount equal to the
difference between (i) the U.S. Shareholder’s pro rata share of the amount
realized by the Series upon the sale; and (ii) the U.S. Shareholder’s tax basis
in its pro rata share of the Portfolio Securities that were sold, which gain or
loss will generally be long-term or short-term capital gain or loss, depending
upon whether the U.S. Shareholder has held its Shares for more than one year. A
U.S. Shareholder’s tax basis in any Portfolio Securities sold by the Series
generally will be determined by multiplying the U.S. Shareholder’s total basis
for its share of all of the Portfolio Securities held in the Series immediately
prior to the sale, by a fraction the numerator of which is the amount of
Portfolio Securities sold and the denominator of which is the total amount of
the Portfolio Securities held in the Series immediately prior to the sale.
Immediately after any such sale, a U.S. Shareholder’s tax basis in its pro rata
share of the Portfolio Securities remaining in the Series will equal its tax
basis in its share of the total amount of the Portfolio Securities held in the
Series immediately prior to the sale, less the portion of such basis allocable
to its share of the Portfolio Securities that were sold.
On
a sale or other disposition of Shares, a U.S. Shareholder generally will
recognize gain or loss in an amount equal to the difference between (i) the
amount realized on the sale of the Shares and (ii) the portion of its tax basis
in its pro rata share of the Series assets that is attributable to the Shares
disposed of, determined by multiplying the tax basis of its pro rata share of
all of the assets held by the Series immediately prior to such sale or other
disposition by a fraction the numerator of which is the number of Shares
disposed of and the denominator of which is the total number of Shares it held
immediately prior to such sale or other disposition. That gain or loss will
generally be short-term capital gain or loss if the Shares were held for one
year or less and long-term capital gain or loss if the Shares were held for more
than one year. After any sale of fewer than all of U.S. Shareholder’s Shares,
its tax basis in its pro rata share of the Series assets immediately after the
sale of Shares generally will equal the tax basis in its pro rata share of the
total amount of the assets of the Series immediately prior to the sale, less the
portion of that tax basis that is taken into account in determining the amount
of gain or loss recognized by the U.S. Shareholder upon the sale or other
disposition.
When
a Series sells Series assets, for example to pay expenses, a U.S. Shareholder
generally will recognize gain or loss in an amount equal to the difference
between (i) the U.S. Shareholder’s pro rata share of the amount realized by the
Series upon the sale and (ii) its tax basis for its pro rata share of the Series
assets that were sold, which gain or loss will generally be long-term or
short-term capital gain or loss, depending upon whether the U.S. Shareholder is
treated as having held its share of the Series assets that were sold for more
than one year. A U.S. Shareholder’s tax basis for its share of Series assets
sold by the Series generally will be determined by multiplying the U.S.
Shareholder’s total basis for its share of all of the assets held by the Series
immediately prior to the sale by a fraction, the numerator of which is the
amount of Series assets sold and the denominator of which is the total amount of
assets held in the Series immediately prior to the sale. After any such sale, a
U.S. Shareholder’s tax basis for its pro rata share of the Series remaining
assets will be equal to its tax basis for its share of the total amount of the
assets held in the Series immediately prior to the sale, less the portion of
such basis allocable to its share of the Series assets that were
sold.
A
redemption of some or all of a U.S. Shareholder’s Shares in exchange for the
underlying assets represented by the Shares redeemed generally will not be a
taxable event to the U.S. Shareholder. The U.S. Shareholder’s tax basis in the
assets received in the redemption generally will be the same as the U.S.
Shareholder’s tax basis in the portion of its pro rata share of the assets held
in the Series immediately prior to the redemption that is attributable to the
Shares redeemed. This is determined by multiplying the U.S. Shareholder’s tax
basis in its pro rata share of the assets held in the Series immediately prior
to the redemption by a fraction, the numerator of which is the number of Shares
redeemed and the denominator of which is the number of Shares held by the U.S.
Shareholder immediately prior to the redemption. The U.S. Shareholder’s holding
period with respect to the assets received should include the period during
which the U.S. Shareholder held the Shares redeemed. A subsequent sale of the
Portfolio Securities received by the U.S. Shareholder will be a taxable
event.
