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As filed with the Securities and Exchange
Commission on November 3, 2008 No. 333-151713 No. 811-22209 UNITED
STATES SECURITIES
AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 x Pre-Effective Amendment No. 3 x Post-Effective Amendment No. o and/or REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY x Amendment No. 3 x (Check appropriate box or boxes) Global X
Funds (Exact Name of Registrant as Specified in Charter) 220 Fifth Avenue, 20th Floor New York, NY 10001 (Address of Principal Executive Office) Registrants
Telephone Number, including Area Code: (347) 756-4648 Bruno del Ama Global X Management Company LLC 220 Fifth Avenue, 20th Floor New York, NY 10001 (Name and Address of Agent for Service) Jane A. Kanter, Esq. Daphne T. Chisolm, Esq. Dechert LLP Dechert LLP 1775 I Street, N.W. 100 North Tryon Street Washington, DC 20006-2401 Suite 4000 Charlotte, NC 28202 Approximate date of
proposed public offering: As soon as practicable after this registration statement becomes
effective. The registrant hereby
amends this registration statement on such date or dates as may be necessary to
delay its effective date until the registrant shall file a further amendment
which specifically states that the registration statement shall thereafter
become effective in accordance with section 8(a) of the Securities Act of 1933
or until the registration statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said section 8(a), may
determine. The information in this Prospectus is not
complete and may be changed. The Trust may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This Prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any jurisdiction where the offer
or sale is not permitted.
Subject to Completion
Global
X Funds Global X FTSE Nordic 30 ETF Prospectus
November [__], 2008
Global X Funds
(Trust) is a registered investment company that currently consists of one
exchanged-traded fund. This Prospectus relates to the Global X FTSE Nordic 30
ETF (Fund): The Fund will
list its shares (Shares) on the NYSE Arca (Exchange). The market prices for
Shares may be different from the Funds most recent net asset value (NAV) per
share. The Fund will issue and redeem Shares only in large blocks consisting of
70,000 Shares (Creation Units). The Fund has its own CUSIP number and
exchange trading symbol. Creation Units are issued and redeemed principally
in-kind for securities included in a specified universe. As a practicable
matter, only institutions or large investors known as Authorized Participants
may purchase or redeem Creation Units. Except when aggregated in Creation Units,
Shares are not redeemable securities of the Fund. The Securities
and Exchange Commission (SEC) has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense. TABLE OF CONTENTS 1 1 2 3 7 8 8 9 10 11 11 12 12 12 13 14 15 17 18 19 19 20 No dealer,
salesperson or any other person has been authorized to give any information or
to make any representations, other than those contained in this Prospectus, in
connection with the offer contained in this Prospectus and, if given or made,
such other information or representations must not be relied upon as having been
authorized by the Fund, Global X Management Company LLC the Funds investment
adviser, or the Funds distributor, SEI Investments Distribution Co.
(Distributor). This
Prospectus contains important information about investing in the Fund. Please
read this Prospectus carefully before you make any investment decision. An
investment in the Fund is not a bank deposit and it is not guaranteed by the
Federal Deposit Insurance Corporation or any governmental agency. The Fund is a
non-diversified series of the Trust. The Trust is an open-end management
investment company, registered under the Investment Company Act of 1940, as
amended (1940 Act). The investment adviser to the Fund is Global X Management
Company LLC (Adviser). The Adviser provides the day-to-day portfolio
management of the Fund. Information regarding the Adviser is included under the
section entitled Fund Management in this Prospectus. The Fund is
designed to be used as part of broader asset allocation strategies. Accordingly,
an investment in the Fund may not be appropriate as a complete investment
program. How Is The Fund Different From Conventional
Mutual Funds? Conventional
mutual fund shares are bought from and redeemed with the issuing fund for cash
at NAV typically calculated once a day. Shares of an ETF, by contrast, cannot
be purchased from or redeemed with the issuing ETF except by or through
Authorized Participants, and then typically only for an in-kind basket of
securities. An organized
trading market is expected to exist for Shares, unlike conventional mutual fund
shares, because Shares are listed for trading on the Exchange. Investors can
purchase and sell Shares on the secondary market through a broker.
Secondary-market transactions occur not at NAV, but at market prices that
change throughout the day, based on the supply of, and demand for, Shares and
on changes in the prices of the Funds portfolio holdings. The market price of
Shares will differ somewhat from the NAV of the Fund. The difference between
market price of Shares and the NAV of the Fund is expected to be small most of
the time, but in times of extreme market volatility, the difference may become
significant. The Fund seeks
investment results that correspond generally to the price and yield
performance, before fees and expenses, of the FTSE Nordic 30 Index (Underlying
Index). The Funds investment objective and Underlying Index may be changed
without shareholder approval. Shareholders will be given 60 days prior notice
of any such change. The Underlying
Index is sponsored by an organization (Index Provider) that is independent of
the Fund and the Adviser. The Index Provider determines the relative weightings
of the securities in the Underlying Index and publishes information regarding
the market value of the Underlying Index. The Funds Index Provider is FTSE
Group (FTSE). The Board of
Trustees of the Trust (Board) reserves the right to substitute a replacement
index if: the Index Provider no longer calculates the index, the Underlying
Index license is terminated 1 for any
reason, the identity or the character of the Underlying Index is materially
changed, or for any other reason determined by the Board in good faith. If the
Board determines that it is impracticable to substitute a replacement index, it
will take whatever action is deemed to be in the best interests of the Funds
shareholders. PRINCIPAL INVESTMENT STRATEGIES The Underlying
Index tracks the performance of the 30 largest and most liquid companies in
Sweden, Denmark, Norway and Finland. The index uses the universe of the FTSE
All-World Index - Nordic Region. The Underlying Index is free float adjusted,
liquidity tested and managed by an independent committee. As of August 7 2008,
the Underlying Indexs three largest stocks were Nokia, Nordea Bank AB and
StatoilHydro ASA. The Adviser
uses a passive or indexing approach to try to achieve the Funds investment
objective. Unlike many investment companies, the Fund does not try to beat
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund will
normally invest at least 80% of its total assets in the securities of the
Underlying Index and in American Depositary Receipts (ADRs), Global Depositary
Receipts (GDRs) and Euro Depositary Receipts (EDRs) (collectively
Depositary Receipts) based on the securities in the Underlying Index. The Fund may
also invest up to 20% of its assets (its 20% Asset Basket) in certain
futures, options and swap contracts (which may be leveraged and are considered
derivatives), cash and cash equivalents, as well as in stocks not included in
the Underlying Index, but which the Adviser believes will help the Fund track
the Underlying Index. The Fund will
use a replication strategy. A replication strategy is an indexing strategy that
involves investing in the securities of the Underlying Index in approximately
the same proportions as in the Underlying Index. However, the Fund may utilize
a representative sampling strategy with respect to its Underlying Index when a
replication strategy might be detrimental to its shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to follow its Underlying Index, or, in certain
instances, when a security in the Underlying Index become temporarily illiquid,
unavailable or less liquid. Correlation Correlation is
the extent to which the values of different types of investments move in tandem
with one another in response to changing economic and market conditions. An
index is a theoretical financial calculation, while the Fund is an actual
investment portfolio. The performance of the Fund and the Underlying Index may
vary somewhat due to transaction costs, asset valuations, foreign currency
valuations, market impact, corporate actions (such as mergers and spin-offs),
legal restrictions (such as diversification requirements that apply to the Fund
but not to the Underlying Index) and timing variances. 2 The Adviser
expects that, over time, the correlation between the Funds performance and
that of its Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
its Underlying Index than the Fund using a representative sampling. Industry Concentration Policy The Fund will
concentrate its investments (i.e., hold 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent
that its Underlying Index is concentrated. Securities Lending The Fund may
lend its portfolio securities. In connection with such loans, the Fund receives
liquid collateral equal to at least 105% of the value of the portfolio
securities being lent. This collateral is marked-to-market on a daily basis. The Fund is
subject to the principal risks described below. Some or all of these risks may
adversely affect the Funds NAV, trading price, yield, total return and/or its
ability to meet its objectives. Asset Class Risk The returns
from the types of securities in which the Fund invests may under-perform
returns from the various general securities markets or different asset classes.
The stocks in the Underlying Index may under-perform fixed-income investments
and stock market investments that track other markets, segments and sectors.
