This Statement of Additional Information ("SAI")
is not a prospectus and should be read in conjunction with the Prospectus of the LeaderShares® Equity Skew ETF (the
“Fund”) dated May 6, 2020 (the “Prospectus”). The Prospectus is hereby incorporated by reference, which
means it is legally part of this document. You can obtain copies of the Prospectus, annual or semi-annual reports without charge
by contacting the Fund’s Distributor, Northern Lights Distributors, LLC, 17605 Wright Street, Omaha, NE 68130-2095 or by
calling 1-480-757-4277. You may also obtain the Prospectus by visiting the website at www.leadersharesetfs.com.
The Fund is a series of Two Roads Shared Trust,
a Delaware statutory trust organized on June 8, 2012 (the "Trust"). The Trust is registered as an open-end management
investment company, currently consisting of twenty-two separate active portfolios. The Trust is governed by its Board of Trustees
(the "Board" or "Trustees"). The Fund may issue an unlimited number of shares of beneficial interest. All shares
of the Fund have equal rights and privileges. Each share of the Fund is entitled to one vote on all matters as to which shares
are entitled to vote with respect to the Fund. In addition, each share of the Fund is entitled to participate equally with other
shares (i) in dividends and distributions declared by the Fund and (ii) on liquidation to its proportionate share of the assets
remaining after satisfaction of outstanding liabilities. Shares of the Fund are fully paid, non-assessable and fully transferable
when issued and have no pre-emptive or conversion rights. Fractional shares have proportionately the same rights, including voting
rights, as are provided for a full share.
The Fund is a “diversified” series
of the Trust, meaning that the Fund is subject to diversification requirements of the Investment Company Act of 1940 (the “1940
Act”), which generally limit investments, as to 75% of a fund’s total assets, to no more than 5% in securities in a
single issuer and 10% of an issuer’s voting securities.
The Fund’s investment objective, restrictions
and policies are more fully described herein and in the Prospectus. The Board may launch other series and offer shares of a new
fund under the Trust at any time.
The Fund will issue and redeem Shares at net
asset value ("NAV") only in aggregations of 25,000 Shares (a "Creation Unit"). The Fund will issue and redeem
Creation Units principally in exchange for an in-kind deposit of a basket of designated securities (the "Deposit Securities"),
together with the deposit of a specified cash payment (the "Cash Component"), plus a transaction fee. The Fund is expected
to be approved for listing, subject to notice of issuance, on New York Stock Exchange (“NYSE”) (the "Exchange").
Shares will trade on the Exchange at market prices that may be below, at, or above NAV. In the event of the liquidation of the
Fund, a share split, reverse split or the like, the Trust may revise the number of Shares in a Creation Unit.
The Fund reserves the right to offer creations
and redemptions of Shares for cash. In addition, Shares may be issued in advance of receipt of Deposit Securities subject to various
conditions, including a requirement to maintain on deposit with the Trust cash equal to up to 115% of the market value of the missing
Deposit Securities. In each instance of such cash creations or redemptions, transaction fees, may be imposed and may be higher
than the transaction fees associated with in-kind creations or redemptions. See PURCHASE, REDEMPTION AND PRICING OF SHARES
below.
In order to provide additional information
regarding the indicative value of Shares of the Fund, the Exchange or a market data vendor will disseminate every 15 seconds through
the facilities of the Consolidated Tape Association or other widely disseminated means an updated "intraday indicative value"
("IIV") for the Fund as calculated by an information provider or market data vendor. The Trust is not involved in or
responsible for any aspect of the calculation or dissemination of the IIV and makes no representation or warranty as to the accuracy
of the IIV.
TYPES OF INVESTMENTS, STRATEGIES
AND RELATED RISKS
The investment objective of the Fund and a
description of its principal investment strategies are set forth under “Additional Information about Principal Investment
Strategies and Related Risks” in the Prospectus. The Fund’s investment objective is not a fundamental policy and may
be changed without the approval of a majority of the outstanding voting securities of the Trust (as such term is defined in the
1940 Act). The Fund is an actively-managed exchange-traded fund (“ETF”) and does not seek to replicate the performance
of a specified index.
The Fund has adopted a non-fundamental policy
in accordance with Rule 35d-1 under 1940 Act to invest, under normal circumstances, at least 80% of the value of its net assets,
including any borrowings for investment purposes, in equity securities. The Fund will provide its shareholders with at least 60
days’ prior written notice of any change in such policy. For these purposes, “net assets” are measured at the
time of purchase.
The following pages contain more detailed information
about the types of instruments in which the Fund may invest directly as a principal or non-principal investment strategy. These
instruments include other strategies Redwood Investment Management, LLC (the “Adviser”) employs in pursuit of the Fund’s
investment objective and a summary of related risks.
Securities of Other Investment Companies
The Fund may invest in securities of other
investment companies (“underlying funds”). As a result, the Fund may be subject to the risks of the securities and
other instruments described below through its own direct investments and indirectly through investments in these underlying funds.
The Fund’s investments in an underlying portfolio of ETFs, mutual funds and closed-end funds involve certain additional expenses
and certain tax results, which would not be present in a direct investment in the underlying funds.
Open-End
Investment Companies
The
Fund may invest in shares of open-end investment companies. The Fund and any “affiliated persons,” as defined by the
1940 Act, may purchase in the aggregate only up to 3% of the total outstanding securities of any underlying fund unless: (i) the
underlying investment company and/or the Fund has received an order for exemptive relief from such limitations from the SEC; and
(ii) the underlying investment company and the Fund take appropriate steps to comply with any conditions in such order. Accordingly,
when affiliated persons hold shares of any of the underlying funds, the Fund’s ability to invest fully in shares of those
funds is restricted, and the adviser must then, in some instances, select alternative investments that would not have been its
first preference. The 1940 Act also provides that an underlying fund whose shares are purchased by the Fund will be obligated to
redeem shares held by the Fund only in an amount up to 1% of the underlying fund’s outstanding securities during any period
of less than 30 days. Shares held by the Fund in excess of 1% of an underlying fund’s outstanding securities therefore, will
be considered not readily marketable securities, which, together with other such securities, may not exceed 15% of the Fund’s
total assets. Under certain circumstances an underlying fund may determine to make payment of a redemption by the Fund wholly
or partly by a distribution in kind of securities from its portfolio, in lieu of cash, in conformity with the rules of the SEC.
In such cases, the Fund may hold securities distributed by an underlying fund until the adviser determines that it is appropriate
to dispose of such securities.
Investment
decisions by the investment advisers of the underlying funds are made independently of the Fund and its adviser. Therefore, the
investment adviser of one underlying fund may be purchasing shares of the same issuer whose shares are being sold by the adviser
of the Fund. The result would be an indirect expense to the Fund without accomplishing any investment purpose.
Exchange-Traded
Funds
ETFs
are typically passively managed funds that track their related index and have the flexibility of trading like a security. They
are managed by professionals and provide the investor with diversification, cost and tax
efficiency, liquidity, marginability,
are useful for hedging, have the ability to go long and short, and some provide quarterly dividends. Additionally, some ETFs are
unit investment trusts (UITs) that have two markets. The primary market is where institutions swap “creation units”
in block-multiples of 50,000 shares for in-kind securities and cash in the form of dividends. The secondary market is where individual
investors can trade as little as a single share during trading hours on the exchange. This is different from open-ended mutual
funds that are traded after hours once the net asset value (NAV) is calculated.
Closed-End
Investment Companies
The
Fund may invest its assets in “closed-end” investment companies (or “closed-end funds”), subject to the
investment restrictions set forth below. The Fund may purchase in the aggregate only up to 3% of the total outstanding voting stock
of any closed-end fund. Shares of closed-end funds are typically offered to the public in a one-time initial public offering by
a group of underwriters who retain a spread or underwriting commission of between 4% or 6% of the initial public offering price.
Such securities are then listed for trading on the New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers Automated Quotation System (commonly known as “NASDAQ”) and, in some cases, may be traded in
other over-the-counter markets. Because the shares of closed-end funds cannot be redeemed upon demand to the issuer like the shares
of an open-end investment company (such as the Fund), investors seek to buy and sell shares of closed-end funds in the secondary
market.
The
Fund generally will purchase shares of closed-end funds only in the secondary market. The Fund will incur normal brokerage costs
on such purchases similar to the expenses the Fund would incur for the purchase of securities of any other type of issuer in the
secondary market. The Fund may, however, also purchase securities of a closed-end fund in an initial public offering when, in the
opinion of the adviser, based on a consideration of the nature of the closed-end fund’s proposed investments, the prevailing
market conditions and the level of demand for such securities, they represent an attractive opportunity for growth of capital.
The initial offering price typically will include a dealer spread, which may be higher than the applicable brokerage cost if the
Fund purchased such securities in the secondary market.
The
shares of many closed-end funds, after their initial public offering, frequently trade at a price per share, which is less than
the net asset value per share, the difference representing the “market discount” of such shares. This market discount
may be due in part to the investment objective of long-term appreciation, which is sought by many closed-end funds, as well as
to the fact that the shares of closed-end funds are not redeemable by the holder upon demand to the issuer at the next determined
net asset value but rather are subject to the principles of supply and demand in the secondary market. A relative lack of secondary
market purchasers of closed-end fund shares also may contribute to such shares trading at a discount to their net asset value.
The
Fund may invest in shares of closed-end funds that are trading at a discount to net asset value or at a premium to net asset value.
There can be no assurance that the market discount on shares of any closed-end fund purchased by the Fund will ever decrease. In
fact, it is possible that this market discount may increase and the Fund may suffer realized or unrealized capital losses due to
further decline in the market price of the securities of such closed-end funds, thereby adversely affecting the net asset value
of the Fund’s shares. Similarly, there can be no assurance that any shares of a closed-end fund purchased by the Fund at
a premium will continue to trade at a premium or that the premium will not decrease subsequent to a purchase of such shares by
the Fund.
Closed-end
funds may issue senior securities (including preferred stock and debt obligations) for the purpose of leveraging the closed-end
fund’s common shares in an attempt to enhance the current return to such closed-end fund’s common shareholders. The
Fund’s investment in the common shares of closed-end funds that are financially leveraged may create an opportunity for greater
total return on its investment, but at the same time may be expected to exhibit more volatility in market price and net asset value
than an investment in shares of investment companies without a leveraged capital structure.
Business
Development Companies
Business
development companies (“BDCs”) are regulated under the 1940 Act and are taxed as regulated investment companies (“RICs”)
under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). BDCs typically operate as publicly
traded private equity firms that invest in early stage to mature private companies and small public companies. BDCs realize operating
income when their investments are sold off, and therefore maintain complex organizational, operational, tax and compliance requirements,
and must distribute at least 90% of their taxable earnings as dividends. Additionally, a BDC’s expenses are not direct expenses
paid by Fund shareholders and are not used to calculate the Fund’s net asset value.
Borrowing
While the Fund does not anticipate doing
so, other than for cash management, the Fund may borrow money for investment purposes. Borrowing for investment purposes is one
form of leverage. Leveraging investments, by purchasing securities with borrowed money, is a speculative technique that increases
investment risk, but also increases investment opportunity. Because substantially all of the Fund’s assets will fluctuate
in value, whereas the interest obligations on borrowings may be fixed, the NAV per share of the Fund will increase more when the
Fund’s portfolio assets increase in value and decrease more when the Fund’s portfolio assets decrease in value than
would otherwise be the case. Moreover, interest costs on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the returns on the borrowed funds. Under adverse conditions, the Fund might have to sell portfolio securities
to meet interest or principal payments at a time when investment considerations would not favor such sales. The Fund may use leverage
during periods when the Adviser believes that the Fund’s investment objective would be furthered.
The Fund may also borrow money to facilitate
management of the Fund’s portfolio by enabling the Fund to meet redemption requests when the liquidation of portfolio instruments
would be inconvenient or disadvantageous. Such borrowing is not for investment purposes and will be repaid by the Fund promptly.
As required by the 1940 Act, the Fund must maintain continuous asset coverage (total assets, including assets acquired with borrowed
funds, less liabilities exclusive of borrowings) of 300% of all amounts borrowed. If, at any time, the value of the Fund’s
assets should fail to meet this 300% coverage test, the Fund, within three days (not including Sundays and holidays), will reduce
the amount of the Fund’s borrowings to the extent necessary to meet this 300% coverage requirement. Maintenance of this percentage
limitation may result in the sale of portfolio securities at a time when investment considerations otherwise indicate that it would
be disadvantageous to do so.
In addition to the foregoing, the Fund is authorized
to borrow money as a temporary measure for extraordinary or emergency purposes in amounts not in excess of 5% of the value of the
Fund’s total assets. Borrowings for extraordinary or emergency purposes are not subject to the foregoing 300% asset coverage
requirement.
Cash
Positions Risk
The
Fund may hold a significant position in cash and/or cash equivalent securities. When the Fund’s investment in cash or cash
equivalent securities increases, the Fund may not participate in market advances or declines to the same extent that it would if
the Fund were more fully invested.
Certificates of Deposit and Bankers' Acceptances
The Fund may invest in certificates of deposit
and bankers’ acceptances, which are considered to be short-term money market instruments.
Certificates of deposit are receipts issued
by a depository institution in exchange for the deposit of funds. The issuer agrees to pay the amount deposited plus interest to
the bearer of the receipt on the date specified on the certificate. The certificate usually can be traded in the secondary market
prior to maturity. Bankers' acceptances typically arise from short-term credit arrangements designed to enable businesses to obtain
funds to finance commercial transactions.
Generally, an acceptance is a time draft drawn
on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then "accepted"
by a bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance
may then be held by the accepting bank as an earning asset or it may be sold in the secondary market at the going rate of discount
for a specific maturity. Although maturities for acceptances can be as long as 270 days, most acceptances have maturities of six
months or less.
Commercial Paper
The Fund may purchase commercial paper. Commercial
paper consists of short-term (usually from 1 to 270 days) unsecured promissory notes issued by corporations in order to finance
their current operations. See Appendix B for more information on ratings assigned to commercial paper. It may be secured by letters
of credit, a surety bond or other forms of collateral. Commercial paper is usually repaid at maturity by the issuer from the proceeds
of the issuance of new commercial paper. As a result, investment in commercial paper is subject to the risk the issuer cannot issue
enough new commercial paper to satisfy its outstanding commercial paper, also known as rollover risk. Commercial paper may become
illiquid or may suffer from reduced liquidity in certain circumstances. Like all fixed income securities, commercial paper prices
are susceptible to fluctuations in interest rates. If interest rates rise, commercial paper prices will decline. The short-term
nature of a commercial paper investment makes it less susceptible to interest rate risk than many other fixed income securities
because interest rate risk typically increases as maturity lengths increase. Commercial paper tends to yield smaller returns than
longer-term corporate debt because securities with shorter maturities typically have lower effective yields than those with longer
maturities. As with all fixed income securities, there is a chance that the issuer will default on its commercial paper obligation.
Convertible Securities
Convertible securities include fixed
income securities that may be exchanged or converted into a predetermined number of shares of the issuer's underlying common stock
at the option of the holder during a specified period. Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and warrants or a combination of the features of
several of these securities. Convertible securities are senior to common stocks in an issuer's capital structure, but are usually
subordinated to similar non-convertible securities. While providing a fixed-income stream (generally higher in yield than the income
derivable from common stock but lower than that afforded by a similar nonconvertible security), a convertible security also gives
an investor the opportunity, through its conversion feature, to participate in the capital appreciation of the issuing company
depending upon a market price advance in the convertible security's underlying common stock.
Cyber Security Risk
The Fund and its service providers may be prone
to operational and information security risks resulting from 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. Breaches in cyber security include, among other behaviors, stealing or corrupting data maintained online or digitally,
denial of service attacks on websites, the unauthorized release of confidential information or various other forms of cyber-attacks.
Cyber security breaches affecting the Fund or its Adviser, custodian, transfer agent, intermediaries and other third-party service
providers may adversely impact the Fund. For instance, cyber security breaches may interfere with the processing of shareholders
transactions, impact the Fund’s ability to calculate its NAVs, cause the release of private shareholder information or confidential
business information, impede trading, subject the Fund to regulatory fines or financial losses and/or cause reputational damage.
The Fund may also incur additional costs for cyber security risk management purposes. Similar types of cyber security risks are
also present for issuers of securities in which the Fund may invest, which could result in material adverse consequences for such
issuers and may cause the Fund’s investment in such companies to lose value.
Depositary Receipts
Sponsored and unsponsored American Depositary
Receipts ("ADRs"), are receipts issued by an American bank or trust company evidencing ownership of underlying securities
issued by a foreign (non-U.S.) issuer. ADRs, in registered form, are designed for use in U.S. securities markets. In addition to
the investment risks associated with the
underlying issuer, ADRs expose the Fund to
additional risks associated with the non-uniform terms that apply to ADR programs, credit exposure to the depository bank and to
the sponsors and other parties with whom the depository bank establishes the program, currency risk and liquidity risk. Unsponsored
ADRs may be created without the participation of the foreign (non-U.S.) issuer. Holders of these ADRs generally bear all the costs
of the ADR facility, whereas foreign (non-U.S.) issuers typically bear certain costs in a sponsored ADR. The bank or trust company
depositary of an unsponsored ADR may be under no obligation to distribute shareholder communications received from the foreign
(non-U.S.) issuer or to pass through voting rights.
Global Depositary Receipts (“GDRs”)
are receipts issued by non-U.S. financial institutions evidencing ownership of underlying foreign or U.S. securities and are usually
denominated in foreign currencies. GDRs may not be denominated in the same currencies as the securities they represent. Generally,
GDRs are designed for use in the foreign securities markets.
Derivative
Instruments
The
Fund may purchase and write call and put options on securities, securities indices and foreign (non-U.S.) currencies, and enter
into futures contracts and use options on futures contracts as further described below. The Fund may also enter into swap agreements
with respect to foreign (non-U.S.) currencies, interest rates and securities indices. The Fund may use these techniques to hedge
against changes in interest rates, foreign (non-U.S.) currency exchange rates or securities prices or to attempt to achieve investment
returns as part of its overall investment strategies. The Fund may also purchase and sell options relating to foreign (non-U.S.)
currencies for purposes of increasing exposure to a foreign (non-U.S.) currency or to shift exposure to foreign (non-U.S.) currency
fluctuations from one country to another. The Fund will segregate or “earmark” assets determined to be liquid by the
adviser in accordance with procedures established by the Board (or, as permitted by applicable regulation, enter into certain offsetting
positions) to cover its obligations under options, futures, and swaps to avoid leveraging the portfolio of the Fund as described
below.
The
Fund considers derivative instruments to consist of securities or other instruments whose value is derived from or related to the
value of some other instrument or asset, and not to include those securities whose payment of principal and/or interest depends
upon cash flows from underlying assets, such as mortgage-related or asset-backed securities. The value of some derivative instruments
in which the Fund invests may be particularly sensitive to changes in prevailing interest rates, and, like the other investments
of the Fund, the ability of the Fund to successfully utilize these instruments may depend in part upon the ability of the adviser
to correctly forecast interest rates and other economic factors. If the adviser incorrectly forecasts such factors and has taken
positions in derivative instruments contrary to prevailing market trends, the Fund could be exposed to the risk of loss. In addition,
while the use of derivatives for hedging purposes can reduce losses, it can also reduce or eliminate gains, and hedges are sometimes
subject to imperfect matching between the derivative and security it is hedging, which means that a hedge might not be effective.
The Fund might not employ any of the strategies described above, and no assurance can be given that any strategy used will succeed.
A decision as to whether, when and how to utilize derivative instruments involves skill and judgment, and even a well-conceived
derivatives strategy may be unsuccessful. The use of derivative instruments involves brokerage fees and/or other transaction costs.
Investment
in futures-related and commodity-linked derivatives may subject the Fund to additional risks, and in particular may subject the
Fund to greater volatility than investments in traditional securities. The value of futures-related and commodity-linked derivative
instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors
affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs, and international
economic, political and regulatory developments. In order to qualify for the special tax treatment available to regulated investment
companies under the Internal Revenue Code, the Fund must derive at least 90% of its gross income each taxable year from certain
specified types of investments. It is currently unclear which types of commodities-linked derivatives fall within these specified
investment types. As a result, if the Fund’s investment in commodities-linked derivatives were to exceed a certain threshold,
the Fund could fail to qualify for the special tax treatment available to regulated investment companies under the Internal Revenue
Code.
Regulatory
Risks of Derivative Use
The
U.S. government has enacted legislation that provides for new regulation of the derivatives market. The Securities and Exchange
Commission (“SEC”) has also issued a proposed rule relating to a registered investment company’s use of derivatives
and related instruments that, if adopted, could potentially require the Fund to observe more stringent asset coverage and related
requirements than are currently imposed by the 1940 Act, which could adversely affect the value or performance of the Fund. The
European Union (and some other countries) are implementing similar requirements, which will affect the Fund when it enters into
a derivatives transaction with a counterparty organized in that country or otherwise subject to that country’s derivatives
regulations. Because these regulations are new and evolving (and some of the rules are not yet final), their impact remains unclear.
If adopted as proposed, these regulations could limit or impact the Fund’s ability to invest in derivatives and other instruments,
limit the Fund’s ability to employ certain strategies that use derivatives and adversely affect the Fund’s performance,
efficiency in implementing its strategy, liquidity and ability to pursue its investment objectives.
In
February 2012, the Commodity Futures Trading Commission (“CFTC”) adopted certain regulatory changes that subject advisers
to certain registered investment companies to registration with the CFTC as a commodity pool operator (“CPO”) if an
investment company is unable to meet certain trading and marketing limitations. These rules became effective on January 1, 2013.
In relation to these regulatory changes adopted by the CFTC, the Fund’s Adviser intends to rely on an exemption from the
CFTC’s CPO registration requirements. However, it is possible that the Adviser may be required to register as a CPO in the
future and comply with any applicable reporting, disclosure or other regulatory requirements. Compliance with CFTC regulatory requirements
will increase Fund expenses. Other potentially adverse regulatory initiatives could also develop.
It
is also possible that additional government regulation of various types of derivative instruments, including futures, options and
swap agreements, may limit or prevent the Fund from using such instruments as a part of its investment strategy, and could ultimately
prevent the Fund from being able to achieve its investment objective. It is impossible to fully predict the effects of past, present
or future legislation and regulation in this area, but the effects could be substantial and adverse. It is possible that legislative
and regulatory activity could limit or restrict the ability of the Fund to use certain instruments as a part of its investment
strategy. Limits or restrictions applicable to the counterparties with which the Fund may engage in derivative transactions could
also prevent the Fund from using certain instruments.
There
is a possibility of future regulatory changes altering, perhaps to a material extent, the nature of an investment in the Fund or
the ability of the Fund to continue to implement its investment strategy. The futures, options and swaps markets are subject to
comprehensive statutes, regulations, and margin requirements. In addition, the SEC, CFTC and the exchanges are authorized to take
extraordinary actions in the event of a market emergency, including, for example, the implementation or reduction of speculative
position limits, the implementation of higher margin requirements, the establishment of daily price limits and the suspension of
trading. The regulation of futures, options and swaps transactions in the U.S. is a rapidly changing area of law and is subject
to modification by government and judicial action.
In
2010, the U.S. government enacted legislation that provides for new regulation of the derivatives market, including clearing, margin,
reporting and registration requirements. The CFTC and certain futures exchanges have also established limits, referred to as “position
limits,” on the maximum net long or net short positions which any person may hold or control in particular options and futures
contracts. All positions owned or controlled by the same person or entity, even if in different accounts, may be aggregated for
purposes of determining whether the applicable position limits have been exceeded. Thus, even if the Fund does not intend to exceed
applicable position limits, it is possible that different clients managed by the Adviser and its affiliates may be aggregated for
this purpose. The trading decisions of the Adviser may have to be modified and positions held by the Fund may have to be liquidated
in order to avoid exceeding such limits. The modification of investment decisions or the elimination of open positions, if it occurs,
may adversely affect the profitability of the Fund.
The
SEC has in the past adopted interim rules requiring reporting of all short positions on securities above a certain de minimis
threshold and is expected to adopt rules requiring monthly public disclosure in the future. In addition, other non-U.S. jurisdictions
where the Fund may trade have adopted reporting requirements. If the
Fund’s securities short
positions or its strategy become generally known, it could have a significant effect on the Adviser’s ability to implement
its investment strategy. In particular, it would make it more likely that other investors could cause a “short squeeze”
in the securities held short by the Fund forcing the Fund to cover its positions at a loss. Such reporting requirements may also
limit the Adviser’s ability to access management and other personnel at certain companies where the Adviser seeks to take
a short position. In addition, if other investors engage in copycat behavior by taking positions in the same issuers as the Fund,
the cost of borrowing securities to sell short could increase drastically and the availability of such securities to the Fund could
decrease drastically. Such events could make the Fund unable to execute its investment strategy. In addition, the SEC recently
proposed additional restrictions on short sales. If the SEC were to adopt additional restrictions regarding short sales, they could
restrict the Fund’s ability to engage in short sales of securities in certain circumstances, and the Fund may be unable to
execute its investment strategy as a result.
The
SEC and regulatory authorities in other jurisdictions may adopt (and in certain cases, have adopted) bans on short sales of certain
securities in response to market events. Bans on short selling may make it impossible for the Fund to execute certain investment
strategies and may have a material adverse effect on the Fund’s ability to generate returns.
Margin
Deposits and Cover Requirements
Margin
Deposits for Futures Contracts
Unlike
the purchase or sale of portfolio securities, no price is paid or received by the Fund upon the purchase or sale of a futures contract.
Initially, the Fund will be required to deposit with the broker an amount of cash or cash equivalents, known as initial margin,
based on the value of the contract. The nature of initial margin in futures transactions is different from that of margin in securities
transactions in that futures contract margin does not involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker, will be made on a daily basis as the price of the underlying instruments fluctuates,
making the long and short positions in the futures contract more or less valuable, a process known as “marking to the market.”
For example, when the Fund has purchased a futures contract and the price of the contract has risen in response to a rise in the
price of the underlying instruments, that position will have increased in value and the Fund will be entitled to receive from the
broker a variation margin payment equal to that increase in value. Conversely, where the Fund has purchased a futures contract
and the price of the futures contract has declined in response to a decrease in the underlying instruments, the position would
be less valuable and the Fund would be required to make a variation margin payment to the broker. At any time prior to expiration
of the futures contract, the Adviser may elect to close the position by taking an opposite position, subject to the availability
of a secondary market, which will operate to terminate the Fund’s position in the futures contract. A final determination
of variation margin is then made, additional cash is required to be paid by or released to the Fund, and the Fund realizes a loss
or gain.
Cover
Requirements for Forward Contracts, Swap Agreements, Options, Futures and Options on Futures
The
Fund will comply with guidelines established by the SEC with respect to coverage of forwards, futures, swaps and options. These
guidelines may, in certain instances, require segregation by the Fund of cash or liquid securities with its custodian or a designated
sub-custodian to the extent the Fund’s obligations with respect to these strategies are not otherwise “covered”
through ownership of the underlying security, financial instrument or currency or by other portfolio positions or by other means
consistent with applicable regulatory policies. Segregated assets cannot be sold or transferred unless equivalent assets are substituted
in their place or it is no longer necessary to segregate them. As a result, there is a possibility that segregation of a large
percentage of the Fund’s assets could impede portfolio management or the Fund’s ability to meet redemption requests
or other current obligations.
For
example, when entering into a futures contract that will be cash settled, the Fund will cover (and mark-to-market on a daily basis)
liquid assets that, when added to the amounts deposited with a futures commission merchant as margin, are equal to the mark-to-market
amount, if any, owed by the Fund on the futures contract. When entering into a futures contract that does not need to be settled
in cash, the Fund will maintain with its custodian (and mark to market on a daily basis) liquid assets that, when added to the
amounts deposited with a futures commission merchant as margin, are equal to the full notional value of the contract. Alternatively,
the Fund may “cover” its position by purchasing an option on the same futures contract with a strike price as high
or higher than the price of the contract held by the Fund or by entering into an agreement that enables the Fund to settle such
futures contracts in cash.
To the extent the Fund writes credit
default swaps, the Fund will segregate or “earmark” cash or assets determined to be liquid by the Fund in accordance
with procedures established by the Fund’s Board of Trustees, or enter into offsetting positions, with a value at least equal
to the full notional amount of the swap (minus any amounts owed to the Fund). Such segregation or “earmarking” will
ensure that the Fund has assets available to satisfy its obligations with respect to the transaction and will limit any potential
leveraging of the Fund’s portfolio. Also, the Fund does not invest more than 25% of its assets in contracts with any one
counterparty.
Equity Securities
Equity securities include common stocks, preferred
stocks and securities convertible into common stocks, such as convertible bonds, warrants, rights and options. The value of equity
securities varies in response to many factors, including the activities and financial condition of individual companies, the business
market in which individual companies compete and general market and economic conditions. Equity securities fluctuate in value,
often based on factors unrelated to the value of the issuer of the securities, and such fluctuations can be significant.
Common
Stock
Common
stock represents an equity (ownership) interest in a company, and usually possesses voting rights and earns dividends. Dividends
on common stock are not fixed but are declared at the discretion of the issuer. Common stock generally represents the riskiest
investment in a company. In addition, common stock generally has the greatest appreciation and depreciation potential because increases
and decreases in earnings are usually reflected in a company’s stock price.
Preferred
Stock
Preferred
stock is a class of stock that has features of debt because it generally entitles the holder to periodic payments at a fixed rate
of return. Preferred stock has a preference over common stock as to the payment of dividends and the recovery of investment should
a company be liquidated, although preferred stock is usually junior to any outstanding debt of the issuer. Preferred stock typically
does not possess voting rights and its market value may change based on changes in interest rates.
The
fundamental risk of investing in common and preferred stock is the risk that the value of the stock might decrease. Stock values
fluctuate in response to the activities of an individual company or in response to general market and/or economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater short-term risks than preferred stocks, fixed income
securities and money market investments. The market value of all securities, including common and preferred stocks, is based upon
the market’s perception of value and not necessarily the book value of an issuer or other objective measures of a company’s
worth. Preferred stock may be subject to more fluctuations in market value, due to changes in market participants’ perceptions
of the issuer’s ability to continue to pay dividends, than debts of the same issuer. A preferred stock may be considered
either debt or equity, depending on the economic characteristics exhibited by such preferred stock.