Immediately
after any sale or redemption of less than all of a U.S. Shareholder’s Shares,
the U.S. Shareholder’s tax basis in its pro rata share of the assets held in the
Series immediately after such sale or redemption generally will equal its tax
basis for its share of the total amount of the assets held in the Series
immediately prior to the sale or redemption, reduced by the portion of such
basis that is attributable to the Shares sold or redeemed, as addressed above.
The foregoing discussion assumes that all of a U.S. Shareholder’s Shares were
acquired on the same date and at the same price per Share. If a U.S. Shareholder
owns multiple lots of Shares (i.e., Shares acquired on different dates and/or at
different prices), it is uncertain whether the U.S. Shareholder may use the
“specific identification” rules that apply under Treasury Regulations Section
1.1012-1(c) with respect to sales of stock, in determining the amount, and the
long-term or short-term character, of any gain or loss recognized by the U.S.
Shareholder upon the sale of Portfolio Securities held by the Trust, upon the
sale of any Shares by the U.S. Shareholder, or upon the sale by the U.S.
Shareholder of any Portfolio Securities received by it upon the redemption of
any of its Shares. The IRS could take the position that a U.S. Shareholder has a
blended tax basis and holding period for its pro rata share of the underlying
assets in the Series. However, there is no tax guidance on this point. U.S.
Shareholders that hold multiple lots of Shares, or that are contemplating
acquiring multiple lots of Shares, should consult their own tax advisors as to
the determination of the tax basis and holding period for the underlying assets
related to such Shares.
The
Series are expected to hold the Portfolio Securities, the Currency Hedge
Contract and the Settlement Account. It is possible that the Series will hold
other assets and realize income different from those described in this section,
in which case a U.S. Shareholder will have U.S. federal income tax consequences
different from or in addition to those described in this section.
The
Currency Hedge Contract is likely to be classified as a “Section 988
transaction” because it is a type of financial instrument in which the amount of
the payout is determined by reference to the value of one or more “nonfunctional
currencies.” The Series have not received nor requested any written guidance
from the IRS regarding the tax classification of the Currency Hedge Contract as
a “Section 988 transaction.”
Generally,
gain or loss attributable to a Section 988 transaction is ordinary income or
loss rather than capital gain or loss and is sourced to the country of residence
of the taxpayer. There are, however, complex rules that may enable a U.S.
Shareholder to elect to treat any such foreign currency gain or loss
attributable to the Currency Hedge Contract as capital gain or loss. Note there
is very limited guidance with respect to the application of the Section 988
rules to a “grantor trust,” such as the Series, and there is no assurance that
the IRS would respect an election made by a U.S. Shareholder (as opposed to an
election by a Series) to treat any foreign currency gain or loss as capital gain
or loss. The IRS, however, has historically taken and continues to take the
position that a “grantor trust,” such as the Series, for most purposes is
treated as inseparable from its owner or owners for U.S. federal income tax
purposes. Accordingly, because a U.S. Shareholder is deemed for U.S. federal
income tax purposes to be a proportionate owner of the Currency Hedge Contract,
it may be entitled to make an election to treat any income or loss from the
Currency Hedge Contract as capital gain or loss. There are very specific
requirements that must be met to satisfy the capital gain or loss election
described above including concurrent identification requirements under
applicable Treasury Regulations. U.S. Shareholders are strongly urged to consult
their own tax advisors prior to investing in a Series to determine whether they
can satisfy the election requirements, to take the necessary steps to make
timely elections, and to understand the tax consequences of the income or loss
attributable to the Currency Hedge Contract. Note that the Series will not make
an election to treat any foreign currency gain or loss as capital gain or
loss.
Dividends
received by the Series will be taxed to an individual U.S. Shareholder at the
same U.S. federal income tax rates that apply to long-term capital gains,
provided the dividends are qualifying dividends and certain holding period
requirements are satisfied. Dividends that do not meet these requirements are
generally taxed at ordinary income rates. Gains recognized by non-corporate U.S.
Shareholders from a Series sale of Portfolio Securities treated as held for more
than one year by the U.S. Shareholder are taxed at the maximum rate applicable
to long-term capital gains.