Different types of securities tend to go through cycles of out-performance and
under-performance in comparison to the general securities markets. Concentration Risk To the extent
that its Underlying Index or portfolio is concentrated in the securities of
companies in a particular market, industry, group of industries, sector or
asset class, the Fund may be adversely affected by the performance of those
securities, may be subject to increased price volatility and may be more
susceptible to adverse economic, market, political or regulatory occurrences
affecting that market, industry, group of industries, sector or asset class. Counterparty Risk Counterparty
Risk is the risk that a counterparty to a swap contract or other similar
investment instrument may default on its payment obligation to the Fund. Such a
default may cause the value of an investment in the Fund to decrease. 3 Currency Risk Currency risk
is the potential for price fluctuations in the dollar value of foreign
securities because of changing currency exchange rates. Because the Funds NAV
is determined on the basis of U.S. dollars, you may lose money if the local
currency of a foreign market depreciates against the U.S. dollar, even if the
local currency value of the Funds holdings goes up. Custody Risk Custody risk
refers to risks in the process of clearing and settling trades and to the
holding of securities by local banks, agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle. Local agents are held only to the standard of care of the
local markets. Governments or trade groups may compel local agents to hold
securities in designated depositories that are subject to independent
evaluation. The less developed a countrys securities market is, the greater
the likelihood of custody problems occurring. European Economic Risk The Economic
and Monetary Union (EMU) of the European Union (EU) requires compliance
with restrictions on inflation rates, deficits, interest rates, debt levels and
fiscal and monetary controls, each of which may significantly affect every
country in Europe. Decreasing imports or exports, changes in governmental
regulations on trade, changes in the exchange rate of the euro and recessions
among EU members may have a significant adverse effect on the economies of
other EU members and their trading partners. Derivatives Risk Derivatives
risk is the risk that loss may result from the Funds investments in options,
futures and swap contracts, which may be leveraged and are types of
derivatives. Investments in leveraged instruments may result in losses
exceeding the amounts invested. The Fund may use these instruments to help the
Fund track its Underlying Index. Compared to conventional securities,
derivatives can be more sensitive to changes in interest rates or to sudden
fluctuations in market prices and thus the Funds losses may be greater if it
invests in derivates than if it invests only in conventional securities. Foreign Security Risk The Fund
invests substantially all of its assets within the equity markets of countries
outside of the U.S. These markets are subject to special risks associated with
foreign investment including, but not limited to: lower levels of liquidity and
market efficiency; greater securities price volatility; exchange rate
fluctuations and exchange controls; less availability of public information
about issuers; limitations on foreign ownership of securities; imposition of
withholding or other taxes; imposition of restrictions on the expatriation of
the funds or other assets of the Fund; higher transaction and custody costs and
delays in settlement procedures; difficulties in enforcing contractual
obligations; lower levels of regulation of the securities market; and weaker
accounting, disclosure and reporting requirements. Shareholder rights under the
laws of some foreign countries may not be as favorable as U.S. laws. Thus, a
shareholder 4 may have more
difficulty in asserting its rights or enforcing a judgment against a foreign
company than a shareholder of a comparable U.S. company. Investment of more
than 25% of the Funds total assets in securities located in one country or
region will subject the Fund to increased country or region risk with respect
to that country or region. Geographic Risk Geographic
risk is the risk that the Funds assets may be concentrated in countries
located in the same geographic region. This concentration will subject the Fund
to risks associated with that particular region, such as general and local
economic, political and social conditions. Issuer Risk Issuer risk is
the risk that any of the individual companies that the Fund invests in may
perform badly, causing the value of its securities to decline. Poor performance
may be caused by poor management decisions, competitive pressures, changes in
technology, disruptions in supply, labor problems or shortages, corporate
restructurings, fraudulent disclosures or other factors. Issuers may, in times
of distress or on their own discretion, decide to reduce or eliminate dividends
which would also cause their stock prices to decline. Management Risk The Fund may
not fully replicate its Underlying Index and may hold securities not included
in its Underlying Index. Therefore, the Fund is subject to management risk.
That is, the Advisers investment strategy, the implementation of which is
subject to a number of constraints, may not produce the intended results. The
Adviser has no prior experience managing an investment company. The ability of
the Adviser to successfully implement the Funds investment strategies will
influence the Funds performance significantly. The Fund is
not actively managed. The Fund may be affected by a general decline in the
market segments relating to its Underlying Index. The Fund invests in
securities included in, or representative of, its Underlying Index regardless
of their investment merit. The Adviser does not attempt to take defensive
positions in declining markets. Market Risk Market risk is
the risk that the value of the securities in which the Fund invests may go up
or down in response to the prospects of individual issuers and/or general
economic conditions. Price changes may be temporary or last for extended
periods. You could lose money over short periods due to fluctuation in the
Funds NAV in response to market movements, and over longer periods during
market downturns. Market Trading Risks Absence of Prior Active Market 5 Although
Shares are or will be listed for trading on the Exchange and may be listed on
certain foreign exchanges, there can be no assurance that an active trading
market for such Shares will develop or be maintained. Lack of Market Liquidity Secondary
market trading in Shares may be halted by the Exchange because of market
conditions or for other reasons. In addition, trading in Shares is subject to
trading halts caused by extraordinary market volatility pursuant to circuit
breaker rules. There can be no assurance that the requirements necessary to
maintain the listing of Shares will continue to be met or will remain
unchanged. Shares of the Fund May Trade at Prices Other Than NAV Shares of the
Fund may trade at, above or below their NAV. The per share NAV of the Fund will
fluctuate with changes in the market value of the Funds holdings. The trading
prices of Shares will fluctuate in accordance with changes in its NAV as well
as market supply and demand. However, given that Shares can be created and
redeemed only in Creation Units at NAV (unlike shares of many closed-end funds,
which frequently trade at appreciable discounts from, and sometimes at premiums
to, their NAVs), the Adviser believes that large discounts or premiums to the
NAV of the Shares should not be sustained. While the creation/redemption
feature is designed to make it likely that Shares normally will trade close to
the Funds NAV, disruptions to creations and redemptions may result in trading
prices that differ significantly from NAV. Since foreign
exchanges may be open on days when the Fund does not price Shares, the value of
the securities in the Funds portfolio may change on days when shareholders
will not be able to purchase or sell Shares. Secondary Market Trading Risk Shares of the
Fund may trade in the secondary market on days when the Fund do not accept
orders to purchase or redeem Shares. On such days, Shares may trade in the
secondary market with more significant premiums or discounts than might be
experienced on days when the Fund accepts purchase and redemption orders. Non-Diversification Risk The Fund is
classified as non-diversified. This means that the Fund may invest most of
its assets in securities issued by or representing a small number of companies.
As a result, the Fund may be more susceptible to the risks associated with
these particular companies, or to a single economic, political or regulatory
occurrence affecting these companies. 6 Risks Related to Investing in the Nordic
Region The Nordic
economies are dependent on the export of natural resources and natural resource
products. Efforts to comply with the EMU restrictions by Finland may result in
reduced government spending and higher unemployment. Denmark and Sweden have
elected not to join the final stage of the EMU and Norway has elected not to
join both the EU and the EMU and, as a result, these countries may have more
flexibility to pursue different fiscal and economic goals. Faced with
stronger global competition, the Nordic countries - Denmark, Finland, Norway,
and Sweden - have had to scale down their historically generous welfare
programs, resulting in drops in domestic demand and increased unemployment.
Major industries in the region, such as forestry, agriculture, and oil, are
heavily resource-dependent and face pressure as a result of high labor costs.
Pension reform, union regulation, and further cuts in liberal social programs
will likely need to be addressed as the Nordic countries face increased
international competition. Securities Lending The Fund may
engage in lending its portfolio securities. Although the Fund will receive
collateral in connection with all loans of its securities holdings, the Fund
would be exposed to a risk of loss should a borrower default on its obligation
to return the borrowed securities (e.g., the loaned securities may have
appreciated beyond the value of the collateral held by the Fund). In addition,
the Fund will bear the risk of loss of any cash collateral that it invests. Tracking Risk Tracking risk
is the risk that the Funds performance may vary substantially from the
performance of the Underlying Index it tracks as a result of imperfect
correlation between the Funds securities and those of the Underlying Index.
Imperfect correlation may result from share purchases and redemptions,
expenses, changes in the Underlying Indexes, asset valuations, foreign currency
valuations, market impact, corporate actions (such as mergers and spin-offs),
legal restrictions (such as tax-related diversification requirements that apply
to the Fund but not to the Underlying Index) and timing variances, among other
factors. PORTFOLIO HOLDINGS INFORMATION A description
of the Trusts policies and procedures with respect to the disclosure of the
Funds portfolio securities is available in the Funds combined Statement of
Additional Information (SAI). The top largest holdings of the Fund can be
found at www.globalxfunds.com and Fund Fact sheets provide information
regarding the Funds top holdings and may be requested by calling
1-888-GXFund-1 (1-888-493-8631). 7 The Fund has
only recently begun operations, so performance information is not yet
available. This table
describes the fees and expenses that you may pay if you buy and hold Shares of
the Fund. You will also incur usual and customary brokerage commission when
buying and selling Shares. Shareholder Fees None Annual Fund Operating Expenses (expenses that are
deducted from Fund assets)1 Management
Fee:2 0.50% Distribution
and/or service (12b-1) fees:3 None Other
Expenses:4 None Total Annual
Fund Operating Expenses: 0.50% The following
example is intended to help retail investors compare the cost of investing in
the Fund with the cost of investing in other funds. The example illustrates the
hypothetical expenses that such investors would incur over various periods if
they invest $10,000 in the Fund. The example assumes that the Fund provides a
return of 5% a year and that operating expenses remain the same. This example
does not include the brokerage commissions that retail investors will pay to buy
and sell Shares. It also does not include the transaction fees on purchases and
redemptions of Creation Units, because these fees will not be imposed on retail
investors.
