PRINCIPAL INVESTMENT STRATEGIES
The Fund is an actively
managed ETF that seeks to provide investment exposure to companies principally engaged in the mining, exploration, production,
development, processing or recycling of the metals and materials being utilized in advanced battery technologies (“Advanced
Battery Materials”), currently Lithium, Cobalt, Nickel, Manganese and Graphite. Pursuant to this strategy, the Fund invest
at least 80% of its net assets (including investment borrowings) in the securities of companies who (i) derive 50% or more of their
revenue from the mining, exploration, production, development, processing or recycling of Advanced Battery Materials; or (ii) are
in the top five and have at least 10% of global market share of any Advanced Battery Material, with Advanced Battery Materials
as a primary source of revenue or net income for such company. The Fund’s investment sub-advisers, Toroso Investment, LLC
(“Toroso”) and CSAT Investment Advisory, L.P., d/b/a Exponential ETFs (“Exponential,” and with Toroso,
the “Sub-Advisers”), identify companies complying with these standards based upon data and information available in
a company’s public regulatory filings, third-party research and other publicly available information. Toroso manages the
investment strategy and portfolio selection. Exponential constructs and implements Toroso’s trade decisions.
In addition to meeting
the standards set forth above, in order to be eligible for inclusion in the Fund a company’s securities must comply with
the following liquidity standards:
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A security must be listed and traded on a regulated stock exchange in the form of shares tradeable
for non-U.S. investors without restrictions;
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A security must have a market capitalization of at least $75,000,000; and
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A security must have a minimum market capitalization value of at least $100 million over the previous
six months.
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To determine portfolio
weightings, the Sub-Adviser sorts eligible securities into one of four groups generally based upon the Advanced Battery Material
to which they have the most exposure. Companies with a predominant exposure to Lithium, Cobalt and Nickel, respectively, are each
separated into their own group. The final group is composed of companies with a predominant exposure to Manganese or Graphite,
as well as companies engaged in the recycling of Advanced Battery Materials. The securities within each group are initially equally
weighted. The portfolio weight assigned to each group is determined based upon a model developed by the Sub-Adviser which incorporates
information related to the current balance between supply and demand for each Advanced Battery Material, forecasted demand growth,
commodity price outlook, likelihood of new supply discovery and regulatory and geo-political risk. The model adjusts these group
weights on an annual basis.
While securities within
a group are initially equally weighted, the Sub-Adviser may adjust individual security weights within the group. Factors that may
cause the Sub-Adviser to tactically adjust the security weights include (i) the financial fundamentals of a company; (ii) the inventory
and reserves of an Advanced Battery Material relative to its price; (iii) a company’s Environmental, Social and Governance
(ESG) score; and (iv) the discovery of new reserves or other causes of increased or new Advanced Battery Material production.
The Sub-Adviser expects
that, under normal market conditions, the Fund’s portfolio will consist of between 35 and 55 securities. These securities
may be issued by small, medium and large capitalization companies operating in both emerging and developed market countries. The
Fund may purchase equity securities that trade on U.S. or non-U.S. securities exchanges and in the securities of non-U.S. companies
that utilize American Depositary Receipts or Global Depositary Receipts to list on certain exchanges. To the extent that the security
of a non-U.S. issuer is available as an American Depositary Receipt, the Fund will purchase the American Depositary Receipt, provided
that the American Depositary Receipt’s liquidity is comparable to that of the issuer’s equity security. The Fund may
invest up to 20% of its net assets in derivative instruments for the purposes of obtaining equity exposure underlying its investment
strategy. The Fund currently anticipates that any such derivatives exposure would be obtained primarily through swap arrangements
on such equity securities.
Concentration
Policy. The Fund will concentrate (i.e., invest more than 25% of the value of its total assets) in the securities of
companies comprising the metals and mining industry. As of January 1, 2020, the Fund has exposure to Australian companies.
PRINCIPAL RISKS OF INVESTING IN THE FUND
You could lose money
by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objective
will be achieved.
Active Market Risk.