Certain
non-corporate U.S. Shareholders are required to pay a 3.8% tax on the lesser of
the excess of their modified adjusted gross income over a threshold amount or
their “net investment income,” which generally includes dividends, interest, and
net gains from the disposition of investment property. This tax is in addition
to any regular U.S. federal income taxes due on such investment
income.
U.S. Shareholders are urged to consult their own tax advisors regarding the
effect this law may have on an investment in the Shares.
A
corporate U.S. Shareholder generally will not be entitled to the
dividends-received deduction with respect to any dividends received by a Series,
because the dividends-received deduction is generally not available for
dividends received from most foreign corporations.
Under
the “wash sale” rules, a U.S. Shareholder may not be able to deduct a loss on
the Series disposition of Portfolio Securities. As a result, it may be required
to recognize income greater than the total cash actually received from the
Series during the taxable year.
U.S.
Shareholders will be required to recognize gain or loss upon a sale of Series
assets (as discussed above), even though some or all of the proceeds of such
sale are used to pay Series expenses. Generally, for U.S. federal income tax
purposes, a U.S. Shareholder must take into account its full pro rata share of
the Series income, even if some of that income is used to pay Series
expenses.
Any
brokerage or other transaction fees incurred by a U.S. Shareholder in purchasing
Shares will be treated as part of its tax basis in the underlying assets of a
Series. Similarly, any brokerage fee incurred by a U.S. Shareholder in selling
Shares will reduce the amount realized by it with respect to the
sale.
The
Series will file certain information returns with the IRS, and provide certain
tax-related information to Shareholders, in connection with the Series. The
Series will make information available that will enable brokers and custodians
through which Shareholders hold Shares to prepare and, if required, to file
certain information returns (e.g., Form 1099) with the IRS. To the extent
required by applicable Treasury Regulations, each Shareholder will be provided
with information regarding its allocable portion of the Series annual income,
expenses, gains and losses (if any). A U.S. Shareholder may be subject to U.S.
backup withholding tax in certain circumstances unless it provides its taxpayer
identification number and complies with certain certification procedures. The
amount of any backup withholding will be allowed as a credit against a U.S.
Shareholder’s U.S. federal income tax liability and may entitle it to a refund,
provided that the required information is furnished to the IRS.
This
discussion of “U.S. Federal Income Taxes” is for general information only and
not tax advice. All investors should consult their own tax advisers as to the
federal, state, local and foreign tax provisions applicable to
them.
TRANSACTION
FEES
Authorized
Participants are charged standard creation and redemption transaction fees to
offset transfer and other transaction costs associated with the issuance and
redemption of Creation Units. The standard creation and redemption transaction
fee is $250. The standard creation transaction fee is charged to each purchaser
on the day such purchaser creates a Creation Unit. The standard creation
transaction fee is the same regardless of the number of Creation Units purchased
by an investor on the same day. Similarly, the standard redemption transaction
fee is the same regardless of the number of Creation Units redeemed on the same
day. Authorized Participants who place creation orders through DTC for cash
(when cash creations are available or specified) will also be responsible for
the brokerage and other transaction costs of the Series relating to the cash
portion of such creation order. In addition, purchasers of Shares in Creation
Units are responsible for payment of the costs of transferring securities to the
Series and redeemers of Shares in Creation Units are responsible for the costs
of transferring securities from the Series. Investors who use the services of a
broker or other such intermediary may pay fees for such services.
CODE
OF ETHICS
The
Trust and the Manager each have adopted a code of ethics that are designed to
prevent affiliated persons of the Trust and the Manager from engaging in
deceptive, manipulative or fraudulent activities in connection with securities
held or to be acquired by the Series (which may also be held by persons subject
to a code). There can be no assurance that the codes will be effective in
preventing such activities. The codes permit personnel subject to them to invest
in securities, including securities that may be held or purchased by the Series.
The codes are on file with the SEC and are available to the public.