1 Expressed as a percentage of average daily net assets.
2 Management
Fees reflect an investment advisory fee and a supervisory and administrative
fee. For more information about the supervisory and administrative fee, see
Investment Adviser under Fund Management. 3 The Fund has
adopted a Distribution and Service (12b-1) Plan pursuant to which the Fund
may bear a 12b-1 fee not to exceed 0.25% per annum of the Funds average
daily net assets. However, no such fee is currently paid by the Fund.
4 The Fund
does bear other expenses which are not covered under the supervisory and
administrative fee which may vary and affect the total level of expenses paid
by the Fund, such as taxes and governmental fees, brokerage fees, commissions
and other transaction expenses, costs of borrowing money, including interest
expenses and extraordinary expenses (such as litigation and indemnification
expenses). The Fund had not commenced operations as of the date of this prospectus.
Other Expenses are estimates based on the expenses the Fund expects to incur for the fiscal
year and are expected to be less than 0.01%. 8 One Year Three Years $51 $160 These examples
should not be considered to represent actual expenses on performance from the
past or for the future. Creation Unit Transactions Fees and
Redemption Transaction Fees The Fund issues and redeems
Shares at NAV only in large blocks of 70,000 Shares (each block of 70,000
Shares called a Creation Unit) or multiples thereof. As a practical matter,
only broker-dealers or large institutional investors with creation and
redemption agreements known as Authorized Participants can purchase or redeem
these Creation Units. Purchasers of Creation Units at NAV must pay a standard
Creation Transaction Fee of $1,500 per transaction (assuming 70,000 Shares in
each Creation Unit). The fee is a single charge and will be the same regardless
of the number of Creation Units purchased by an investor on the same day. The
value of a Creation Unit as of first creation was approximately $1,050,000. An
Authorized Participant who holds Creation Units and wishes to redeem at NAV
would also pay a standard Redemption Fee of $1,500 per transaction (assuming
70,000 Shares in each Creation Unit), on the date of such redemption,
regardless of the number of Creation Units redeemed that day. If a Creation
Unit is purchased or redeemed for cash, a higher Transaction Fee will be
charged. See Transaction Fees later in this Prospectus. Investors who hold Creation
Units will also pay the Annual Fund Operating Expenses described in the table
above. Assuming an investment in a Creation Unit of $1,050,000 and a 5% return
each year, and assuming that the Funds gross operating expenses remain the
same, the total costs would be $6,868 if the Creation Unit is redeemed after
one year, and $18,340 if the Creation Unit is redeemed after three years. The Transaction Fee is not
an expense of the Fund and does not impact the Funds expense ratio. BUYING AND SELLING FUND SHARES Shares of the
Fund trade on the Exchange and elsewhere during the trading day. Shares can be
bought and sold throughout the trading day like other shares of publicly traded
securities. There is no minimum investment for purchases made on the Exchange.
When buying or selling Shares through a broker, you will incur customary
brokerage commissions and charges. In addition, you will also incur the cost of
the spread, which is the difference between what professional investors are willing
to pay for Shares (the bid price) and the price at which they are willing to
sell Shares (the ask price). The commission is frequently a fixed amount and
may be a significant proportional cost for investors seeking to buy or sell
small amounts of Shares. The spread with respect to Shares varies over time
based on the Funds trading volume and market liquidity, and is generally lower
if the Fund has a lot of trading volume and market liquidity and higher if the
Fund has little trading volume and market liquidity. Because of the costs of
buying and selling Shares, frequent trading may reduce investment return. 9 Shares of the
Fund may be acquired or redeemed directly from the Fund only in Creation Units
or multiples thereof, as discussed in the Creations and Redemptions section.
Once created, Shares generally trade in the secondary market in amounts less
than a Creation Unit. Shares of the
Fund trade under the trading symbol GXF. The Fund will
be listed on the Exchange. The Exchange is open for trading Monday through
Friday and is closed on weekends and the following holidays, as observed: New
Years Day, Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Book Entry Shares of the Fund are held
in book-entry form, which means that no stock certificates are issued. The
Depository Trust Company (DTC) or its nominee, is the record owner of all
outstanding Shares and is recognized as the owner of all Shares for all purposes. Investors owning Shares are
beneficial owners as shown on the records of DTC or its participants. DTC
serves as the securities depository for all Shares. Participants include DTC,
securities brokers and dealers, banks, trust companies, clearing corporations
and other institutions that directly or indirectly maintain a custodial
relationship with DTC. As a beneficial owner of Shares, you are not entitled to
receive physical delivery of stock certificates or to have Shares registered in
your name, and you are not considered a registered owner of Shares. Therefore,
to exercise any rights as an owner of Shares, you must rely upon the procedures
of DTC and its participants. These procedures are the same as those that apply
to any securities that you hold in book entry or street name form. Investment Adviser Global X
Management Company LLC serves as the investment adviser and the administrator
for the Fund. Subject to the supervision of the Board of Trustees, the Adviser
is responsible for managing the investment activities of the Fund and the
Funds business affairs and other administrative matters. The Adviser is a
Delaware limited liability company with its principal offices located at 220
Fifth Avenue, 20th Floor New York, New York 10001. The Fund pays
for the advisory and supervisory and administrative services it requires under
what is essentially an all-in fee structure. The Management Fees shown in the
Annual Fund Operating Expenses table reflect both an investment advisory fee
and a supervisory and administrative fee. The Adviser provides or procures
supervisory and administrative services for the Fund and also bears the costs
of various third-party services required by the Fund, including audit,
custodial, portfolio accounting, legal, transfer agency and printing costs. For its
investment advisory, supervisory and administrative services, the Fund will pay
monthly a fee to the Adviser at the annual rate (stated as a percentage of the
average daily net assets of the Fund) of 0.50%. 10 The Trust, the
Adviser and the Distributor each have adopted a code of ethics, (Code) as
required by applicable law, which is designed to prevent affiliated persons of
the Trust, the Adviser, and the Distributor from engaging in deceptive,
manipulative, or fraudulent activities in connection with securities held or to
be acquired by the Fund (which may also be held by persons subject to a Code).
There can be no assurance that the Codes will be effective in preventing such
activities. The Codes permit personnel subject to them to invest in securities,
including securities that may be held or purchased by the Fund. The Codes are
on file with the SEC and are available to the public. Approval of Advisory Agreement A discussion regarding the
basis for the Board of Trustees approval of the investment advisory agreement
will be available in the Funds first annual or semi-annual report to
shareholders. Portfolio Management The portfolio
managers who are currently responsible for the day-to-day management of the
Funds portfolio are Bruno del Ama and Jose Gonzalez. Bruno del Ama: Bruno del Ama has been Chief
Executive Officer of the Adviser since March 2008. Prior to joining the
Adviser, Mr. del Ama was a director at Radian Asset Assurance from 2004 to 2008.
Prior to 2004, Mr. del Ama was senior consultant at Oliver Wyman. Mr. del Ama
received a Masters in Business Administration from the Wharton Business School. Jose Gonzalez: Jose Gonzalez has been a
Principal of the Adviser since March 2008. Mr. Gonzalez is also a registered
representative of GWM Group, Inc. (GWM), a registered broker-dealer and an
affiliate of the Adviser. Mr. Gonzalez has been affiliated with GWM since 2006.
Prior to joining GWM, Mr. Gonzalez was a registered representative of Broad Street
Securities, Inc. Prior to 2004, Mr. Gonzalez was a financial advisor with
Lloyd, Scott, & Valenti, Ltd. The SAI
provides additional information about the portfolio managers compensation
structure, other accounts managed by the portfolio manager and the portfolio
managers ownership of securities of the Fund he manages. SEI
Investments Distribution Co. distributes Creation Units for the Fund on an
agency basis. The Distributor does not maintain a secondary market in Shares.