Fixed Income Securities
There
is normally an inverse relationship between the market value of securities sensitive to prevailing interest rates and actual changes
in interest rates. In other words, an increase in interest rates produces a decrease in market value. The longer the remaining
maturity (and duration) of a security, the greater will be the effect of interest rate changes on the market value of that security.
Changes in the ability of an issuer to make payments of interest and principal and in the markets’ perception of an issuer’s
creditworthiness will also affect the market value of the fixed income securities of that issuer. Obligations of issuers of fixed
income securities (including municipal securities) are subject to the provisions of bankruptcy, insolvency, and other laws affecting
the rights and remedies of creditors, such as the Federal Bankruptcy Reform Act of 1978. In addition, the obligations of municipal
issuers may become subject to laws enacted in the future by Congress, state legislatures, or referenda extending the time for payment
of principal and/or interest, or imposing other constraints upon enforcement of such obligations or upon the ability of municipalities
to levy taxes. Changes in the ability of an issuer to make payments of interest and principal and in the market’s perception
of an issuer’s creditworthiness will also affect the market value of the fixed income securities of that issuer. The possibility
exists, therefore, that, the ability of any issuer to pay, when due, the principal of and interest on its fixed income securities
may become impaired.
Yields on fixed income securities are dependent
on a variety of factors, including the general conditions of the money market and other fixed income securities markets, the size
of a particular offering, the maturity of the obligation and the rating of the issue. An investment in the Fund will be subjected
to risk even if all fixed income securities in the Fund’s portfolio are paid in full at maturity. All fixed income securities,
including U.S. Government securities, can change in value when there is a change in interest rates or in the issuer’s actual
or perceived creditworthiness or ability to meet its obligations.
Corporate
fixed income securities include corporate bonds and notes and short-term investments such as commercial paper and variable rate
demand notes. Commercial paper (short-term promissory notes) is issued by companies to finance their or their affiliate’s
current obligations and is frequently unsecured. Variable and floating rate demand notes are unsecured obligations redeemable upon
not more than 30 days’ notice. These obligations include master demand notes that permit investment of fluctuating amounts
at varying rates of interest pursuant to a direct arrangement with the issuer of the instrument. The issuer of these obligations
often has the right, after a given period, to prepay the outstanding principal amount of the obligations upon a specified number
of days’ notice. These obligations generally are not traded, nor generally is there an established secondary market for these
obligations. To the extent a demand note does not have a 7-day or shorter demand feature and there is no readily available market
for the obligation, it is treated as an illiquid security.
Fixed income securities are subject to a variety
of risks, such as interest rate risk, income risk, call/prepayment risk, inflation risk, credit risk and (in the case of foreign
securities) country and currency risk.
Foreign
Custody Risk
The
Fund may hold foreign securities and cash with foreign banks, agents, and securities depositories appointed by the Fund’s
custodian (each a “Foreign Custodian”).
Some Foreign Custodians may be recently organized or new to the foreign custody business. In some countries, Foreign Custodians
may be subject to little or no regulatory oversight over or independent evaluation of their operations. Further, the laws of certain
countries may place limitations on the Fund’s ability to
recover its assets if a Foreign Custodian enters bankruptcy. Investments in emerging markets may be subject to even greater custody
risks than investments in more developed markets. Custody services in emerging market countries are very often undeveloped and
may be considerably less well-regulated than in more developed countries, and thus may not afford the same level of investor protection
as would apply in developed countries.
Foreign
(Non-U.S.) Currency Transactions
The
Fund may engage in foreign (non-U.S.) currency transactions, including foreign (non-U.S.) currency forward contracts, options,
swaps, and other strategic transactions in connection with investments in securities of non-U.S. companies. The Fund will conduct
its foreign (non-U.S.) currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign (non-U.S.) currency exchange market or through forward contracts to purchase or sell foreign (non-U.S.) currencies.
The
Fund may enter into forward foreign (non-U.S.) currency exchange contracts (forward contracts) in order to protect against possible
losses on foreign (non-U.S.) investments resulting from adverse changes in the relationship between the U.S. dollar and foreign
(non-U.S.) currencies, as well as to increase exposure to a foreign (non-U.S.) currency or to shift exposure to foreign (non-U.S.)
currency fluctuations from one country to another. A forward contract is an obligation to purchase or sell a specific currency
for an agreed price on a future date which is individually negotiated and privately traded by currency traders and their customers.
Although foreign (non-U.S.) exchange dealers often do not charge a fee for conversion, they do realize a profit based on the difference
(spread) between the price at which they are buying and selling various currencies. However, forward contracts may limit the potential
gains which could result from a positive change in such currency relationships. The Fund will segregate or “earmark”
assets determined to be liquid by the adviser in accordance with procedures established by the Board, to cover the Fund’s
obligations under forward foreign (non-U.S.) currency exchange contracts entered into for non-hedging purposes.
The
Fund may purchase and write put and call options on foreign (non-U.S.) currencies for the purpose of protecting against declines
in the U.S. dollar value of foreign (non-U.S.) portfolio securities and against increases in the U.S. dollar cost of foreign (non-U.S.)
securities to be acquired. As with other kinds of options, however, the writing of an option on foreign (non-U.S.) currency will
constitute only a partial hedge, up to the amount of the premium received, and the Fund could be required to purchase or sell foreign
(non-U.S.) currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on foreign (non-U.S.)
currency may constitute an effective hedge against fluctuation in exchange rates although, in the event of rate movements adverse
to the Fund’s position, the Fund may forfeit the entire amount of the premium plus related transaction costs.
The
Fund may enter into interest rate swaps on either an asset-based or liability-based basis, depending on whether it is hedging its
assets or its liabilities, and will usually enter into interest rate swaps on a net basis (i.e., the two payment streams
are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments). The net amount
of the excess, if any, of the Fund’s obligations over its entitlement with respect to each interest rate swap will be calculated
on a daily basis and an amount of cash or other liquid assets (marked to market daily) having an aggregate net asset value at least
equal to the accrued excess will be segregated or “earmarked.” The adviser will monitor the creditworthiness of all
counterparties on an ongoing basis. If there is a default by the other party to such a transaction, the Fund will have contractual
remedies pursuant to the agreements related to the transaction. There is no limit on the amount of interest rate swap transactions
that may be entered into by the Fund, subject to the segregation requirement described above. These transactions may in some instances
involve the delivery of securities or other underlying assets by the Fund or its counterparty to collateralize obligations under
the swap. Under the documentation currently used in those markets, the risk of loss with respect to interest rate swaps is limited
to the net amount of the payments that the Fund is contractually obligated to make. If the other party to an interest rate swap
that is not collateralized defaults, the Fund would risk the loss of the net amount of the payments that it contractually is entitled
to receive.
While
the adviser is authorized to hedge against currency risk, it is not required to do so. The adviser may choose not to hedge currency
exposure.
Foreign
(Non-U.S.) Government Securities
The
Fund may invest in foreign (non-U.S.) government securities, including securities issued by foreign (non-U.S.) governments, including
political subdivisions, or their authorities, agencies, instrumentalities or by supra-national
agencies. Different kinds of foreign
(non-U.S.) government securities have different types of government support. For example, some foreign (non-U.S.) government securities
are supported by the full faith and credit of a foreign (non-U.S.) national government or a political subdivision and some are
not. Foreign (non-U.S.) government securities of some countries may involve varying degrees of credit risk as a result of financial
or political instability in those countries or the possible inability of the Fund to enforce its rights against a foreign (non-U.S.)
government. As with issuers of other fixed income securities, sovereign issuers may be unable or unwilling to satisfy their obligations
to pay principal or interest payments.
Supra-national
agencies are agencies whose member nations make capital contributions to support the agencies’ activities. Examples include
the International Bank for Reconstruction and Development (the World Bank), the Asian Development Bank and the Inter-American Development
Bank.
As
with other fixed income securities, foreign (non-U.S.) government securities expose their holders to market risk because their
values typically change as interest rates fluctuate. For example, the value of foreign (non-U.S.) government securities may
fall during times of rising interest rates. Also, yields on foreign (non-U.S.) government securities tend to be lower than
those of corporate securities of comparable maturities.
In
addition to investing directly in foreign (non-U.S.) government securities, the Fund may purchase certificates of accrual or similar
instruments evidencing undivided ownership interests in interest payments and/or principal payments of foreign (non-U.S.) government
securities. Certificates of accrual and similar instruments may be more volatile than other foreign (non-U.S.) government securities.
Foreign (Non-U.S) Investments – General
To
the extent consistent with its investment objective and strategies, the Fund may invest in foreign securities, including bonds
and other fixed income securities of foreign issuers. Foreign fixed income securities may include eurodollar convertible securities,
which are fixed income securities that are issued in U.S. dollars outside the United States and are convertible into or exchangeable
for equity securities of the same or a different issuer. Investment in foreign securities involves special risks. These include
market risk, interest rate risk and the risks of investing in securities of foreign issuers and of companies whose securities are
principally traded outside the United States on foreign exchanges or foreign over-the-counter markets and in investments denominated
in foreign currencies. Market risk involves the possibility that security prices will decline over short or even extended periods.
The markets tend to be cyclical, with periods of generally rising prices and periods of generally declining prices. These cycles
will affect the value of the Fund to the extent that it invests in foreign securities. The holdings of the Fund, to the extent
that they invest in fixed-income securities, will be sensitive to changes in interest rates and the interest rate environment.
Generally, the prices of bonds and debt securities fluctuate inversely with interest rate changes. In addition, the performance
of investments in securities denominated in a foreign currency will depend on the strength of the foreign currency against the
U.S. dollar and the interest rate environment in the country issuing the currency. Absent other events which could otherwise affect
the value of a foreign security (such as a change in the political climate or an issuer’s credit quality), appreciation in
the value of the foreign currency generally can be expected to increase the value of a foreign currency-denominated security in
terms of U.S. dollars. A rise in foreign interest rates or decline in the value of the foreign currency relative to the U.S. dollar
generally can be expected to depress the value of a foreign currency-denominated security.
There
are other risks and costs involved in investing in foreign securities which are in addition to the usual risks inherent in domestic
investments. Investment in foreign securities involves higher costs than investment in U.S. securities, including higher transaction
and custody costs as well as the imposition of additional taxes by foreign governments. Foreign investments also involve risks
associated with the level of currency exchange rates, less complete financial information about the issuers, less market liquidity,
more market volatility and political instability. Future political and economic developments, the possible imposition of withholding
taxes on dividend income, the possible seizure or nationalization of foreign holdings, the possible establishment of exchange controls,
or the adoption of other governmental restrictions might adversely affect an investment in foreign securities. Additionally, foreign
banks and foreign branches of domestic banks are subject to less stringent reserve requirements, and to different
accounting, auditing and recordkeeping
requirements. Also, the legal remedies for investors may be more limited than the remedies available in the United States. Additionally,
many countries throughout the world are dependent on a healthy U.S. economy and are adversely affected when the U.S. economy weakens
or its markets decline. For example, the decline in the U.S. subprime mortgage market quickly spread throughout global credit markets,
triggering a liquidity crisis that affected fixed-income and equity markets around the world.
European
countries can be affected by the significant fiscal and monetary controls that the European Economic and Monetary Union (“EMU”)
imposes for membership. Europe’s economies are diverse, its governments are decentralized, and its cultures vary widely.
Several European Union (“EU”) countries, including Greece, Ireland, Italy, Spain and Portugal, have faced budget issues,
some of which may have negative long-term effects for the economies of those countries and other EU countries. There is continued
concern about national-level support for the euro and the accompanying coordination of fiscal and wage policy among EMU member
countries. Member countries are required to maintain tight control over inflation, public debt, and budget deficit to qualify for
membership in the EMU. These requirements can severely limit the ability of EMU member countries to implement monetary policy to
address regional economic conditions.
In June of 2016, the United Kingdom (the
“UK”) approved a referendum to leave the EU, commonly referred to as “Brexit,” which sparked depreciation
in the value of the British pound and heightened the risk of continued worldwide economic volatility. Pursuant to Article 50 of
the Treaty of Lisbon, the UK gave notice in March 2017 of its withdrawal from the EU and commenced negotiations on the terms of
withdrawal. With notice given, the negotiation period could last for two years or more. The UK withdrew from the EU on January
31, 2020. It is unclear what the potential consequences of the UK’s withdrawal may
be. In addition, it is possible that measures could be taken to revote the issue of the withdrawal, or that regions of the UK could
seek to separate and remain a part of the EU. As a result of the scheduled withdrawal, the Fund may be exposed to volatile trading
markets and significant and unpredictable currency fluctuations over a short period of time, and potentially lower economic growth
in the UK, Europe and globally. Securities issued by companies domiciled in the UK could be subject to changing regulatory and
tax regimes. Banking and financial services companies that operate in the UK or EU could be disproportionately impacted by these
actions. Further insecurity in EU membership or the abandonment of the euro could exacerbate market and currency volatility and
negatively impact the Fund’s investments in securities issued by companies located in EU countries. The impact of these actions,
especially if they occur in a disorderly fashion, is not clear but could be significant and far-reaching.
Many
non-governmental issuers, and even certain governments, have defaulted on, or been forced to restructure, their debts; many other
issuers have faced difficulties obtaining credit or refinancing existing obligations; financial institutions have in many cases
required government or central bank support, have needed to raise capital, and/or have been impaired in their ability to extend
credit; and financial markets in Europe and elsewhere have experienced extreme volatility and declines in asset values and liquidity.
These difficulties may continue, worsen or spread within and without Europe. Responses to the financial problems by European governments,
central banks and others, including austerity measures and reforms, may not work, may result in social unrest and may limit future
growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and others
of their debt could have additional adverse effects on economies, financial markets and asset valuations around the world. In addition,
one or more countries may abandon the euro, the common currency of the European Union, and/or withdraw from the European Union.
The impact of these actions, especially if they occur in a disorderly fashion, is not clear but could be significant and far-reaching.
To
the extent consistent with its investment objectives and strategies, the Fund may invest in foreign debt, including the securities
of foreign governments. Several risks exist concerning such investments, including the risk that foreign governments may default
on their obligations, may not respect the integrity of such debt, may attempt to renegotiate the debt at a lower rate, and may
not honor investments by U.S. entities or citizens.
Although
the Fund may invest in securities denominated in foreign currencies, its portfolio securities and other assets are valued in U.S.
dollars. Currency exchange rates may fluctuate significantly over short periods of time causing, together with other factors, the
Fund’s NAV to fluctuate as well. Currency exchange rates can be affected unpredictably by the intervention or the failure
to intervene by U.S. or foreign governments or central banks, or by
currency controls or political developments
in the United States or abroad. To the extent that the Fund’s total assets, adjusted to reflect the Fund’s net position
after giving effect to currency transactions, are denominated in the currencies of foreign countries, the Fund will be more susceptible
to the risk of adverse economic and political developments within those countries.
Dividends
and interest payable on the Fund’s foreign portfolio securities may be subject to foreign withholding taxes. To the extent
such taxes are not offset by credits or deductions allowed to investors under U.S. federal income tax law, they may reduce the
net return to the shareholders.
The
Fund’s income and, in some cases, capital gains from foreign stocks and securities will be subject to applicable taxation
in certain of the countries in which it invests, and treaties between the United States and such countries may not be available
in some cases to reduce the otherwise applicable tax rates.
The
Fund also is subject to the possible imposition of exchange control regulations or freezes on the convertibility of currency. In
addition, the use of forward currency exchange contracts with other instruments, the net currency positions of the Fund may expose
it to risks independent of its securities positions. Although the net long and short foreign currency exposure of the Fund will
not exceed its total asset values, to the extent that the Fund is fully invested in foreign securities while also maintaining currency
positions, it may be exposed to greater risk than it would have if it did not maintain the currency positions.
The
Fund’s foreign securities are generally held outside the United States in the primary market for the securities in the custody
of certain eligible foreign banks and trust companies, as permitted under the 1940 Act (“foreign sub-custodians”).
Settlement practices for foreign securities may differ from those in the United States. Some countries have limited governmental
oversight and regulation of industry practices, stock exchanges, depositories, registrars, brokers and listed companies, which
increases the risk of corruption and fraud and the possibility of losses to the Fund. In particular, under certain circumstances,
foreign securities may settle on a delayed delivery basis, meaning that the Fund may be required to make payment for securities
before the Fund has actually received delivery of the securities or deliver securities prior to the receipt of payment. Typically,
in these cases, the Fund will receive evidence of ownership in accordance with the generally accepted settlement practices in the
local market entitling the Fund to deliver payment at a future date, but there is a risk that the security will not be delivered
to the Fund or that payment will not be received, although the Fund and its foreign sub-custodians take reasonable precautions
to mitigate this risk.
Foreign
markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements
have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such
delays in settlement could result in temporary periods when a portion of the assets of the Fund remain uninvested and no return
is earned on such assets. The inability of the Fund to make intended security purchases or sales due to settlement problems could
result in missed attractive investment opportunities, losses to the Fund due to subsequent declines in value of the portfolio securities
or, if the Fund has entered into a contract to sell the securities, possible liability to the purchaser. Losses can also result
from lost, stolen or counterfeit securities; defaults by brokers and banks; failures or defects of the settlement system; or poor
and improper record keeping by registrars and issuers.
Share
blocking refers to a practice in certain foreign markets under which an issuer’s securities are blocked from trading at the
custodian or sub-custodian level for a specified number of days before and, in certain instances, after a shareholder meeting where
a vote of shareholders takes place. The blocking period can last up to several weeks. Share blocking may prevent the Fund from
buying or selling securities during this period, because during the time shares are blocked, trades in such securities will not
settle. It may be difficult or impossible to lift blocking restrictions, with the particular requirements varying widely by country.
The Fund may invest a significant percentage
of its assets in the securities of issuers located in geographic regions with securities markets that are highly developed, liquid
and subject to extensive regulation, including Japan. In recent years, Japan’s economic growth has been substantially below
the level of earlier decades, and its economy has experienced periods of recession. Similar to many European countries, Japan is
experiencing a deterioration of its competitiveness. Although Japan is attempting to reform its political process and deregulate
its economy to address the situation, there is no guarantee that these efforts will succeed.
Japan’s
economy is heavily dependent upon international trade, and is especially sensitive to trade barriers and disputes. Domestic or
foreign trade sanctions or other protectionist measures may also adversely impact Japan’s economy. In particular, Japan relies
on large imports of agricultural products, raw materials and fuels. Increases in the price of crude oil, a substantial rise in
other commodity prices, or a fall-off in Japan’s manufactured exports, may affect Japan’s economy adversely. Additionally,
slowdowns in the economies of key trading partners such as the United States, China and countries in Southeast Asia could have
a negative impact on the Japanese economy.
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. The Japanese yen may also be affected by currency volatility elsewhere in Asia, particularly Southeast Asia. The Japanese
securities markets are less regulated than the U.S. markets. Evidence has emerged from time to time of distortion of market prices
to serve political or other purposes. Shareholders’ rights also are not always enforced.
Japan has had territorial
disputes and/or defense issues with China, North Korea, South Korea and Russia, among others. In the past several years, Japan’s
relationship with North Korea has been especially strained because of increased nuclear and military activity by North Korea. Japan’s
disputes with neighboring countries have the potential to cause uncertainty in the Japanese markets and affect the overall Japanese
economy in times of crisis. In addition, Japan is vulnerable to earthquakes, volcanoes and other natural disasters. The
March 2011 earthquakes and tsunami in Japan have caused volatility in the Japanese securities markets. The longstanding impact
of these natural disasters, however, remains unclear.
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.
Foreign Investments
– Emerging Markets
The
Fund, to the extent permitted by its investment objectives and strategies, may also invest in countries with emerging economies
or securities markets. Emerging market countries are generally located in the Asia and Pacific regions, the Middle East, Eastern
Europe, Central America, South America and Africa. Political and economic structures in many of these countries may be undergoing
significant evolution and rapid development, and these countries may lack the social, political and economic stability characteristics
of more developed countries.
In
general, the securities markets of emerging countries are less liquid, subject to greater price volatility and have a smaller market
capitalization than the U.S. securities markets. In certain countries, there may be fewer publicly traded securities and the market
may be dominated by a few issues or sectors. Issuers and securities markets in such countries are not subject to as extensive and
frequent accounting, financial and other reporting requirements or as comprehensive government regulations as are issuers and securities
markets in the United States. In particular, the assets and profits appearing on the financial statements of emerging country issuers
may not reflect their financial position or results of operations in the same manner as financial statements for U.S. issuers.
Substantially less information may be publicly available about emerging country issuers than is available about issuers in the
United States.
Emerging
country securities markets are typically marked by a high concentration of market capitalization and trading volume in a small
number of issuers representing a limited number of industries, as well as a high concentration of ownership of such securities
by a limited number of investors. The markets for securities in certain emerging countries are in the earliest stages of their
development. Even the markets for relatively widely traded securities in emerging countries may not be able to absorb, without
price disruptions, a significant increase in trading volume or trades of a size customarily undertaken by institutional investors
in the securities markets of developed countries. The limited size of many of these securities markets can cause prices to be erratic
for reasons apart from factors that affect the soundness and competitiveness of the securities issuers. For example, prices may
be unduly influenced by traders who control large positions in these markets. Additionally, market making and arbitrage activities
are generally less extensive in such markets, which may contribute to increased volatility and reduced liquidity of such markets.
The limited liquidity of emerging country securities may also affect the Fund’s ability to accurately value its portfolio
securities or to acquire or dispose of securities at the price and time it wishes to do so or in order to meet redemption requests.
Certain
emerging market countries may have antiquated legal systems, which may adversely impact the Fund. For example, while the potential
liability of a shareholder in a U.S. corporation with respect to acts of the corporation is generally limited to the amount of
the shareholder’s investment, the notion of limited liability is less clear in certain emerging market countries. Similarly,
the rights of investors in emerging market companies may be more limited than those of shareholders in U.S. corporations. In addition,
the systems of corporate governance to which issuers in certain emerging countries are subject may be less advanced than the systems
to which issuers located in more developed countries are subject, and therefore, shareholders of such issuers may not receive many
of the protections available to shareholders of issuers located in more developed countries.
Because
of the recent formation of the Russian securities markets, the underdeveloped state of Russia’s banking and telecommunication
system and the legal and regulatory framework in Russia, settlement, clearing and registration of securities transactions are subject
to additional risks. Prior to 2013, there was no central registration system for equity share registration in Russia and registration
was carried out either by the issuers themselves or by registrars located throughout Russia. These registrars may not have been
subject to effective state supervision or licensed with any governmental entity. In 2013, Russia established the National Settlement
Depository (“NSD”) as a recognized central securities depository, and title to Russian equities is now based on the
records of the NSD and not on the records of local registrars. The implementation of the NSD is generally expected to decrease
the risk of loss in connection with recording and transferring title to securities; however, loss may still occur. Additionally,
issuers and registrars remain prominent in the validation and approval of documentation requirements for corporate action processing
in Russia, and there remain inconsistent market standards in the Russian market with respect to the completion and submission of
corporate action elections. To the extent that the Fund suffers a loss relating to title or corporate actions relating to its portfolio
securities, it may be difficult for the Fund to enforce its rights or otherwise remedy the loss. In addition, Russia also may attempt
to assert its influence in the region through economic or even military measures, as it did with Georgia in the summer of 2008
and the Ukraine in 2014. Such measures may have an adverse effect on the Russian economy, which may, in turn negatively impact
the Fund.
The
United States, the EU and other countries have imposed economic sanctions on certain Russian individuals and Russian corporations.
Additional broader sanctions may be imposed in the future. These sanctions, or even the threat of further sanctions, may result
in the decline of the value and liquidity of Russian securities, a weakening of the ruble or other adverse consequences to the
Russian economy. These sanctions could also result in the immediate freeze of Russian securities, impairing the ability of the
Fund to buy, sell, receive or deliver those securities. Sanctions could also result in Russia taking counter measures or retaliatory
actions, which may further impair the value and liquidity of Russian securities.
The
sanctions against certain Russian issuers include prohibitions on transacting in or dealing in new debt of longer than 30 or 90
days maturity or new equity of such issuers. Securities held by the Fund issued prior to the date of the sanctions being imposed
are not currently subject to any restrictions under the sanctions. However, compliance with each of these sanctions may impair
the ability of the Fund to buy, sell, hold, receive or deliver the affected securities or other securities of such issuers. If
it becomes impracticable or unlawful for the Fund to hold securities subject to, or otherwise affected by, sanctions (collectively,
“affected securities”), or if deemed appropriate by the Fund’s investment adviser, the Fund may prohibit in-kind
deposits of the affected securities in connection with creation transactions and instead require a cash deposit, which may also
increase the Fund’s transaction costs.
Current
or future sanctions may result in Russia taking counter measures or retaliatory actions, which may further impair the value and
liquidity of Russian securities. These retaliatory measures may include the immediate freeze of Russian assets held by the Fund.
In the event of such a freeze of any Fund assets, including depositary receipts, the Fund may need to liquidate non-restricted
assets in order to satisfy any Fund redemption orders. The liquidation of Fund assets during this time may also result in the Fund
receiving substantially lower prices for its securities.
Transaction
costs, including brokerage commissions or dealer mark-ups, in emerging countries may be higher than in developed securities markets.
In addition, existing laws and regulations are often inconsistently applied. As legal systems in emerging countries develop, foreign
investors may be adversely affected by new or amended laws and regulations. In circumstances where adequate laws exist, it may
not be possible to obtain swift and equitable enforcement of the law.
Certain
emerging countries may restrict or control foreign investments in their securities markets. These restrictions may limit the Fund’s
investment in those countries and may increase the expenses of the Fund. Certain emerging countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons to only a specified percentage of an issuer’s
outstanding securities or a specific class of securities which may have less advantageous terms (including price) than securities
of the company available for purchase by nationals. In addition, the repatriation of both investment income and capital from emerging
countries may be subject to restrictions which require governmental consents or prohibit repatriation entirely for a period of
time. Even where there is no outright restriction on repatriation of capital, the mechanics of repatriation may affect certain
aspects of the operation of the Fund. Custodial and/or settlement systems in emerging countries may not be fully developed. To
the extent the Fund invests in emerging countries, Fund assets that are traded in such markets and which have been entrusted to
sub-custodians in these markets may be exposed to risks for which the sub-custodian will have no liability.
Emerging
countries may be subject to a substantially greater degree of economic, political and social instability and disruption than more
developed countries. This instability may result from, among other things, the following: (i) authoritarian governments or military
involvement in political and economic decision making, including changes or attempted changes in governments through extra-constitutional
means; (ii) social unrest associated with demands for improved political, economic or social conditions; (iii) internal insurgencies;
(iv) hostile relations with neighboring countries; (v) ethnic, religious and racial disaffection or conflict; and (vi) the absence
of developed legal structures governing foreign private investments and private property. Such economic, political and social instability
could disrupt the principal financial markets in which the Fund may invest and adversely affect the value of the Fund’s assets.
The Fund’s investments can also be adversely affected by any increase in taxes or by political, economic or diplomatic developments.
The
Fund may invest in former “east bloc” countries in Eastern Europe. Most Eastern European countries had a centrally
planned, socialist economy for a substantial period of time. The governments of many Eastern European countries have more recently
been implementing reforms directed at political and economic liberalization, including efforts to decentralize the economic decision-making
process and move towards a market economy. However, business entities in many Eastern European countries do not have an extended
history of operating in a market-oriented economy, and the ultimate impact of Eastern European countries’ attempts to move
toward more market-oriented economies is currently unclear. In addition, any change in the leadership or policies of Eastern European
countries may halt the expansion of or reverse the liberalization of foreign investment policies now occurring and adversely affect
existing investment opportunities.
Investment exposure to China subjects
the Fund to risks specific to China. China may be subject to considerable degrees of economic, political and social instability.
China is a developing market and demonstrates significantly higher volatility from time to time in comparison to developed markets.
The Chinese government has undertaken reform of economic and market practices and expansion of the sphere for private ownership
of property in China. However, Chinese markets generally continue to experience inefficiency, volatility and pricing anomalies
resulting from governmental influence, a lack of publicly available information and/or political and social instability. Internal
social unrest or confrontations with other neighboring countries, including military conflicts in response to such events, may
also disrupt economic development in China and result in a greater risk of currency fluctuations, currency convertibility, interest
rate fluctuations and higher rates of inflation. Export growth continues to be a major driver of China’s rapid economic growth.
Reduction in spending on Chinese products and services, institution of tariffs or other trade barriers, or a downturn in any of
the economies of China’s key trading partners may have an adverse impact on the Chinese economy.
A
significant portion of the Fund may also be invested in issuers located in Central and South American countries. Securities markets
in Central and South American countries may experience greater volatility than in other emerging countries. In addition, a number
of Central and South American countries are among the largest emerging country debtors. There have been moratoria on, and reschedulings
of, repayment with respect to these debts. Such events can restrict the flexibility of these debtor nations in the international
markets and result in the imposition of onerous conditions on their economies.
Many
of the currencies of Central and South American countries have experienced steady devaluation relative to the U.S. dollar, and
major devaluations have historically occurred in certain countries. Any devaluations in the currencies in which the Fund’s
portfolio securities are denominated may have a detrimental impact on the Fund. There is also a risk that certain Central and South
American countries may restrict the free conversion of their currencies into other currencies. Some Central and South American
countries may have managed currencies that are not free floating against the U.S. Dollar. This type of system can lead to sudden
and large adjustments in the currency that, in turn, can have a disruptive and negative effect on foreign investors. Certain Central
and South American currencies may not be internationally traded and it would be difficult for the Fund to engage in foreign currency
transactions designed to protect the value of the Fund’s interests in securities denominated in such currencies.
The
emergence of the Central and South American economies and securities markets will require continued economic and fiscal discipline
that has been lacking at times in the past, as well as stable political and social conditions. Governments of many Central and
South American countries have exercised and continue to exercise substantial influence over many aspects of the private sector.