SERIES
WEBSITE AND DISCLOSURE OF PORTFOLIO HOLDINGS
The
Manager maintains a website for the Series at www.adrhedged.com. The
website for the Series contain the following information, on a per-Share basis,
for each Series: (1) the prior business day’s NAV; (2) the market closing price
or the reported midpoint of the bid-ask spread at the time of NAV calculation
(“Bid-Ask Price”); and (3) a calculation of the premium or discount of the
market closing price or the Bid-Ask Price against such NAV. In addition, on each
business day, before the commencement of trading in
Shares
on the Exchange, each Series will disclose on its website (www.adrhedged.com)
the identities and quantities of the portfolio securities and other assets held
by the Series that will form the basis for the calculation of NAV at the end of
the business day.
A
description of the Series policies and procedures with respect to the disclosure
of the Series portfolio securities is available in the SAI.
OTHER
INFORMATION
The
Trust was organized as a Delaware statutory trust on August 27, 2010. Its
Declaration of Trust currently permits the Trust to issue an unlimited number of
Shares of beneficial interest. If Shareholders are required to vote on any
matters, each Share outstanding would be entitled to one vote. Annual meetings
of Shareholders will not be held except as required by the Investment Company
Act and other applicable law. See the Series SAI for more information concerning
the Trust’s form of organization.
PrecidianSM is
a service mark of Precidian Funds, LLC.
FINANCIAL
HIGHLIGHTS
The
following table is intended to help you better understand the financial
performance of the Series since their inception. Certain information reflects
financial results for a single share of each Series. The total return in the
table represents the rate you would have earned (or lost) on an investment in
each Series, assuming reinvestment of all dividends and distributions. The
following information has been derived from the Series’ financial statements,
which have been audited by KPMG, LLP, the independent registered public
accounting firm of the Series, whose report, along with the Series financial
statements, is included in the Series annual report to shareholders. The annual
report is available from the Series upon request without charge.
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ARM
Holdings PLC ADRhedged™ |
Period
Ended |
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Selected
Per Share Data |
December
31,
2025(a) |
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Net
Asset Value, beginning of period |
$ |
50.00 |
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Income
(loss) from investment operations: |
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Net
investment income(b) |
0.07 |
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Net
realized and unrealized gain (loss) |
(2.21) |
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Total
from investment operations |
(2.14) |
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Less
distributions from: |
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Net
investment income |
(1.23) |
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Total
distributions |
(1.23) |
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Net
Asset Value, end of period |
$ |
46.63 |
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Market
price, end of period |
$ |
46.54 |
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Total
Return based on Net Asset Value(%) |
(4.54) |
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(c) |
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Total
Return based on Market Price (%) |
(4.71) |
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(c) |
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Ratios
to Average Net Assets and Supplemental Data |
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Net
Assets, end of period ($ millions) |
$ |
0.90 |
|
|
|
Ratio
of expenses (%) |
0.19 |
|
(d) |
|
Ratio
of net investment income (loss) (%) |
0.15 |
|
(d) |
|
Portfolio
turnover rate (%)(e) |
0 |
|
(c) |
(a)
For the period March 13, 2025 (commencement of operations) through December 31,
2025.
(b)
Per share numbers have been calculated using the average shares outstanding
method.
(c)
Not annualized.
(d)
Annualized.
(e)
Excludes the impact of in-kind transactions related to the processing of capital
share transactions in Creation Units.
|
|
|
|
|
|
|
|
| |
|
ASML
Holdings NV ADRhedged™ |
Period
Ended |
|
|
Selected
Per Share Data |
December
31,
2025(a) |
|
|
Net
Asset Value, beginning of period |
$ |
50.00 |
|
|
|
Income
(loss) from investment operations: |
| |
|
Net
investment income(b) |
0.37 |
|
|
|
Net
realized and unrealized gain (loss) |
22.09 |
|
|
|
Total
from investment operations |
22.46 |
|
|
|
|
| |
|
Less
distributions from: |
| |
|
Net
investment income |
(0.14) |
|
|
|
Total
distributions |
(0.14) |
|
|
|
Net
Asset Value, end of period |
$ |
72.32 |
|
|
|
Market
price, end of period |
$ |
72.33 |
|
|
|
|
| |
|
Total
Return based on Net Asset Value(%) |
44.91 |
|
(c) |
|
Total
Return based on Market Price (%) |
44.93 |
|
(c) |
|
Ratios
to Average Net Assets and Supplemental Data |
| |
|
Net
Assets, end of period ($ millions) |
$ |
1.40 |
|
|
|
Ratio
of expenses (%) |
0.19 |
|
(d) |
|
Ratio
of net investment income (loss) (%) |
0.76 |
|
(d) |
|
Portfolio
turnover rate (%)(e) |
0 |
|
(c) |
(a)
For the period March 13, 2025 (commencement of operations) through December 31,
2025.