The Distributor has no role in determining the policies of the Fund or the
securities that are purchased or sold by the Fund. The Distributors principal
address is Freedom Valley Drive Oaks, PA 19456. The Distributor is not
affiliated with the Adviser. SEI
Investments Global Trusts Services is the sub-administrator for the Fund. 11 Brown Brothers
Harriman & Co. is the custodian and transfer agent for the Fund. Dechert LLP
serves as legal counsel to the Fund. Sanville &
Company serves as the Funds independent registered public accounting firm. The
independent registered public accounting firm is responsible for auditing the
annual financial statements of the Fund. Investors may
acquire Shares on the Exchange and in the secondary markets through a broker or
dealer. On the Exchange and in the secondary markets, there is no minimum share
amount you must buy or sell, with the result that you may purchase or sell as
little as one Share. Shares qualify as margin borrowing collateral. When you buy
or sell Shares on the Exchange or in the secondary markets, your broker will
normally charge you a commission or other transaction charges and you may pay
market premiums or discounts on purchases and sales of Shares. For information
about buying and selling Shares on the Exchange or in the secondary markets,
please contact your broker or dealer. Unlike
frequent trading of shares of a traditional open-end mutual funds (i.e., not
exchange-traded shares), frequent trading of Shares on the secondary market
does not disrupt portfolio management, increase the Funds trading costs, lead
to realization of capitalization gains, or otherwise harm Fund shareholders
because these trades does not involve the Fund directly. A few institutional
investors are authorized to purchase and redeem the Funds Shares directly with
the Fund. Because these trades are effected in-kind (i.e., for securities, and
not for cash), they do not cause any of the harmful effects (noted above) that
may result from frequent cash trades. Moreover, the Fund imposes transaction
fees on in-kind purchases and redemptions of the Fund to cover the custodial
and other costs incurred by the Fund in effecting in-kind trades. These fees
increase if an investor substitutes cash in part or in whole for securities,
reflecting the fact that the Funds trading costs increase in those
circumstances. For these reasons, the Board of Trustees has determined that it
is not necessary to adopt policies and procedures to detect and deter frequent
trading and market-timing in Shares of the Fund. The Board of
Trustees of the Trust has adopted a distribution and services plan (Plan)
pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund is authorized
to pay distribution fees in connection with the sale and distribution of its
Shares and pay service fees in connection with the provision of ongoing
services to shareholders of each class and the maintenance of shareholder
accounts in an amount up to 0.25% of its average daily net assets each year. No Rule 12b-1
fees are currently paid by the Fund, and there are no current plans to impose
these fees. However, in the event Rule 12b-1 fees are charged in the future,
because these fees are paid out of the Funds assets on an ongoing basis, these
fees will increase the cost of your 12 investment in
the Fund. By purchasing Shares subject to distribution fees and service fees,
you may pay more over time than you would by purchasing Shares with other types
of sales charge arrangements. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the
rules of FINRA. The net income attributable to Shares will be reduced by the
amount of distribution fees and service fees and other expenses of the Fund. DETERMINATION OF NET ASSET VALUE The Fund
calculates its NAV generally once daily Monday through Friday generally as of
the regularly scheduled close of business of the New York Stock Exchange
(NYSE) (normally 4:00 p.m. Eastern time) on each day that the NYSE, the
Exchange and the Funds custodian are open for business, based on prices at the
time of closing, provided that any assets or liabilities denominated in
currencies other than the U.S. dollar shall be translated into U.S. dollars at
the prevailing market rates on the date of valuation as quoted by one or more
major banks or dealers that make a two-way market in such currencies (or a data
service provider based on quotations received from such banks or dealers). The
NAV of the Fund is calculated by dividing the value of the net assets of the
Fund (i.e., the value of its total assets less total liabilities) by the total
number of outstanding Shares, generally rounded to the nearest cent. In calculating
the Funds NAV, the Funds investments are generally valued using market
valuations. A market valuation generally means a valuation (i) obtained from an
exchange, a pricing service, or a major market maker (or dealer), (ii) based on
a price quotation or other equivalent indication of value supplied by an
exchange, a pricing service, or a major market maker (or dealer), or (iii)
based on amortized cost. In the case of shares of funds that are not traded on
an exchange, a market valuation means the funds published NAV per share. The
Fund may use various pricing services or discontinue the use of any pricing
service. A price obtained from a pricing service based on such pricing
services valuation matrix may be considered a market valuation. In the event
that current market valuations are not readily available or such valuations do
not reflect current market values, the affected investments will be valued
using fair value pricing pursuant to the pricing policy and procedures approved
by the Funds Board of Trustees. The frequency with which the Funds
investments are valued using fair value pricing is primarily a function of the
types of securities and other assets in which the Fund invests pursuant to its
investment objective, strategies and limitations. Investments
that may be valued using fair value pricing include, but are not limited to:
(i) an unlisted security related to corporate actions; (ii) a restricted
security (i.e., one that may not be publicly sold without registration under
the Securities Act of 1933, as amended (the Securities Act)); (iii) a
security whose trading has been suspended or which has been de-listed from its
primary trading exchange; (iv) a security that is thinly traded; (v) a security
in default or bankruptcy proceedings for which there is no current market
quotation; (vi) a security affected by currency controls or restrictions; and
(vii) a security affected by a significant event (i.e., an event that occurs
after the close of the markets on which the security is traded but before the
time as of which the Funds NAV is computed and that may materially affect the
value of the Funds 13 investments).
Examples of events that may be significant events are government actions,
natural disasters, armed conflict, acts of terrorism, and significant market
fluctuations. Valuing the
Funds investments using fair value pricing will result in using prices for
those investments that may differ from current market valuations. Use of fair
value prices and certain current market valuations could result in a difference
between the prices used to calculate the Funds net asset value and the prices
used by the Funds Underlying Index, which, in turn, could result in a
difference between the Funds performance and the performance of the Funds
Underlying Index. Because
foreign markets may be open on different days than the days during which a
shareholder may purchase Shares, the value of the Funds investments may change
on days when shareholders are not able to purchase the Shares. Additionally,
due to varying holiday schedules redemption requests made on certain dates may
result in a settlement period exceeding seven calendar days. A list of the
holiday schedules of the foreign exchanges of the Funds Underlying Index, as
well as the dates on which a settlement period would exceed seven calendar days
in 2008 is contained in the SAI. The value of
assets denominated in foreign currencies is converted into U.S. dollars using
exchange rates deemed appropriate by the Adviser as investment adviser. Any use
of a different rate from the rates used by the Index Provider may adversely
affect the Funds ability to track its Underlying Index. Dividends from net
investment income, including any net foreign currency gains, generally are declared
and paid at least annually and any net realized securities gains are
distributed at least annually. In order to improve tracking error or comply
with the distribution requirements of the Internal Revenue Code of 1986,
dividends may be declared and paid more frequently than annually for the Fund. Dividends and other
distributions on Shares are distributed on a pro rata basis to beneficial
owners of such Shares. Dividend payments are made through DTC participants to
beneficial owners then of record with proceeds received from the Fund.
Dividends and securities gains distributions are distributed in U.S. dollars
and cannot be automatically reinvested in additional Shares. No dividend reinvestment
service is provided by the Trust. Broker-dealers may make available the DTC
book-entry Dividend Reinvestment Service for use by beneficial owners of the
Fund for reinvestment of their dividend distributions. Beneficial owners should
contact their broker to determine the availability and costs of the service and
the details of participation therein. Brokers may require beneficial owners to
adhere to specific procedures and timetables. If this service is available and
used, dividend distributions of both income and realized gains will be
automatically reinvested in additional whole Shares purchased in the secondary
market. 14 The following
is a summary of certain tax considerations that may be relevant to an investor
in the Fund. Except where otherwise indicated, the discussion relates to
investors who are individual United States citizens or residents and is based
on current tax law. You should consult your tax advisor for further information
regarding federal, state, local and/or foreign tax consequences relevant to
your specific situation. Distributions.
The Fund intends to qualify as a regulated investment company for federal tax
purposes, and to distribute to shareholders substantially all of its net
investment income and net capital gain each year. Except as otherwise noted
below, you will generally be subject to federal income tax on the Funds
distributions to you, regardless of whether they are paid in cash or reinvested
in Shares. For federal income tax purposes, Fund distributions attributable to
short-term capital gains and net investment income are taxable to you as
ordinary income. Distributions attributable to net capital gains (the excess of
net long-term capital gains over net short-term capital losses) of the Fund
generally are taxable to you as long-term capital gains. This is true no matter
how long you own your Shares. The maximum long-term capital gain rate
applicable to individuals, estates and trusts is currently 15%. You will be
notified annually of the tax status of distributions to you. Distributions
of qualifying dividends will also generally be taxable to you at long-term
capital gain rates, as long as certain requirements are met. In general, if 95%
or more of the gross income of the Fund (other than net capital gain) consists
of dividends received from domestic corporations or qualified foreign
corporations (qualifying dividends), then all distributions paid by the Fund
to individual shareholders will be treated as qualifying dividends. But if less
than 95% of the gross income of the Fund (other than net capital gain) consists
of qualifying dividends, then distributions paid by the Fund to individual
shareholders will be qualifying dividends only to the extent they are derived
from qualifying dividends earned by the Fund. For the lower rates to apply, you
must have owned your Shares for at least 61 days during the 121-day period
beginning on the date that is 60 days before the Funds ex-dividend date (and
the Fund will need to have met a similar holding period requirement with
respect to the shares of the corporation paying the qualifying dividend). The
amount of the Funds distributions that qualify for this favorable treatment
may be reduced as a result of the Funds securities lending activities (if
any), a high portfolio turnover rate or investments in debt securities or non-qualified
foreign corporations. In addition, whether distributions received from foreign
corporations are qualifying dividends will depend on several factors including
the country of residence of the corporation making the distribution.