Although the Shares are listed for trading on the Exchange, there can be no assurance that an active trading market for the Shares
will develop or be maintained. Shares trade on the Exchange at market prices that may be below, at or above the Fund’s net
asset value. Securities, including the Shares, are subject to market fluctuations and liquidity constraints that may be caused
by such factors as economic, political, or regulatory developments, changes in interest rates, and/or perceived trends in securities
prices. Shares of the Fund could decline in value or underperform other investments.
Australia Risk.
Investing in securities of Australian companies may involve additional risks. The Australian economy is heavily dependent
on the Asian, European and U.S. markets. Reduced spending by any of these economies on Australian products may adversely affect
the Australian market. Additionally, Australia is located in a geographic region that has historically been prone to natural disasters.
The occurrence of a natural disaster in the region could negatively impact the Australian economy and affect the value of the
securities held by the Fund.
Authorized Participant
Concentration Risk. Only an authorized participant may engage in creation
or redemption transactions directly with the Fund. The Fund has a limited number of institutions that act as authorized participants
on an agency basis (i.e. on behalf of other market 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 Fund and no other authorized participant is
able to step forward to create or redeem, in either of these cases, Shares may trade at a discount to the Fund’s
net asset value and possibly face delisting.
Currency Risk.
Because the Fund’s net asset value is determined in U.S. dollars, the Fund’s net asset value could decline if a relevant
foreign currency depreciates against the U.S. dollar or if there are delays or limits on the repatriation of such currency. Currency
exchange rates can be very volatile and can change quickly and unpredictably. As a result, the Fund’s net asset value may
change without warning, which could have a significant negative impact on the Fund.
Cyber Security
Risk. The Fund is susceptible to operational risks through breaches in cyber security. A breach in cyber security refers to
both intentional and unintentional events that may cause the Fund to lose proprietary information, suffer data corruption or lose
operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage, additional compliance
costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to the
Fund’s digital information systems through “hacking” or malicious software coding, but may also result from outside
attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition,
cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent, custodian,
or sub-advisor, as applicable, or issuers in which the Fund invests, can also subject the Fund to many of the same risks associated
with direct cyber security breaches. While the Fund has established business continuity plans and risk management systems designed
to reduce the risks associated with cyber security, there are inherent limitations in such plans and systems. Additionally, there
is no guarantee that such efforts will succeed, especially because the Fund does not directly control the cyber security systems
of issuers or third-party service providers.
Depositary Receipts
Risk. The Fund invests in depositary receipts. Depositary receipts may be subject to certain of the risks associated with direct
investments in the securities of foreign companies, such as currency, political, economic and market risks, because their values
depend on the performance of the non-dollar denominated underlying foreign securities. Certain countries may limit the ability
to convert depositary into the underlying foreign securities and vice versa, which may cause the securities of the foreign company
to trade at a discount or premium to the market price of the related depositary receipts. Depositary receipts may be purchased
through “sponsored” or “unsponsored” facilities. A sponsored facility is established jointly by a depositary
and the issuer of the underlying security. A depositary may establish an unsponsored facility without participation by the issuer
of the deposited security. Unsponsored receipts may involve higher expenses and may be less liquid. Holders of unsponsored depositary
receipts generally bear all the costs of such facilities, and the depositary of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Derivatives Risk.
The use of derivative instruments, such as swap arrangements, can lead to losses because of adverse movements in the price or value
of the underlying asset, index or rate, which may be magnified by certain features of the derivatives. These risks are heightened
when the Fund’s portfolio managers use derivatives to enhance the Fund’s return or as a substitute for a position or
security, rather than to hedge (or offset) the risk of a position or security held by the Fund. The use of derivatives presents
risks different from, and greater than, the risks associated with investing directly in traditional securities. Among the risks
presented are market risk, credit risk, management risk and liquidity risk. The use of derivatives can lead to losses because of
adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the
derivatives. The success of the use of derivatives will depend on the ability of the Fund’s portfolio managers to assess
and predict the impact of market or economic developments on the underlying asset, index or rate, and the derivative itself, without
the benefit of observing the performance of the derivative under all possible market conditions.