The political history of certain Central and South American countries has been characterized by political uncertainty, intervention
by the military in civilian and economic spheres and political corruption. Such developments, if they were to recur, could reverse
favorable trends toward market and economic reform, privatization and removal of trade barriers.
International
economic conditions, particularly those in the United States, as well as world prices for oil and other commodities may also influence
the recovery of the Central and South American economies. Because commodities such as oil, gas, minerals and metals represent a
significant percentage of the region’s exports, the economies of Central and South American countries are particularly sensitive
to fluctuations in commodity prices. As a result, the economies in many of these countries can experience significant volatility.
Certain
Central and South American countries have entered into regional trade agreements that would, among other things, reduce barriers
among countries, increase competition among companies and reduce government subsidies in certain industries. No assurance can be
given that these changes will result in the economic stability intended. There is a possibility that these trade arrangements will
not be implemented, will be implemented but not completed or will be completed but then partially or completely unwound. It is
also possible that a significant participant could choose to abandon a trade agreement, which could diminish its credibility and
influence. Any of these occurrences could have adverse effects on the markets of both participating and non-participating countries,
including share appreciation or depreciation of participant’s national currencies and a significant increase in exchange
rate volatility, a resurgence in economic protectionism, an undermining of confidence in the Central and South American markets,
an undermining of Central and South American economic stability, the collapse or slowdown of the drive toward Central and South
American economic unity, and/or reversion of the attempts to lower government debt and inflation rates that were introduced in
anticipation of such trade agreements. Such developments could have an adverse impact on the Fund’s investments in Central
and South America generally or in specific countries participating in such trade agreements.
The
economies of emerging countries may suffer from unfavorable growth of gross domestic product, rates of inflation and hyperinflation,
capital reinvestment, resources, self-sufficiency and balance of payments. Many emerging countries have experienced in the past,
and continue to experience, high rates of inflation. In certain countries inflation has at times accelerated rapidly to hyperinflationary
levels, creating a negative interest rate environment and sharply eroding the value of outstanding financial assets in those countries.
Other emerging countries, on the other hand, have recently experienced deflationary pressures and are in economic recessions. The
economies of many emerging countries are heavily dependent upon international trade and are accordingly affected by protective
trade barriers and the economic conditions of their trading partners. In addition, the economies of some emerging countries are
vulnerable to weakness in world prices for their commodity exports.
Risks
related to currencies and corporate actions are also greater in emerging countries than in developed countries. For example, some
emerging countries may have fixed or managed currencies that are not free-floating against the U.S. dollar. Certain emerging countries
may experience sudden and large adjustments in their currency, which can have a disruptive and adverse effect on foreign investors.
Some emerging countries have a higher risk of currency devaluations, and some of these countries may experience sustained periods
of high inflation or rapid changes in inflation rates which can have negative effects on a country’s economy and securities
markets. Some emerging
countries may impose restrictions on
the free conversion of their currencies into foreign currencies, including the U.S. dollar. Corporate action procedures in emerging
countries may be less reliable and have limited or no involvement by the depositories
and central banks. Lack of standard practices and payment systems can lead to significant delays in payment.
High Yield (Non-Investment Grade Debt) Securities
Credit Quality
Credit quality of non-investment
grade securities can change suddenly and unexpectedly and even recently-issued credit ratings may not fully reflect the actual
risks posed by a particular high-yield security.
Greater Risk of Loss
These
securities are regarded as predominately speculative. There is a greater risk that issuers of lower-rated securities will default
than issuers of higher-rated securities. Issuers of lower-rated securities generally are less creditworthy and may be highly indebted,
financially distressed, or bankrupt. These issuers are more vulnerable to real or perceived economic changes, political changes
or adverse industry developments. In addition, high yield securities are frequently subordinated to the prior payment of senior
indebtedness. If an issuer fails to pay principal or interest on securities held by the Fund, the Fund would experience a decrease
in income and a decline in the market value of its investments.
Liquidity
There
may be no established secondary or public market for investments in lower-rated securities. Such securities are frequently traded
in markets that may be relatively less liquid than the market for higher-rated securities. In addition, relatively few institutional
purchasers may hold a major portion of an issue of lower-rated securities at times. As a result, the Fund may be required to sell
investments at substantial losses or retain them indefinitely when an issuer’s financial condition is deteriorating.
New
Legislation
Future
legislation may have a possible negative impact on the market for high yield, high risk bonds. As an example, in the late 1980’s,
legislation required federally-insured savings and loan associations to divest their investments in high yield, high risk bonds.
New legislation, if enacted, could have a material negative effect on the Fund’s investments in lower-rated securities.
Sensitivity
to Interest Rate and Economic Changes
The
income and market value of lower-rated securities may fluctuate more than higher-rated securities. Although non-investment grade
securities tend to be less sensitive to interest rate changes than investment grade securities, non-investment grade securities
are more sensitive to short-term corporate, economic and market developments. During periods of economic uncertainty and change,
the market price of the investments in lower-rated securities may be volatile. The default rate for high yield bonds tends to be
cyclical, with defaults rising in periods of economic downturn.
Valuation
Difficulties
It
is often more difficult to value lower-rated securities than higher-rated securities. If an issuer’s financial condition
deteriorates, accurate financial and business information may be limited or unavailable. In addition, the lower-rated investments
may be thinly traded and there may be no established secondary market. Because of the lack of market pricing and current information
for investments in lower-rated securities, valuation of such investments is much more dependent on judgment than is the case with
higher-rated securities.
High
yield, high risk investments may include the following:
Convertible
Securities
These
are bonds or preferred stock that may be converted to common stock.
Distressed
Securities
An
investment in distressed securities may involve a substantial degree of risk. These instruments, which involve loans, loan participations,
bonds, notes, non-performing and sub-performing mortgage loans typically are unrated, lower-rated, in default or close to default.
Many of these instruments are not publicly traded, and may become illiquid. The prices of such instruments may be extremely
volatile. Securities of distressed companies are generally more likely to become worthless than the securities of more financially
stable companies. Valuing such instruments may be difficult, and the Fund may lose all of its investment, or it may be required
to accept cash or securities with a value less than the Fund’s original investment. Issuers of distressed securities are
typically in a weak financial condition and may default, in which case the Fund may lose its entire investment.
Loan
Participations and Assignments
These
are participations in, or assignments of all or a portion of loans to corporations or to governments, including governments of
less developed countries (“LDCs”).
Pay-in-kind
bonds
These
are bonds which allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional
bonds. These bonds are typically sold without registration under the Securities Act of 1933, as amended (the “Securities
Act”), usually to a relatively small number of institutional investors.
Preferred
Stock
These
are stocks that generally pay a dividend at a specified rate and have preference over common stock in the payment of dividends
and in liquidation.
Securities
issued in connection with Reorganizations and Corporate Restructurings
In
connection with reorganizing or restructuring of an issuer, an issuer may issue common stock or other securities to holders of
its fixed income securities. The Fund may hold such common stock and other securities even if it does not invest in such securities.
Straight
fixed income securities
These
include bonds and other debt obligations that bear a fixed or variable rate of interest payable at regular intervals and have a
fixed or resettable maturity date. The particular terms of such securities vary and may include features such as call provisions
and sinking funds.
Zero-coupon
debt securities
These
do not pay periodic interest but are issued at a discount from their value at maturity. When held to maturity, their entire return
equals the difference between their issue price and their maturity value.
Zero-fixed-coupon
debt securities
These
are zero-coupon debt securities that convert on a specified date to periodic interest-paying debt securities..
Illiquid and Restricted Securities
Pursuant
to Rule 22e-4 under the 1940 Act, the Fund may invest up to 15% of its net assets in illiquid investments. An illiquid investment
is an investment that the Fund reasonably expects cannot be sold or disposed of in current market conditions within 7 calendar
days or less without the sale or disposition significantly changing the market value of the investment. Illiquid investments
include securities that are illiquid by virtue of the absence of a readily available market (e.g.,
because trading in the security is suspended or because market makers do not exist or will not entertain bids or offers) or
legal or contractual restrictions on resale (e.g., because they have not been registered
under the Securities Act). Illiquid investments include: repurchase agreements and time deposits with a notice or demand
period of more than seven days; interest rate; currency, mortgage and credit default swaps; interest rate caps; floors and collars;
municipal leases; certain restricted securities, such as those purchased in a private placement of securities, unless it is determined,
based upon a review of the trading markets for a specific restricted security, that such restricted security is liquid; and certain
over-the-counter options. Securities that have legal or contractual restrictions on resale but have a readily available market
are not considered illiquid for purposes of this limitation. With respect to the Fund, repurchase agreements subject to demand
are deemed to have a maturity equal to the notice period. Foreign (non-U.S.) securities that
are freely tradable in their principal markets are not considered to be illiquid.
Restricted and other illiquid investments may
be subject to the potential for delays on resale and uncertainty in valuation. The Fund might be unable to dispose of illiquid
investments promptly or at reasonable prices and might thereby experience difficulty in satisfying redemption requests from shareholders.
The Fund might have to register restricted securities in order to dispose of them, resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities. To the extent an investment held by the Fund is deemed to
be an illiquid investment or a less liquid investment, the Fund will be exposed to a greater liquidity risk.
In October 2016, the SEC adopted a new liquidity
risk management rule, Rule 22e-4 under the 1940 Act, requiring open-end funds, such as the Fund, to establish a liquidity risk
management program and to enhance disclosures regarding fund liquidity. As required by Rule 22e-4, the Trust has implemented a
liquidity risk management program and related procedures to identify illiquid investments pursuant to Rule 22e-4. If the limitation
on illiquid investments is exceeded, other than by a change in market values, the condition will be reported to the Board and,
when required, to the SEC. The effect the new rule will have on the Fund is not yet known, but the rule may impact the Fund’s
performance and ability to achieve its investment objective.
A large institutional market exists for certain
securities that are not registered under the Securities Act, including foreign (non-U.S.) securities. The fact that there are contractual
or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of such
investments. Rule 144A under the Securities Act allows such a broader institutional trading market for securities otherwise subject
to restrictions on resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements
of the Securities Act for resale of certain securities to qualified institutional buyers. Rule 144A has produced enhanced liquidity
for many restricted securities, and market liquidity for such securities may continue to expand as a result of this regulation
and the consequent existence of the PORTAL system, which is an automated system for the trading, clearance and settlement of unregistered
securities of domestic and foreign (non-U.S.) issuers sponsored by the Financial Industry Regulatory, Inc.
Under the current guidelines of the staff of
the SEC, illiquid investments are also considered to include, among other securities, purchased OTC options, certain cover for
OTC options, repurchase agreements with maturities in excess of seven days, and certain securities whose disposition is restricted
under federal securities law.
Under guidelines adopted by the Trust's Board,
the Fund’s Adviser may determine that particular Rule 144A securities, and commercial paper issued in reliance on the private
placement exemption from registration afforded by Section 4(a)(2) of the Securities Act, are liquid even though they are not registered.
A determination of whether such a security is liquid or not is a question of fact. In making this determination, the Adviser will
consider, as it deems appropriate under the circumstances and among other factors: (1) the frequency of trades and quotes for the
security; (2) the number of dealers willing to purchase or sell the security; (3) the number of other potential purchasers of the
security; (4) dealer undertakings to make a market in the security; (5) the nature of the security (e.g., debt or equity, date
of maturity, terms of dividend or interest payments, and other material terms) and the nature of the marketplace trades (e.g.,
the time needed to dispose of the security, the method of soliciting offers, and the mechanics of transfer); and (6) the rating
of the security and the financial condition and prospects of the issuer. In the case of commercial paper, the Adviser will also
determine that the paper (1) is not traded flat or in default as to principal and interest, and (2) is rated in one of the two
highest rating categories by at least two Nationally Recognized Statistical Rating Organizations ("NRSROs") or, if only
one NRSRO rates the security, by that NRSRO, or, if the security is unrated, the Adviser determines that it is of equivalent quality.
Rule 144A securities and Section 4(a)(2) commercial
paper that have been deemed liquid as described above will continue to be monitored by the Adviser to determine if the security
is no longer liquid as the result of changed conditions. Investing in Rule 144A securities or Section 4(a)(2) commercial paper
could have the effect of increasing the amount of the Fund’s assets invested in illiquid securities if institutional buyers
are unwilling to purchase such securities.
Insured Bank Obligations
The Fund may invest in insured bank obligations.
The Federal Deposit Insurance Corporation ("FDIC") insures the deposits of federally insured banks and savings and loan
associations (collectively referred to as "banks"), currently up to $250,000. The Fund may purchase bank obligations,
which are fully insured as to principal by the FDIC. Currently, to remain fully insured as to principal, these investments must
be limited to $250,000 per bank; if the principal amount and accrued interest together exceed $250,000, the excess principal and
accrued interest will not be insured. Insured bank obligations may have limited marketability.
Lending Portfolio Securities
For
the purpose of achieving income, the Fund may lend its portfolio securities, provided (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or cash equivalents (cash, U.S. Government securities, negotiable certificates
of deposit, bankers’ acceptances or letters of credit) maintained on a daily mark-to-market basis in an amount at least equal
to the current market value of the securities loaned, (2) the Fund may at any time call the loan and obtain the return of securities
loaned, (3) the Fund will receive any interest or dividends received on the loaned securities, and (4) the aggregate value of the
securities loaned will not at any time exceed one-third of the total assets of the Fund. The Fund currently does not intend
to engage in portfolio securities lending.
As with other extensions of credit,
there are risks that collateral could be inadequate in the event of the borrower failing financially, which could result in actual
financial loss, and risks that recovery of loaned securities could be delayed, which could result in interference with portfolio
management decisions or exercise of ownership rights. The Fund will be responsible for the risks associated with the investment
of cash collateral, including the risk that the Fund may lose money on the investment or may fail to earn sufficient income to
meet its obligations to the borrower. In addition, the Fund may lose its right to vote its shares of the loaned securities at a
shareholders meeting if the Adviser does not recall or does not timely recall the loaned securities, or if the borrower fails to
return the recalled securities in advance of the record date for the meeting.
Securities
lending involves counterparty risk, including the risk that the loaned securities may not be returned or returned in a timely manner
and/or a loss of rights in the collateral if the borrower or the lending agent defaults or fails
financially. This risk is increased when the
Fund’s loans are concentrated with a single or limited number of borrowers. There are no limits on the number of borrowers
to which the Fund may lend securities and the Fund may lend securities to only one or a small group of borrowers. As of the date
of this SAI, the Fund does not engage in securities lending.
LIBOR Risk
The Fund may invest in securities and
other instruments whose interest payments are determined by references to the London Interbank Offered Rate (“LIBOR”).
According to various reports, certain financial institutions, commencing as early as 2005 and throughout the global financial crisis,
routinely made artificially low submissions in the LIBOR setting process. Since the LIBOR scandal came to light, several financial
institutions have been fined significant amounts by various financial regulators in connection with allegations of manipulation
of LIBOR rates. Other financial institutions in various countries are being investigated for similar actions. These developments
may have adversely affected the interest rates on securities whose interest payments were determined by reference to LIBOR. Any
future similar developments could, in turn, reduce the value of such securities owned by the Fund.
In 2017, the United Kingdom’s
Financial Conduct Authority (“FCA”) warned that LIBOR may cease to be available or appropriate for use by 2021. The
unavailability of LIBOR presents risks to the Fund, including the risk that any pricing or adjustments to the Fund’s investments
resulting from a substitute reference rate may adversely affect the Fund’s performance and/or NAV. There is currently no
definitive information regarding the future utilization of LIBOR or of any particular replacement rate. Abandonment of or modifications
to LIBOR could have adverse impacts on newly issued financial instruments and existing financial instruments which reference LIBOR.
While some instruments in which the Fund invests may contemplate a scenario where LIBOR is no longer available by providing for
an alternative rate setting methodology, not all instruments in which the Fund invests may have such provisions and there is significant
uncertainty regarding the effectiveness of any such alternative methodologies. Abandonment of or modifications to LIBOR could lead
to significant short-term and long-term uncertainty and market instability. It remains uncertain how such changes would be implemented
and the effects such changes would have on the Fund, including any negative effects on the Fund's liquidity and valuation of the
Fund's investments, issuers of instruments in which the Fund invests and financial markets generally.
Money Market Fund Investments
Certain money market funds in which
the Fund may invest may operate as “institutional money market funds” under Rule 2a-7 of the 1940 Act and must calculate
their NAV per share to the fourth decimal place (e.g., $1.0000) reflecting market-based values of the money market fund’s
holdings. Because the share price of these money market funds will fluctuate, when the Fund sells its shares they may be worth
more or less than what the Fund originally paid for them. The Fund could also lose money if the money market fund holds defaulted
securities or as a result of adverse market conditions. These money market funds may impose a “liquidity fee” upon
the redemption of their shares or may temporarily suspend the ability to redeem shares if the money market fund’s liquidity
falls below the required minimums because of market conditions or other factors.
These measures may result in an investment
loss or prohibit the Fund from redeeming shares when the Adviser would otherwise redeem shares. If a liquidity fee is imposed or
redemptions are suspended, an investing Fund may have to sell other investments at less than opportune times to raise cash to meet
shareholder redemptions or for other purposes. The Adviser, as a result of imposition of liquidity fees or suspension of redemptions,
or the potential risk of such actions, may determine not to invest the Fund’s assets in a money market fund when it otherwise
would, and may potentially be forced to invest in more expensive, lower-performing investments.
Imposition of a liquidity fee or temporary
suspension of redemptions is at the discretion of a money market fund’s board of directors or trustees; however, they must
impose a liquidity fee or suspend redemptions if they determine it would be in the best interest of the money market fund. Such
a determination may conflict with the interest of the Fund.
The Fund may also invest in money market
funds that invest at least 99.5% of their assets in U.S. government securities and operate as “government money market funds”
under Rule 2a-7. Government money market funds may seek to maintain a stable price of $1.00 per share and are generally not required
to impose liquidity fees or temporarily suspend
redemptions. However, government money
market funds typically offer materially lower yields than other money market funds with fluctuating share prices.
The Fund could lose money invested in
a money market fund. An investment in a money market fund, including a government money market fund, is not insured or guaranteed
by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency. A money market fund’s sponsor
has no legal obligation to provide financial support to the money market fund, and you should not expect that the sponsor or any
person will provide financial support to a money market fund at any time.
In addition to the fees and expenses
that the Fund directly bears, the Fund indirectly bears the fees and expenses of any money market funds in which it invests. By
investing in a money market fund, the Fund will be exposed to the investment risks of the money market fund in direct proportion
to such investment. The money market fund may not achieve its investment objective. The Fund, through its investment in the money
market fund, may not achieve its investment objective. To the extent the Fund invests in instruments such as derivatives, the Fund
may hold investments, which may be significant, in money market fund shares to cover its obligations resulting from the Fund’s
investments in derivatives. Money market funds are subject to comprehensive regulations. The enactment of new legislation or regulations,
as well as changes in interpretation and enforcement of current laws, may affect the manner of operation, performance and/or yield
of money market funds.
Money Market Instrument Risk
The value of money market instruments
may be affected by changing interest rates and by changes in the credit ratings of the investments. An investment in a money market
fund is not insured or guaranteed by the FDIC or any other government agency. It is possible to lose money by investing in a money
market fund. Recently, the SEC adopted money market fund reform intended to address potential systemic risks associated with money
market funds and to improve transparency for money market fund investors. The money market fund reforms may impact the structure,
operations and return potential of the money market funds in which the Fund invests.
Mortgage Pass-Through Securities
Interests
in pools of mortgage pass-through securities differ from other forms of fixed income securities (which normally provide periodic
payments of interest in fixed amounts and the payment of principal in a lump sum at maturity or on specified call dates). Instead,
mortgage pass-through securities provide monthly payments consisting of both interest and principal payments. In effect, these
payments are a “pass-through” of the monthly payments made by the individual borrowers on the underlying residential
mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Unscheduled payments of principal may be made
if the underlying mortgage loans are repaid or refinanced or the underlying properties are foreclosed, thereby shortening the securities’
weighted average life. Some mortgage pass-through securities (such as securities guaranteed by Ginnie Mae) are described as “modified
pass-through securities.” These securities entitle the holder to receive all interest and principal payments owed on the
mortgage pool, net of certain fees, on the scheduled payment dates regardless of whether the mortgagor actually makes the payment.
The
principal governmental guarantor of mortgage pass-through securities is Ginnie Mae. Ginnie Mae is authorized to guarantee, with
the full faith and credit of the U.S. Treasury, the timely payment of principal and interest on securities issued by lending institutions
approved by Ginnie Mae (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of mortgage
loans. These mortgage loans are either insured by the Federal Housing Administration or guaranteed by the Veterans Administration.
A “pool” or group of such mortgage loans is assembled and after being approved by Ginnie Mae, is offered to investors
through securities dealers.
Mortgage-backed
securities issued by the Federal National Mortgage Association (“FNMA”) include FNMA Guaranteed Mortgage Pass-Through
Certificates, which are solely the obligations of FNMA and are not backed by or entitled to the full faith and credit of the United
States, except as described below, but are supported by the right of the issuer to borrow from the U.S. Treasury. FNMA is a stockholder-owned
corporation chartered under an Act of the U.S. Congress. FNMA certificates are guaranteed as to timely payment of the principal
and interest by FNMA.
Mortgage-related securities issued by
the Federal Home Loan Mortgage Corporation (“FHLMC”) include FHLMC Mortgage Participation Certificates. FHLMC is a
corporate instrumentality of the United States, created pursuant to an Act of Congress. FHLMC certificates are not guaranteed by
the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal
Home Loan Bank. FHLMC certificates entitle the holder to timely payment of interest, which is guaranteed by FHLMC. FHLMC guarantees
either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee
timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal after
default.
From
time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating federal sponsorship
of FNMA and FHLMC. The Trust cannot predict what legislation, if any, may be proposed in the future in Congress with regard to
such sponsorship or which proposals, if any, might be enacted. Such proposals, if enacted, might materially and adversely affect
the availability of government guaranteed mortgage-backed securities and the Fund’s liquidity and value.
There
is risk that the U.S. government will not provide financial support to its agencies, authorities, instrumentalities or sponsored
enterprises. The Fund may purchase U.S. government securities that are not backed by the full faith and credit of the United States,
such as those issued by FNMA and FHLMC. The maximum potential liability of the issuers of some U.S. government securities held
by the Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible
that these issuers will not have the funds to meet their payment obligations in the future.
The
volatility and disruption that impacted the capital and credit markets during late 2008 and into 2009 have led to increased market
concerns about FHLMC’s and FNMA’s ability to withstand future credit losses associated with securities held in their
investment portfolios, and on which they provide guarantees, without the direct support of the federal government. On September 7,
2008, both FHLMC and FNMA were placed under the conservatorship of the Federal Housing Finance Agency (“FHFA”).
Under
the plan of conservatorship, the FHFA has assumed control of, and generally has the power to direct, the operations of FHLMC and
FNMA, and is empowered to exercise all powers collectively held by their respective shareholders, directors and officers, including
the power to: (1) take over the assets of and operate FHLMC and FNMA with all the powers of the shareholders, the directors,
and the officers of FHLMC and FNMA and conduct all business of FHLMC and FNMA; (2) collect all obligations and money due to
FHLMC and FNMA; (3) perform all functions of FHLMC and FNMA which are consistent with the conservator’s appointment;
(4) preserve and conserve the assets and property of FHLMC and FNMA; and (5) contract for assistance in fulfilling any
function, activity, action or duty of the conservator. In addition, in connection with the actions taken by the FHFA, the U.S.
Treasury Department (the “Treasury”) entered into certain preferred stock purchase agreements with each of FHLMC and
FNMA which established the Treasury as the holder of a new class of senior preferred stock in each of FHLMC and FNMA, which stock
was issued in connection with financial contributions from the Treasury to FHLMC and FNMA.
The
conditions attached to the financial contribution made by the Treasury to FHLMC and FNMA and the issuance of this senior preferred
stock placed significant restrictions on the activities of FHLMC and FNMA. FHLMC and FNMA must obtain the consent of the Treasury
to, among other things: (i) make any payment to purchase or redeem its capital stock or pay any dividend other than in respect
of the senior preferred stock issued to the Treasury, (ii) issue capital stock of any kind, (iii) terminate the conservatorship
of the FHFA except in connection with a receivership, or (iv) increase its debt beyond certain specified levels. In addition,
significant restrictions were placed on the maximum size of each of FHLMC’s and FNMA’s respective portfolios of mortgages
and mortgage-backed securities, and the purchase agreements entered into by FHLMC and FNMA provide that the maximum size of their
portfolios of these assets must decrease by a specified percentage each year. The future status and role of FHLMC and FNMA could
be impacted by (among other things): the actions taken and restrictions placed on FHLMC and FNMA by the FHFA in its role as conservator;
the restrictions placed on FHLMC’s and FNMA’s operations and activities as a result of the senior preferred stock investment
made by the Treasury; market responses to developments at FHLMC and FNMA;
and future legislative and regulatory
action that alters the operations, ownership, structure and/or mission of these institutions, each of which may, in turn, impact
the value of, and cash flows on, any mortgage-backed securities guaranteed by FHLMC and FNMA, including any such mortgage-backed
securities held by the Fund.
As
a result of the economic recession that commenced in the United States in 2008, there is a heightened risk that the receivables
and loans underlying the asset-backed securities purchased by the Fund may suffer greater levels of default than was historically
experienced.
Commercial
banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers
also create pass-through pools of conventional residential mortgage loans. Such issuers may, in addition, be the originators and/or
servicers of the underlying mortgage loans as well as the guarantors of the mortgage pass-through securities.
Caps
and Floors
The
underlying mortgages that collateralize the ARMs in which the Fund may invest will frequently have caps and floors which limit
the maximum amount by which the loan rate to the residential borrower may change up or down: (1) per reset or adjustment interval,
and (2) over the life of the loan. Some residential mortgage loans restrict periodic adjustments by limiting changes in the borrower’s
monthly principal and interest payments rather than limiting interest rate changes. These payment caps may result in negative amortization.
The value of mortgage securities in which the Fund invests may be affected if market interest rates rise or fall faster and farther
than the allowable caps or floors on the underlying residential mortgage loans. Additionally, even though the interest rates on
the underlying residential mortgages are adjustable, amortization and prepayments may occur, thereby causing the effective maturities
of the mortgage securities in which the Fund invests to be shorter than the maturities stated in the underlying mortgages.
Inverse
Floaters
Inverse
floaters constitute a class of mortgage-backed securities with a coupon rate that moves inversely to a designated index, such as
LIBOR (London Interbank Offered Rate) or 11th District Cost of Funds Index (“COFI”). Inverse floaters have coupon rates
that typically change at a multiple of the changes of the relevant index rate. Any rise in the index rate (as a consequence of
an increase in interest rates) causes a drop in the coupon rate on an inverse floater while any drop in the index rate causes an
increase in the coupon rate of an inverse floater. In some circumstances, the coupon on an inverse floater could decrease to zero.
In addition, like most other fixed income securities, the value of inverse floaters will decrease as interest rates increase and
their average lives will extend. Inverse floaters exhibit greater price volatility than the majority of mortgage-backed securities.
In addition, some inverse floaters display extreme sensitivity to changes in prepayments. As a result, the yield to maturity of
an inverse floater is sensitive not only to changes in interest rates but also to changes in prepayment rates on the related underlying
mortgage assets. As described above, inverse floaters may be used alone or in tandem with interest-only stripped mortgage instruments.
Mortgage
Dollar Rolls
The
Fund may enter into mortgage dollar rolls with a bank or a broker-dealer. A mortgage dollar roll is a transaction in which the
Fund sells mortgage-related securities for immediate settlement and simultaneously purchases the same type of securities for forward
settlement at a discount. While the Fund begins accruing interest on the newly purchased securities from the purchase or trade
date, it is able to invest the proceeds from the sale of its previously owned securities, which will be used to pay for the new
securities, in money market investments until a future settlement date. The use of mortgage dollar rolls is a speculative technique
involving leverage, and is considered to be a form of borrowing.
Private
Mortgage Pass-Through Securities
Private
mortgage pass-through securities, also known as “non-agency mortgage securities”, are structured similarly to the Ginnie
Mae, FNMA and FHLMC mortgage pass-through securities and are issued by United States and foreign (non-U.S.) private issuers such
as originators of and investors in mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment
banks and special purpose subsidiaries of the foregoing. These securities usually are backed by a pool of conventional fixed-rate
or adjustable-rate mortgage loans. Since private mortgage pass-through securities typically are not guaranteed by an entity having
the credit status of Ginnie Mae, FNMA and FHLMC, such securities generally are structured with one or more types of credit enhancement.
Mortgage
assets often consist of a pool of assets representing the obligations of a number of different parties. There are usually fewer
properties in a pool of assets backing commercial mortgage-backed securities than in a pool of assets backing residential mortgage-backed
securities; hence they may be more sensitive to the performance of fewer mortgage assets. To lessen the effect of failures by obligors
on underlying assets to make payments, those securities may contain elements of credit support, which fall into two categories:
(i) liquidity protection; and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that
the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses resulting from default ensures
ultimate payment of the obligations on at least a portion of the assets in the pool. This protection may be provided through guarantees,
insurance policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring
the transaction or through a combination of such approaches. The degree of credit support provided for each issue is generally
based on historical information respecting the level of credit risk associated with the underlying assets. Delinquencies or losses
in excess of those anticipated could adversely affect the return on an investment in a security. The Fund will not pay any fees
for credit support, although the existence of credit support may increase the price of a security.
Resets
The
interest rates paid on the Adjustable Rate Mortgage Securities (“ARMs”) in which the Fund may invest generally are
readjusted or reset at intervals of one year or less to an increment over some predetermined interest rate index. There are two
main categories of indices: those based on U.S. Treasury securities and those derived from a calculated measure, such as a cost-of-funds
index or a moving average of mortgage rates. Commonly utilized indices include the one-year and five-year constant maturity Treasury
Note rates, the three-month Treasury Bill rate, the 180-day Treasury Bill rate, rates on longer-term Treasury securities, the National
Median Cost of Funds, the one-month or three-month London Interbank Offered Rate (“LIBOR”), the prime rate of a specific
bank, or commercial paper rates. Some indices, such as the one-year constant maturity Treasury Note rate, closely mirror changes
in market interest rate levels. Others tend to lag changes in market rate levels and tend to be somewhat less volatile.