Accordingly, distributions from many of the Funds holdings may not be
qualifying dividends. A portion of
distributions paid by the Fund to shareholders who are corporations may also
qualify for the dividends-received deduction for corporations, subject to
certain holding period requirements and debt financing limitations. The amount
of the dividends qualifying for this deduction may, however, be reduced as a
result of the Funds securities lending activities, by a high portfolio
turnover rate or by investments in debt securities or foreign corporations. Distributions
from the Fund will generally be taxable to you in the year in which they are
paid, with one exception. Dividends and distributions declared by the Fund in
October, November or 15 December and
paid in January of the following year are taxed as though they were paid on
December 31. You should
note that if you buy Shares of the Fund shortly before it makes a distribution,
the distribution will be fully taxable to you even though, as an economic
matter, it simply represents a return of a portion of your investment. This
adverse tax result is known as buying into a dividend. Foreign Taxes. The
Fund will be subject to foreign withholding taxes with respect to certain
dividends or interest received from sources in foreign countries. If at the
close of the taxable year more than 50% in value of the Funds assets consists
of stock in foreign corporations, the Fund will be eligible to make an election
to treat a proportionate amount of those taxes as constituting a distribution
to each shareholder, which would allow you either (1) to credit that
proportionate amount of taxes against U.S. Federal income tax liability as a
foreign tax credit or (2) to take that amount as an itemized deduction. If the
Fund is not eligible or chooses not to make this election it will be entitled
to deduct such taxes in computing the amounts it is required to distribute. Sales and Exchanges.
The sale of Shares is a taxable event on which a gain or loss may be
recognized. The amount of gain or loss is based on the difference between your
tax basis in Shares and the amount you receive for them upon disposition.
Generally, you will recognize long-term capital gain or loss if you have held
your Fund Shares for over one-year at the time you sell or exchange them. Gains
and losses on Shares held for one-year or less will generally constitute
short-term capital gains, except that a loss on Shares held six months or less
will be recharacterized as a long-term capital loss to the extent of any long-term
capital gains distributions that you have received on the Shares. A loss
realized on a sale or exchange of Fund Shares may be disallowed under the
so-called wash sale rules to the extent the Shares disposed of are replaced
with other Shares of that same Fund within a period of 61 days beginning 30
days before and ending 30 days after the Shares are disposed of, such as
pursuant to a dividend reinvestment in Shares of the Fund. If disallowed, the
loss will be reflected in an adjustment to the basis of the Shares acquired. IRAs and Other Tax-Qualified Plans.
The one major exception to the preceding tax principles is that distributions
on, and sales, exchanges and redemptions of, Shares held in an IRA or other
tax-qualified plan will not be currently taxable unless the Shares were
purchased with borrowed funds. Backup Withholding.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 28% of the dividends and gross sales proceeds paid to any shareholder
(i) who had provided either an incorrect tax identification number or no number
at all, (ii) who is subject to backup withholding by the Internal Revenue
Service for failure to report the receipt of taxable interest or dividend
income properly, or (iii) who has failed to certify to the Trust, when required
to do so, that he or she is not subject to backup withholding or that he or she
is an exempt recipient. U.S. Tax Treatment of Foreign Shareholders. A
foreign shareholder generally will not be subject to U.S. withholding tax in
respect of proceeds from, or gain on, the redemption of Shares 16 or in respect
of capital gain dividends (i.e., dividends attributable to long-term capital
gains of the Fund) unless, in the case of a shareholder who is a nonresident
alien individual, the shareholder is present in the United States for 183 days
or more during the taxable year and certain other conditions are met. Foreign
shareholders generally will be subject to U.S. withholding tax at a rate of 30%
(or a lower treaty rate, if applicable) on distributions by the Fund of net
investment income, other ordinary income, and the excess, if any, of net
short-term capital gain over net long-term capital loss for the year, unless
the distributions are effectively connected with a U.S. trade or business of
the shareholder. Foreign shareholders should consult their tax advisors
regarding the U.S. and foreign tax consequences of investing in the Fund. State and Local Taxes. You
may also be subject to state and local taxes on income and gain attributable to
your ownership of Shares. State income taxes may not apply, however, to the
portions of the Funds distributions, if any, that are attributable to interest
earned by the Fund on U.S. government securities. You should consult your tax
advisor regarding the tax status of distributions in your state and locality. Sunset of Tax Provisions.
Some of the tax provisions described above are subject to sunset provisions.
Specifically, a sunset provision provides that the 15% long-term capital gain
rate will increase to 20% and the taxation of dividends at the long-term
capital gain rate will change for taxable years beginning after December 31,
2010. Consult Your Tax Professional.
Your investment in the Fund could have additional tax consequences. You should
consult your tax professional for information regarding all tax consequences
applicable to your investments in the Fund. More tax information relating to
the Fund is also provided in the Statement of Additional Information. This
short summary is not intended as a substitute for careful tax planning. Shares traded
in the secondary market are created at NAV by market makers, large investors
and institutions only in block-size Creation Units. The number of Shares per
Creation Unit for the Fund will be 70,000. Each creator
enters into an authorized participant agreement with SEI Investments
Distribution Co., the Funds Distributor, which is subject to acceptance by the
transfer agent, and then deposits into the applicable Fund a portfolio of
securities closely approximating the holdings of the Fund and a specified
amount of cash in exchange for a specified number of Creation Units. Similarly,
Shares can be redeemed only in a specified number of Creation Units,
principally in-kind for a portfolio of securities held by the Fund and a
specified amount of cash. Except when aggregated in Creation Units, Shares are
not redeemable. The prices at which creations and redemptions occur are based
on the next calculation of NAV after an order is received in a form described
in the authorized participant agreement. Certain
countries have instituted capital controls that prohibit the repatriation of
capital and free transfers of securities. Certain countries may also have
settlement, clearance and/or registration problems. In addition, the Trust may
in its discretion make available purchases and redemptions of Creation Units of
Shares in U.S. dollars rather than on an in-kind basis. 17 The Fund
intends to comply with the federal securities laws in accepting securities for
deposits and satisfying redemptions with redemption securities, including
requiring that the securities accepted for deposits and the securities
delivered to satisfy redemption requests are securities that may be sold in transactions
that would be exempt from registration under the Securities Act. Further, an
Authorized Participant that is not a qualified institutional buyer, as such
term is defined under Rule 144A of the Securities Act, will not be able to
receive Fund securities that are restricted securities eligible for resale
under Rule 144A. Creations and
redemptions must be made through a firm that is either a member of the
Continuous Net Settlement System of the National Securities Clearing
Corporation (NSCC) or a DTC participant, and in each case, must have executed
an authorized participant agreement with the Distributor with respect to
creations and redemptions of Creation Units. Information about the procedures
regarding creation and redemption of Creation Units (including the cutoff times
for receipt of creation and redemption orders) is included in the SAI. Because new
Shares may be created and issued on an ongoing basis, at any point during the
life of the Fund a distribution, as such term is used in the Securities Act,
may be occurring. Broker-dealers and other persons are cautioned that some
activities on their part may, depending on the circumstances, result in their
being deemed participants in a distribution in a manner that could render them
statutory underwriters and subject to the prospectus delivery and liability
provisions of the Securities Act. Nonetheless, any determination of whether one
is an underwriter must take into account all the relevant facts and
circumstances of each particular case. Broker-dealers
should also note that dealers who are not underwriters, but are participating
in a distribution (as contrasted to ordinary secondary transactions), and thus
dealing with Shares that are part of an unsold allotment within the meaning
of section 4(3)(C) of the Securities Act, would be unable to take advantage of
the prospectus delivery exemption provided by section 4(3) of the Securities
Act. For delivery of prospectuses to exchange members, the prospectus delivery
mechanism of Rule 153 under the Securities Act is available only with respect
to transactions on a national securities exchange. The Fund will
impose a purchase transaction fee and a redemption transaction fee to offset
transfer and other transaction costs associated with the issuance and
redemption of Creation Units. Purchasers and redeemers of Creation Units for
cash are required to pay a higher fee to compensate for brokerage and market
impact expenses and other associated costs. The standard creation and
redemption transaction fees for creations and redemptions in kind for the Fund
are discussed below. The standard creation transaction fee is charged to each
purchaser on the day such purchaser creates a Creation Unit. The fee is a
single charge and will be the amount indicated below regardless of the number
of Creation Units purchased by an investor on the same day. Similarly, the
redemption transaction fee will be the amount indicated regardless of the
number of Creation Units redeemed that day. The Adviser may, from time to time,
at its own expense, compensate purchasers of Creation Units who have purchased
substantial amounts of Creation Units and other financial institutions for
administrative or marketing services. 18 The standard
creation and redemption transaction fees for creations and redemptions through
DTC for cash (when cash creations and redemptions are available or specified)
will also be subject to a higher fee up to the maximum amount shown below. In
addition, purchasers of shares in Creation Units are responsible for payment of
the costs of transferring the securities to the Fund. Redeemers of shares in
Creation Units are responsible for the costs of transferring the securities
from the Fund. Investors who use the services of a broker or other such intermediary
may pay fees for such services. The Standard
Fee for in-kind and cash purchases and redemptions for the Fund will be $1,500.