Emerging Markets
Risk. Investments in emerging market issuers are subject to a greater risk of loss than investments in issuers located or operating
in more developed markets. This is due to, among other things, the potential for greater market volatility, lower trading volume,
higher levels of inflation, political and economic instability, greater risk of a market shutdown and more governmental limitations
on foreign investments in emerging market countries than are typically found in more developed markets. Moreover, emerging markets
often have less uniformity in accounting and reporting requirements, less reliable securities valuations and greater risks associated
with custody of securities than developed markets. In addition, emerging markets often have greater risk of capital controls through
such measures as taxes or interest rate control than developed markets. Certain emerging market countries may also lack the infrastructure
necessary to attract large amounts of foreign trade and investment.
Equity Securities
Risk. The value of the Shares will fluctuate with changes in the value of the equity securities in which it invests. Equity
securities prices fluctuate for several reasons, including changes in investors’ perceptions of the financial condition of
an issuer or the general condition of the relevant stock market, such as the current market volatility, or when political or economic
events affecting the issuers occur.
Exploration Companies
Risk. The exploration and development of metals involves significant financial risks over a significant period of time, which
even a combination of careful evaluation, experience and knowledge may not eliminate. Few properties which are explored are ultimately
developed into producing mines. Major expenditures may be required to establish reserves by drilling and to construct mining and
processing facilities at a site. In addition, metal exploration companies typically operate at a loss and are dependent on securing
equity and/or debt financing, which might be more difficult to secure for an exploration company than for a more established counterpart.
Line of Business
Risk. Some of the companies in which the Fund will invest are engaged in other lines of business unrelated to the mining, refining
and/or manufacturing of metals and these lines of business could adversely affect their operating results. The operating results
of these companies may fluctuate as a result of these additional risks and events in the other lines of business. In addition,
a company’s ability to engage in new activities may expose it to business risks with which it has less experience than it
has with the business risks associated with its traditional businesses. Despite a company’s possible success in activities
linked to its mining, refining and/or manufacturing of metals, there can be no assurance that the other lines of business in which
these companies are engaged will not have an adverse effect on a company’s business or financial condition.
Management Risk.
The Fund is subject to management risk because it is an actively managed. In managing the Fund’s portfolio, the Sub-Advisers
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that
these will produce the desired results.
Market Maker Risk.
If the Fund has lower average daily trading volumes, it may rely on a small number of third-party market makers to provide a market
for the purchase and sale of Shares. Any trading halt or other problem relating to the trading activity of these market makers
could result in a dramatic change in the spread between the Fund’s net asset value and the price at which the Shares are
trading on the Exchange, which could result in a decrease in value of the Shares. In addition, decisions by market makers or authorized
participants to reduce their role or step away from these activities in times of market stress could inhibit the effectiveness
of the arbitrage process in maintaining the relationship between the underlying values of the Fund's portfolio securities and the
Fund’s market price. This reduced effectiveness could result in Shares trading at a discount to net asset value and also
in greater than normal intra-day bid-ask spreads for Shares.
Market Risk.
Market risk is the risk that a particular security owned by the Fund or the Shares in general may fall in value. Securities are
subject to market fluctuations caused by such factors as economic, political, regulatory or market developments, changes in interest
rates and perceived trends in securities prices. Overall security values could decline generally or could underperform other investments.
Materials Companies
Risk. The Fund’s assets are concentrated in the materials sector, which means the Fund is more affected by the performance
of the materials sector than a fund that is more diversified. Many materials companies are significantly affected by the level
and volatility of commodity prices, exchange rates, import controls, worldwide competition, environmental policies and consumer
demand. At times, worldwide production of industrial materials has exceeded demand as a result of over-building or economic downturns,
leading to poor investment returns or losses. Other risks may include liabilities for environmental damage and general civil liabilities,
depletion of resources, and mandated expenditures for safety and pollution control. The materials sector may also be affected by
economic cycles, technical progress, labor relations, and government regulations.