Stripped
Mortgage Securities
Stripped
mortgage securities may be issued by federal agencies, or by private originators of, or investors in, mortgage loans, including
savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing.
Stripped mortgage securities usually are structured with two classes that receive different proportions of the interest and principal
distribution of a pool of mortgage assets. A common type of stripped mortgage security will have one class receiving some of the
interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder
of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or “IO” class),
while the other class will receive all of the principal (the principal-only or “PO” class). PO classes generate income
through the accretion of the deep discount at which such securities
are purchased, and, while PO classes
do not receive periodic payments of interest, they receive monthly payments associated with scheduled amortization and principal
prepayment from the mortgage assets underlying the PO class. The yield to maturity on a PO or an IO class security is extremely
sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets. A slower than expected
rate of principal payments may have an adverse effect on a PO-class security’s yield to maturity. If the underlying mortgage
assets experience slower than anticipated principal repayment, the Fund may fail to fully recoup its initial investment in these
securities. Conversely, a rapid rate of principal payments may have a material adverse effect on an IO-class security’s yield
to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail
to fully recoup its initial investment in these securities.
The
Fund may purchase stripped mortgage securities for income, or for hedging purposes to protect the Fund’s portfolio against
interest rate fluctuations. For example, since an IO class will tend to increase in value as interest rates rise, it may be utilized
to hedge against a decrease in value of other fixed income securities in a rising interest rate environment.
Municipal
Government Obligations
In
general, municipal obligations are debt obligations issued by or on behalf of states, territories and possessions of the United
States (including the District of Columbia) and their political subdivisions, agencies and instrumentalities. Municipal obligations
generally include debt obligations issued to obtain funds for various public purposes. Certain types of municipal obligations are
issued in whole or in part to obtain funding for privately operated facilities or projects. Municipal obligations include general
obligation bonds, revenue bonds, industrial development bonds, notes and municipal lease obligations. Municipal obligations also
include additional obligations, the interest on which is exempt from federal income tax, that may become available in the future
as long as the Board determines that an investment in any such type of obligation is consistent with the Fund’s investment
objectives. Municipal obligations may be fully or partially backed by local government, the credit of a private issuer, current
or anticipated revenues from a specific project or specific assets or domestic or foreign entities providing credit support such
as letters of credit, guarantees or insurance.
Municipal
Lease Obligations
Municipal
lease obligations may take the form of a lease, an installment purchase or a conditional sales contract. They are issued by state
and local governments and authorities to acquire land, equipment and facilities, such as vehicles, telecommunications and computer
equipment and other capital assets. The Fund may invest in funds that purchase these lease obligations directly, or it may purchase
participation interests in such lease obligations. States have different requirements for issuing municipal debt and issuing municipal
leases. Municipal leases are generally subject to greater risks than general obligation or revenue bonds because they usually contain
a “non-appropriation” clause, which provides that the issuer is not obligated to make payments on the obligation in
future years unless funds have been appropriated for this purpose each year. Such non-appropriation clauses are required to avoid
the municipal lease obligations from being treated as debt for state debt restriction purposes. Accordingly, such obligations are
subject to “non-appropriation” risk. Municipal leases may be secured by the underlying capital asset and it may be
difficult to dispose of any such asset in the event of non-appropriation or other default.
Over-the-Counter
Instruments
The
trading of over-the-counter instruments subjects the Fund to a variety of risks including: (1) counterparty risk; (2) basis risk;
(3) interest rate risk; (4) settlement risk; (5) legal risk; and (6) operational risk. Counterparty risk is the risk that the Fund’s
counterparties might default on their obligation to pay or perform generally on their obligations. The over-the-counter markets
and some foreign (non-U.S.) markets are “principals’ markets.” That means that performance of the contract is
the responsibility only of the individual firm or member on the other side of the trade and not any exchange or clearing corporation.
Such “counterparty risk” is accentuated for contracts with longer maturities where events may intervene to prevent
settlement, or where the Fund has concentrated its transactions with
a single or small group of counterparties.
Basis risk is the risk attributable to the movements in the spread between the derivative contract price and the future price
of the underlying instrument. Interest rate risk is the general risk associated with movements in interest rates. Settlement risk
is the risk that a settlement in a transfer system does not take place as expected. Legal risk is the risk that a transaction proves
unenforceable in law or because it has been inadequately documented. Operational risk is the risk of unexpected losses arising
from deficiencies in a firm’s management information, support and control systems and procedures. Transactions in over-the-counter
derivatives may involve other risks as well, as there is no exchange market on which to close out an open position. It may be impossible
to liquidate an existing position, to assess the value of a position or to assess the exposure to risk.
Preferred
Stock
Preferred
stock is a class of stock having a preference over common stock as to the payment of dividends and the recovery of investment should
a company be liquidated, although preferred stock is usually junior to the fixed income securities of the issuer. Preferred stock
typically does not possess voting rights and its market value may change based on changes in interest rates.
The
fundamental risk of investing in common and preferred stock is the risk that the value of the stock might decrease. Stock values
fluctuate in response to the activities of an individual company or in response to general market and/or economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater short-term risks than preferred stocks, fixed income
securities and money market investments. The market value of all securities, including common and preferred stocks, is based upon
the market’s perception of value and not necessarily the book value of an issuer or other objective measures of a company’s
worth.
Recent Market
Events
The Fund
could lose money over short periods due to short-term market movements and over longer periods during more prolonged market downturns.
The value of a security or other instrument may decline due to changes in general market conditions, economic trends or events
that are not specifically related to the issuer of the security or other instrument, or factors that affect a particular issuer
or issuers, country, group of countries, region, market, industry, group of industries, sector or asset class. During a general
market downturn, multiple asset classes may be negatively affected. Changes in market conditions and interest rates generally do
not have the same impact on all types of securities and instruments.
Stresses associated with the 2008 financial
crisis in the United States and global economies peaked approximately a decade ago, but periods of unusually high volatility in
the financial markets and restrictive credit conditions, sometimes limited to a particular sector or a geography, continue to recur.
Some countries, including the United States, have adopted and/or are considering the adoption of more protectionist trade policies,
a move away from the tighter financial industry regulations that followed the financial crisis, and/or substantially reducing corporate
taxes. The exact shape of these policies is still being considered, but the equity and debt markets may react strongly to expectations
of change, which could increase volatility, especially if the market’s expectations are not borne out. A rise in protectionist
trade policies, and the possibility of changes to some international trade agreements, could affect the economies of many nations
in ways that cannot necessarily be foreseen at the present time. In addition, geopolitical and other risks, including environmental
and public health, may add to instability in world economies and markets generally. Economies and financial markets throughout
the world are becoming increasingly interconnected. As a result, whether or not the Fund
invests in securities of issuers located in or with significant exposure to countries experiencing economic, political and/or financial
difficulties, the value and liquidity of the Fund’s investments may be negatively
affected by such events.
An outbreak of infectious respiratory
illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and has now been
detected globally. On March 11, 2020, the World Health Organization announced that it had made the assessment that COVID-19 can
be characterized as a pandemic. COVID-19 has resulted in travel restrictions, closed international borders, enhanced health screenings
at ports of entry and elsewhere,
disruption of and delays in healthcare
service preparation and delivery, prolonged quarantines, cancellations, business and school closings,
supply chain disruptions, and lower consumer demand, as well as general concern and uncertainty. The impact of COVID-19, and
other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire
global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of
infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health
crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain
countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty. The
value of the Fund and the securities in which the Fund
invests may be adversely affected by impacts caused by COVID-19 and other epidemics and pandemics that may arise in the future.
In addition, as a possible consequence of the measures taken in response to the spread of COVID-19 and the resulting market disruptions,
volatility and liquidity concerns, the Fund may have difficulty in complying with the distribution requirements necessary for the
Fund to maintain its status as a regulated investment company under the Internal Revenue Code.
Repurchase
Agreements
The
Fund may enter into repurchase agreements. In a repurchase agreement, an investor (such as the Fund) purchases a security (known
as the “underlying security”) from a securities dealer or bank. Any such dealer or bank must be deemed creditworthy
by the Adviser. At that time, the bank or securities dealer agrees to repurchase the underlying security at a mutually agreed upon
price on a designated future date. The repurchase price may be higher than the purchase price, the difference being income to the
Fund, or the purchase and repurchase prices may be the same, with interest at an agreed upon rate due to the Fund on repurchase.
In either case, the income to the Fund generally will be unrelated to the interest rate on the underlying securities. Repurchase
agreements must be “fully collateralized,” in that the market value of the underlying securities (including accrued
interest) must at all times be equal to or greater than the repurchase price. Therefore, a repurchase agreement can be considered
a loan collateralized by the underlying securities.
Repurchase
agreements are generally for a short period of time, often less than a week, and will generally be used by the Fund to invest excess
cash or as part of a temporary defensive strategy. Repurchase agreements that do not provide for payment within seven days will
be treated as illiquid securities. In the event of a bankruptcy or other default by the seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying security and losses. These losses could result from: (a) possible decline
in the value of the underlying security while the Fund is seeking to enforce its rights under the repurchase agreement; (b) possible
reduced levels of income or lack of access to income during this period; and (c) expenses of enforcing its rights.
Regulation as a Commodity Pool Operator
The Trust, on behalf of the Fund, will file
with the National Futures Association, a notice claiming an exclusion from the definition of the term "commodity pool operator"
under the Commodity Exchange Act, as amended, and the rules of the Commodity Futures Trading Commission promulgated thereunder,
with respect to the Fund’s operation. Accordingly, the Fund will not be subject to registration or regulation as a commodity
pool operator.
Risks
Related to the Adviser and to its Strategy
Quantitative
Model Risk
The
Adviser implements the Fund’s investment strategies using proprietary trading models (each, a “Model” and collectively,
the “Models”) that analyze information and data supplied by third parties. When the data proves to be incorrect or
incomplete, any decisions made in reliance thereon expose the Fund to potential risks. For example, by relying on the data, the
Adviser may be induced to buy or sell investments when it may not be advantageous to do so, or to miss favorable opportunities
altogether.
The
Models seek to accurately invest during favorable investment time periods based on technical analysis using current and historical
data. The use of the Models has inherent risks. For example, a Model may incorrectly forecast future behavior, leading to potential
losses on a cash flow and/or a mark-to-market basis. In addition, a
Model may produce unexpected results,
which can result in losses for the Fund. Furthermore, because the Models rely on historical and market data supplied by third parties,
the success of relying on the Models may depend heavily on the accuracy and reliability of the supplied historical and market data.
If incorrect historical or market data is entered into a Model, the resulting information will be incorrect. However, even if the
historical and market data is accurate the price trends that a Model identifies will often substantially differ from actual market
prices. Differences in price trends and actual market prices may result in losses for the Fund.
Obsolescence
Risk
The
Fund is unlikely to be successful unless the assumptions underlying the Models are realistic and either remain realistic and relevant
in the future or are adjusted to account for changes in the overall market environment. If such assumptions are inaccurate or become
inaccurate and are not promptly adjusted, it is likely that profitable trading signals will not be generated. If and to the extent
that a Model does not reflect certain factors major losses may result. Any modification of a Model will not be subject to any requirement
that shareholders receive notice of the change or that they consent to it. There can be no assurance as to the effects (positive
or negative) of any modification of a Model on the Fund’s performance.
Crowding/Convergence
There
is significant competition among systematic, trend-following managers, and the ability of the Adviser to deliver returns consistent
with the Fund’s objectives and policies is dependent on its ability to employ a trading strategy that is simultaneously profitable
and differentiated from similar trading employed by other managers. To the extent that the Adviser’s trading on behalf of
the Fund comes to resemble trading employed by other managers, the risk that a market disruption that negatively affects its models,
and therefore adversely affects the Fund, is increased, and such a disruption could accelerate reductions in liquidity or rapid
re-pricing due to simultaneous trading across a number of funds in the marketplace.
Involuntary
Disclosure Risk
As
described above, the ability of the Adviser to achieve the Fund’s investment objective is dependent in large part on its
ability to develop and protect its Models and any related proprietary research. The Models and any related proprietary research
are largely protected by the use of policies, procedures, agreements, and similar measures designed to create and enforce robust
confidentiality, non-disclosure, and similar safeguards. However, public disclosure obligations (or disclosure obligations to exchanges
or regulators with insufficient privacy safeguards) could lead to opportunities for competitors to reverse-engineer a Model, and
thereby impair the relative or absolute performance of the Fund.
Proprietary
Trading Methods
Because
the Models and the trading methods employed by the Adviser on behalf of the Fund are proprietary, a shareholder will not be able
to determine any details of such methods or whether they are being followed.
Securities
Economically Tied to Non-U.S. Markets
An
issuer of a security may be deemed to be economically tied to a particular country if it meets one or more of the following criteria:
(i) the issuer or guarantor of the security is organized under the laws of, or maintains its principal place of business in, such
country; (ii) the currency of settlement of the security is the currency of such country; (iii) the principal trading market for
the security is in such country; (iv) during the issuer’s most recent fiscal year, it derived at least 50% of its revenues
or profits from goods produced or sold, investments made, or services performed in such country or has at least 50% of its assets
in that country; or (v) the issuer is included in an index that is representative of that country. In the event that an issuer
may be considered to be economically tied to more than one country based on these criteria (for example, where the issuer is organized
under the laws of one country but derives at least 50% of its revenues or profits from goods produced or sold in another country),
the Adviser may classify the issuer as being economically tied to any country that meets the above criteria in its discretion based
on an assessment of the relevant facts and circumstances.
Securities Options
The Fund may purchase and write (i.e.,
sell) put and call options. Such options may relate to particular securities or stock indices, and may or may not be listed on
a domestic or foreign (non-U.S.) securities exchange and may or may not be issued by the Options Clearing Corporation. Options
trading is a highly specialized activity that entails greater than ordinary investment risk. Options may be more volatile than
the underlying instruments, and therefore, on a percentage basis, an investment in options may be subject to greater fluctuation
than an investment in the underlying instruments themselves.
A call option for a particular security gives
the purchaser of the option the right to buy, and the writer (seller) the obligation to sell, the underlying security at the stated
exercise price at any time prior to the expiration of the option, regardless of the market price of the security. The premium paid
to the writer is in consideration for undertaking the obligation under the option contract. A put option for a particular security
gives the purchaser the right to sell the security at the stated exercise price at any time prior to the expiration date of the
option, regardless of the market price of the security.
Stock index options are put options and call
options on various stock indices. In most respects, they are identical to listed options on common stocks. The primary difference
between stock options and index options occurs when index options are exercised. In the case of stock options, the underlying security,
common stock, is delivered. However, upon the exercise of an index option, settlement does not occur by delivery of the securities
comprising the index. The option holder who exercises the index option receives an amount of cash if the closing level of the stock
index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price
of the option. This amount of cash is equal to the difference between the closing price of the stock index and the exercise price
of the option expressed in dollars times a specified multiple. A stock index fluctuates with changes in the market value of the
stocks included in the index. For example, some stock index options are based on a broad market index, such as the Standard &
Poor's 500® Index or the Value Line Composite Index or a narrower market index, such as the Standard & Poor's 100®.
Indices may also be based on an industry or market segment, such as the NYSE ARCA Oil and Gas Index or the Computer and Business
Equipment Index. Options on stock indices are currently traded on the Chicago Board Options Exchange, the New York Stock Exchange,
the American Stock Exchange, the Pacific Stock Exchange, the Philadelphia Stock Exchange, and the NASDAQ PHLX.
The Fund’s obligation to sell an instrument
subject to a call option written by it, or to purchase an instrument subject to a put option written by it, may be terminated prior
to the expiration date of the option by the Fund’s execution of a closing purchase transaction, which is effected by purchasing
on an exchange an option of the same series (i.e., same underlying instrument, exercise price and expiration date) as the
option previously written. A closing purchase transaction will ordinarily be effected to realize a profit on an outstanding option,
to prevent an underlying instrument from being called, to permit the sale of the underlying instrument or to permit the writing
of a new option containing different terms on such underlying instrument. The cost of such a liquidation purchase plus transactions
costs may be greater than the premium received upon the original option, in which event the Fund will have incurred a loss in the
transaction. There is no assurance that a liquid secondary market will exist for any particular option. An option writer unable
to effect a closing purchase transaction will not be able to sell the underlying instrument or liquidate the assets held in a segregated
account, as described below, until the option expires or the optioned instrument is delivered upon exercise. In such circumstances,
the writer will be subject to the risk of market decline or appreciation in the instrument during such period.
If an option purchased by the Fund expires
unexercised, the Fund realizes a loss equal to the premium paid. If the Fund enters into a closing sale transaction on an option
purchased by it, the Fund will realize a gain if the premium received by the Fund on the closing transaction is more than the premium
paid to purchase the option, or a loss if it is less. If an option written by the Fund expires on the stipulated expiration date
or if the Fund enters into a closing purchase transaction, it will realize a gain (or loss if the cost of a closing purchase transaction
exceeds the net premium received when the option is sold). If an option written by the Fund is exercised, the proceeds of the sale
will be increased by the net premium originally received and the Fund will realize a gain or loss.
Certain Risks Regarding Options
There are several risks associated
with transactions in options. For example, there are significant differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. In addition,
a liquid secondary market for particular options, whether traded over-the-counter or on an exchange, may be absent for reasons
which include the following: there may be insufficient trading interest in certain options; restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; trading halts, suspensions or other restrictions may be imposed with respect
to particular classes or series of options or underlying securities or currencies; unusual or unforeseen circumstances may interrupt
normal operations on an exchange; the facilities of an exchange or the Options Clearing Corporation may not at all times be adequate
to handle current trading value; or one or more exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market
on that exchange (or in that class or series of options) would cease to exist, although outstanding options that had been issued
by the Options Clearing Corporation as a result of trades on that exchange would continue to be exercisable in accordance with
their terms.
Successful use by the Fund of options
on stock indices will be subject to the ability of the Adviser to correctly predict movements in the directions of the stock market.
This requires different skills and techniques than predicting changes in the prices of individual securities. In addition, the
Fund’s ability to effectively hedge all or a portion of the securities in its portfolio, in anticipation of or during a market
decline, through transactions in put options on stock indices, depends on the degree to which price movements in the underlying
index correlate with the price movements of the securities held by the Fund. Inasmuch as the Fund’s securities will not duplicate
the components of an index, the correlation will not be perfect. Consequently, the Fund bears the risk that the prices of its securities
being hedged will not move in the same amount as the prices of its put options on the stock indices. It is also possible that there
may be a negative correlation between the index and the Fund’s securities that would result in a loss on both such securities
and the options on stock indices acquired by the Fund.
The hours of trading for options
may not conform to the hours during which the underlying securities are traded. To the extent that the options markets close before
the markets for the underlying securities, significant price and rate movements can take place in the underlying markets that cannot
be reflected in the options markets. The purchase of options is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio securities transactions. The purchase of stock index options
involves the risk that the premium and transaction costs paid by the Fund in purchasing an option will be lost as a result of unanticipated
movements in prices of the securities comprising the stock index on which the option is based.
There is no assurance that a liquid
secondary market on an options exchange will exist for any particular option, or at any particular time, and for some options no
secondary market on an exchange or elsewhere may exist. If the Fund is unable to close out a call option on securities that it
has written before the option is exercised, the Fund may be required to purchase the optioned securities in order to satisfy its
obligation under the option to deliver such securities. If the Fund is unable to effect a closing sale transaction with respect
to options on securities that it has purchased, it would have to exercise the option in order to realize any profit and would incur
transaction costs upon the purchase and sale of the underlying securities.
Cover for Options Positions
Transactions using options (other
than options that the Fund has purchased) expose the Fund to an obligation to another party. The Fund will not enter into any such
transactions unless it owns either (i) an offsetting ("covered") position in securities or other options or (ii) cash
or liquid securities with a value sufficient at all times to cover its potential obligations not covered as provided in (i) above.
The Fund will comply with SEC guidelines regarding cover for these instruments and, if the guidelines so require, set aside cash
or liquid securities in a segregated account with the Fund’s custodian in the prescribed amount. Under current SEC guidelines,
the Fund will segregate assets to cover transactions in which the Fund writes or sells options.
Assets used as cover or held in a
segregated account cannot be sold while the position in the corresponding option is open, unless they are replaced with similar
assets. As a result, the commitment of a large portion of the Fund’s assets to cover or segregated accounts could impede
portfolio management or the Fund’s ability to meet redemption requests or other current obligations.
Options
on Futures Contracts
The
Fund may purchase and sell options on the same types of futures in which it may invest. Options on futures are similar to options
on underlying instruments except that options on futures give the purchaser the right, in return for the premium paid, to assume
a position in a futures contract (a long position if the option is a call and a short position if the option is a put), rather
than to purchase or sell the futures contract, at a specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied
by the delivery of the accumulated balance in the writer’s futures margin account which represents the amount by which the
market price of the futures contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the futures contract. Purchasers of options who fail to exercise their options prior to the exercise date
suffer a loss of the premium paid.
Dealer
Options
The
Fund may engage in transactions involving dealer options as well as exchange-traded options. Certain additional risks are specific
to dealer options. While the Fund might look to a clearing corporation to exercise exchange-traded options, if the Fund were to
purchase a dealer option it would need to rely on the dealer from which it purchased the option to perform if the option were exercised.
Failure by the dealer to do so would result in the loss of the premium paid by the Fund as well as loss of the expected benefit
of the transaction.
Exchange-traded
options generally have a continuous liquid market while dealer options may not. Consequently, the Fund may generally be able to
realize the value of a dealer option it has purchased only by exercising or reselling the option to the dealer who issued it. Similarly,
when the Fund writes a dealer option, the Fund may generally be able to close out the option prior to its expiration only by entering
into a closing purchase transaction with the dealer to whom the Fund originally wrote the option.
While
the Fund will seek to enter into dealer options only with dealers who will agree to and which are expected to be capable of entering
into closing transactions with the Fund, there can be no assurance that the Fund will at any time be able to liquidate a dealer
option at a favorable price at any time prior to expiration. Unless the Fund, as a covered dealer call option writer, is able to
effect a closing purchase transaction, it will not be able to liquidate securities (or other assets) used as cover until the option
expires or is exercised. In the event of insolvency of the other party, the Fund may be unable to liquidate a dealer option. With
respect to options written by the Fund, the inability to enter into a closing transaction may result in material losses to the
Fund. For example, because the Fund must maintain a secured position with respect to any call option on a security it writes, the
Fund may not sell the assets, which it has segregated to secure the position while it is obligated under the option. This requirement
may impair the Fund’s ability to sell portfolio securities at a time when such sale might be advantageous.
The
Staff of the SEC has taken the position that purchased dealer options are illiquid securities. The Fund may treat the cover used
for written dealer options as liquid if the dealer agrees that the Fund may repurchase the dealer options they have written for
a maximum price to be calculated by a predetermined formula. In such cases, the dealer option would be considered illiquid only
to the extent the maximum purchase price under the formula exceeds the intrinsic value of the option. Accordingly, the Fund will
treat dealer options as subject to the Fund’s limitation on illiquid securities. If the SEC changes its position on the liquidity
of dealer options, the Fund will change its treatment of such instruments accordingly.
Spread
Transactions
The
Fund may purchase covered spread options from securities dealers. These covered spread options are not presently exchange-listed
or exchange-traded. The purchase of a spread option gives the Fund the right to put securities that it owns at a fixed dollar spread
or fixed yield spread in relationship to another security that the Fund does not own, but which is used as a benchmark. The risk
to the Fund, in addition to the risks of dealer options described above, is the cost of the premium paid as well as any transaction
costs. The purchase of spread options will be used to protect the Fund against adverse changes in prevailing credit quality spreads,
i.e., the yield spread between high quality and lower quality securities. This protection is provided only during the life of the
spread options.
Structured
Notes, Bonds and Debentures
Typically,
the value of the principal and/or interest on these instruments is determined by reference to changes in the value of specific
currencies, interest rates, commodities, indexes or other financial indicators (the “Reference”) or the relevant change
in two or more References. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased
depending upon changes in the applicable Reference. The terms of the structured securities may provide that in certain circumstances
no principal is due at maturity and, therefore, may result in the loss of the Fund’s entire investment. The value of structured
securities may move in the same or the opposite direction as the value of the Reference, so that appreciation of the Reference
may produce an increase or decrease in the interest rate or value of the security at maturity. In addition, the change in interest
rate or the value of the security at maturity may be a multiple of the change in the value of the Reference so that the security
may be more or less volatile than the Reference, depending on the multiple. Consequently, structured securities may entail a greater
degree of market risk and volatility than other types of debt obligations.
Swaps
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 in comparison with the markets for other similar
instruments that are traded in the over-the-counter market. The Fund’s Adviser, under the supervision of the Board,
is responsible for determining and monitoring the liquidity of the Fund’s transactions in swap agreements. The use of equity
swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary
portfolio securities transactions.
Credit Default Swaps
In a credit default swap, one
party makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default
by a third party, typically an emerging country, on its obligation. The Fund may use credit default swaps to provide a measure
of protection against defaults of sovereign issuers (i.e., to reduce risk where the Fund owns or has exposure to the sovereign
issuer) and may use credit default swaps to take an active long or short position with respect to the likelihood of a particular
issuer’s default. In connection with these agreements, cash or liquid securities may be set aside as collateral by the Fund’s
custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral. Swaps are
marked to market daily based upon quotations from market makers and the change in value, if any, is recorded as unrealized gain
or loss. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are
based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly
from the values that would have been realized had a ready market for these instruments existed, and the differences could be material.
Payments received or made at the end of the measurement period are recorded as realized gain or loss. Entering into these agreements
involves, to varying degrees, elements of credit, market, and documentation risk. Such risks involve the possibility that there
will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform
or disagree as to the meaning of contractual terms in the agreements, and that there may be unfavorable changes in interest rates.
The Dodd-Frank Wall Street Reform
and Consumer Protection Act (the “Dodd-Frank Act”) and related regulatory developments requires the clearing and exchange-trading
of certain interest rate swaps and credit default swaps. The Dodd-Frank Act will ultimately require the clearing of many additional
types of OTC derivative instruments that the Commodities Futures Trading Commission (“CFTC”) and SEC recently defined
as “swaps” including non-deliverable foreign (non-U.S.) exchange forwards, OTC foreign (non-U.S.) exchange options
and swaptions. Mandatory exchange-trading and clearing will take place on a phased-in basis based on type of market participant
and CFTC approval of contracts for central clearing. The Adviser will continue to monitor developments in this area, particularly
to the extent regulatory changes affect the Fund’s ability to enter into swap agreements.
Swap Agreements
Swap agreements are typically
two-party, uncleared contracts entered into primarily by institutional investors for periods ranging from a day to more than one
year. In a standard “swap” transaction, two parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or “swapped”
between the parties are calculated with respect to a “notional amount,” i.e., the return on or increase in value of
a particular dollar amount invested in a “basket” of securities representing a particular index. Most swap agreements
entered into by the Fund calculate the obligations of the parties to the agreement on a “net basis.” Consequently,
the Fund’s current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid
or received under the agreement based on the relative values of the positions held by each party to the agreement (the “net
amount”). Payments may be made at the conclusion of a swap agreement or periodically during its term. Swap agreements
often do not involve the delivery of securities or other underlying assets. Accordingly, if a swap is entered into on a net
basis, if the other party to a swap agreement defaults, the Fund’s risk of loss consists of the net amount of payments that
such Fund is contractually entitled to receive, if any. The net amount of the excess, if any, of the Fund’s obligations
over its entitlements with respect to a swap agreement entered into on a net basis will be accrued daily and an amount of cash
or liquid asset having an aggregate NAV at least equal to the accrued excess will be maintained in an account with the Fund’s
custodian that satisfies the 1940 Act. The Fund will also establish and maintain such accounts with respect to its total
obligations under any swaps that are not entered into on a net basis. Obligations under swap agreements so covered will not
be construed to be “senior securities” for purposes of the Fund’s investment restriction concerning senior securities.
Because most swap agreements are two-party contracts and may have terms of greater than seven days, swap agreements may be
considered to be illiquid for the Fund’s illiquid investment limitations. The Fund will not enter into any swap agreement
unless the Adviser believes that the other party to the transaction is creditworthy. The Fund bears the risk of loss of the
amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty.
The Fund may enter into a swap
agreement in circumstances where the Adviser believes that it may be more cost effective or practical than buying the underlying
securities or a futures contract or an option on such securities. The counterparty to any swap agreement will typically be
a bank, investment banking firm or broker/dealer. The counterparty will generally agree to pay the Fund the amount, if any,
by which the notional amount of the swap agreement would have increased in value had it been invested in the particular stocks,
futures contracts or other underlying assets represented in the index, plus the dividends that would have been received on those
instruments. The Fund will agree to pay to the counterparty a floating rate of interest on the notional amount of the swap
agreement plus the amount, if any, by which the notional amount would have decreased in value had it been invested in such stocks,
futures contracts or other underlying assets. Therefore, the return to the Fund on any swap agreement should be the gain
or loss on the notional amount plus dividends on the stocks less the interest paid by the Fund on the notional amount.
The Fund may enter into total
return swap agreements. Total return swap agreements are contracts in which one party agrees to make periodic payments based on
the change in market value of underlying assets, which may include a specified security, futures contract, basket of securities
or futures contracts, defined portfolios of bonds, loans and mortgages, or securities indices during the specified period, in return
for periodic payments based on a fixed or variable interest rate or the total return from other underlying assets. Total return
swap agreements may be used to obtain exposure to a security, commodity or market without owning or taking physical custody of
such security, commodity or market. Total return swap agreements may effectively add leverage to the Fund’s portfolio because,
in addition to its total net assets, the Fund would be subject to investment exposure on the notional
amount of the swap. Total return
swaps are a mechanism for the user to accept the economic benefits of asset ownership without utilizing the balance sheet. The
other leg of the swap, usually the London Interbank Offered Rate (LIBOR), is spread to reflect the non-balance sheet nature of
the product. Total return swaps can be designed with any underlying asset agreed between two parties. Typically no notional amounts
are exchanged with total return swaps. Total return swap agreements entail the risk that a party will default on its payment obligations
to the Fund thereunder. Swap agreements also entail the risk that the Fund will not be able to meet its obligation to the counterparty.