(b)
Per share numbers have been calculated using the average shares outstanding
method.
(c)
Not annualized.
(d)
Annualized.
(e)
Excludes the impact of in-kind transactions related to the processing of capital
share transactions in Creation Units.
|
|
|
|
|
|
|
|
| |
|
BP
p.l.c. ADRhedged™ |
Period
Ended |
|
|
Selected
Per Share Data |
December
31,
2025(a) |
|
|
Net
Asset Value, beginning of period |
$ |
50.00 |
|
|
|
Income
(loss) from investment operations: |
| |
|
Net
investment income(b) |
3.25 |
|
|
|
Net
realized and unrealized gain (loss) |
1.56 |
|
(c) |
|
Total
from investment operations |
4.81 |
|
|
|
|
| |
|
Less
distributions from: |
| |
|
Net
investment income |
(0.94) |
|
|
|
Total
distributions |
(0.94) |
|
|
|
Net
Asset Value, end of period |
$ |
53.87 |
|
|
|
Market
price, end of period |
$ |
53.77 |
|
|
|
|
| |
|
Total
Return based on Net Asset Value(%) |
9.65 |
|
(d) |
|
Total
Return based on Market Price (%) |
9.46 |
|
(d) |
|
Ratios
to Average Net Assets and Supplemental Data |
| |
|
Net
Assets, end of period ($ millions) |
$ |
1.10 |
|
|
|
Ratio
of expenses (%) |
0.19 |
|
(e) |
|
Ratio
of net investment income (loss) (%) |
6.37 |
|
(e) |
|
Portfolio
turnover rate (%)(f) |
0 |
|
(d) |
(a)
For the period January 6, 2025 (commencement of operations) through December 31,
2025.
(b)
Per share numbers have been calculated using the average shares outstanding
method.
(c)
Because of the timing of subscriptions and redemptions in relation to
fluctuating market at values, the amount shown may not agree with the change in
aggregate gains and losses.
(d)
Not annualized.
(e)
Annualized.
(f)
Excludes the impact of in-kind transactions related to the processing of capital
share transactions in Creation Units.
|
|
|
|
|
|
|
|
| |
|
GSK
plc ADRhedged™ |
Period
Ended |
|
|
Selected
Per Share Data |
December
31,
2025(a) |
|
|
Net
Asset Value, beginning of period |
$ |
50.00 |
|
|
|
Income
(loss) from investment operations: |
| |
|
Net
investment income(b) |
2.60 |
|
|
|
Net
realized and unrealized gain (loss) |
16.57 |
|
|
|
Total
from investment operations |
19.17 |
|
|
|
|
| |
|
Less
distributions from: |
| |
|
Net
investment income |
(0.79) |
|
|
|
Total
distributions |
(0.79) |
|
|
|
Net
Asset Value, end of period |
$ |
68.38 |
|
|
|
Market
price, end of period |
$ |
68.20 |
|
|
|
|
| |
|
Total
Return based on Net Asset Value(%) |
38.35 |
|
(c) |
|
Total
Return based on Market Price (%) |
37.98 |
|
(c) |
|
Ratios
to Average Net Assets and Supplemental Data |
| |
|
Net
Assets, end of period ($ millions) |
$ |
0.70 |
|
|
|
Ratio
of expenses (%) |
0.19 |
|
(d) |
|
Ratio
of net investment income (loss) (%) |
4.68 |
|
(d) |
|
Portfolio
turnover rate (%)(e) |
0 |
|
(c) |
(a)
For the period January 6, 2025 (commencement of operations) through December 31,
2025.
(b)
Per share numbers have been calculated using the average shares outstanding
method.