The maximum additional variable charge for cash purchases and redemptions for
the Fund will be 0.30%. The Fund is
not sponsored, endorsed, sold or promoted by the Exchange. The Exchange makes
no representation or warranty, express or implied, to the owners of Shares or
any member of the public regarding the advisability of investing in securities
generally or in the Fund particularly or the ability of the Fund to achieve its
objective. The Exchange has no obligation or liability in connection with the
administration, marketing or trading of the Fund. For purposes
of the 1940 Act, Shares are issued by a registered investment company and
purchases of such Shares by investment companies and companies relying on
Section 3(c)(1) or 3(c)(7) of the 1940 Act are subject to the restrictions set
forth in Section 12(d)(1) of the 1940 Act, except as permitted by an exemptive
order that permits registered investment companies to invest in Shares beyond
the limits in Section 12(d)(1)(A), subject to certain terms and conditions,
including that the registered investment company and companies relying on
Section 3(c)(1) or 3(c)(7) of the 1940 Act enter into an agreement with the
Trust regarding the terms of the investment. The Trust has
obtained an SEC order permitting registered investment companies to invest in
Shares as described above. One such condition stated in the order is that
registered investment companies relying on the order must enter into a written
agreement with the Trust. The Fund is
newly organized and therefore has not yet had any operations as of the date of
this Prospectus. 19 For more information visit our website or Investment Adviser Distributor Custodian and Transfer Agent Sub-Administrator
Legal Counsel Independent
Registered Public 20 A Statement of
Additional Information dated November [ ], 2008,
which contains more details about the Fund, is incorporated by reference in its
entirety into this Prospectus, which means that it is legally part of this Prospectus. You will find
additional information about the Fund in its annual and semi-annual reports to
shareholders, when available. The annual report will explain the market
conditions and investment strategies affecting the Funds performance during
its last fiscal year. You can ask
questions or obtain a free copy of the Funds shareholder report or the
Statement of Additional Information by calling 1-888-GXFund-1 (1-888-493-8631).
Free copies of the Funds shareholder report and the Statement of Additional
Information are available from our website at www.globalxfunds.com. Information
about the Fund, including its reports and the Statement of Additional
Information, has been filed with the SEC. It can be reviewed and copied at the
SECs Public Reference Room in Washington, DC or on the EDGAR database on the
SECs internet site (http://www.sec.gov). Information on the operation of the
SECs Public Reference Room may be obtained by calling the SEC at
1-202-551-8090. You can also request copies of these materials, upon payment of
a duplicating fee, by electronic request at the SECs e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the SEC, 100
F Street NE, Room 1580, Washington, DC 20549. PROSPECTUS Distributor SEI Investments Distribution Co.
November
[ ], 2008
Investment
Company Act File No.: 811-22209 21 The information
in this Statement of Additional Information is not complete and may be changed.
The Trust may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This Statement of Additional
Information is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any jurisdiction where the offer or sale is
not permitted.
Preliminary
Statement of Additional Information dated November 3, 2008
GLOBAL X FUNDS Statement
of Additional Information
Dated November [ ],
2008
This Statement of Additional Information (Additional
Statement) is not a prospectus. It should be read in conjunction with the
current Prospectus (Prospectus) for Global X FTSE Nordic 30 ETF (Fund) of
Global X Funds (Trust) as such Prospectus may be revised or supplemented from
time to time.
The Prospectus for the Fund dated November [ ] 2008.
Capitalized terms used herein that are not defined have the same meaning as in
the Prospectus, unless otherwise noted. A copy of the Prospectus may be
obtained without charge by writing to SEI Investments Global Trusts Services,
Freedom Valley Drive Oaks, PA 19456, calling 1-888-GXFund-1 (1-888-493-8631)
or visiting www.globalxfunds.com.
1 1 1 2 10 11 12 13 14 14 14 15 15 16 17 17 17 18 20 21 21 22 22 22 23 23 23 23 24 24 25 25 28 i 28 29 30 30 30 30 30 TAXATION OF INCOME FROM CERTAIN
FINANCIAL INSTRUMENTS
AND PFICS 31 31 31 31 32 32 33 33 33 33 33 33 33 A-1 B-1 B-5 ii GENERAL DESCRIPTION OF THE TRUST AND THE FUND The Trust currently consists of one investment
portfolio. The Trust was formed as a Delaware Statutory Trust on March 6, 2008
and is authorized to have multiple series or portfolios. The Trust is an
open-end management investment company, registered under the Investment Company
Act of 1940, as amended (1940 Act). The offering of the Trusts shares is
registered under the Securities Act of 1933, as amended (Securities Act).
This Statement of Additional Information relates to the Fund. The investment objective of the Fund is to provide
investment results that correspond generally to the price and yield
performance, before fees and expenses, of the FTSE Nordic 30 Index (Underlying
Index). The Fund is managed by Global X Management Company LLC (Adviser). The Fund offers and issues shares at its net asset
value per share (NAV) only in aggregations of a specified number of shares
(each, a Creation Unit or a Creation Unit Aggregation), generally in
exchange for a basket of equity securities included in its Underlying Index
(Deposit Securities), together with the deposit of a specified cash payment
(Cash Component). The shares of the Fund will be listed and expected to be
traded on the NYSE Arca (Exchange). Shares trade in the secondary market and elsewhere at
market prices that may be at, above or below NAV. Shares are redeemable only in
Creation Unit Aggregations and, generally, in exchange for portfolio securities
and a Cash Component. Creation Units typically are a specified number of
shares. The number of shares per Creation Unit of the Fund are 70,000. The Trust reserves the right to offer a cash option
for creations and redemptions of shares. 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 at least equal to 110%
of the market value of the missing Deposit Securities. The required amount of
deposit may be changed by the Adviser from time to time. See the Purchase and
Redemption of Creation Units section of this Statement of Additional
Information for further discussion. In each instance of such cash creations or
redemptions, transaction fees may be imposed that will be in addition to the
transaction fees associated with in-kind creations or redemptions. In all
cases, such conditions and fees will be limited in accordance with the
requirements of the Securities and Exchange Commission (SEC) applicable to
management investment companies offering redeemable securities. ADDITIONAL INVESTMENT INFORMATION A discussion of exchange listing and trading matters
associated with an investment in the Fund is contained in the Prospectus. The
discussion below supplements, and should be read in conjunction with, that
section of the Prospectus. Shares of the Fund are listed for trading on the
Exchange and trade throughout the day on the Exchange and other secondary
markets. There can be no assurance that the requirements of the Exchange
necessary to maintain the listing of shares of the Fund will continue to be
met. The Exchange may, but is not required to, remove the shares of the Fund
from its listing if (1) following the initial twelve-month period beginning
upon the commencement of trading of the Fund, there are fewer than fifty (50)
record and/or beneficial holders of the Fund for thirty (30) or more
consecutive trading days, (2) the value of the Underlying Index on which the
Fund is based is no longer calculated or available, (3) the indicative
optimized portfolio value (IOPV) of the Fund is no longer calculated or
available, or (4) any other event shall occur or condition exist that, in the
opinion of the Exchange, makes further dealings on the Exchange inadvisable.
The Exchange will remove the shares of the Fund from listing and trading upon
termination of the Fund. As in the case of other publicly-traded securities,
brokers commissions on transactions will be based on negotiated commission rates
at customary levels. In order to provide additional information regarding
the indicative value of shares of the Fund, the Exchange disseminates every
fifteen seconds, through the facilities of the Consolidated Tape Association,
an updated IOPV for 1 the Fund as calculated by an information provider or a
market data vendor. The Trust is not involved in or responsible for any aspect
of the calculation or dissemination of the IOPVs, and makes no representation
or warranty as to the accuracy of the IOPVs. An IOPV has an equity securities value component and a
cash component. The equity securities values included in an IOPV are the values
of the Deposit Securities for the Fund. While the IOPV reflects the current
market value of the Deposit Securities required to be deposited in connection
with the purchase of a Creation Unit Aggregation, it does not necessarily
reflect the precise composition of the current portfolio of securities held by
the Fund at a particular point in time because the current portfolio of the
Fund may include securities that are not a part of the Deposit Securities.