Metals and Mining
Companies Risk. The Fund invests in securities that are issued by and/or have exposure to, companies primarily involved in
the metals and mining industry. Investments in metals and mining companies may be speculative and subject to greater price volatility
than investments in other types of companies. The profitability of companies in the metals and mining industry is related to, among
other things, worldwide metal prices and extraction and production costs. Worldwide metal prices may fluctuate substantially over
short periods of time, and as a result, the Fund’s Share price may be more volatile than other types of investments. In addition,
metals and mining companies may be significantly affected by changes in global demand for certain metals, economic developments,
energy conservation, the success of exploration projects, changes in exchange rates, interest rates, economic conditions, tax treatment,
trade treaties, and government regulation and intervention, and events in the regions that the companies to which the Fund has
exposure operate (e.g., expropriation, nationalization, confiscation of assets and property, the imposition of restrictions
on non-U.S. investments or repatriation of capital, military coups, social or political unrest, violence and labor unrest). Metals
and mining companies may also be subject to the effects of competitive pressures in the metals and mining industry.
Non-Diversification
Risk. Because the Fund is non-diversified and can invest a greater portion of its assets in securities of individual issuers
than a diversified fund, changes in the market value of a single investment could cause greater fluctuations in Share price than
would occur in a diversified fund. This may increase the Fund’s volatility and cause the performance of a relatively small
number of issuers to have a greater impact on the Fund’s performance.
Non-U.S. Investment
Risk. Securities issued by non-U.S. companies present risks beyond those of securities of U.S. issuers. Risks of investing
in the securities of non-U.S. companies include: different accounting standards; expropriation, nationalization or other adverse
political or economic developments; currency devaluation, blockages or transfer restrictions; changes in foreign currency exchange
rates; taxes; restrictions on non-U.S. investments and exchange of securities; and less government supervision and regulation of
issuers in non-U.S. countries. Prices of non-U.S. securities also may be more volatile.
Operational Risk.
The Fund is exposed to operational risks arising from a number of factors, including, but not limited to, human error, processing
and communication errors, errors of the Fund’s service providers, counterparties or other third-parties, failed or inadequate
processes and technology or systems failures. The Fund, Adviser and Sub-Advisers seek to reduce these operational risks through
controls and procedures. However, these measures do not address every possible risk and may be inadequate to address these risks.
Premium/Discount
Risk. The net asset value of Shares will generally fluctuate with changes in the market value of the Fund’s holdings.
The market prices of Shares will generally fluctuate in accordance with change in net asset value as well as the relative supply
of and demand for Shares on the Exchange. The Fund cannot predict whether Shares will trade bellow (discount), at or above (premium)
their net asset value. Price differences may be due, in large part, to the fact that supply and demand forces at work in the secondary
trading market for Shares will be closely related to, but not identical to, the same forces influencing the prices of the holdings
of the Fund trading individually or in the aggregate at any point in time.
Rare Earth Metal
Companies Risk. Rare earth metals have more specialized uses and are often more difficult to extract. The use of strategic
metals in modern technology has increased dramatically over the past years. Consequently, the demand for these metals has strained
supply, which has the potential to result in a shortage of such materials which could adversely affect the companies in the Fund’s
portfolio. Companies involved in the various activities that are related to the mining, refining and/or manufacturing of rare earth
metals tend to be small-, medium- and micro-capitalization companies with volatile share prices, are highly dependent on the price
of rare earth metals, which may fluctuate substantially over short periods of time. The value of such companies may be significantly
affected by events relating to international, national and local political and economic developments, energy conservation efforts,
the success of exploration projects, commodity prices, tax and other government regulations, depletion of resources, and mandated
expenditures for safety and pollution control devices. The mining, refining and/or manufacturing of rare earth metals can be capital
intensive and, if companies involved in such activities are not managed well, the share prices of such companies could decline
even as prices for the underlying rare earth metals are rising. In addition, companies involved in the various activities that
are related to the mining, refining and/or manufacturing of rare earth metals may be at risk for environmental damage claims.
Regulatory Action
Risk. The mining, refining and/or manufacturing of metals may be significantly affected by regulatory action and changes in
governments. For example, China, which produces approximately 80% of the world’s rare earth supplies, has ended its former
export quota for rare earth metals following a World Trade Organization (“WTO”) ruling. Future moves by China or other
countries essential to the producing, refining or recycling of rare earth metals to limit exports could have a significant adverse
effect on industries around the globe and on the values of the businesses in which the Fund invests. Moreover, while it is expected
that China will consume a large percentage of the rare earth metals produced within the country to support its growing economy,
China has shown a willingness to flood the market for rare earth metals thereby causing many companies to shut down.