Generally, the Fund will enter into total return swaps on a net basis (i.e., the two payment streams are netted out with
the Fund receiving or paying, as the case may be, only the net amount of the two payments).
Technology
Risk
The Adviser uses various technologies
in managing the Fund, consistent with the Fund’s investment objective and strategy described in the Prospectus. For example,
proprietary and third-party data and systems are utilized to support decision making for the Fund. Data imprecision, software or
other technology malfunctions, programming inaccuracies and similar circumstances may impair the performance of these systems,
which may negatively impact the Fund.
Temporary
Defensive Position
In
anticipation of or in response to adverse market, economic, political or other conditions, the Fund may take temporary defensive
positions (up to 100% of its assets) in cash, cash equivalents and short term U.S. government securities. If the Fund were to take
a temporary defensive position, its opportunity to achieve upside return may be limited; however, the ability to be fully defensive
is an integral part of achieving the Fund’s investment objective.
Time Deposits and Variable Rate Notes
The
Fund may invest in fixed time deposits, whether or not subject to withdrawal penalties. The commercial paper obligations which
the Fund may buy are unsecured and may include variable rate notes. The nature and terms of a variable rate note (i.e.,
a “Master Note”) permit the Fund to invest fluctuating amounts at varying rates of interest pursuant to a direct arrangement
between the Fund as lender, and the issuer, as borrower. It permits daily changes in the amounts borrowed. The Fund has the right
at any time to increase, up to the full amount stated in the note agreement, or to decrease the amount outstanding under the note.
The issuer may prepay at any time and without penalty any part of or the full amount of the note. The note may or may not be backed
by one or more bank letters of credit. Because these notes are direct lending arrangements between the Fund and the issuer, it
is not generally contemplated that they will be traded; moreover, there is currently no secondary market for them. Except as specifically
provided in the Prospectus, there is no limitation on the type of issuer from whom these notes may be purchased; however, in connection
with such purchase and on an ongoing basis, the adviser will consider the earning power, cash flow and other liquidity ratios of
the issuer, and its ability to pay principal and interest on demand, including a situation in which all holders of such notes made
demand simultaneously. Variable rate notes are subject to the Fund’s investment restriction on illiquid securities unless
such notes can be put back to the issuer on demand within seven days.
Trading
in Futures Contracts
A
futures contract provides for the future sale by one party and purchase by another party of a specified amount of a specific financial
instrument (e.g., units of a stock index) for a specified price, date, time and place designated at the time the contract is made.
Brokerage fees are incurred when a futures contract is bought or sold and margin deposits must be maintained. Entering into a contract
to buy is commonly referred to as buying or purchasing a contract or holding a long position. Entering into a contract to sell
is commonly referred to as selling a contract or holding a short position.
Unlike
when the Fund purchases or sells a security, no price would be paid or received by the Fund upon the purchase or sale of a futures
contract. Upon entering into a futures contract, and to maintain the Fund’s open positions in futures
contracts, the Fund would be required
to deposit with its futures broker in a segregated account an amount of cash, U.S. Government securities, suitable money market
instruments, or other liquid securities, known as “initial margin.”
The
margin required for a particular futures contract is set by the exchange on which the contract is traded, and may be significantly
modified from time to time by the exchange during the term of the contract. Futures contracts are customarily purchased and sold
on margins that may range upward from less than 5% of the value of the contract being traded.
If
the price of an open futures contract changes (by increase in underlying instrument or index in the case of a sale or by decrease
in the case of a purchase) so that the loss on the futures contract reaches a point at which the margin on deposit does not satisfy
margin requirements, the broker will require an increase in the margin. However, if the value of a position increases because of
favorable price changes in the futures contract so that the margin deposit exceeds the required margin, the broker will pay the
excess to the Fund.
These
subsequent payments, called “variation margin,” to and from the futures broker, are made on a daily basis as the price
of the underlying assets fluctuate making the long and short positions in the futures contract more or less valuable, a process
known as “marking to the market.” The Fund expects to earn interest income on its margin deposits.
Although
certain futures contracts, by their terms, require actual future delivery of and payment for the underlying instruments, in practice
most futures contracts are usually closed out before the delivery date. Closing out an open futures contract purchase or sale is
effected by entering into an offsetting futures contract sale or purchase, respectively, for the same aggregate amount of the identical
underlying instrument or index and the same delivery date. If the offsetting purchase price is less than the original sale price,
the Fund realizes a gain; if it is more, the Fund realizes a loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Fund realizes a gain; if it is less, the Fund realizes a loss. The transaction costs must also be included
in these calculations. There can be no assurance, however, that the Fund will be able to enter into an offsetting transaction with
respect to a particular futures contract at a particular time. If the Fund is not able to enter into an offsetting transaction,
the Fund will continue to be required to maintain the margin deposits on the futures contract.
For
example, one contract in the Financial Times Stock Exchange 100 Index future is a contract to buy 25 pounds sterling multiplied
by the level of the UK Financial Times 100 Share Index on a given future date. Settlement of a stock index futures contract may
or may not be in the underlying instrument or index. If not in the underlying instrument or index, then settlement will be made
in cash, equivalent over time to the difference between the contract price and the actual price of the underlying asset at the
time the stock index futures contract expires.
The
Fund’s futures contracts may be subject to periods of illiquidity because of market conditions, regulatory considerations
and other reasons. For example, commodity exchanges limit fluctuations in certain futures contract prices during a single day by
regulations referred to as “daily limits.” During a single day, no trades may be executed at prices beyond the daily
limit. Once the price of a futures contract for a particular commodity has increased or decreased by an amount equal to the daily
limit, positions in the commodity futures contracts can neither be taken nor liquidated unless the traders are willing to effect
trades at or within the limit. Futures contract prices have occasionally moved the daily limit for several consecutive days with
little or no trading. Such market conditions could prevent the Fund from promptly liquidating its futures contracts.
United
States Government Obligations
The
Fund may invest in United States Government Obligations. These consist of various types of marketable securities issued by the
United States Treasury, i.e., bills, notes and bonds. Such securities are direct obligations of the United States government
and differ mainly in the length of their maturity. Treasury bills, the most frequently issued marketable government security, have
a maturity of up to one year and are issued on a discount basis.
Receipts
Interests in separately traded
interest and principal component parts of U.S. government obligations that are issued by banks or brokerage firms and are created
by depositing U.S. government obligations into a special account at a custodian bank. The custodian holds the interest and principal
payments for the benefit of the registered owners of the certificates or receipts. The custodian arranges for the issuance of the
certificates or
receipts evidencing ownership and
maintains the register. Treasury Receipts (“TRs”) and Separately Traded Registered Interest and Principal Securities
(“STRIPS”) are interests in accounts sponsored by the U.S. Treasury. Receipts are sold as zero coupon securities.
U.S. Government Zero Coupon
Securities
STRIPS and receipts are sold as
zero coupon securities, that is, fixed income securities that have been stripped of their unmatured interest coupons. Zero coupon
securities are sold at a (usually substantial) discount and redeemed at face value at their maturity date without interim cash
payments of interest or principal. The amount of this discount is accreted over the life of the security, and the accretion constitutes
the income earned on the security for both accounting and tax purposes. Because of these features, the market prices of zero coupon
securities are generally more volatile than the market prices of securities that have similar maturity but that pay interest periodically.
Zero coupon securities are likely to respond to a greater degree to interest rate changes than are non-zero coupon securities with
similar maturity and credit qualities.
U.S. Treasury Obligations
U.S. Treasury obligations consist
of bills, notes and bonds issued by the U.S. Treasury and separately traded interest and principal component parts of such obligations
that are transferable through the federal book-entry system known as STRIPS and TRs.
United
States Government Agency
Treasury
obligations may differ in their interest rates, maturities, times of issuance and other characteristics. No assurance can be given
that the U.S. Government will provide financial support to its agencies and authorities if it is not obligated by law to do so.
In addition, the value of U.S. Government securities may be affected by changes in the credit rating of the U.S. Government.
The
Fund may invest in securities issued by United States Government Agencies. These consist of fixed income securities issued by agencies
and instrumentalities of the United States Government, including the various types of instruments currently outstanding or which
may be offered in the future. Agencies include, among others, the Federal Housing Administration, Government National Mortgage
Association (“GNMA”), Export-Import Bank of the United States, Maritime Administration, and General Services Administration.
Instrumentalities include, for example, each of the Federal Home Loan Banks, the National Bank for Cooperatives, FHLMC, the Farm
Credit Banks, FNMA, and the United States Postal Service. These securities are either: (i) backed by the full faith and credit
of the United States government (e.g., United States Treasury Bills); (ii) guaranteed by the United States Treasury (e.g.,
GNMA mortgage-backed securities); (iii) supported by the issuing agency’s or instrumentality’s right to borrow from
the United States Treasury (e.g., FNMA Discount Notes); or (iv) supported only by the issuing agency’s or instrumentality’s
own credit (e.g., Tennessee Valley Association).
Government-related guarantors (i.e.,
not backed by the full faith and credit of the United States Government) include FNMA and FHLMC. FNMA is a government-sponsored
corporation owned entirely by private stockholders. It is subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved
seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks
and credit unions and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal
and interest by FNMA but are not backed by the full faith and credit of the United States Government.
FHLMC was created by Congress in 1970
for the purpose of increasing the availability of mortgage credit for residential housing. It is a government-sponsored corporation
formerly owned by the twelve Federal Home Loan Banks and now owned entirely by private stockholders. FHLMC issues Participation
Certificates (“PC’s”), which represent interests in conventional mortgages from FHLMC’s national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith
and credit of the United States Government. Commercial banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers also create pass-through pools of conventional residential mortgage loans.
Such issuers may, in addition, be the originators and/or servicers of the underlying mortgage loans as
well as the guarantors of the mortgage-related
securities. Pools created by such nongovernmental issuers generally offer a higher rate of interest than government and government-related
pools because there are no direct or indirect government or agency guarantees of payments in the former pools. However, timely
payment of interest and principal of these pools may be supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit. The insurance and guarantees are issued by governmental entities,
private insurers and the mortgage poolers.
Mortgage-backed securities issued by
FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates, which are solely the obligations of FNMA and are not backed by
or entitled to the full faith and credit of the United States, except as described below, but are supported by the right of the
issuer to borrow from the U.S. Treasury. FNMA is a stockholder-owned corporation chartered under an Act of the U.S. Congress. FNMA
certificates are guaranteed as to timely payment of the principal and interest by FNMA. Mortgage-related securities issued by FHLMC
include FHLMC Mortgage Participation Certificates. FHLMC is a corporate instrumentality of the United States, created pursuant
to an Act of Congress. FHLMC certificates are not guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan Bank. FHLMC certificates entitle the holder to
timely payment of interest, which is guaranteed by FHLMC. FHLMC guarantees either ultimate collection or timely payment of all
principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit
the amount due on account of its guarantee of ultimate payment of principal after default.
From time to time, proposals have been
introduced before Congress for the purpose of restricting or eliminating federal sponsorship of FNMA and FHLMC. The Trust cannot
predict what legislation, if any, may be proposed in the future in Congress with regard to such sponsorship or which proposals,
if any, might be enacted. Such proposals, if enacted, might materially and adversely affect the availability of government guaranteed
mortgage-backed securities and the Fund’s liquidity and value.
There is risk that the U.S. government
will not provide financial support to its agencies, authorities, instrumentalities or sponsored enterprises. The Fund may purchase
U.S. government securities that are not backed by the full faith and credit of the United States, such as those issued by FNMA
and FHLMC. The maximum potential liability of the issuers of some U.S. government securities held by the Fund may greatly exceed
their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will
not have the funds to meet their payment obligations in the future.
The volatility and disruption that impacted
the capital and credit markets during late 2008 and into 2009 have led to increased market concerns about FHLMC’s and FNMA’s
ability to withstand future credit losses associated with securities held in their investment portfolios, and on which they provide
guarantees, without the direct support of the federal government. On September 7, 2008, both FHLMC and FNMA were placed under
the conservatorship of the Federal Housing Finance Agency (“FHFA”).
Under the plan of conservatorship, the
FHFA has assumed control of, and generally has the power to direct, the operations of FHLMC and FNMA, and is empowered to exercise
all powers collectively held by their respective shareholders, directors and officers, including the power to: (1) take over
the assets of and operate FHLMC and FNMA with all the powers of the shareholders, the directors, and the officers of FHLMC and
FNMA and conduct all business of FHLMC and FNMA; (2) collect all obligations and money due to FHLMC and FNMA; (3) perform
all functions of FHLMC and FNMA which are consistent with the conservator’s appointment; (4) preserve and conserve the
assets and property of FHLMC and FNMA; and (5) contract for assistance in fulfilling any function, activity, action or duty
of the conservator. In addition, in connection with the actions taken by the FHFA, the U.S. Treasury Department (the “Treasury”)
entered into certain preferred stock purchase agreements with each of FHLMC and FNMA which established the Treasury as the holder
of a new class of senior preferred stock in each of FHLMC and FNMA, which stock was issued in connection with financial contributions
from the Treasury to FHLMC and FNMA.
The conditions attached to the financial
contribution made by the Treasury to FHLMC and FNMA and the issuance of this senior preferred stock placed significant restrictions
on the activities of FHLMC and FNMA. FHLMC and FNMA must obtain the consent of the Treasury to, among other things: (i) make
any payment to purchase or redeem its capital stock or pay any dividend other than in respect of the senior preferred stock issued
to the Treasury, (ii) issue
capital stock of any kind, (iii) terminate
the conservatorship of the FHFA except in connection with a receivership, or (iv) increase its debt beyond certain specified
levels. In addition, significant restrictions were placed on the maximum size of each of FHLMC’s and FNMA’s respective
portfolios of mortgages and mortgage-backed securities, and the purchase agreements entered into by FHLMC and FNMA provide that
the maximum size of their portfolios of these assets must decrease by a specified percentage each year. The future status and role
of FHLMC and FNMA could be impacted by (among other things): the actions taken and restrictions placed on FHLMC and FNMA by the
FHFA in its role as conservator; the restrictions placed on FHLMC’s and FNMA’s operations and activities as a result
of the senior preferred stock investment made by the Treasury; market responses to developments at FHLMC and FNMA; and future legislative
and regulatory action that alters the operations, ownership, structure and/or mission of these institutions, each of which may,
in turn, impact the value of, and cash flows on, any mortgage-backed securities guaranteed by FHLMC and FNMA, including any such
mortgage-backed securities held by the Fund.
As a result of the economic recession that
commenced in the United States in 2008, there is a heightened risk that the receivables and loans underlying the asset-backed securities
purchased by the Fund may suffer greater levels of default than was historically experienced.
Warrants
Warrants are options to purchase common stock
at a specific price (usually at a premium above the market value of the optioned common stock at issuance) valid for a specific
period of time. Warrants may have a life ranging from less than one year to twenty years, or they may be perpetual. However, most
warrants have expiration dates after which they are worthless. In addition, a warrant is worthless if the market price of the common
stock does not exceed the warrant's exercise price during the life of the warrant. Warrants have no voting rights, pay no dividends,
and have no rights with respect to the assets of the corporation issuing them. The percentage increase or decrease in the market
price of the warrant may tend to be greater than the percentage increase or decrease in the market price of the optioned common
stock.
When-Issued, Forward Commitments and
Delayed Settlements
The Fund may purchase and sell securities on
a when-issued, forward commitment or delayed settlement basis. In this event, the Custodian (as defined under the section entitled
"Custodian") will segregate liquid assets equal to the amount of the commitment in a separate account. Normally, the
Custodian will set aside portfolio securities to satisfy a purchase commitment. In such a case, the Fund may be required subsequently
to segregate additional assets in order to assure that the value of the account remains equal to the amount of the Fund’s
commitment. It may be expected that the Fund’s net assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.
The Fund does not intend to engage in these
transactions for speculative purposes but only in furtherance of its investment objectives. Because the Fund will segregate liquid
assets to satisfy its purchase commitments in the manner described, the Fund’s liquidity and the ability of the Adviser to
manage them may be affected in the event the Fund’s forward commitments, commitments to purchase when-issued securities and
delayed settlements ever exceeded 15% of the value of its net assets.
The Fund will purchase securities on a when-issued,
forward commitment or delayed settlement basis only with the intention of completing the transaction. If deemed advisable as a
matter of investment strategy, however, the Fund may dispose of or renegotiate a commitment after it is entered into, and may sell
securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. In these cases
such Fund may realize a taxable capital gain or loss. When the Fund engages in when-issued, forward commitment and delayed settlement
transactions, it relies on the other party to consummate the trade. Failure of such party to do so may result in the Fund incurring
a loss or missing an opportunity to obtain a price credited to be advantageous.
The market value of the securities underlying
a when-issued purchase, forward commitment to purchase securities, or a delayed settlement and any subsequent fluctuations in their
market value is taken into account when determining the market value of the Fund starting on the day the Fund agrees to purchase
the securities. The Fund does not earn interest on the securities it has committed to purchase until it has paid for and delivered
on the settlement date.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment
restrictions that may not be changed without approval by a "majority of the outstanding shares" of the Fund, which, as
used in this SAI, means the vote of the lesser of (a) 67% or more of the shares of the Fund represented at a meeting, if the holders
of more than 50% of the outstanding shares of the Fund are present or represented by proxy, or (b) more than 50% of the outstanding
shares of the Fund.
1. Borrowing
Money. The Fund may not borrow money, except to the extent permitted under applicable securities laws.
2. Senior
Securities. The Fund may not issue senior securities, except as otherwise permitted under applicable securities laws.
3. Underwriting.
The Fund may not act as an underwriter of securities of other issuers, except to the extent that the Fund may be considered an
underwriter under applicable securities laws in the disposition of portfolio securities or in the purchase of securities directly
from the issuer thereof.
4. Concentration.
The Fund may not purchase any security (other than U.S. Government Securities or securities of other investment companies) if as
a result more than 25% of the Fund’s total assets, taken at the time of the investment, would be invested in the securities
of issuers whose principal business activities are in the same industry.
5. Real
Estate. The Fund may not purchase or sell real estate unless acquired as a result of ownership of securities or other instruments,
but this policy shall not prevent the Fund from investing in securities or other instruments backed by real estate (e.g.,
REITs) or in securities of issuers engaged in the real estate business.
6. Commodities.
The Fund may purchase or sell commodities to the extent permitted by applicable law from time to time.
7. Loans.
The Fund may not make loans, except to the extent permitted under the 1940 Act, the rules and regulations promulgated thereunder,
and any applicable exemptive relief.
THE
FOLLOWING ARE ADDITIONAL INVESTMENT LIMITATIONS OF THE FUND. THE FOLLOWING RESTRICTIONS ARE DESIGNATED AS NON-FUNDAMENTAL AND MAY
BE CHANGED BY THE BOARD OF TRUSTEES OF THE TRUST WITHOUT THE APPROVAL OF SHAREHOLDERS.
1.
Pledging. The Fund will not mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any assets of
the Fund except as may be necessary in connection with borrowings described in limitation (1) above. Margin deposits, security
interests, liens and collateral arrangements with respect to transactions involving options, futures contracts, short sales and
other permitted investments and techniques are not deemed to be a mortgage, pledge or hypothecation of assets for purposes of this
limitation.
2.
Borrowing. The Fund will not purchase any security while borrowings representing more than one third of its total assets are outstanding.
3.
Margin Purchases. The Fund may not purchase securities on margin, except for use of short-term credit necessary for clearance of
purchases and sales of portfolio securities, but it may make margin deposits in connection with covered transactions in options,
futures, options on futures and short positions. For purposes of this restriction, the posting of margin deposits or other forms
of collateral in connection with swap agreements is not considered purchasing securities on margin.
4.
Illiquid Investments. The Fund will not hold 15% or more of its net assets in securities for which there are legal or contractual
restrictions on resale and other illiquid securities.
If a restriction on the Fund’s investments
is adhered to at the time an investment is made, a subsequent change in the percentage of Fund assets invested in certain securities
or other instruments of the Fund’s investment portfolio, resulting from changes in the value of the Fund’s total assets,
will not be considered a violation of the restriction; provided, however, that the asset coverage requirement applicable to borrowings
shall be maintained in the manner contemplated by applicable law.
POLICIES AND PROCEDURES FOR
DISCLOSURE OF PORTFOLIO HOLDINGS
The Trust has
adopted policies and procedures that govern the disclosure of the Fund’s portfolio holdings. These policies and procedures
are designed to ensure that such disclosure is in the best interests of the Fund’s shareholders.
It is the Trust’s
policy to: (1) ensure that any disclosure of portfolio holdings information is in the best interest of Trust shareholders;
(2) protect the confidentiality of portfolio holdings information; (3) have procedures in place to guard against personal trading
based on the information; and (4) ensure that the disclosure of portfolio holdings information does not create conflicts between
the interests of the Trust’s shareholders and those of the Trust’s affiliates.
The Fund’s
portfolio holdings are, or will be, disclosed on the Fund’s website at www.leadersharesetfs.com each day the Fund is open
for business. The Fund’s portfolio holdings information will also generally be provided for dissemination through the facilities
of the National Securities Clearing Corporation ("NSCC") and/or other fee-based subscription services to NSCC members
and/or subscribers to those other fee-based subscription services, including Authorized Participants (as defined below), and to
entities that publish and/or analyze such information in connection with the process of purchasing or redeeming Creation Units
or trading shares of the Fund in the secondary market. This information typically reflects the Fund’s anticipated holdings
as of the next Business Day.
The Fund also
discloses its portfolio holdings by mailing its annual and semi-annual reports to shareholders approximately two months after the
end of the fiscal year and semi-annual period. The Fund also discloses its portfolio holdings reports on Form N-CSR and Form N-Q
(or on Form N-PORT, Form N-Q’s successor form) two months after the end of each quarter/semi-annual period.
The Fund may
choose to make portfolio holdings available to rating agencies such as Lipper, Morningstar or Bloomberg earlier and more frequently
on a confidential basis.
Under limited
circumstances, as described below, the Fund’s portfolio holdings may be disclosed to, or known by, certain third parties
in advance of its filing with the SEC on Form N-CSR or Form N-Q or Form N-PORT, as applicable. In each case, a determination
has been made by the Trust’s Chief Compliance Officer that such advance disclosure is supported by a legitimate business
purpose of the Fund and that the recipient is subject to a duty to keep the information confidential.
·
The Adviser. Personnel of the Adviser, including personnel responsible for managing the Fund’s portfolio, may have full
daily access to Fund portfolio holdings since that information is necessary in order for the Adviser to provide its management,
administrative, and investment services to the Fund. As required for purposes of analyzing the impact of existing and future market
changes on the prices, availability, demand and liquidity of such securities, as well as for the assistance of the portfolio managers
in the trading of such securities, Adviser personnel may also release and discuss certain portfolio holdings with various broker-dealers.
·
Gemini Fund Services, LLC is the fund accountant, administrator and custody administrator for the Fund; therefore, its personnel
have full daily access to the Fund’s portfolio holdings since that information is necessary in order for them to provide
the agreed-upon services for the Trust.
·
Brown Brothers Harriman & Co. is custodian for the Fund; therefore, its personnel have full daily access to the Fund’s
portfolio holdings since that information is necessary in order for them to provide the agreed-upon services for the Trust.
·
Grant Thornton LLP is the Fund’s independent registered public accounting firm; therefore, its personnel have access
to the Fund’s portfolio holdings in connection with auditing of the Fund’s annual financial statements and providing
assistance and consultation in connection with SEC filings.
·
Blank Rome LLP is counsel to the Fund; therefore, its personnel have access to the Fund’s portfolio holdings in connection
with review of the Fund’s annual and semi-annual shareholder reports and SEC filings.
Additions
to List of Approved Recipients. The Trust’s Chief Compliance Officer is the person responsible, and whose prior
approval is required, for any disclosure of the Fund’s portfolio securities at any time or to any persons other than those
described above. In such cases, the recipient must have a legitimate business need for the information in connection with
the operation or administration of the Fund, as determined by the Trust’s Chief Compliance Officer, and must be subject to
a duty to keep the information confidential. There are no ongoing arrangements in place with respect to the disclosure of portfolio
holdings. In no event shall the Fund, the Adviser or any other party receive any direct or indirect compensation in connection
with the disclosure of information about the Fund’s portfolio holdings.
Compliance
With Portfolio Holdings Disclosure Procedures. The Trust’s Chief Compliance Officer will report periodically to
the Board with respect to compliance with the Fund’s portfolio holdings disclosure procedures, and from time to time will
provide the Board any updates to the portfolio holdings disclosure policies and procedures.
There is no
assurance that the Trust’s policies on disclosure of portfolio holdings will protect the Fund from the potential misuse of
holdings information by individuals or firms in possession of that information.
Calculation of Share Price
As indicated in the Fund’s prospectus
under the heading "Net Asset Value," ("NAV") of the Fund's shares is determined by dividing the total value
of the Fund's portfolio investments and other assets, less any liabilities, by the total number of shares outstanding of such Fund.
Generally, the Fund’s domestic securities
(including underlying ETFs which hold portfolio securities primarily listed on foreign (non-U.S.) exchanges) are valued each day
at the last quoted sales price on each security’s primary exchange. Securities traded or dealt in upon one or more securities
exchanges for which market quotations are readily available and not subject to restrictions against resale shall be valued at the
last quoted sales price on the primary exchange or, in the absence of a sale on the primary exchange, at the mean between the current
bid and ask prices on such exchange. Securities primarily traded in the NASDAQ National Market System for which market quotations
are readily available shall be valued using the NASDAQ Official Closing Price. If market quotations are not readily available,
securities will be valued at their fair market value as determined in good faith by the Fund’s fair value committee in accordance
with procedures approved by the Board and as further described below. Securities that are not traded or dealt in any securities
exchange (whether domestic or foreign) and for which over-the-counter market quotations are readily available generally shall be
valued at the last sale price or, in the absence of a sale, at the mean between the current bid and ask price on such over-the-
counter market.
Certain securities or investments for which
daily market quotes are not readily available may be valued, pursuant to guidelines established by the Board, with reference to
other securities or indices. Debt securities not traded on an exchange may be valued at prices supplied by a pricing agent(s) based
on broker or dealer supplied valuations or matrix pricing, a method of valuing securities by reference to the value of other securities
with similar characteristics, such as rating, interest rate and maturity. Short-term investments having a maturity of 60 days or
less may be generally valued at amortized cost, provided such valuations represent par value.
Exchange traded options are valued at the last
quoted sales price or, in the absence of a sale, at the mean between the current bid and ask prices on the exchange on which such
options are traded. Futures and options on futures are valued at the settlement price determined by the exchange. Other securities
for which market quotes are not readily available are valued at fair value as determined in good faith by the Board or persons
acting at their direction. Swap agreements and other derivatives are generally valued daily based upon quotations from market makers
or by a pricing service in accordance with the valuation procedures approved by the Board.
Under certain circumstances, the Fund may use
an independent pricing service to calculate the fair market value of foreign equity securities on a daily basis by applying valuation
factors to the last sale price or the mean price as noted above. The fair market values supplied by the independent pricing service
will generally reflect market trading that occurs after the close of the applicable foreign markets of comparable securities or
the value of other instruments that have a strong correlation to the fair-valued securities. The independent pricing service will
also take into account the current relevant currency exchange rate. A security that is fair valued may be valued at a price higher
or lower than actual market quotations or the value determined by other funds using their own fair valuation procedures. Because
foreign securities may trade on days when Fund shares are not priced, the value of securities held by the Fund can change on days
when Fund shares cannot be redeemed or purchased. In the event that a foreign security’s market quotations are not readily
available or are deemed unreliable (for reasons other than because the foreign exchange on which it trades closed before the Fund’s
calculation of NAV), the security will be valued at its fair market value as determined in good faith by the Fund’s fair
value committee in accordance with procedures approved by the Board as discussed below. Without fair valuation, it is possible
that short-term traders could take advantage of the arbitrage opportunity and dilute the NAV of long-term investors. Fair valuation
of the Fund’s portfolio securities can serve to reduce arbitrage opportunities available to short-term traders, but there
is no assurance that it will prevent dilution of the Fund’s NAV by short-term traders. In addition, because the Fund may
invest in underlying ETFs which hold portfolio securities primarily listed on foreign (non-U.S.) exchanges, and these exchanges
may trade on weekends or other days when the underlying ETFs do not price their shares, the value of these portfolio securities
may change on days when you may not be able to buy or sell Fund shares
Investments initially valued in currencies
other than the U.S. dollar are converted to U.S. dollars using exchange rates obtained from pricing services. As a result, the
NAV of the Fund's shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of securities
traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly
on a day that the New York Stock Exchange is closed and an investor is not able to purchase, redeem or exchange shares
Fund shares are valued at the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m., Eastern time) (the "NYSE Close") on each day that the New
York Stock Exchange is open. For purposes of calculating the NAV, the Fund normally use pricing data for domestic equity securities
received shortly after the NYSE Close and
does not normally take into account trading,
clearances or settlements that take place after the NYSE Close. Domestic fixed income and foreign securities are normally priced
using data reflecting the earlier closing of the principal markets for those securities. Information that becomes known to the
Fund or its agents after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the
price of the security or the NAV determined earlier that day.
When market quotations are insufficient or
not readily available, the Fund may value securities at fair value or estimate their value as determined in good faith by the Board
or its designees, pursuant to procedures approved by the Board. Fair valuation may also be used by the Board if extraordinary events
occur after the close of the relevant market but prior to the NYSE Close.