Therefore, the Funds IOPV disseminated during the Exchange trading hours
should not be viewed as a real time update of the Funds NAV, which is
calculated only once a day. In addition to the equity component described in the
preceding paragraph, the IOPV for the Fund includes a cash component consisting
of estimated accrued dividends and other income, less expenses. If applicable,
each IOPV also reflects changes in currency exchange rates between the U.S.
Dollar and the applicable foreign currency. The Trust reserves the right to adjust the share
prices of the Fund in the future to maintain convenient trading ranges for
investors. Any adjustments would be accomplished through stock splits or
reverse stock splits, which would have no effect on the net assets of the
applicable Fund. INVESTMENT
OBJECTIVE, STRATEGIES AND RISKS The Fund seeks to achieve its objective by investing
primarily in securities issued by companies that comprise the relevant
Underlying Index and through transactions that provide substantially similar
exposure to securities in the Underlying Index. The Fund operates as an index
fund and will not be actively managed. Adverse performance of a security in the
Funds portfolio will ordinarily not result in the elimination of the security
from the Funds portfolio. The Fund will normally invest at least 80% of its
total assets in the securities of its Underlying Index and in American
Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and Euro
Depositary Receipts (EDRs) (collectively Depositary Receipts) based on the
securities in its Underlying Index. The Fund may also invest up to 20% of its
assets in certain futures, options and swap contracts, cash and cash
equivalents, as well as in stocks not included in its Underlying Index but
which the Adviser believes will help the Fund track its Underlying Index. The Fund will use a replication strategy. A
replication strategy is an indexing strategy that involves investing in the
securities of the Underlying Index in approximately the same proportions as in
the Underlying Index. However, the Fund may utilize a representative sampling
strategy with respect to its Underlying Index when a replication strategy might
be detrimental to its shareholders, such as when there are practical
difficulties or substantial costs involved in compiling a portfolio of equity
securities to follow its Underlying Index, or, in certain instances, when a
securities in the Underlying Index become temporarily illiquid, unavailable or
less liquid, or due to legal restrictions (such as diversification requirements
that apply to the Fund but not the Underlying Index).. The Fund has adopted a non-fundamental investment
policy in accordance with Rule 35d-1 under the 1940 Act to invest, under normal
circumstances, at least 80% of the value of its net assets, plus the amount of
any borrowings for investment purposes, in securities of the Funds Underlying
Index and in Depositary Receipts based on securities in the Underlying Index.
The Fund has also adopted a policy to provide its shareholders with at least 60
days prior written notice of any change in such policy. If, subsequent to an
investment, the 80% requirement is no longer met, the Funds future investments
will be made in a manner that will bring the Fund into compliance with this
policy. The following supplements the information contained in
the Prospectus concerning the investment objectives and policies of the Fund. DEPOSITARY
RECEIPTS. The Fund will normally invest at least 80% of its
total assets in the securities of its Underlying Index and in Depositary
Receipts based on the securities in its Underlying Index. ADRs are receipts
that are traded in the United States evidencing ownership of the underlying
foreign securities and are denominated in U.S. dollars. EDRs and GDRs are
receipts issued by a non-U.S. financial institution evidencing ownership of
underlying foreign or U.S. securities and usually are denominated in foreign
currencies. EDRs and GDRs may not 2 be denominated in the same currency as the securities
they represent. Generally, EDRs and GDRs are designed for use in the foreign
securities markets. To the extent the Fund invests in ADRs, such ADRs will
be listed on a national securities exchange. To the extent the Fund invests in
GDRs or EDRs, such GDRs and EDRs will be listed on a foreign exchange. The Fund
will not invest in any unlisted Depositary Receipt, or any Depository Receipt
for which pricing information is not readily available. Generally, all
depositary receipts must be sponsored. The Fund, however, may invest in
unsponsored depositary receipts under certain limited circumstances. A
non-sponsored depository may not provide the same shareholder information that
a sponsored depository is required to provide under its contractual arrangement
with the issuer. Therefore, there may be less information available regarding
such issuers and there may not be a correlation between such information and
the market value of the depositary receipts. NON-DIVERSIFICATION
RISK. Non-diversification risk is the risk that a
non-diversified fund may be more susceptible to adverse financial, economic or
other developments affecting any single issuer, and more susceptible to greater
losses because of these developments. The Fund is classified as
non-diversified for purposes of the 1940 Act. A non-diversified
classification means that the Fund is not limited by the 1940 Act with regard
to the percentage of its assets that may be invested in the securities of a
single issuer. The securities of a particular issuer may dominate the
Underlying Index of the Fund and, consequently, the Funds investment
portfolio. The Fund may also concentrate its investments in a particular industry
or group of industries, as noted in the description of the Fund. The securities
of issuers in particular industries may dominate the Underlying Index of the
Fund and, consequently, the Funds investment portfolio. This may adversely
affect its performance or subject the Funds shares to greater price volatility
than that experienced by less concentrated investment companies. Additionally,
the Fund invests substantially all of its assets within the equity markets of a
single country outside the U.S. The Fund intends to maintain the required level of
diversification and otherwise conduct its operations so as to qualify as a
regulated investment company for purposes of the Internal Revenue Code (the
IRC), and to relieve the Fund of any liability for federal income tax to the
extent that its earnings are distributed to shareholders. Compliance with the
diversification requirements of the IRC may limit the investment flexibility of
the Fund and may make it less likely that the Fund will meet its investment objectives. SHORT-TERM
INSTRUMENTS AND TEMPORARY INVESTMENTS. To the extent
consistent with its investment policies, the Fund may invest in short-term
instruments, including money market instruments, on an ongoing basis to provide
liquidity or for other reasons. Money market instruments are generally
short-term investments that may include but are not limited to: (i) shares of
money market funds; (ii) obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities (including government-sponsored
enterprises); (iii) negotiable certificates of deposit (CDs), bankers
acceptances, fixed time deposits, bank notes and other obligations of U.S. and
foreign banks (including foreign branches) and similar institutions; (iv)
commercial paper rated at the date of purchase Prime-1 by Moodys Investors
Service, Inc. (Moodys), A-1 by Standard & Poors Rating Service
(S&P) or, if unrated, of comparable quality as determined by the Adviser;
(v) non-convertible corporate debt securities (e.g.,
bonds and debentures) with remaining maturities at the date of purchase of not
more than 397 days and that satisfy the rating requirements set forth in Rule
2a-7 under the 1940 Act; (vi) repurchase agreements; and (vii) short-term U.S.
dollar-denominated obligations of foreign banks (including U.S. branches) that,
in the opinion of the Adviser, are of comparable quality to obligations of U.S.
banks which may be purchased by the Fund. Any of these instruments may be
purchased on a current or a forward-settled basis. Time deposits are non-negotiable deposits maintained
in banking institutions for specified periods of time at stated interest rates.
Bankers acceptances are time drafts drawn on commercial banks by borrowers,
usually in connection with international transactions. Commercial paper
represents short-term unsecured promissory notes issued in bearer form by banks
or bank holding companies, corporations and finance companies. Certificates of
deposit are negotiable certificates issued against funds deposited in a
commercial bank for a definite period of time and earning a specified return.
Bankers acceptances are negotiable drafts or bills of exchange, normally drawn
by an importer or exporter to pay for specific merchandise, which are
accepted by a bank, meaning, in effect, that the bank unconditionally agrees
to pay the face value of the instrument on maturity. Fixed time deposits are
bank obligations payable at a stated maturity date and bearing interest at a
fixed rate. Fixed time deposits may be withdrawn on demand by the investor, but
may be subject to early withdrawal penalties that vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer 3 a beneficial interest in a fixed time deposit to a
third party. Bank notes generally rank junior to deposit liabilities of banks
and pari passu with other senior, unsecured obligations of the bank. Bank notes
are classified as other borrowings on a banks balance sheet, while deposit
notes and certificates of deposit are classified as deposits. Bank notes are
not insured by the FDIC or any other insurer. Deposit notes are insured by the
FDIC only to the extent of $100,000 per depositor per bank. The Fund may invest a portion of its assets in the
obligations of foreign banks and foreign branches of domestic banks. Such
obligations include Eurodollar Certificates of Deposit (ECDs), which are U.S.
dollar-denominated certificates of deposit issued by offices of foreign and
domestic banks located outside the United States; Eurodollar Time Deposits
(ETDs), which are U.S. dollar-denominated deposits in a foreign branch of a
U.S. bank or a foreign bank; Canadian Time Deposits (CTDs), which are
essentially the same as ETDs except they are issued by Canadian offices of
major Canadian banks; Schedule Bs, which are obligations issued by Canadian
branches of foreign or domestic banks; Yankee Certificates of Deposit (Yankee
CDs), which are U.S. dollar-denominated certificates of deposit issued by a
U.S. branch of a foreign bank and held in the United States; and Yankee
Bankers Acceptances (Yankee BAs), which are U.S. dollar-denominated bankers
acceptances issued by a U.S. branch of a foreign bank and held in the United States.