(c)
Not annualized.
(d)
Annualized.
(e)
Excludes the impact of in-kind transactions related to the processing of capital
share transactions in Creation Units.
|
|
|
|
|
|
|
|
|
|
|
| |
|
HSBC
Holdings plc ADRhedged™ |
For
the Year Ended |
Period
Ended |
|
|
Selected
Per Share Data |
December
31,
2025 |
December
31,
2024(a) |
|
|
Net
Asset Value, beginning of period |
$ |
56.08 |
|
$ |
50.00 |
|
|
|
Income
(loss) from investment operations: |
|
| |
|
Net
investment income(b) |
4.08 |
|
0.78 |
|
|
|
Net
realized and unrealized gain (loss) |
26.41 |
|
5.88 |
|
|
|
Total
from investment operations |
30.49 |
|
6.66 |
|
|
|
|
|
| |
|
Less
distributions from: |
|
| |
|
Net
investment income |
— |
|
(0.58) |
|
|
|
Total
distributions |
— |
|
(0.58) |
|
|
|
Net
Asset Value, end of period |
$ |
86.57 |
|
$ |
56.08 |
|
|
|
Market
price, end of period |
$ |
86.42 |
|
$ |
56.36 |
|
|
|
|
|
| |
|
Total
Return based on Net Asset Value(%) |
54.36 |
|
13.35 |
|
(c) |
|
Total
Return based on Market Price (%) |
53.34 |
|
13.91 |
|
(c) |
|
Ratios
to Average Net Assets and Supplemental Data |
|
| |
|
Net
Assets, end of period ($ millions) |
$ |
4.30 |
|
$ |
2.00 |
|
|
|
Ratio
of expenses (%) |
0.19 |
|
0.19 |
|
(d) |
|
Ratio
of net investment income (loss) (%) |
5.82 |
|
6.33 |
|
(d) |
|
Portfolio
turnover rate (%)(e) |
0 |
|
0 |
|
(c) |
(a)
For the period October 4, 2024 (commencement of operations) through December 31,
2024.
(b)
Per share numbers have been calculated using the average shares outstanding
method.
(c)
Not annualized.
(d)
Annualized.
(e)
Excludes the impact of in-kind transactions related to the processing of capital
share transactions in Creation Units.
|
|
|
|
|
|
|
|
| |
|
Novo
Nordisk A/S (B Shares) ADRhedged™ |
Period
Ended |
|
|
Selected
Per Share Data |
December
31,
2025(a) |
|
|
Net
Asset Value, beginning of period |
$ |
50.00 |
|
|
|
Income
(loss) from investment operations: |
| |
|
Net
investment income(b) |
0.54 |
|
|
|
Net
realized and unrealized gain (loss) |
(22.56) |
|
|
|
Total
from investment operations |
(22.02) |
|
|
|
|
| |
|
Less
distributions from: |
| |
|
Net
investment income |
(0.65) |
|
|
|
Total
distributions |
(0.65) |
|
|
|
Net
Asset Value, end of period |
$ |
27.33 |
|
|
|
Market
price, end of period |
$ |
27.43 |
|
|
|
|
| |
|
Total
Return based on Net Asset Value(%) |
(44.03) |
|
(c) |
|
Total
Return based on Market Price (%) |
(43.82) |
|
(c) |
|
Ratios
to Average Net Assets and Supplemental Data |
| |
|
Net
Assets, end of period ($ millions) |
$ |
3.00 |
|
|
|
Ratio
of expenses (%) |
0.19 |
|
(d) |
|
Ratio
of net investment income (loss) (%) |
1.75 |
|
(d) |
|
Portfolio
turnover rate (%)(e) |
0 |
|
(c) |
(a)
For the period January 6, 2025 (commencement of operations) through December 31,
2025.
(b)
Per share numbers have been calculated using the average shares outstanding
method.
(c)
Not annualized.
(d)
Annualized.