Notice to Texas Shareholders
Under section 72.1021(a) of the Texas Property
Code, initial investors in the Fund who are Texas residents may designate a representative to receive notices of abandoned property
in connection with Fund shares. Texas shareholders who wish to appoint a representative should notify the Trust’s Transfer
Agent by writing to the address below to obtain a form for providing written notice to the Trust:
LeaderShares® Equity Skew ETF
c/o Gemini Fund Services, LLC
17645 Wright Street, Suite 200
Omaha, Nebraska 68130
Creation Units
The Fund sells and redeems Shares in Creation
Units on a continuous basis through the Distributor, without a sales load, at the NAV next determined after receipt of an order
in proper form on any Business Day. A “Business Day” is any day on which the NYSE is open for business. As of the date
of this SAI, the NYSE observes the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
A Creation Unit is an aggregation of 25,000
Shares. The Board may declare a split or a consolidation in the number of Shares outstanding of the Fund or Trust, and make a corresponding
change in the number of Shares in a Creation Unit.
Authorized Participants
To purchase or redeem any Creation Units, you
must be, or transact through, an Authorized Participant. In order to be an Authorized Participant, you must be either a broker-dealer
or other participant (“Participating Party”) in the Continuous Net Settlement System (“Clearing Process”)
of the National Securities Clearing Corporation (“NSCC”) or a participant in DTC with access to the DTC system (“DTC
Participant”), and you must execute an agreement (“Participant Agreement”) with the Distributor that governs
transactions in the Fund’s Creation Units.
Investors who are not Authorized Participants
but want to transact in Creation Units may contact the Distributor for the names of Authorized Participants. An Authorized Participant
may require investors to enter into a separate agreement to transact through it for Creation Units and may require orders for purchases
of shares placed with it to be in a particular form. Investors transacting through a broker that is not itself an Authorized Participant
and therefore must still transact through an Authorized Participant may incur additional charges. There are expected to be a limited
number of Authorized Participants at any one time.
Orders must be transmitted by an Authorized
Participant by telephone or other transmission method acceptable to the Distributor. Market disruptions and telephone or other
communication failures may impede the transmission of orders.
Transaction Fees
A fixed fee payable to the Custodian is imposed
on each creation and redemption transaction regardless of the number of Creation Units involved in the transaction (“Fixed
Fee”). Purchases and redemptions of Creation Units for cash or involving cash-in-lieu (as defined below) are required to
pay an additional variable charge to compensate the Fund and its ongoing shareholders for brokerage and market impact expenses
relating to Creation Unit transactions (“Variable Charge,” and together with the Fixed Fee, the “Transaction
Fees”). With the approval of the Board, the Adviser may waive or adjust the Transaction Fees, including the Fixed Fee and/or
Variable Charge (shown in the table below), from time to time. In such cases, the Authorized Participant will reimburse the respective
Fund for, among other things, any difference between the market value at which the securities and/or financial instruments were
purchased by the Fund and the cash-in-lieu amount, applicable registration fees, brokerage commissions and certain taxes. In addition,
purchasers of Creation Units are responsible for the costs of transferring the Deposit Securities to the account of the Fund.
Investors who use the services of a broker,
or other such intermediary may be charged a fee for such services. The Transaction Fees for the Fund are listed in the table below.
Fee for In-Kind and Cash Purchases
|
Minimum Additional Variable Charge for Cash Purchases*
|
Maximum Additional Variable Charge for Cash Purchases*
|
$600
|
20 bps
|
200 bps
|
* As a
percentage of the amount invested.
The Clearing Process
Transactions by an Authorized Participant that
is a Participating Party using the NSCC system are referred to as transactions “through the Clearing Process.” Transactions
by an Authorized Participant that is a DTC Participant using the DTC system are referred to as transactions “outside the
Clearing Process.” The Clearing Process is an enhanced clearing process that is available only for certain securities and
only to DTC participants that are also participants in the Continuous Net Settlement System of the NSCC. In-kind (portions of)
purchase orders not subject to the Clearing Process will go through a manual clearing process run by DTC. Portfolio Deposits that
include government securities must be delivered through the Federal Reserve Bank wire transfer system (“Federal Reserve System”).
Fund Deposits that include cash may be delivered through the Clearing Process or the Federal Reserve System. In-kind deposits of
securities for orders outside the Clearing Process must be delivered through the Federal Reserve System (for government securities)
or through DTC (for corporate securities).
Foreign Securities
Because the portfolio securities of the Fund
may trade on days that the Exchange is closed or are otherwise not Business Days for the Fund, shareholders may not be able to
redeem their shares of the Fund, or to purchase or sell shares of the Fund on the Exchange, on days when the NAV of the Fund could
be significantly affected by events in the relevant foreign markets.
Purchasing Creation Units
Portfolio Deposit
The consideration for a Creation Unit generally
consists of the Deposit Securities and a Cash Component. Together, the Deposit Securities and the Cash Component constitute the
“Portfolio Deposit.” The Cash Component serves the function of compensating for any differences between the net asset
value per Creation Unit and the Deposit Securities. Thus, the Cash Component with respect to the Fund is equal to the difference
between (x) the net asset value per Creation Unit of the Fund and (y) the market value of the Deposit Securities. If (x) is more
than (y), the Authorized Participant will pay the Cash Component to the Fund. If (x) is less than (y), the Authorized Participant
will receive the Cash Component from the Fund.
On each Business Day, prior to the opening
of business on the Exchange (currently 9:30 a.m., Eastern Time), the Adviser through the Custodian makes available through NSCC
the name and amount of each Deposit Security in the current Portfolio Deposit (based on information at the end of the previous
Business Day) for the Fund and the (estimated) Cash Component, effective through and including the previous Business Day, per Creation
Unit. The Deposit Securities announced are applicable to purchases of Creation Units until the next announcement of Deposit Securities.
Payment of any stamp duty or the like shall
be the sole responsibility of the Authorized Participant purchasing a Creation Unit. The Authorized Participant must ensure that
all Deposit Securities properly denote change in beneficial ownership.
Custom Orders and Cash-in-lieu
The Fund may, in its sole discretion, permit
or require the substitution of an amount of cash (“cash-in-lieu”) to be added to the Cash Component to replace any
Deposit Security. The Fund may permit or require cash-in-lieu when, for example, a Deposit Security may not be available in sufficient
quantity for delivery or may not be eligible for transfer through the systems of DTC or the Clearing Process. Similarly, the Fund
may permit or require cash in lieu of Deposit Securities when, for example, the Authorized Participant or its underlying investor
is restricted under U.S. or local securities laws or policies from transacting in one or more Deposit Securities. The Fund will
comply with the federal securities laws in accepting Deposit Securities including that the Deposit Securities are sold in transactions
that would be exempt from registration under the Securities Act. All orders involving cash-in-lieu are considered to be “Custom
Orders.”
Purchase Orders
To order a Creation Unit, an Authorized Participant
must submit an irrevocable purchase order to the Distributor.
Timing of Submission of Purchase Orders
An Authorized Participant must submit an irrevocable
purchase order no later than the earlier of (i) 4:00 p.m. Eastern Time or (ii) the closing time of the bond markets and/or the
trading session on the Exchange, on any Business Day in order to receive that Business Day’s NAV (“Cut-off Time”).
The Cut-off Time for Custom Orders is generally two hours earlier. The Business Day the order is deemed received by the Distributor
is referred to as the “Transmittal Date.” An order to create Creation Units is deemed received on a Business Day if
(i) such order is received by the Distributor by the Cut-off Time on such day and (ii) all other procedures set forth in the Participant
Agreement are properly followed. Persons placing or effectuating custom orders and/or orders involving cash should be mindful of
time deadlines imposed by intermediaries, such as DTC and/or the Federal Reserve Bank wire system, which may impact the successful
processing of such orders to ensure that cash and securities are transferred by the “Settlement Date,” which is generally
the Business Day immediately following the Transmittal Date (“T+1”) for cash and the second Business Day following
the Transmittal Date for securities (“T+2”).
Orders Using the Clearing Process
If available, (portions of) orders may be settled
through the Clearing Process. In connection with such orders, the Distributor transmits, on behalf of the Authorized Participant,
such trade instructions as are necessary to effect the creation order. Pursuant to such trade instructions, the Authorized Participant
agrees to deliver the requisite Portfolio Deposit to the Fund, together with such additional information as may be required by
the Distributor. Cash Components will be delivered using either the Clearing Process or the Federal Reserve System.
Orders Outside the Clearing Process
If the Clearing Process is not available for
(portions of) an order, Portfolio Deposits will be made outside the Clearing Process. Orders outside the Clearing Process must
state that the DTC Participant is not using the Clearing Process and that the creation of Creation Units will be effected through
DTC. The Portfolio Deposit transfer must be ordered by the DTC Participant on the Transmittal Date in a timely fashion so as to
ensure the delivery of Deposit Securities (whether standard or custom) through DTC to the Fund account by 11:00 a.m., Eastern time,
on T+1. The Cash
Component, along with any cash-in-lieu and
Transaction Fee, must be transferred directly to the Custodian through the Federal Reserve System in a timely manner so as to be
received by the Custodian no later than 12:00 p.m., Eastern Time, on T+1. If the Custodian does not receive both the Deposit Securities
and the cash by the appointed time, the order may be canceled. A canceled order may be resubmitted the following Business Day but
must conform to that Business Day’s Portfolio Deposit. Authorized Participants that submit a canceled order will be liable
to the Fund for any losses incurred by the Fund in connection therewith.
Orders involving foreign Deposit Securities
are expected to be settled outside the Clearing Process. Thus, upon receipt of an irrevocable purchase order, the Distributor will
notify the Adviser and the Custodian of such order. The Custodian , who will have caused the appropriate local sub-custodian(s)
of the Fund to maintain an account into which an Authorized Participant may deliver Deposit Securities (or cash -in-lieu), with
adjustments determined by such Fund, will then provide information of the order to such local sub-custodian(s). The ordering Authorized
Participant will then deliver the Deposit Securities (and any cash-in-lieu) to the Fund’s account at the applicable local
sub-custodian. The Authorized Participant must also make available on or before the contractual settlement date, by means satisfactory
to the Fund, immediately available or same day funds in U.S. dollars estimated by the Fund to be sufficient to pay the Cash Component
and Transaction Fee. When a relevant local market is closed due to local market holidays, the local market settlement process will
not commence until the end of the local holiday period. Settlement must occur by 2:00 p.m., Eastern Time, on the contractual settlement
date.
Acceptance of Purchase Order
All questions as to the number of shares of
each security in the Deposit Securities and the validity, form, eligibility and acceptance for deposit of any securities to be
delivered shall be determined by the Fund. The Fund’s determination shall be final and binding.
The Fund reserves the absolute right to reject
or revoke acceptance of a purchase order transmitted to it by the Distributor if (a) the order is not in proper form; (b) the investor(s),
upon obtaining the shares ordered, would own 80% or more of the currently outstanding shares of the Fund; (c) the Deposit Securities
delivered do not conform to the Deposit Securities for the applicable date; (d) acceptance of the Deposit Securities would have
certain adverse tax consequences to the Fund; (e) the acceptance of the Portfolio Deposit would, in the opinion of counsel, be
unlawful; (f) the acceptance of the Portfolio Deposit would otherwise, in the discretion of the Trust, Fund or the Adviser, have
an adverse effect on the Trust, Fund or the rights of beneficial owners; or (g) in the event that circumstances outside the control
of the Trust, the Distributor and the Adviser make it for all practical purposes impossible to process purchase orders. Examples
of such circumstances include acts of God; public service or utility problems resulting in telephone, telecopy or computer failures;
fires, floods or extreme weather conditions; market conditions or activities causing trading halts; systems failures involving
computer or other informational systems affecting the Trust, the Distributor, DTC, NSCC, the Adviser, the Fund’s Custodian,
a sub-custodian or any other participant in the creation process; and similar extraordinary events. The Distributor shall notify
an Authorized Participant of its rejection of the order. The Fund, the Custodian, any sub-custodian and the Distributor are under
no duty, however, to give notification of any defects or irregularities in the delivery of Portfolio Deposits, and they shall not
incur any liability for the failure to give any such notification.
Issuance of a Creation Unit
Once the Fund has accepted an order, upon next
determination of the Fund’s NAV, such Fund will confirm the issuance of a Creation Unit, against receipt of payment, at such
NAV. The Distributor will transmit a confirmation of acceptance to the Authorized Participant that placed the order.
Except as provided below, a Creation Unit will
not be issued until the Fund obtains good title to the Deposit Securities and the Cash Component, along with any cash-in-lieu and
Transaction Fee. Except as provided in Appendix C, the delivery of Creation Units will generally occur no later than T+2.
In certain cases, Authorized Participants will
create and redeem Creation Units on the same trade date. In these instances, the Trust reserves the right to settle these transactions
on a net basis.
With respect to orders involving foreign Deposit
Securities, when the applicable local sub-custodian(s) have confirmed to the Custodian that the Deposit Securities (or cash -in-lieu)
have been delivered to the Fund’s account at the applicable local sub-custodian(s), the Distributor and the Adviser shall
be notified of such delivery, and such Fund will issue and cause the delivery of the Creation Unit. While, as stated above, Creation
Units are generally delivered on T+2, the Fund may settle Creation Unit transactions on a basis other than T+2 in order to accommodate
foreign market holiday schedules, to account for different treatment among foreign and U.S. markets of dividend record dates and
ex-dividend dates (that is the last day the holder of a security can sell the security and still receive dividends payable on the
security), and in certain other circumstances.
The Fund may issue a Creation Unit prior to
receiving good title to the Deposit Securities, under the following circumstances. Pursuant to the applicable Participant Agreement,
the Fund may issue a Creation Unit notwithstanding that (certain) Deposit Securities have not been delivered, in reliance on an
undertaking by the relevant Authorized Participant to deliver the missing Deposit Securities as soon as possible, which undertaking
is secured by such Authorized Participant’s delivery to and maintenance with the Custodian of collateral having a value equal
to at least 115% of the value of the missing Deposit Securities (“Collateral”), as adjusted by time to time by the
Adviser. Such Collateral will have a value greater than the NAV of the Creation Unit on the date the order is placed. Such collateral
must be delivered no later than 2:00 p.m., Eastern Time, on T+1. The only Collateral that is acceptable to the Fund is cash in
U.S. Dollars.
While (certain) Deposit Securities remain undelivered,
the Collateral shall at all times have a value equal to at least 115% (as adjusted by the Adviser) of the daily marked-to-market
value of the missing Deposit Securities. At any time, the Fund may use the Collateral to purchase the missing securities, and the
Authorized Participant will be liable to such Fund for any costs incurred thereby or losses resulting therefrom, whether or not
they exceed the amount of the Collateral, including any Transaction Fee, any amount by which the purchase price of the missing
Deposit Securities exceeds the market value of such securities on the Transmittal Date, brokerage and other transaction costs.
The Trust will return any unused Collateral once all of the missing securities have been received by the Fund. More information
regarding the Fund’s current procedures for collateralization is available from the Distributor.
Cash Purchase Method
When cash purchases of Creation Units are available
or specified for the Fund, they will be effected in essentially the same manner as in-kind purchases In the case of a cash purchase,
the investor must pay the cash equivalent of the Portfolio Deposit. In addition, cash purchases will be subject to Transaction
Fees, as described above.
Redeeming a Creation Unit
Redemption Basket
The consideration received in connection with
the redemption of a Creation Unit generally consists of an in-kind basket of designated securities (“Redemption Securities”)
and a Cash Component. Together, the Redemption Securities and the Cash Component constitute the “Redemption Basket.”
There can be no assurance that there will be
sufficient liquidity in Shares in the secondary market to permit assembly of a Creation Unit. In addition, investors may incur
brokerage and other costs in connection with assembling a Creation Unit.
The Cash Component serves the function of compensating
for any differences between the net asset value per Creation Unit and the Redemption Securities. Thus, the Cash Component is equal
to the difference between (x) the net asset value per Creation Unit of the Fund and (y) the market value of the Redemption Securities.
If (x) is more than (y), the Authorized Participant will receive the Cash Component from the Fund. If (x) is less than (y), the
Authorized Participant will pay the Cash Component to the Fund.
If the Redemption Securities on a Business
Day are different from the Deposit Securities, prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern Time),
the Adviser through the Custodian makes available through NSCC the name and amount of each Redemption Security in the current Redemption
Basket (based on information at the end of the previous Business Day) for the Fund and the (estimated) Cash Component, effective
through and including the previous Business
Day, per Creation Unit. If the Redemption Securities on a Business Day are different from the Deposit Securities, all redemption
requests that day will be processed outside the Clearing Process.
The right of redemption may be suspended or
the date of payment postponed: (i) for any period during which the NYSE is closed (other than customary weekend and holiday closings);
(ii) for any period during which trading on the NYSE is suspended or restricted; (iii) for any period during which an emergency
exists as a result of which disposal of the Shares or determination of the ETF’s NAV is not reasonably practicable; or (iv)
in such other circumstances as permitted by the SEC, including as described below.
Custom Redemptions and Cash-in-lieu
The Fund may, in its sole discretion, permit
or require the substitution of cash-in-lieu to be added to the Cash Component to replace any Redemption Security. The Fund may
permit or require cash-in-lieu when, for example, a Redemption Security may not be available in sufficient quantity for delivery
or may not be eligible for transfer through the systems of DTC or the Clearing Process. Similarly, the Fund may permit or require
cash-in-lieu of Redemption Securities when, for example, the Authorized Participant or its underlying investor is restricted under
U.S. or local securities law or policies from transacting in one or more Redemption Securities. The Fund will comply with the federal
securities laws in satisfying redemptions with Redemption Securities, including that the Redemption Securities are sold in transactions
that would be exempt from registration under the Securities Act. All redemption requests involving cash-in-lieu are considered
to be “Custom Redemptions.”
Redemption Requests
To redeem a Creation Unit, an Authorized Participant
must submit an irrevocable redemption request to the Distributor.
An Authorized Participant submitting a redemption
request is deemed to represent to the Fund that it has ascertained or has reasonable grounds to believe that as of the time of
the contractual settlement date, that (i) it or its customer, as the case may be, owns, will own or have the authority and right
to tender for redemption the Creation Unit to be redeemed and can receive the entire proceeds of the redemption, and (ii) all of
the Shares that are in the Creation Unit to be redeemed have not been borrowed, loaned or pledged to another party nor are they
the subject of a repurchase agreement, securities lending agreement or such other arrangement that would preclude the delivery
of such Shares to the Fund on the contractual settlement date. The Fund reserves the absolute right, in its sole discretion, to
verify these representations, but will typically require verification in connection with higher levels of redemption activity and/or
short interest in the Fund. If the Authorized Participant, upon receipt of a verification request, does not provide sufficient
verification of the requested representations, the redemption request will not be considered to be in proper form and may be rejected
by the Fund.
Timing of Submission of Redemption Requests
An Authorized Participant must submit an irrevocable
redemption order no later than the Cut-off Time. The Cut-off Time for Custom Orders is generally two hours earlier. The Business
Day the order is deemed received by the Distributor is referred to as the “Transmittal Date.” A redemption request
is deemed received if (i) such order is received by the Distributor by the Cut-off Time on such day and (ii) all other procedures
set forth in the Participant Agreement are properly followed. Persons placing or effectuating Custom Redemptions and/or orders
involving cash should be mindful of time deadlines imposed by intermediaries, such as DTC and/or the Federal Reserve System, which
may impact the successful processing of such orders to ensure that cash and securities are transferred by the Settlement Date,
as defined above.
Requests Using the Clearing Process
If available, (portions of) redemption requests
may be settled through the Clearing Process. In connection with such orders, the Distributor transmits on behalf of the Authorized
Participant, such trade instructions as are necessary to effect the redemption. Pursuant to such trade instructions, the Authorized
Participant agrees to deliver the requisite
Creation Unit(s) to the Fund, together with
such additional information as may be required by the Distributor. Cash Components will be delivered using either the Clearing
Process or the Federal Reserve System, as described above.
Requests Outside the Clearing Process
If the Clearing Process is not available for
(portions of) an order, Redemption Baskets will be delivered outside the Clearing Process. Orders outside the Clearing Process
must state that the DTC Participant is not using the Clearing Process and that the redemption will be effected through DTC. The
Authorized Participant must transfer or cause to be transferred the Creation Unit(s) of shares being redeemed through the book-entry
system of DTC so as to be delivered through DTC to the Custodian by 10:00 a.m., Eastern Time, on received T+1. In addition, the
Cash Component must be received by the Custodian by 12:00 p.m., Eastern Time, on T+1. If the Custodian does not receive the Creation
Unit(s) and Cash Component by the appointed times on T+1, the redemption will be rejected, except in the circumstances described
below. A rejected redemption request may be resubmitted the following Business Day.
Orders involving foreign Redemption Securities
are expected to be settled outside the Clearing Process. Thus, upon receipt of an irrevocable redemption request, the Distributor
will notify the Adviser and the Custodian. The Custodian will then provide information of the redemption to the Fund’s local
sub-custodian(s). The redeeming Authorized Participant, or the investor on whose behalf is acting, will have established appropriate
arrangements with a broker-dealer, bank or other custody provider in each jurisdiction in which the Redemption Securities are customarily
traded and to which such Redemption Securities (and any cash-in-lieu) can be delivered from the Fund’s accounts at the applicable
local sub-custodian(s).
Acceptance of Redemption Requests
All questions as to the number of shares of
each security in the Deposit Securities and the validity, form, eligibility and acceptance for deposit of any securities to be
delivered shall be determined by the Trust. The Trust’s determination shall be final and binding.
Delivery of Redemption Basket
Once the Fund has accepted a redemption request,
upon next determination of such Fund’s NAV, the Fund will confirm the issuance of a Redemption Basket, against receipt of
the Creation Unit(s) at such NAV, any cash-in-lieu and Transaction Fee. A Creation Unit tendered for redemption and the payment
of the Cash Component, any cash-in-lieu and Transaction Fee will be effected through DTC. The Authorized Participant, or the investor
on whose behalf it is acting, will be recorded on the book-entry system of DTC.
The Redemption Basket will generally be delivered
to the redeeming Authorized Participant within T+2. Except under the circumstances described below, however, a Redemption Basket
generally will not be issued until the Creation Unit(s) are delivered to the Fund, along with the Cash Component, any cash-in-lieu
and Transaction Fee.
In certain cases, Authorized Participants will
create and redeem Creation Units on the same trade date. In these instances, the Trust reserves the right to settle these transactions
on a net basis.