Small Fund
Risk. The Fund currently has fewer assets than larger funds, and like other smaller funds, large inflows and outflows may
impact the Fund’s market exposure for limited periods of time. This impact may be positive or negative, depending on the
direction of market movement during the period affected. Because the Fund has fewer assets than larger Funds, investors in the
Fund bear the risk that the Fund may not be successful in implementing its investment strategy, may not employ a successful investment
strategy, or may fail to attract sufficient assets under management to realize economies of scale, any of which could result in
the Fund being liquidated at any time without shareholder approval and at a time that may not be favorable for all shareholders.
Such liquidation could have negative tax consequences for shareholders and could cause shareholders to incur expenses of liquidation
and elevated transaction costs. Even if the Fund does not liquidate, if the Fund fails to attract a large amount of assets, shareholders
of the Fund may incur higher expenses. In addition, the Fund may face the risk of being delisted if the Fund does not meet certain
conditions of the Exchange. Finally, when the Fund’s size is small, the Fund may experience low trading volume and wide
bid/ask spreads.
Smaller Companies
Risk. Small and/or mid-capitalization companies may be more vulnerable to adverse general market or economic developments,
and their securities may be less liquid and may experience greater price volatility than larger, more established companies as
a result of several factors, including limited trading volumes, products or financial resources, management inexperience and less
publicly available information. Accordingly, such companies are generally subject to greater market risk than larger, more established
companies.
Swaps Risk.
The use of swaps is a highly specialized activity which involves investment techniques and risk analyses different from those associated
with ordinary portfolio securities transactions. Transactions in equity swaps can involve greater risks than if the Fund
had invested in securities directly since, in addition to general market risks, swaps may be leveraged and are also subject to
illiquidity risk, counterparty risk, credit risk and pricing risk. Regulators also may impose limits on an entity’s or group
of entities’ positions in certain swaps. However, certain risks are reduced (but not eliminated) if the Fund invests in cleared
swaps. Because bilateral swap agreements are two-party contracts and because they may have terms of greater than seven days, these
swaps may be considered to be illiquid. Moreover, the Fund bears the risk of loss of the amount expected to be received under an equity
swap in the event of the default or bankruptcy of a swap counterparty. Many swaps are complex and valued subjectively. Swaps
may also be subject to pricing or “basis” risk, which exists when a particular derivative diverges from the price of
corresponding cash market instruments. Under certain market conditions it may not be economically feasible to initiate a transaction
or liquidate a position in time to avoid a loss or take advantage of an opportunity. If a swap transaction is particularly large
or if the relevant market is illiquid, it may not be possible to initiate a transaction or liquidate a position at an advantageous
time or price, which may result in significant losses. The value of equity swaps can be very volatile, and a variance in the degree
of volatility or in the direction of securities prices from the Fund’s expectations may produce significant losses in the
Fund’s investments in swaps. In addition, a perfect correlation between an equity swap and a security position may be impossible
to achieve. As a result, the Fund’s use of equity swaps may not be effective in fulfilling the Fund’s investment strategies
and may contribute to losses that would not have been incurred otherwise.
Trading Issues
Risk. Although the Shares of the Fund are listed for trading on the Exchange, there can be no assurance that an active trading
market for such Shares will develop or be maintained. Trading in Shares on the Exchange may be halted due to market conditions
or for reasons that, in the view of the Exchange, make trading in shares inadvisable. In addition, trading in Shares on the Exchange
is subject to trading halts caused by extraordinary market volatility pursuant to Exchange “circuit breaker” rules.
Market makers are under no obligation to make a market in the Fund’s Shares, and authorized participants are not obligated
to submit purchase or redemption orders for Creation Units. There can be no assurance that the requirements of the Exchange necessary
to maintain the listing of the Fund will continue to be met or will remain unchanged. The Fund may have difficulty maintaining
its listing on the Exchange in the event the Fund’s assets are small or the Fund does not have enough shareholders.
The Shares will
change in value, and you could lose money by investing in the Fund. The Fund may not achieve its investment objective.