(e)
Excludes the impact of in-kind transactions related to the processing of capital
share transactions in Creation Units.
|
|
|
|
|
|
|
|
| |
|
SAP
SE ADRhedged™ |
Period
Ended |
|
|
Selected
Per Share Data |
December
31,
2025(a) |
|
|
Net
Asset Value, beginning of period |
$ |
50.00 |
|
|
|
Income
(loss) from investment operations: |
| |
|
Net
investment income(b) |
0.40 |
|
|
|
Net
realized and unrealized gain (loss) |
(6.06) |
|
|
|
Total
from investment operations |
(5.66) |
|
|
|
|
| |
|
Net
Asset Value, end of period |
$ |
44.34 |
|
|
|
Market
price, end of period |
$ |
44.34 |
|
|
|
|
| |
|
Total
Return based on Net Asset Value(%) |
(11.32) |
|
(c) |
|
Total
Return based on Market Price (%) |
(11.32) |
|
(c) |
|
Ratios
to Average Net Assets and Supplemental Data |
| |
|
Net
Assets, end of period ($ millions) |
$ |
0.40 |
|
|
|
Ratio
of expenses (%) |
0.19 |
|
(d) |
|
Ratio
of net investment income (loss) (%) |
0.79 |
|
(d) |
|
Portfolio
turnover rate (%)(e) |
0 |
|
(c) |
(a)
For the period January 6, 2025 (commencement of operations) through December 31,
2025.
(b)
Per share numbers have been calculated using the average shares outstanding
method.
(c)
Not annualized.
(d)
Annualized.
(e)
Excludes the impact of in-kind transactions related to the processing of capital
share transactions in Creation Units.
|
|
|
|
|
|
|
|
|
|
|
| |
|
Shell
plc ADRhedged™ |
For
the Year Ended |
Period
Ended |
|
|
Selected
Per Share Data |
December
31,
2025 |
December
31,
2024(a) |
|
|
Net
Asset Value, beginning of period |
$ |
47.46 |
|
$ |
50.00 |
|
|
|
Income
(loss) from investment operations: |
|
| |
|
Net
investment income(b) |
2.30 |
|
0.66 |
|
|
|
Net
realized and unrealized gain (loss) |
3.88 |
|
(2.33) |
|
|
|
Total
from investment operations |
6.18 |
|
(1.67) |
|
|
|
|
|
| |
|
Less
distributions from: |
|
| |
|
Net
investment income |
— |
|
(0.87) |
|
|
|
Total
distributions |
— |
|
(0.87) |
|
|
|
Net
Asset Value, end of period |
$ |
53.64 |
|
$ |
47.46 |
|
|
|
Market
price, end of period |
$ |
53.53 |
|
$ |
47.69 |
|
|
|
|
|
| |
|
Total
Return based on Net Asset Value(%) |
13.01 |
|
(3.29) |
|
(c) |
|
Total
Return based on Market Price (%) |
12.24 |
|
(2.82) |
|
(c) |
|
Ratios
to Average Net Assets and Supplemental Data |
|
| |
|
Net
Assets, end of period ($ millions) |
$ |
1.60 |
|
$ |
1.40 |
|
|
|
Ratio
of expenses (%) |
0.19 |
|
0.19 |
|
(d) |
|
Ratio
of net investment income (loss) (%) |
4.46 |
|
5.82 |
|
(d) |
|
Portfolio
turnover rate (%)(e) |
0 |
|
0 |
|
(c) |
(a)
For the period October 4, 2024 (commencement of operations) through December 31,
2024.
(b)
Per share numbers have been calculated using the average shares outstanding
method.
(c)
Not annualized.
(d)
Annualized.
(e)
Excludes the impact of in-kind transactions related to the processing of capital
share transactions in Creation Units.