With respect to orders involving foreign Redemption
Securities, the Fund may settle Creation Unit transactions on a basis other than T+2 in order to accommodate foreign market holiday
schedules, to account for different treatment among foreign and U.S. markets of dividend record dates and ex-dividend dates (that
is the last day the holder of a security can sell the security and still receive dividends payable on the security), and in certain
other circumstances. When a relevant local market is closed due to local market holidays, the local market settlement process will
not commence until the end of the local holiday period. Listed below are the dates in calendar year 2019 in which the regular holidays
in non-U.S. markets may impact Fund settlement. This list is based on information available to the Fund. The list may not be accurate
or complete and is subject to change:
Market
|
Holiday Date
|
Holiday Name
|
Argentina
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Argentina
|
Monday, February 24, 2020
|
Carnival
|
Argentina
|
Tuesday, February 25, 2020
|
Carnival
|
Argentina
|
Monday, March 23, 2020
|
Bridge Holiday for Tourism
|
Argentina
|
Tuesday, March 24, 2020
|
Memorial Day
|
Argentina
|
Thursday, April 02, 2020
|
Malvinas Islands Memorial Day
|
Argentina
|
Thursday, April 09, 2020
|
Holy Thursday
|
Argentina
|
Friday, April 10, 2020
|
Good Friday
|
Argentina
|
Friday, May 01, 2020
|
Labour Day
|
Argentina
|
Monday, May 25, 2020
|
May Revolution's Day
|
Argentina
|
Monday, June 15, 2020
|
Martin Miguel Guemes Memorial
|
Argentina
|
Thursday, July 09, 2020
|
Independence Day
|
Argentina
|
Friday, July 10, 2020
|
Bridge Holiday for Tourism
|
Argentina
|
Monday, August 17, 2020
|
San Martin's Memorial Day
|
Argentina
|
Monday, October 12, 2020
|
Respect to Cultural Diversity
|
Argentina
|
Friday, November 06, 2020
|
Banking Labor Day
|
Argentina
|
Monday, November 23, 2020
|
Day of National Sovereignty
|
Argentina
|
Monday, December 07, 2020
|
Bridge Holiday for Tourism
|
Argentina
|
Tuesday, December 08, 2020
|
Virgin Mary's Day
|
Argentina
|
Friday, December 25, 2020
|
Christmas Day
|
Australia
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Australia
|
Friday, April 10, 2020
|
Good Friday
|
Australia
|
Monday, April 13, 2020
|
Easter Monday
|
Australia
|
Thursday, December 24, 2020
|
Christmas Eve
|
Australia
|
Friday, December 25, 2020
|
Christmas Day
|
Australia
|
Thursday, December 31, 2020
|
New Year’s Eve
|
Austria
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Austria
|
Monday, January 06, 2020
|
Epiphany Day
|
Austria
|
Friday, April 10, 2020
|
Good Friday
|
Austria
|
Monday, April 13, 2020
|
Easter Monday
|
Austria
|
Friday, May 01, 2020
|
Labour Day
|
Austria
|
Thursday, May 21, 2020
|
Ascension Day
|
Austria
|
Monday, June 01, 2020
|
Whit Monday
|
Austria
|
Thursday, June 11, 2020
|
Corpus Christi Day
|
Austria
|
Monday, October 26, 2020
|
National Holiday
|
Austria
|
Tuesday, December 08, 2020
|
Immaculate Conception
|
Austria
|
Thursday, December 24, 2020
|
Christmas Eve
|
Austria
|
Friday, December 25, 2020
|
Christmas Day
|
Austria
|
Thursday, December 31, 2020
|
New Year’s Eve
|
Bahrain
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Bahrain
|
Sunday, May 03, 2020
|
Labour Day
|
Bahrain
|
Sunday, May 24, 2020
|
Eid al-Fitr
|
Bahrain
|
Monday, May 25, 2020
|
Eid al-Fitr
|
Bahrain
|
Thursday, July 30, 2020
|
Eid al-Adha
|
Bahrain
|
Friday, July 31, 2020
|
Eid al-Adha
|
Bahrain
|
Wednesday, December 16, 2020
|
National Day
|
Bahrain
|
Thursday, December 17, 2020
|
National Day
|
Belgium
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Belgium
|
Friday, April 10, 2020
|
Good Friday
|
Belgium
|
Monday, April 13, 2020
|
Easter Monday
|
Belgium
|
Friday, May 01, 2020
|
Labour Day
|
Belgium
|
Friday, December 25, 2020
|
Christmas Day
|
Bermuda
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Bermuda
|
Friday, April 10, 2020
|
Good Friday
|
Bermuda
|
Monday, May 25, 2020
|
Bermuda Day
|
Bermuda
|
Monday, June 15, 2020
|
National Heroes' Day
|
Bermuda
|
Thursday, July 30, 2020
|
Emancipation and Somers Day
|
Bermuda
|
Friday, July 31, 2020
|
Emancipation and Somers Day
|
Bermuda
|
Monday, September 07, 2020
|
Labour Day
|
Bermuda
|
Wednesday, November 11, 2020
|
Remembrance Day
|
Bermuda
|
Friday, December 25, 2020
|
Christmas Day
|
Bermuda
|
Monday, December 28, 2020
|
Boxing Day (Observed)
|
Bosnia-Herzegovina
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Bosnia-Herzegovina
|
Thursday, January 02, 2020
|
New Year’s Holiday
|
Bosnia-Herzegovina
|
Tuesday, January 07, 2020
|
Orthodox Christmas
|
Bosnia-Herzegovina
|
Thursday, January 09, 2020
|
Republic Day
|
Bosnia-Herzegovina
|
Monday, April 13, 2020
|
Easter Monday
|
Bosnia-Herzegovina
|
Friday, April 17, 2020
|
Orthodox Good Friday
|
Bosnia-Herzegovina
|
Monday, April 20, 2020
|
Orthodox Easter Monday
|
Bosnia-Herzegovina
|
Friday, May 01, 2020
|
Labour Day
|
Bosnia-Herzegovina
|
Monday, May 25, 2020
|
Eid-al-Fitr/Ramadan
|
Bosnia-Herzegovina
|
Friday, July 31, 2020
|
Eid-al-Adha/Hajj
|
Bosnia-Herzegovina
|
Saturday, November 21, 2020
|
Dayton Peace Agreement Day
|
Bosnia-Herzegovina
|
Wednesday, November 25, 2020
|
Statehood Day
|
Bosnia-Herzegovina
|
Friday, December 25, 2020
|
Christmas Day
|
Botswana
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Botswana
|
Friday, April 10, 2020
|
Good Friday
|
Botswana
|
Monday, April 13, 2020
|
Easter Monday
|
Botswana
|
Friday, May 01, 2020
|
Labour Day
|
Botswana
|
Thursday, May 21, 2020
|
Ascension Day
|
Botswana
|
Wednesday, July 01, 2020
|
Sir Seretse Khama Day
|
Botswana
|
Monday, July 20, 2020
|
Presidents' Day
|
Botswana
|
Tuesday, July 21, 2020
|
Presidents' Day
|
Botswana
|
Wednesday, September 30, 2020
|
Independence Day
|
Botswana
|
Friday, December 25, 2020
|
Christmas Day
|
Bulgaria
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Bulgaria
|
Tuesday, March 03, 2020
|
Liberation Day
|
Bulgaria
|
Friday, April 17, 2020
|
Good Friday
|
Bulgaria
|
Monday, April 20, 2020
|
Easter Monday
|
Bulgaria
|
Friday, May 01, 2020
|
Labour Day
|
Bulgaria
|
Wednesday, May 06, 2020
|
Saint George's Day
|
Bulgaria
|
Monday, May 25, 2020
|
Culture and Literacy Day
|
Bulgaria
|
Monday, September 07, 2020
|
Unification Day
|
Bulgaria
|
Tuesday, September 22, 2020
|
Independence Day
|
Bulgaria
|
Thursday, December 24, 2020
|
Christmas Eve
|
Bulgaria
|
Friday, December 25, 2020
|
Christmas Day
|
Canada
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Canada
|
Monday, February 17, 2020
|
Family Day
|
Canada
|
Friday, April 10, 2020
|
Good Friday
|
Canada
|
Monday, May 18, 2020
|
Victoria Day
|
Canada
|
Wednesday, July 01, 2020
|
Canada Day
|
Canada
|
Monday, August 03, 2020
|
Civic Holiday
|
Canada
|
Monday, September 07, 2020
|
Labour Day
|
Canada
|
Monday, October 12, 2020
|
Thanksgiving Day
|
Canada
|
Wednesday, November 11, 2020
|
Remembrance Day
|
Canada
|
Friday, December 25, 2020
|
Christmas Day
|
Canada
|
Monday, December 28, 2020
|
Boxing Day (Observed)
|
Chile
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Chile
|
Friday, April 10, 2020
|
Good Friday
|
Chile
|
Friday, May 01, 2020
|
Labour Day
|
Chile
|
Thursday, May 21, 2020
|
Navy Day
|
Chile
|
Monday, June 29, 2020
|
St. Peter and St. Paul Dinner
|
Chile
|
Thursday, July 16, 2020
|
Our Lady of Mount Carmel
|
Chile
|
Friday, September 18, 2020
|
Independence Day
|
Chile
|
Monday, October 12, 2020
|
Day of the Race
|
Chile
|
Tuesday, December 08, 2020
|
Immaculate Conception
|
Chile
|
Friday, December 25, 2020
|
Christmas Day
|
China
|
Wednesday, January 01, 2020
|
New Year’s Day
|
China
|
Friday, January 24, 2020
|
Chinese New Year
|
China
|
Monday, January 27, 2020
|
Chinese New Year
|
China
|
Tuesday, January 28, 2020
|
Chinese New Year
|
China
|
Wednesday, January 29, 2020
|
Chinese New Year
|
China
|
Thursday, January 30, 2020
|
Chinese New Year
|
China
|
Friday, May 01, 2020
|
Labour Day
|
China
|
Thursday, June 25, 2020
|
Dragon Boat Festival
|
China
|
Friday, June 26, 2020
|
Dragon Boat Festival
|
China
|
Thursday, October 01, 2020
|
National Day Holiday
|
China
|
Friday, October 02, 2020
|
National Day Holiday
|
China
|
Monday, October 05, 2020
|
National Day Holiday
|
China
|
Tuesday, October 06, 2020
|
National Day Holiday
|
China
|
Wednesday, October 07, 2020
|
National Day Holiday
|
Costa Rica
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Costa Rica
|
Thursday, April 09, 2020
|
Holy Thursday
|
Costa Rica
|
Friday, April 10, 2020
|
Good Friday
|
Costa Rica
|
Friday, May 01, 2020
|
Labour Day
|
Costa Rica
|
Tuesday, September 15, 2020
|
Independence Day
|
Costa Rica
|
Monday, October 12, 2020
|
Culture Encounter Day
|
Costa Rica
|
Friday, December 25, 2020
|
Christmas Day
|
Croatia
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Croatia
|
Monday, January 06, 2020
|
Epiphany Day
|
Croatia
|
Friday, April 10, 2020
|
Good Friday
|
Croatia
|
Monday, April 13, 2020
|
Easter Monday
|
Croatia
|
Friday, May 01, 2020
|
Labour Day
|
Croatia
|
Thursday, June 11, 2020
|
Corpus Christi Day
|
Croatia
|
Monday, June 22, 2020
|
Day of Antifascist Struggle
|
Croatia
|
Thursday, June 25, 2020
|
Statehood Day
|
Croatia
|
Wednesday, August 05, 2020
|
Victory and Homeland Day
|
Croatia
|
Thursday, October 08, 2020
|
Independence Day
|
Croatia
|
Thursday, December 24, 2020
|
Christmas Eve
|
Croatia
|
Friday, December 25, 2020
|
Christmas Day
|
Croatia
|
Thursday, December 31, 2020
|
New Year’s Eve
|
Cyprus
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Cyprus
|
Wednesday, March 11, 2020
|
Green Monday
|
Cyprus
|
Wednesday, March 25, 2020
|
Greek Independence Day
|
Cyprus
|
Wednesday, April 01, 2020
|
Cyprus National Day
|
Cyprus
|
Friday, April 10, 2020
|
Good Friday
|
Cyprus
|
Monday, April 13, 2020
|
Easter Monday
|
Cyprus
|
Friday, April 17, 2020
|
Orthodox Good Friday
|
Cyprus
|
Monday, April 20, 2020
|
Orthodox Easter Monday
|
Cyprus
|
Tuesday, April 21, 2020
|
Orthodox Easter Tuesday
|
Cyprus
|
Friday, May 01, 2020
|
Labour Day
|
Cyprus
|
Monday, June 08, 2020
|
Pentecost
|
Cyprus
|
Thursday, June 25, 2020
|
Public Holiday
|
Cyprus
|
Thursday, October 01, 2020
|
Independence Day
|
Cyprus
|
Wednesday, October 28, 2020
|
Greek National Day
|
Cyprus
|
Thursday, December 24, 2020
|
Christmas Eve
|
Cyprus
|
Friday, December 25, 2020
|
Christmas Day
|
Czech Republic
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Czech Republic
|
Friday, April 10, 2020
|
Good Friday
|
Czech Republic
|
Monday, April 13, 2020
|
Easter Monday
|
Czech Republic
|
Friday, May 01, 2020
|
May Day
|
Czech Republic
|
Thursday, December 24, 2020
|
Christmas Eve
|
Czech Republic
|
Friday, December 25, 2020
|
Christmas Day
|
Denmark
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Denmark
|
Friday, April 10, 2020
|
Good Friday
|
Denmark
|
Monday, April 13, 2020
|
Easter Monday
|
Denmark
|
Friday, May 01, 2020
|
May Day
|
Denmark
|
Monday, June 01, 2020
|
Whit Monday
|
Denmark
|
Thursday, December 24, 2020
|
Christmas Eve
|
Denmark
|
Friday, December 25, 2020
|
Christmas Day
|
Eswatini
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Eswatini
|
Friday, April 10, 2020
|
Good Friday
|
Eswatini
|
Monday, April 13, 2020
|
Easter Monday
|
Eswatini
|
Monday, April 20, 2020
|
King's Birthday Holiday
|
Eswatini
|
Friday, May 01, 2020
|
Women's Day
|
Eswatini
|
Thursday, May 21, 2020
|
Ascension Day
|
Eswatini
|
Wednesday, July 22, 2020
|
King Father's Birthday
|
Eswatini
|
Monday, September 07, 2020
|
Somhlolo Day Holiday
|
Eswatini
|
Friday, December 25, 2020
|
Christmas Day
|
Eswatini
|
Monday, December 28, 2020
|
Incwala Day
|
France
|
Wednesday, January 01, 2020
|
New Year’s Day
|
France
|
Friday, April 10, 2020
|
Good Friday
|
France
|
Monday, April 13, 2020
|
Easter Monday
|
France
|
Friday, May 01, 2020
|
Labour Day
|
France
|
Friday, December 25, 2020
|
Christmas Day
|
Germany
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Germany
|
Friday, April 10, 2020
|
Good Friday
|
Germany
|
Monday, April 13, 2020
|
Easter Monday
|
Germany
|
Friday, May 01, 2020
|
Labour Day
|
Germany
|
Thursday, May 21, 2020
|
Ascension Day
|
Germany
|
Monday, June 01, 2020
|
Whit Monday
|
Germany
|
Thursday, June 11, 2020
|
Corpus Christi Day
|
Germany
|
Thursday, December 24, 2020
|
Christmas Eve
|
Germany
|
Friday, December 25, 2020
|
Christmas Day
|
Germany
|
Thursday, December 31, 2020
|
New Year’s Eve
|
Ghana
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Ghana
|
Friday, March 06, 2020
|
Independence Day
|
Ghana
|
Friday, April 10, 2020
|
Good Friday
|
Ghana
|
Monday, April 13, 2020
|
Easter Monday
|
Ghana
|
Friday, May 01, 2020
|
May Day
|
Ghana
|
Sunday, May 24, 2020
|
Eid al-Fitr
|
Ghana
|
Monday, May 25, 2020
|
Africa Unity Day
|
Ghana
|
Wednesday, July 01, 2020
|
Republic Day
|
Ghana
|
Friday, July 31, 2020
|
Eid al-Adha
|
Ghana
|
Tuesday, August 04, 2020
|
Founders Day
|
Ghana
|
Monday, September 21, 2020
|
Memorial Day
|
Ghana
|
Friday, December 04, 2020
|
Farmers' Day
|
Ghana
|
Friday, December 25, 2020
|
Christmas Day
|
Greece
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Greece
|
Monday, January 06, 2020
|
Epiphany Day
|
Greece
|
Monday, March 02, 2020
|
Ash Monday
|
Greece
|
Wednesday, March 25, 2020
|
Independence Day
|
Greece
|
Friday, April 10, 2020
|
Good Friday
|
Greece
|
Monday, April 13, 2020
|
Easter Monday
|
Greece
|
Friday, April 17, 2020
|
Orthodox Good Friday
|
Greece
|
Monday, April 20, 2020
|
Orthodox Easter Monday
|
Greece
|
Friday, May 01, 2020
|
Labour Day
|
Greece
|
Monday, June 01, 2020
|
Whit Monday
|
Greece
|
Wednesday, October 28, 2020
|
National Holiday
|
Greece
|
Thursday, December 24, 2020
|
Christmas Eve
|
Greece
|
Friday, December 25, 2020
|
Christmas Day
|
Hong Kong SAR
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Hong Kong SAR
|
Friday, January 24, 2020
|
Lunar New Year
|
Hong Kong SAR
|
Monday, January 27, 2020
|
Lunar New Year
|
Hong Kong SAR
|
Tuesday, January 28, 2020
|
Lunar New Year
|
Hong Kong SAR
|
Wednesday, January 29, 2020
|
Chinese New Year
|
Hong Kong SAR
|
Thursday, January 30, 2020
|
Chinese New Year
|
Hong Kong SAR
|
Friday, April 10, 2020
|
Good Friday
|
Hong Kong SAR
|
Monday, April 13, 2020
|
Easter Monday
|
Hong Kong SAR
|
Thursday, April 30, 2020
|
Buddha Birthday
|
Hong Kong SAR
|
Friday, May 01, 2020
|
Labour Day
|
Hong Kong SAR
|
Thursday, June 25, 2020
|
Tuen Ng Festival
|
Hong Kong SAR
|
Wednesday, July 01, 2020
|
Holiday
|
Hong Kong SAR
|
Thursday, October 01, 2020
|
National Day
|
Hong Kong SAR
|
Friday, October 02, 2020
|
Mid-Autumn Festival
|
Hong Kong SAR
|
Monday, October 05, 2020
|
National Day Holiday
|
Hong Kong SAR
|
Tuesday, October 06, 2020
|
National Day Holiday
|
Hong Kong SAR
|
Wednesday, October 07, 2020
|
National Day Holiday
|
Hong Kong SAR
|
Monday, October 26, 2020
|
Chung Yeung Festival
|
Hong Kong SAR
|
Thursday, December 24, 2020
|
Christmas Eve
|
Hong Kong SAR
|
Friday, December 25, 2020
|
Christmas Day
|
Hong Kong SAR
|
Thursday, December 31, 2020
|
New Year’s Eve
|
Hungary
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Hungary
|
Friday, April 10, 2020
|
Good Friday
|
Hungary
|
Monday, April 13, 2020
|
Easter Monday
|
Hungary
|
Friday, May 01, 2020
|
Labour Day
|
Hungary
|
Monday, June 01, 2020
|
Whit Monday
|
Hungary
|
Thursday, August 20, 2020
|
Saint Stephen's Day
|
Hungary
|
Friday, August 21, 2020
|
Bridge Holiday
|
Hungary
|
Friday, October 23, 2020
|
Anniversary of 1956 Revolution
|
Hungary
|
Thursday, December 24, 2020
|
Christmas Eve
|
Hungary
|
Friday, December 25, 2020
|
Christmas Day
|
Hungary
|
Thursday, December 31, 2020
|
New Year’s Eve
|
Iceland
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Iceland
|
Thursday, April 09, 2020
|
Maundy Thursday
|
Iceland
|
Friday, April 10, 2020
|
Good Friday
|
Iceland
|
Monday, April 13, 2020
|
Easter Monday
|
Iceland
|
Thursday, April 23, 2020
|
First Day of Summer
|
Iceland
|
Friday, May 01, 2020
|
Labour Day
|
Iceland
|
Thursday, May 21, 2020
|
Ascension Day
|
Iceland
|
Monday, June 01, 2020
|
Whit Monday
|
Iceland
|
Wednesday, June 17, 2020
|
Independence Day
|
Iceland
|
Monday, August 03, 2020
|
Commerce Day
|
Iceland
|
Thursday, December 24, 2020
|
Christmas Eve
|
Iceland
|
Friday, December 25, 2020
|
Christmas Day
|
Iceland
|
Thursday, December 31, 2020
|
New Year’s Eve
|
Indonesia
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Indonesia
|
Wednesday, March 25, 2020
|
Day of Silence
|
Indonesia
|
Friday, April 10, 2020
|
Good Friday
|
Indonesia
|
Friday, May 01, 2020
|
Labour Day
|
Indonesia
|
Thursday, May 07, 2020
|
Vesak Day
|
Indonesia
|
Thursday, May 21, 2020
|
Ascension Day
|
Indonesia
|
Friday, May 22, 2020
|
Holiday
|
Indonesia
|
Monday, May 25, 2020
|
Holiday
|
Indonesia
|
Monday, June 01, 2020
|
Birth of Pancasila
|
Indonesia
|
Friday, July 31, 2020
|
Holiday
|
Indonesia
|
Monday, August 17, 2020
|
Independence Day
|
Indonesia
|
Thursday, August 20, 2020
|
Islamic New Year
|
Indonesia
|
Thursday, October 29, 2020
|
Prophet Muhammad's Birthday
|
Indonesia
|
Thursday, December 24, 2020
|
Christmas Eve
|
Indonesia
|
Friday, December 25, 2020
|
Christmas Day
|
Ireland
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Ireland
|
Friday, April 10, 2020
|
Good Friday
|
Ireland
|
Monday, April 13, 2020
|
Easter Monday
|
Ireland
|
Friday, May 01, 2020
|
May Day
|
Ireland
|
Monday, June 01, 2020
|
Holiday
|
Ireland
|
Friday, December 25, 2020
|
Christmas Day
|
Italy
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Italy
|
Friday, April 10, 2020
|
Good Friday
|
Italy
|
Monday, April 13, 2020
|
Easter Monday
|
Italy
|
Friday, May 01, 2020
|
Labour Day
|
Italy
|
Thursday, December 24, 2020
|
Christmas Eve
|
Italy
|
Friday, December 25, 2020
|
Christmas Day
|
Italy
|
Thursday, December 31, 2020
|
New Year’s Eve
|
Ivory Coast
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Ivory Coast
|
Monday, April 13, 2020
|
Easter Monday
|
Ivory Coast
|
Friday, May 01, 2020
|
Labour Day
|
Ivory Coast
|
Wednesday, May 20, 2020
|
Revelation of Quran
|
Ivory Coast
|
Thursday, May 21, 2020
|
Ascension Day
|
Ivory Coast
|
Sunday, May 24, 2020
|
Korite
|
Ivory Coast
|
Monday, June 01, 2020
|
Whit Monday
|
Ivory Coast
|
Friday, July 31, 2020
|
Tabaski
|
Ivory Coast
|
Friday, August 07, 2020
|
Independence Day
|
Ivory Coast
|
Saturday, August 15, 2020
|
Assumption Day
|
Ivory Coast
|
Thursday, October 29, 2020
|
Prophet’s Birthday
|
Ivory Coast
|
Sunday, November 01, 2020
|
All Saints' Day
|
Ivory Coast
|
Sunday, November 15, 2020
|
National Peace Day
|
Ivory Coast
|
Friday, December 25, 2020
|
Christmas Day
|
Japan
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Japan
|
Thursday, January 02, 2020
|
Bank Holiday
|
Japan
|
Friday, January 03, 2020
|
Bank Holiday
|
Japan
|
Monday, January 13, 2020
|
Coming-of-Age Day
|
Japan
|
Tuesday, February 11, 2020
|
National Foundation Day
|
Japan
|
Monday, February 24, 2020
|
Emperor's Birthday Observed
|
Japan
|
Friday, March 20, 2020
|
Vernal Equinox Day
|
Japan
|
Wednesday, April 29, 2020
|
Showa Day
|
Japan
|
Monday, May 04, 2020
|
Greenery Day
|
Japan
|
Tuesday, May 05, 2020
|
Children's Day
|
Japan
|
Wednesday, May 06, 2020
|
Memorial Day Observed
|
Japan
|
Thursday, July 23, 2020
|
Marine Day
|
Japan
|
Friday, July 24, 2020
|
Health and Sports Day
|
Japan
|
Monday, August 10, 2020
|
Mountain Day
|
Japan
|
Monday, September 21, 2020
|
Respect for the Aged Day
|
Japan
|
Tuesday, September 22, 2020
|
Autumnal Equinox Day
|
Japan
|
Tuesday, November 03, 2020
|
Culture Day
|
Japan
|
Monday, November 23, 2020
|
Labor Thanksgiving Day
|
Japan
|
Thursday, December 31, 2020
|
Bank Holiday
|
Jordan
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Jordan
|
Friday, May 01, 2020
|
Labour Day
|
Jordan
|
Sunday, May 24, 2020
|
Eid al-Fitr
|
Jordan
|
Monday, May 25, 2020
|
Independence Day
|
Jordan
|
Tuesday, May 26, 2020
|
Eid al-Fitr
|
Jordan
|
Wednesday, May 27, 2020
|
Eid al-Fitr
|
Jordan
|
Friday, July 31, 2020
|
Eid al-Adha
|
Jordan
|
Sunday, August 02, 2020
|
Eid al-Adha
|
Jordan
|
Monday, August 03, 2020
|
Eid al-Adha
|
Jordan
|
Tuesday, August 04, 2020
|
Eid al-Adha
|
Jordan
|
Thursday, August 20, 2020
|
Muharram/New Year
|
Jordan
|
Thursday, October 29, 2020
|
Prophet’s Birthday
|
Jordan
|
Friday, December 25, 2020
|
Christmas Day
|
Kenya
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Kenya
|
Friday, April 10, 2020
|
Good Friday
|
Kenya
|
Monday, April 13, 2020
|
Easter Monday
|
Kenya
|
Friday, May 01, 2020
|
Labour Day
|
Kenya
|
Monday, May 25, 2020
|
Eid al-Fitr
|
Kenya
|
Monday, June 01, 2020
|
Madaraka Day
|
Kenya
|
Friday, July 31, 2020
|
Eid al-Adha
|
Kenya
|
Saturday, October 10, 2020
|
Moi Day
|
Kenya
|
Tuesday, October 20, 2020
|
Mashujaa Day
|
Kenya
|
Saturday, December 12, 2020
|
Jamhuri Day
|
Kenya
|
Friday, December 25, 2020
|
Christmas Day
|
Kuwait
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Kuwait
|
Tuesday, February 25, 2020
|
National Day
|
Kuwait
|
Wednesday, February 26, 2020
|
Liberation Day
|
Kuwait
|
Sunday, March 22, 2020
|
Isra and Miraj holiday
|
Kuwait
|
Sunday, May 24, 2020
|
Eid al-Fitr
|
Kuwait
|
Monday, May 25, 2020
|
Eid al-Fitr
|
Kuwait
|
Tuesday, May 26, 2020
|
Eid al-Fitr
|
Kuwait
|
Thursday, July 30, 2020
|
Waqfat Arafat
|
Kuwait
|
Sunday, August 02, 2020
|
Eid al-Adha
|
Kuwait
|
Monday, August 03, 2020
|
Eid al-Adha
|
Kuwait
|
Thursday, August 20, 2020
|
Islamic New Year holiday
|
Kuwait
|
Sunday, November 01, 2020
|
Prophet’s Birthday
|
Luxembourg
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Luxembourg
|
Friday, April 10, 2020
|
Good Friday
|
Luxembourg
|
Monday, April 13, 2020
|
Easter Monday
|
Luxembourg
|
Friday, May 01, 2020
|
Labour Day
|
Luxembourg
|
Thursday, December 24, 2020
|
Christmas Eve
|
Luxembourg
|
Friday, December 25, 2020
|
Christmas Day
|
Luxembourg
|
Thursday, December 31, 2020
|
New Year’s Eve
|
Malaysia
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Malaysia
|
Friday, May 01, 2020
|
Women's Day
|
Malaysia
|
Thursday, May 07, 2020
|
Wesak Day
|
Malaysia
|
Monday, May 25, 2020
|
Eid-ul-Fitri
|
Malaysia
|
Friday, July 31, 2020
|
Eid-ul-Adha
|
Malaysia
|
Thursday, August 20, 2020
|
Holiday
|
Malaysia
|
Monday, August 31, 2020
|
National Day
|
Malaysia
|
Wednesday, September 16, 2020
|
Malaysia Day
|
Malaysia
|
Thursday, October 29, 2020
|
Prophet’s Birthday
|
Malaysia
|
Friday, December 25, 2020
|
Christmas Day
|
Mauritius
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Mauritius
|
Thursday, January 02, 2020
|
New Year’s Holiday
|
Mauritius
|
Friday, February 21, 2020
|
Maha Shivaratree
|
Mauritius
|
Thursday, March 12, 2020
|
Independence Day
|
Mauritius
|
Wednesday, March 25, 2020
|
Ugaadi
|
Mauritius
|
Friday, May 01, 2020
|
Labour Day
|
Mauritius
|
Monday, November 02, 2020
|
Indentured Labourers
|
Mauritius
|
Friday, December 25, 2020
|
Christmas Day
|
Mexico
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Mexico
|
Monday, February 03, 2020
|
Constitution Day
|
Mexico
|
Monday, March 16, 2020
|
Benito Juarez Day
|
Mexico
|
Thursday, April 09, 2020
|
Holy Thursday
|
Mexico
|
Friday, April 10, 2020
|
Good Friday
|
Mexico
|
Friday, May 01, 2020
|
Labour Day
|
Mexico
|
Wednesday, September 16, 2020
|
Independence Day
|
Mexico
|
Monday, November 02, 2020
|
All Souls Day
|
Mexico
|
Monday, November 16, 2020
|
Revolution Day
|
Mexico
|
Friday, December 25, 2020
|
Christmas Day
|
Namibia
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Namibia
|
Friday, April 10, 2020
|
Good Friday
|
Namibia
|
Monday, April 13, 2020
|
Easter Monday
|
Namibia
|
Friday, May 01, 2020
|
Women's Day
|
Namibia
|
Monday, May 04, 2020
|
Cassinga Day
|
Namibia
|
Thursday, May 21, 2020
|
Ascension Day
|
Namibia
|
Monday, May 25, 2020
|
Africa Day
|
Namibia
|
Wednesday, August 26, 2020
|
Heroes Day
|
Namibia
|
Thursday, December 10, 2020
|
Women's Day
|
Namibia
|
Friday, December 25, 2020
|
Christmas Day
|
Netherlands
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Netherlands
|
Friday, April 10, 2020
|
Good Friday
|
Netherlands
|
Monday, April 13, 2020
|
Easter Monday
|
Netherlands
|
Friday, May 01, 2020
|
Labour Day
|
Netherlands
|
Friday, December 25, 2020
|
Christmas Day
|
New Zealand
|
Wednesday, January 01, 2020
|
New Year’s Day
|
New Zealand
|
Thursday, January 02, 2020
|
New Year’s Holiday
|
New Zealand
|
Monday, January 20, 2020
|
Wellington Anniversary Day
|
New Zealand
|
Monday, January 27, 2020
|
Auckland Anniversary Day
|
New Zealand
|
Thursday, February 06, 2020
|
Waitangi Day
|
New Zealand
|
Friday, April 10, 2020
|
Good Friday
|
New Zealand
|
Monday, April 13, 2020
|
Easter Monday
|
New Zealand
|
Monday, April 27, 2020
|
ANZAC Day Observed
|
New Zealand
|
Monday, June 01, 2020
|
Queen's Birthday
|
New Zealand
|
Monday, October 26, 2020
|
Labour Day
|
New Zealand
|
Friday, December 25, 2020
|
Christmas Day
|
New Zealand
|
Monday, December 28, 2020
|
Boxing Day (Observed)
|
Nigeria
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Nigeria
|
Friday, April 10, 2020
|
Good Friday
|
Nigeria
|
Monday, April 13, 2020
|
Easter Monday
|
Nigeria
|
Friday, May 01, 2020
|
Labour Day
|
Nigeria
|
Monday, May 25, 2020
|
Id el Fitri Holiday
|
Nigeria
|
Friday, June 12, 2020
|
Democracy Day
|
Nigeria
|
Friday, July 31, 2020
|
Id el Kabir
|
Nigeria
|
Thursday, October 01, 2020
|
National Day
|
Nigeria
|
Thursday, October 29, 2020
|
Id el Maulud
|
Nigeria
|
Friday, December 25, 2020
|
Christmas Day
|
Oman
|
Sunday, May 24, 2020
|
Eid al-Fitr
|
Oman
|
Monday, May 25, 2020
|
Eid al-Fitr
|
Oman
|
Tuesday, May 26, 2020
|
Eid al-Fitr
|
Oman
|
Thursday, July 23, 2020
|
Renaissance Day
|
Oman
|
Thursday, July 30, 2020
|
Eid al-Adha
|
Oman
|
Friday, July 31, 2020
|
Eid al-Adha
|
Oman
|
Wednesday, August 19, 2020
|
Islamic New Year
|
Pakistan
|
Wednesday, February 05, 2020
|
Kashmir Day
|
Pakistan
|
Monday, March 23, 2020
|
Pakistan Day
|
Pakistan
|
Friday, May 01, 2020
|
Labour Day
|
Pakistan
|
Monday, May 25, 2020
|
Eid al-Fitr
|
Pakistan
|
Tuesday, May 26, 2020
|
Eid al-Fitr
|
Pakistan
|
Wednesday, May 27, 2020
|
Eid al-Fitr
|
Pakistan
|
Friday, July 31, 2020
|
Eid al-Adha
|
Pakistan
|
Sunday, August 02, 2020
|
Eid al-Adha
|
Pakistan
|
Friday, August 14, 2020
|
Independence Day
|
Pakistan
|
Friday, August 28, 2020
|
First Day of Ashura
|
Pakistan
|
Thursday, October 29, 2020
|
Eid Milad un-Nabi
|
Pakistan
|
Friday, December 25, 2020
|
Christmas Day
|
Philippines
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Philippines
|
Thursday, April 09, 2020
|
Maundy Thursday
|
Philippines
|
Friday, April 10, 2020
|
Good Friday
|
Philippines
|
Friday, May 01, 2020
|
Labour Day
|
Philippines
|
Friday, June 12, 2020
|
Independence Day
|
Philippines
|
Friday, August 21, 2020
|
Ninoy Aquino Day
|
Philippines
|
Monday, August 31, 2020
|
National Heroes' Day
|
Philippines
|
Monday, November 02, 2020
|
All Saints' Day
|
Philippines
|
Thursday, December 24, 2020
|
Christmas Eve
|
Philippines
|
Friday, December 25, 2020
|
Christmas Day
|
Philippines
|
Wednesday, December 30, 2020
|
Rizal Day
|
Philippines
|
Thursday, December 31, 2020
|
Last Day of the Year
|
Portugal
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Portugal
|
Friday, April 10, 2020
|
Good Friday
|
Portugal
|
Monday, April 13, 2020
|
Easter Monday
|
Portugal
|
Friday, May 01, 2020
|
Labour Day
|
Portugal
|
Friday, December 25, 2020
|
Christmas Day
|
Qatar
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Qatar
|
Tuesday, February 11, 2020
|
Sports Day
|
Qatar
|
Sunday, May 24, 2020
|
Eid al-Fitr
|
Qatar
|
Monday, May 25, 2020
|
Eid al-Fitr
|
Qatar
|
Tuesday, May 26, 2020
|
Eid al-Fitr
|
Qatar
|
Thursday, July 30, 2020
|
Eid al-Adha
|
Qatar
|
Friday, July 31, 2020
|
Eid al-Adha
|
Qatar
|
Saturday, August 01, 2020
|
Eid al-Adha
|
Qatar
|
Friday, December 18, 2020
|
National Day
|
Rwanda
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Rwanda
|
Thursday, January 02, 2020
|
New Year’s Holiday
|
Rwanda
|
Monday, February 03, 2020
|
National Heroes' Day
|
Rwanda
|
Tuesday, April 07, 2020
|
Memorial Day
|
Rwanda
|
Friday, April 10, 2020
|
Good Friday
|
Rwanda
|
Friday, May 01, 2020
|
Labour Day
|
Rwanda
|
Monday, May 25, 2020
|
Eid al-Fitr
|
Rwanda
|
Wednesday, July 01, 2020
|
Independence Day
|
Rwanda
|
Monday, July 06, 2020
|
Liberation Day
|
Rwanda
|
Friday, August 07, 2020
|
Umuganura Day
|
Rwanda
|
Monday, August 17, 2020
|
Holiday
|
Rwanda
|
Friday, December 25, 2020
|
Christmas Day
|
Rwanda
|
Monday, December 28, 2020
|
Boxing Day (Observed)
|
Serbia
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Serbia
|
Thursday, January 02, 2020
|
New Year’s Holiday
|
Serbia
|
Tuesday, January 07, 2020
|
Orthodox Christmas Day
|
Serbia
|
Monday, February 17, 2020
|
Serbia National Day
|
Serbia
|
Friday, April 17, 2020
|
Orthodox Good Friday
|
Serbia
|
Monday, April 20, 2020
|
Orthodox Easter Monday
|
Serbia
|
Friday, May 01, 2020
|
Labour Day
|
Serbia
|
Wednesday, November 11, 2020
|
Armistice Day
|
Serbia
|
Thursday, December 31, 2020
|
New Year’s Eve
|
Singapore
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Singapore
|
Monday, January 27, 2020
|
Chinese New Year
|
Singapore
|
Friday, April 10, 2020
|
Good Friday
|
Singapore
|
Friday, May 01, 2020
|
Labour Day
|
Singapore
|
Thursday, May 07, 2020
|
Vesak Day
|
Singapore
|
Monday, May 25, 2020
|
Hari Raya Puasa
|
Singapore
|
Friday, July 31, 2020
|
Hari Raya Haji
|
Singapore
|
Monday, August 10, 2020
|
National Day
|
Singapore
|
Friday, December 25, 2020
|
Christmas Day
|
Slovenia
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Slovenia
|
Thursday, January 02, 2020
|
New Year’s Holiday
|
Slovenia
|
Friday, April 10, 2020
|
Good Friday
|
Slovenia
|
Monday, April 13, 2020
|
Easter Monday
|
Slovenia
|
Monday, April 27, 2020
|
Holiday
|
Slovenia
|
Friday, May 01, 2020
|
Labour Day
|
Slovenia
|
Thursday, June 25, 2020
|
Statehood Day
|
Slovenia
|
Thursday, December 24, 2020
|
Christmas Eve
|
Slovenia
|
Friday, December 25, 2020
|
Christmas Day
|
Slovenia
|
Thursday, December 31, 2020
|
New Year’s Eve
|
South Africa
|
Wednesday, January 01, 2020
|
New Year’s Day
|
South Africa
|
Friday, April 10, 2020
|
Good Friday
|
South Africa
|
Monday, April 13, 2020
|
Family Day
|
South Africa
|
Monday, April 27, 2020
|
Freedom Day
|
South Africa
|
Friday, May 01, 2020
|
Women's Day
|
South Africa
|
Tuesday, June 16, 2020
|
Youth Day
|
South Africa
|
Monday, August 10, 2020
|
Women's Day
|
South Africa
|
Thursday, September 24, 2020
|
Heritage Day
|
South Africa
|
Wednesday, December 16, 2020
|
Reconciliation Day
|
South Africa
|
Friday, December 25, 2020
|
Christmas Day
|
Spain
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Spain
|
Friday, April 10, 2020
|
Good Friday
|
Spain
|
Monday, April 13, 2020
|
Easter Monday
|
Spain
|
Friday, May 01, 2020
|
Labour Day
|
Spain
|
Thursday, December 24, 2020
|
Christmas Eve
|
Spain
|
Friday, December 25, 2020
|
Christmas Day
|
Spain
|
Thursday, December 31, 2020
|
New Year’s Eve
|
Switzerland
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Switzerland
|
Thursday, January 02, 2020
|
Bank Holiday
|
Switzerland
|
Friday, April 10, 2020
|
Good Friday
|
Switzerland
|
Monday, April 13, 2020
|
Easter Monday
|
Switzerland
|
Friday, May 01, 2020
|
Labour Day
|
Switzerland
|
Thursday, May 21, 2020
|
Ascension Day
|
Switzerland
|
Monday, June 01, 2020
|
Whit Monday
|
Switzerland
|
Friday, December 25, 2020
|
Christmas Day
|
Tanzania
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Tanzania
|
Tuesday, April 07, 2020
|
Karume Day
|
Tanzania
|
Friday, April 10, 2020
|
Good Friday
|
Tanzania
|
Monday, April 13, 2020
|
Easter Monday
|
Tanzania
|
Friday, May 01, 2020
|
Women's Day
|
Tanzania
|
Tuesday, July 07, 2020
|
Saba Saba
|
Tanzania
|
Friday, July 31, 2020
|
Eid al-Adha
|
Tanzania
|
Wednesday, October 14, 2020
|
Mwalimu Nyerere Day
|
Tanzania
|
Thursday, October 29, 2020
|
Maulid
|
Tanzania
|
Wednesday, December 09, 2020
|
Independence Day
|
Tanzania
|
Friday, December 25, 2020
|
Christmas Day
|
Thailand
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Thailand
|
Monday, February 10, 2020
|
Makha Bucha Day (Observed)
|
Thailand
|
Monday, April 06, 2020
|
Memorial Day
|
Thailand
|
Monday, April 13, 2020
|
Songkran Festival
|
Thailand
|
Tuesday, April 14, 2020
|
Songkran Festival
|
Thailand
|
Wednesday, April 15, 2020
|
Songkran Festival
|
Thailand
|
Friday, May 01, 2020
|
Labour Day
|
Thailand
|
Monday, May 04, 2020
|
Coronation Day
|
Thailand
|
Wednesday, May 06, 2020
|
Vesak Day
|
Thailand
|
Wednesday, June 03, 2020
|
Queen Suthida's Birthday
|
Thailand
|
Monday, July 06, 2020
|
Asarnha Bucha Day (Observed)
|
Thailand
|
Tuesday, July 28, 2020
|
H.M. the King's Birthday
|
Thailand
|
Wednesday, August 12, 2020
|
Mother’s Day
|
Thailand
|
Tuesday, October 13, 2020
|
Great Memorial Day
|
Thailand
|
Friday, October 23, 2020
|
Chulalongkorn Day
|
Thailand
|
Monday, December 07, 2020
|
National Day
|
Thailand
|
Thursday, December 10, 2020
|
Constitution Day
|
Thailand
|
Thursday, December 31, 2020
|
New Year’s Eve
|
Tunisia
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Tunisia
|
Tuesday, January 14, 2020
|
Revolution National Day
|
Tunisia
|
Friday, March 20, 2020
|
Independence Day
|
Tunisia
|
Thursday, April 09, 2020
|
Martyrs' Day
|
Tunisia
|
Friday, May 01, 2020
|
Working National Day
|
Tunisia
|
Monday, May 25, 2020
|
Aid El Fitr
|
Tunisia
|
Tuesday, May 26, 2020
|
Aid El Fitr
|
Tunisia
|
Friday, July 31, 2020
|
Aid El Idha
|
Tunisia
|
Thursday, August 13, 2020
|
Women National Day
|
Tunisia
|
Monday, August 31, 2020
|
Islamic New Year
|
Tunisia
|
Thursday, October 15, 2020
|
Evacuation Day
|
Tunisia
|
Thursday, October 29, 2020
|
Prophet’s Birthday
|
Turkey
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Turkey
|
Thursday, April 23, 2020
|
National Sovereignty
|
Turkey
|
Friday, May 01, 2020
|
Labour Day
|
Turkey
|
Tuesday, May 19, 2020
|
Youth and Sports Day
|
Turkey
|
Monday, May 25, 2020
|
Ramadan Holiday
|
Turkey
|
Wednesday, July 15, 2020
|
National Unity Day
|
Turkey
|
Thursday, July 30, 2020
|
Sacrifice Feast
|
Turkey
|
Friday, July 31, 2020
|
Sacrifice Feast
|
Turkey
|
Monday, August 03, 2020
|
Sacrifice Feast
|
Turkey
|
Sunday, August 30, 2020
|
Victory Day
|
Turkey
|
Wednesday, October 28, 2020
|
Republic Day
|
Turkey
|
Thursday, October 29, 2020
|
Republic Day
|
Uganda
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Uganda
|
Friday, April 10, 2020
|
Good Friday
|
Uganda
|
Monday, April 13, 2020
|
Easter Monday
|
Uganda
|
Friday, May 01, 2020
|
Labour Day
|
Uganda
|
Wednesday, June 03, 2020
|
Martyrs' Day
|
Uganda
|
Tuesday, June 09, 2020
|
National Heroes' Day
|
Uganda
|
Friday, July 31, 2020
|
Eid al-Adha
|
Uganda
|
Friday, October 09, 2020
|
Independence Day
|
Uganda
|
Friday, December 25, 2020
|
Christmas Day
|
United Arab Emirates
|
Wednesday, January 01, 2020
|
New Year’s Day
|
United Arab Emirates
|
Sunday, May 24, 2020
|
Eid al-Fitr
|
United Arab Emirates
|
Monday, May 25, 2020
|
Eid al-Fitr
|
United Arab Emirates
|
Tuesday, May 26, 2020
|
Eid al-Fitr
|
United Arab Emirates
|
Friday, July 31, 2020
|
Eid al-Adha
|
United Arab Emirates
|
Sunday, August 02, 2020
|
Eid al-Adha
|
United Arab Emirates
|
Wednesday, December 02, 2020
|
National Day
|
United States
|
Wednesday, January 01, 2020
|
New Year’s Day
|
United States
|
Monday, January 20, 2020
|
Martin Luther King Jr. Day
|
United States
|
Monday, February 17, 2020
|
Washington's Birthday
|
United States
|
Friday, April 10, 2020
|
Good Friday
|
United States
|
Monday, May 25, 2020
|
Memorial Day
|
United States
|
Friday, July 03, 2020
|
Independence Day Eve
|
United States
|
Monday, July 06, 2020
|
Independence Day
|
United States
|
Monday, September 07, 2020
|
Labor Day
|
United States
|
Monday, October 12, 2020
|
Columbus Day
|
United States
|
Wednesday, November 11, 2020
|
Veterans' Day
|
United States
|
Thursday, November 26, 2020
|
Thanksgiving Day
|
United States
|
Friday, November 27, 2020
|
Day After Thanksgiving
|
United States
|
Friday, December 25, 2020
|
Christmas Day
|
Uruguay
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Uruguay
|
Monday, January 06, 2020
|
Children's Day
|
Uruguay
|
Monday, February 24, 2020
|
Carnival Monday
|
Uruguay
|
Tuesday, February 25, 2020
|
Carnival Tuesday
|
Uruguay
|
Thursday, April 09, 2020
|
Holy Thursday
|
Uruguay
|
Friday, April 10, 2020
|
Good Friday
|
Uruguay
|
Friday, May 01, 2020
|
Labour Day
|
Uruguay
|
Monday, May 18, 2020
|
Las Piedras Battle Day
|
Uruguay
|
Friday, June 19, 2020
|
Artigas Day
|
Uruguay
|
Tuesday, August 25, 2020
|
Independence Day
|
Uruguay
|
Monday, October 12, 2020
|
Columbus Day
|
Uruguay
|
Monday, November 02, 2020
|
All Souls Day
|
Uruguay
|
Friday, December 25, 2020
|
Christmas Day
|
Zambia
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Zambia
|
Monday, March 09, 2020
|
International Women's Day
|
Zambia
|
Thursday, March 12, 2020
|
Youth Day
|
Zambia
|
Friday, April 10, 2020
|
Good Friday
|
Zambia
|
Monday, April 13, 2020
|
Easter Monday
|
Zambia
|
Friday, May 01, 2020
|
Labour Day
|
Zambia
|
Monday, May 25, 2020
|
Africa Freedom Day
|
Zambia
|
Monday, July 06, 2020
|
Heroes' Day
|
Zambia
|
Tuesday, July 07, 2020
|
Unity Day
|
Zambia
|
Monday, August 03, 2020
|
Farmers' Day
|
Zambia
|
Friday, December 25, 2020
|
Christmas Day
|
Zimbabwe
|
Wednesday, January 01, 2020
|
New Year’s Day
|
Zimbabwe
|
Friday, February 21, 2020
|
Robert MugabeNationalYouth Day
|
Zimbabwe
|
Thursday, April 09, 2020
|
Holy Thursday
|
Zimbabwe
|
Friday, April 10, 2020
|
Good Friday
|
Zimbabwe
|
Monday, April 13, 2020
|
Good Friday
|
Zimbabwe
|
Friday, May 01, 2020
|
Women's Day
|
Zimbabwe
|
Monday, May 25, 2020
|
Africa Day
|
Zimbabwe
|
Monday, August 10, 2020
|
Heroes' Day
|
Zimbabwe
|
Tuesday, August 11, 2020
|
Defense Forces Day
|
Zimbabwe
|
Tuesday, December 22, 2020
|
Unity Day
|
Zimbabwe
|
Friday, December 25, 2020
|
Christmas Day
|
Cash Redemption Method
When cash redemptions of Creation Units are
available or specified for the Fund, they will be effected in essentially the same manner as in-kind redemptions. In the case of
a cash redemption, the investor will receive the cash equivalent of the Redemption Basket minus any Transaction Fees, as described
above.
TAX STATUS
The following discussion is general in nature
and should not be regarded as an exhaustive presentation of all possible tax ramifications. If an entity or arrangement treated
as a partnership for U.S. federal income tax purposes holds shares of the Fund, the U.S. federal income tax treatment of a partner
in such partnership generally will depend upon the status of the partner and activities of the partnership. All shareholders (and
partners in a partnership that is a shareholder) should consult a qualified tax adviser regarding their investment in the Fund.
The Fund intends to qualify and has elected
to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code, and intends to continue to so
qualify, which requires compliance with certain requirements concerning the sources of its income, diversification of its assets,
and the amount and timing of its distributions to shareholders, as described more fully below. Such qualification does not involve
supervision of management or investment practices or policies by any government agency or bureau. By so qualifying, the Fund should
not be subject to federal income or excise tax on its investment company taxable income or net capital gain, which are distributed
to shareholders in accordance with the applicable timing requirements. Investment company taxable income and net capital gain of
the Fund will be computed in accordance with Section 852 of the Internal Revenue Code.
Investment company taxable income is made up
of dividends and interest less expenses, plus any excess of net short-term capital gains over net long-term capital losses. Net
capital gain (that is, the excess of net long-term capital gains over net-short-term capital losses) for a fiscal year is computed
by taking into account any capital loss carryforward of the Fund. Capital losses incurred in tax years beginning after December
22, 2010 may be carried forward indefinitely and retain the character of the original loss. Capital loss carry forwards are available
to offset future realized capital gains. To the extent that these carry forwards are used to offset future capital gains it is
probable that the amount offset will not be distributed to shareholders.
To be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code, the Fund must, among other things, (a) derive at least 90% of its gross income
from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stocks,
securities or foreign currencies, or other income (including gains from options, futures or forward contracts) derived with respect
to the business of investing in such securities or currencies, and net income from “qualified publicly traded partnerships”
(as defined in Section 851(h) of the Internal Revenue Code), and (b) diversify its holdings so that, at the end of each quarter,
(i) at least 50% of the value of the Fund's total assets is represented by cash and cash items, U.S. government securities and
securities of other regulated investment companies, and other securities (for purposes of this calculation, generally limited in
respect of any one issuer, to an amount not
greater than 5% of the value of the Fund's total assets and 10% of the outstanding voting securities of such issuer) and (ii) not
more than 25% of the value of the Fund’s total assets is invested in the securities (other than U.S. government securities
or the securities of other regulated investment companies) of any one issuer, two or more issuers that the Fund controls and that
are determined to be engaged in the same or similar trades or businesses, or the securities of certain publicly traded partnerships.
If the Fund
qualifies as a regulated investment company and distributes to its shareholders each taxable year an amount equal to or exceeding
the sum of (i) 90% of its investment company taxable income without regard to the deduction for dividends paid and (ii) 90% of
the excess of its gross tax-exempt interest, if any, over certain disallowed deductions, the Fund generally will not be subject
to U.S. federal income tax on any income of the Fund, including net capital gain distributed to shareholders. If, however, the
Fund meets such distribution requirements, but chooses to retain a portion of its investment company taxable income or net capital
gain, it generally will be subject to U.S. federal income tax at regular corporate rates on the amount retained.
The Fund intends
to distribute all of its investment company taxable income and any net capital gains in accordance with the timing requirements
imposed by the Internal Revenue Code and therefore should not be required to pay any federal income or excise taxes. Distributions
of investment company taxable income and net capital gain will be made after the end of each year ending October 31, and no later
than December 31 of each year. Both types of distributions will be in shares of the Fund unless a shareholder elects to receive
cash.
If the Fund fails to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code in any fiscal year, it will be treated as a corporation for
federal income tax purposes. As such the Fund would be required to pay income taxes on its investment company taxable income and
net capital gains, if any, at the rates generally applicable to corporations (currently, at a maximum rate of 21% plus state and
local taxes, if any). Shareholders of the Fund generally would not be liable for income tax on the Fund's investment company taxable
income or net capital gains in their individual capacities. Distributions to shareholders, whether from the Fund's investment company
taxable income or net capital gains, would be treated as taxable dividends to the extent of current or accumulated earnings and
profits of the Fund. Distributions by the Fund in excess of the Fund’s current and
accumulated earnings and profits will be treated as a return of capital to the extent of (and in reduction of) a shareholder’s
tax basis in his or her Fund shares and any such amount in excess of that basis will be treated as gain from the sale of shares,
as discussed below.
The Fund is subject to a 4% nondeductible excise
tax on certain undistributed amounts of ordinary income and capital gain under a prescribed formula contained in Section 4982 of
the Internal Revenue Code. The formula requires payment to shareholders during a calendar year of distributions representing at
least 98% of the Fund's ordinary income for the calendar year and at least 98.2% of its capital gain net income (i.e., the excess
of its capital gains over capital losses) realized during the one-year period ending October 31 during such year plus 100% of any
income that was neither distributed nor taxed to the Fund during the preceding calendar year. Under ordinary circumstances, the
Fund expects to time its distributions so as to avoid liability for this tax.
The following discussion of tax consequences
is for the general information of shareholders that are subject to tax. Shareholders that are IRAs or other qualified retirement
plans are exempt from income taxation under the Internal Revenue Code.
Distributions of investment company taxable
income are taxable to shareholders as ordinary income.
Distributions of net capital gain ("capital
gain dividends") generally are taxable to shareholders as long-term capital gain; regardless of the length of time the shares
of the Trust have been held by such shareholders.
The Fund may be able to report a portion of
its income as “qualified dividend income,” which, if certain conditions, including holding period requirements, are
met by the Fund and the shareholders, is taxable to noncorporate shareholders at rates of up to 20%. In general, dividends may
be reported by the Fund as qualified dividend income if they are attributable to qualified dividend income received by the Fund.
Qualified dividend income is, in general, dividend income from U.S. corporations and certain foreign corporations (i.e., certain
foreign corporations incorporated in a possession of the U.S. or in certain countries with a comprehensive tax treaty with the
U.S., and
certain other foreign corporations if the stock
with respect to which the dividend is paid is readily tradable on an established securities market in the U.S.). Passive foreign
investment companies are not qualified foreign corporations for this purpose, and dividends received by the Fund from REITs generally
are not expected to qualify for treatment as qualified dividend income.
Under the Tax Cuts and Jobs Act (the “2017
Tax Act”), "qualified REIT dividends" (i.e., ordinary REIT dividends other than capital gain dividends and portions
of REIT dividends designated as qualified dividend income eligible for capital gain tax rates) are eligible for a 20% deduction
by individuals and other non-corporate taxpayers. This deduction, if allowed in full, equates to a maximum effective tax rate of
29.6% (37% top rate applied to income after 20% deduction). On January 18, 2019, the Treasury Department released proposed regulations,
on which taxpayers may rely pending the issuance of final regulations, that allows a regulated investment company (such as the
Fund) to pay and report “Section 199A dividends” to its shareholders with respect to the regulated investment company's
qualified REIT dividends. Under the proposed regulations, the amount of Section 199A dividends that the Fund may pay and report
to its shareholders is limited to the excess of the "qualified REIT dividends" that the Fund receives from REITs for
a taxable year over the Fund’s expenses allocable to such dividends. A shareholder may treat section 199A dividends received
with respect to a share of the Fund as "qualified REIT dividends” if the shareholder has held the share for more than
45 days during the 91-day period beginning 45 days before the date on which the share becomes ex-dividend, but only to the extent
that the shareholder is not under an obligation (under a short-sale or otherwise) to make related payments with respect to positions
in substantially similar or related property. A shareholder may include 20% of the shareholder's "qualified REIT dividends"
in the computation of the shareholder’s “combined qualified business income amount” under Section 199A of the
Internal Revenue Code. Section 199A of the Internal Revenue Code allows a taxpayer (other than a corporation) a deduction for a
taxable year equal to the lesser of (A) the taxpayer’s “combined qualified business income amount” or (B) 20%
of the excess of the taxpayer’s taxable income over the taxpayer’s net capital gain for the year.
Certain U.S. shareholders, including individuals
and estates and trusts, are subject to an additional 3.8% Medicare tax on all or a portion of their “net investment income,”
which should include dividends from the Fund and net gains from the disposition of shares of the Fund. U.S. shareholders are urged
to consult their own tax advisors regarding the implications of the additional Medicare tax resulting from an investment in the
Fund.
Redemption of Fund shares by a shareholder
will result in the recognition of taxable gain or loss in an amount equal to the difference between the amount realized and the
shareholder's tax basis in his or her Fund shares. Such gain or loss is treated as a capital gain or loss if the shares are held
as capital assets. However, any loss realized upon the redemption of shares within six months from the date of their purchase will
be treated as a long-term capital loss to the extent of any amounts treated as capital gain dividends during such six-month period.
All or a portion of any loss realized upon the redemption of shares may be disallowed to the extent shares are purchased (including
shares acquired by means of reinvested dividends) within 30 days before or after such redemption.
Distributions of investment company taxable
income and net capital gain will be taxable as described above, whether received in additional cash or shares. Shareholders electing
to receive distributions in the form of additional shares will have a cost basis for federal income tax purposes in each share
so received equal to the net asset value of a share on the reinvestment date.
All distributions of investment company taxable
income and net capital gain, whether received in shares or in cash, must be reported by each taxable shareholder on his or her
federal income tax return. Dividends or distributions declared in October, November or December as of a record date in such a month,
if any, will be deemed to have been received by shareholders on December 31, if paid during January of the following year. Redemptions
of shares may result in tax consequences (gain or loss) to the shareholder and are also subject to these reporting requirements.
The
Fund (or its administrative agent) is required to report to the IRS and furnish to shareholders the cost basis information for
sale transactions of shares. Shareholders may elect to have one of several cost basis methods applied to their account when calculating
the cost basis of shares sold, including average cost, FIFO or some other specific identification method. Unless you instruct otherwise,
the Fund will use average cost as its default cost basis method. If average cost is used for the first sale of shares covered by
these rules, the shareholder may only use an alternative cost basis method for shares purchased prospectively. Shareholders should
consult with their tax advisors to determine
the best cost basis method for their
tax situation. Shareholders that hold their shares through a financial intermediary should contact such financial intermediary
with respect to reporting of cost basis and available elections for their accounts.
Under the Internal Revenue Code, the Fund will
be required to report to the Internal Revenue Service all distributions of taxable income and capital gains as well as gross proceeds
from the redemption or exchange of Fund shares, except in the case of certain exempt shareholders. Under the backup withholding
provisions of Section 3406 of the Internal Revenue Code, distributions of investment company taxable income and net capital gain
and proceeds from the redemption or exchange of the shares of a regulated investment company may be subject to withholding of federal
income tax (currently, at a rate of 24%) in the case of non-exempt shareholders who fail to furnish the regulated investment company
with their taxpayer identification numbers and with required certifications regarding their status under the federal income tax
law, or if the Fund is notified by the IRS or a broker that withholding is required due to an incorrect TIN or a previous failure
to report taxable interest or dividends. If the withholding provisions are applicable, any such distributions and proceeds, whether
taken in cash or reinvested in additional shares, will be reduced by the amounts required to be withheld.
Options, Futures, Forward Contracts and Swap Agreements
To the extent such investments are permissible
for the Fund, the Fund's transactions in options, futures contracts, hedging transactions, forward contracts, straddles and foreign
currencies will be subject to special tax rules (including mark-to-market, constructive sale, straddle, wash sale and short sale
rules), the effect of which may be to accelerate income to the Fund, defer losses to the Fund, cause adjustments in the holding
periods of the Fund's securities, convert long-term capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders.
To the extent such investments are permissible,
certain of the Fund's hedging activities (including its transactions, if any, in foreign currencies or foreign currency-denominated
instruments) are likely to produce a difference between its book income and its taxable income. If the Fund's book income exceeds
its taxable income, the distribution (if any) of such excess book income will be treated as (i) a dividend to the extent of the
Fund's remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter, as a return
of capital to the extent of the recipient's basis in the shares, and (iii) thereafter, as gain from the sale or exchange of a capital
asset. If the Fund's book income is less than taxable income, the Fund could be required to make distributions exceeding book income
to qualify as a regulated investment company that is accorded special tax treatment.
Passive Foreign Investment Companies
Investment by the Fund in certain "passive
foreign investment companies" ("PFICs") could subject the Fund to a U.S. federal income tax (including interest
charges) on distributions received from the company or on proceeds received from the disposition of shares in the company, which
tax cannot be eliminated by making distributions to Fund shareholders. However, the Fund may elect to treat a PFIC as a "qualified
electing fund" ("QEF"), in which case the Fund will be required to include its share of the company's income and
net capital gains annually, regardless of whether it receives any distribution from the company.
The Fund also may make an election to “mark
to market” the gains (and to a limited extent losses) in such holdings as though it had sold and repurchased its holdings
in those PFICs on the last day of the Fund's taxable year. Such gains and losses are treated as ordinary income and loss. The QEF
and mark-to-market elections may accelerate the recognition of income (without the receipt of cash) and increase the amount required
to be distributed for the Fund to avoid taxation. Making either of these elections, therefore, may require the Fund to liquidate
other investments (including when it is not advantageous to do so) to meet its distribution requirement, which also may accelerate
the recognition of gain and affect the Fund's total return.
Foreign Currency Transactions
The Fund's transactions in foreign currencies,
foreign currency-denominated debt securities and certain foreign currency options, futures contracts and forward contracts (and
similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the
value of the foreign currency concerned.
Foreign Taxation
Income received by the Fund from sources within
foreign countries may be subject to withholding and other taxes imposed by such countries. Tax treaties and conventions between
certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of the value of the Fund's total assets at
the close of its taxable year consists of securities of foreign corporations, the Fund may be able to elect to "pass through"
to the Fund's shareholders the amount of eligible foreign income and similar taxes paid by the Fund. If this election is made,
a shareholder generally subject to tax will be required to include in gross income (in addition to taxable dividends actually received)
his or her pro rata share of the foreign taxes paid by the Fund, and may be entitled to use it as a foreign tax credit against
his or her U.S. federal income tax liability, subject to certain limitations. In particular, a shareholder must hold his or her
shares (without protection from risk of loss) on the ex-dividend date and for at least 15 more days during the 30-day period surrounding
the ex-dividend date to be eligible to claim a foreign tax credit with respect to a gain dividend. No deduction for foreign taxes
may be claimed by a shareholder who does not itemize deductions. Each shareholder will be notified within 60 days after the close
of the Fund's taxable year whether the foreign taxes paid by the Fund will "pass through" for that year.
Generally, a credit for foreign taxes is subject
to the limitation that it may not exceed the shareholder's U.S. tax attributable to his or her total foreign source taxable income.
For this purpose, if the pass-through election is made, the source of the Fund's income will flow through to shareholders of the
Fund. With respect to the Fund, gains from the sale of securities will be treated as derived from U.S. sources and certain currency
fluctuation gains, including fluctuation gains from foreign currency-denominated debt securities, receivables and payables will
be treated as ordinary income derived from U.S. sources. The limitation on the foreign tax credit is applied separately to foreign
source passive income, and to certain other types of income. A shareholder may be unable to claim a credit for the full amount
of his or her proportionate share of the foreign taxes paid by the Fund.
Original Issue Discount and Pay-In-Kind Securities
Current federal tax law requires the holder
of a U.S. Treasury or other fixed income zero coupon security to accrue as income each year a portion of the discount at which
the security was purchased, even though the holder receives no interest payment in cash on the security during the year. In addition,
pay-in-kind securities will give rise to income, which is required to be distributed and is taxable even though the Fund holding
the security receives no interest payment in cash on the security during the year.
Some of the debt securities (with a fixed maturity
date of more than one year from the date of issuance) that may be acquired by the Fund may be treated as debt securities that are
issued originally at a discount. Generally, the amount of the original issue discount ("OID") is treated as interest
income and is included in income over the term of the debt security, even though payment of that amount is not received until a
later time, usually when the debt security matures. A portion of the OID includable in income with respect to certain high-yield
corporate debt securities (including certain pay-in-kind securities) may be treated as a dividend for U.S. federal income tax purposes.
Some of the debt securities (with a fixed maturity
date of more than one year from the date of issuance) that may be acquired by the Fund in the secondary market may be treated as
having market discount. Generally, any gain recognized on the disposition of, and any partial payment of principal on, a debt security
having market discount is treated as ordinary income to the extent the gain, or principal payment, does not exceed the "accrued
market discount" on such debt security. Market discount generally accrues in equal daily installments. The Fund may make one
or more of the elections applicable to debt securities having market discount, which could affect the character and timing of recognition
of income.
Some debt securities (with a fixed maturity
date of one year or less from the date of issuance) that may be acquired by the Fund may be treated as having acquisition discount,
or OID in the case of certain types of debt securities. Generally, the Fund will be required to include the acquisition discount,
or OID, in income over the term of the debt security, even though payment of that amount is not received until a later time, usually
when the debt security matures. The Fund may make one or more of the elections applicable to debt securities having acquisition
discount, or OID, which could affect the character and timing of recognition of income.
If the Fund holds the foregoing kinds of securities,
it may be required to pay out as an income distribution each year an amount that is greater than the total amount of cash interest
the Fund actually received. Such distributions may be made from the cash assets of the Fund or by liquidation of portfolio securities,
if necessary (including when it is not advantageous to do so). The Fund may realize gains or losses from such liquidations. In
the event the Fund realizes net capital gains from such transactions, its shareholders may receive a larger capital gain distribution,
if any, than they would in the absence of such transactions.
Shareholders of the Fund may be subject to
state and local taxes on distributions received from the Fund and on redemptions of the Fund’s shares.
A brief explanation of the form and character
of the distribution accompany each distribution. In January of each year the Fund issues to each shareholder a statement of the
federal income tax status of all distributions.
Shareholders should consult their tax advisors
about the application of federal, state and local and foreign tax law in light of their particular situation.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board has selected Grant Thornton LLP,
Two Commerce Square, 2001 Market Street, Suite 700, Philadelphia, PA 19103, as its independent registered public accounting firm
for the current fiscal period. The firm provides services including (i) audit of annual financial statements, (ii) assistance and
consultation in connection with SEC filings, and (iii) other audit related and tax services.
LEGAL COUNSEL
Blank Rome LLP, located at 1271 Avenue of the
Americas, New York, NY 10020, serves as the Trust's legal counsel.