|
|
|
|
|
|
|
|
| |
|
STMicroelectronics
NV ADRhedged™ |
Period
Ended |
|
|
Selected
Per Share Data |
December
31,
2025(a) |
|
|
Net
Asset Value, beginning of period |
$ |
50.00 |
|
|
|
Income
(loss) from investment operations: |
| |
|
Net
investment income(b) |
0.62 |
|
|
|
Net
realized and unrealized gain (loss) |
1.25 |
|
|
|
Total
from investment operations |
1.87 |
|
|
|
|
| |
|
Less
distributions from: |
| |
|
Net
investment income |
(0.35) |
|
|
|
Total
distributions |
(0.35) |
|
|
|
Net
Asset Value, end of period |
$ |
51.52 |
|
|
|
Market
price, end of period |
$ |
51.48 |
|
|
|
|
| |
|
Total
Return based on Net Asset Value(%) |
3.74 |
|
(c) |
|
Total
Return based on Market Price (%) |
3.67 |
|
(c) |
|
Ratios
to Average Net Assets and Supplemental Data |
| |
|
Net
Assets, end of period ($ millions) |
$ |
0.50 |
|
|
|
Ratio
of expenses (%) |
0.19 |
|
(d) |
|
Ratio
of net investment income (loss) (%) |
1.49 |
|
(d) |
|
Portfolio
turnover rate (%)(e) |
0 |
|
(c) |
(a)
For the period March 13, 2025 (commencement of operations) through December 31,
2025.
(b)
Per share numbers have been calculated using the average shares outstanding
method.
(c)
Not annualized.
(d)
Annualized.
(e)
Excludes the impact of in-kind transactions related to the processing of capital
share transactions in Creation Units.
|
|
|
|
|
|
|
|
| |
|
Toyota
Motor Corporation ADRhedged™ |
Period
Ended |
|
|
Selected
Per Share Data |
December
31,
2025(a) |
|
|
Net
Asset Value, beginning of period |
$ |
50.00 |
|
|
|
Income
(loss) from investment operations: |
| |
|
Net
investment income(b) |
1.12 |
|
|
|
Net
realized and unrealized gain (loss) |
12.72 |
|
|
|
Total
from investment operations |
13.84 |
|
|
|
|
| |
|
Less
distributions from: |
| |
|
Net
investment income |
(6.30) |
|
|
|
Total
distributions |
(6.30) |
|
|
|
Net
Asset Value, end of period |
$ |
57.54 |
|
|
|
Market
price, end of period |
$ |
57.71 |
|
|
|
|
| |
|
Total
Return based on Net Asset Value(%) |
29.05 |
|
(c) |
|
Total
Return based on Market Price (%) |
29.41 |
|
(c) |
|
Ratios
to Average Net Assets and Supplemental Data |
| |
|
Net
Assets, end of period ($ millions) |
$ |
2.30 |
|
|
|
Ratio
of expenses (%) |
0.19 |
|
(d) |
|
Ratio
of net investment income (loss) (%) |
2.57 |
|
(d) |
|
Portfolio
turnover rate (%)(e) |
0 |
|
(c) |
(a)
For the period March 13, 2025 (commencement of operations) through December 31,
2025.
(b)
Per share numbers have been calculated using the average shares outstanding
method.
(c)
Not annualized.
(d)
Annualized.
(e)
Excludes the impact of in-kind transactions related to the processing of capital
share transactions in Creation Units.
Precidian
ETFs Trust
FOR
MORE INFORMATION
You
will find more information about the Series in the following
documents:
Statement
of Additional Information: For
more information about the Series, you may wish to refer to the Series SAI dated
April 30, 2026, which is on file with the SEC and incorporated by reference into
this prospectus.
Annual/Semi-Annual
Reports: Additional
information about each Series investments is available in the Series annual and
semi-annual reports to shareholders and in Form N-CSR. In each Series annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Series performance during its last
fiscal year. In Form N-CSR, you will find the Series annual and semi-annual
financial statements.
You
can obtain a free copy of the SAI, annual and semi-annual reports, and other
information, such as the Series financial statements, by writing to the Series
at Precidian ETFs Trust, 8730 Stony Point Parkway, Suite 205, Richmond, Virginia
23235, by calling the Fund toll-free at (844)
954-5333,
by email at: [email protected]. The Series annual and semi-annual reports,
prospectus and SAI are all available for viewing/downloading at
www.adrhedged.com. General inquiries regarding the Series may also be directed
to the above address or telephone number.
Copies
of these documents and other information about the Series are available on the
EDGAR Database on the Commission’s Internet site at http://www.sec.gov, and
copies of these documents may also be obtained, after paying a duplication fee,
by electronic request at the following email address:
[email protected].
(Investment
Company Act File No. 811-22524.)