Commercial paper purchased by the Fund may include
asset-backed commercial paper. Asset-backed commercial paper is issued by a
special purpose entity that is organized to issue the commercial paper and to
purchase trade receivables or other financial assets. The credit quality of
asset-backed commercial paper depends primarily on the quality of these assets
and the level of any additional credit support. EQUITY
SWAPS, TOTAL RATE OF RETURN SWAPS AND CURRENCY SWAPS. The
Fund may invest up to 20% of its total assets in swap contracts. The Fund may enter into equity swap contracts to
invest in a market without owning or taking physical custody of securities in
circumstances in which direct investment is restricted for legal reasons or is
otherwise impracticable. These instruments are privately negotiated
over-the-counter derivative products. A great deal of flexibility is possible
in the way these instruments are structured. The counterparty to an equity swap
contract will typically be a bank, investment banking firm or broker/dealer.
Equity swap contracts may be structured in different ways. For example, a
counterparty may agree to pay the Fund the amount, if any, by which the
notional amount of the equity swap contract would have increased in value had
it been invested in particular stocks (or an index of stocks), plus the
dividends that would have been received on those stocks. In these cases, the
Fund may agree to pay to the counterparty the amount, if any, by which that
notional amount would have decreased in value had it been invested in the
stocks. Therefore, the return to the Fund on any equity swap contract 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. In other cases, the
counterparty and the Fund may each agree to pay the other the difference
between the relative investment performances that would have been achieved if
the notional amount of the equity swap contract had been invested in different
stocks (or indices of stocks). Total rate of return swaps are contracts that obligate
a party to pay or receive interest in exchange for the payment by the other
party of the total return generated by a security, a basket of securities, an
index or an index component. The Fund also may enter into currency swaps, which
involve the exchange of the rights of the Fund and another party to make or
receive payments in specific currencies. Currency swaps involve the exchange of
rights of the Fund and another party to make or receive payments in specific
currencies. Some transactions are entered into 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 Fund will enter into equity swaps only on a net basis.
Payments may be made at the conclusion of an equity swap contract or
periodically during its term. Equity swaps do not involve the delivery of
securities or other underlying assets. Accordingly, the risk of loss with
respect to equity swaps is limited to the net amount of payments that the Fund
is contractually obligated to make. If the other party to an equity swap, or
any other swap entered into on a net basis, defaults, the Funds risk of loss
consists of the net amount of payments that such Fund is contractually entitled
to receive, if any. In contrast, other transactions may involve the payment of
the gross amount owed. For example, currency swaps usually involve the delivery
of the entire principal amount of one designated currency in exchange for the
other designated currency. Therefore, the entire principal value of a currency
swap is subject to the risk that the other 4 party to the swap will default on its contractual
delivery obligations. To the extent that the amount payable by the Fund under a
swap is covered by segregated cash or liquid assets, the Fund and the Adviser
believe that transactions do not constitute senior securities under the 1940
Act and, accordingly, will not treat them as being subject to the Funds
borrowing restrictions. The Fund will not enter into any swap transactions
unless the unsecured commercial paper, senior debt or claims-paying ability of
the other party is rated either A, or A-1 or better by S&P, or Fitch
Ratings (Fitch); or A or Prime-1 or better by Moodys, or has received a
comparable rating from another organization that is recognized as a nationally
recognized statistical rating organization (NRSRO) or, if unrated by such
rating organization, is determined to be of comparable quality by the Adviser.
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. Such contractual remedies, however, may be subject to bankruptcy
and insolvency laws that may affect the Funds rights as a creditor (e.g., the Fund may not receive the net
amount of payments that it contractually is entitled to receive). The swap
market has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid in comparison with markets for other similar instruments
which are traded in the interbank market. The use of equity, total rate of return and currency
swaps is a highly specialized activity which involves investment techniques and
risks different from those associated with ordinary portfolio securities
transactions. FOREIGN
CURRENCY TRANSACTIONS. To the extent consistent with its
investment policies, the Fund may invest in forward foreign currency exchange
contracts and foreign currency futures contracts. The Fund, however, does not
expect to engage in currency transactions for speculative purposes or for the
purpose of hedging against declines in the value of the Funds assets that are
denominated in a foreign currency. The Fund may enter into forward foreign
currency exchange contracts and foreign currency futures contracts to facilitate
local settlements or to protect against currency exposure in connection with
its distributions to shareholders. Foreign currency exchange contracts involve an
obligation to purchase or sell a specified currency on a future date at a price
set at the time of the contract. Forward currency contracts do not eliminate
fluctuations in the values of portfolio securities but rather allow the Fund to
establish a rate of exchange for a future point in time. Foreign currency
futures contracts involve an obligation to deliver or acquire the specified
amount of a specific currency, at a specified price and at a specified future
time. Such futures contracts may be settled on a net cash payment basis rather
than by the sale and delivery of the underlying currency. The Fund may incur
costs in connection with forward foreign currency exchange and futures
contracts and conversions of foreign currencies and U.S. dollars. Liquid assets equal to the amount of the Funds assets
that could be required to consummate forward contracts will be segregated
except to the extent the contracts are otherwise covered. The segregated
assets will be valued at market or fair value. If the market or fair value of
such assets declines, additional liquid assets will be segregated daily so that
the value of the segregated assets will equal the amount of such commitments by
the Fund. A forward contract to sell a foreign currency is covered if the
Fund owns the currency (or securities denominated in the currency) underlying
the contract, or holds a forward contract (or call option) permitting the Fund
to buy the same currency at a price that is (i) no higher than the Funds price
to sell the currency or (ii) greater than the Funds price to sell the currency
provided the Fund segregates liquid assets in the amount of the difference. A
forward contract to buy a foreign currency is covered if the Fund holds a
forward contract (or call option) permitting the Fund to sell the same currency
at a price that is (i) as high as or higher than the Funds price to buy the
currency or (ii) lower than the Funds price to buy the currency provided the
Fund segregates liquid assets in the amount of the difference. FOREIGN
INVESTMENTS. The Fund invests predominately in foreign
securities. 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 stock prices will decline over short
or even extended periods. The stock 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 stocks. 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 5 otherwise affect the value of a foreign security (such
as a change in the political climate or an issuers 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 U.S. 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 Funds 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 U.S. or abroad.
To the extent that the Funds total assets, adjusted to reflect the Funds 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. The Fund also is subject to the possible imposition of
exchange control regulations or freezes on the convertibility of currency. In
addition, through the use of forward currency exchange contracts with other
instruments, any net currency positions of the Fund may expose its to risks
independent of its securities positions. The Fund will be subject to foreign withholding taxes
with respect to certain dividends or interest received from sources in foreign
countries. 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 costs attributable to investing abroad usually are
higher than investments in domestic securities for several reasons, such as the
higher cost of investment research, higher costs of custody of foreign
securities, higher commissions paid on comparable transactions on foreign
markets and additional costs arising from delays in settlements of transactions
involving foreign securities. The Fund intends invest its assets predominantly in
the securities of issuers located in Nordic region (Sweden, Denmark, Norway and
Finland), which has securities markets that are highly developed, liquid and
subject to extensive regulation. FUTURES
CONTRACTS AND RELATED OPTIONS. To the extent consistent with
its investment policies, the Fund may invest up to 20% of its total assets in
U.S. or foreign futures contracts and may purchase and sell call and put
options on futures contracts. These futures contracts and options will be used
to simulate full investment in the respective Underlying Index, to facilitate trading
or to reduce transaction costs. The Fund will only enter into futures contracts
and options on futures contracts that are traded on a U.S. or foreign exchange.
The Fund will not use futures or options for speculative purposes. The Trust, on behalf of the Fund, has claimed an
exclusion from the definition of the term commodity pool operator under the
Commodity Exchange Act, and, therefore, is not subject to registration or
regulation as a pool operator under that Act with respect to the Fund. The Fund
will engage in transactions in futures contracts and related options only to
the extent such transactions are consistent with the requirement of the
Internal Revenue Code 6 of 1986, as amended (Code) for maintaining its
qualifications as regulated investment companies for federal income tax
purposes. Participation in foreign futures and foreign options
transactions involves the execution and clearing of trades on or subject to the
rules of a foreign board of trade. Neither the National Futures Association
(NFA) nor any domestic exchange regulates activities of any foreign boards of
trade, including the execution, delivery and clearing of transactions, or has
the power to compel enforcement of the rules of a foreign board of trade or any
applicable foreign law. This is true even if the exchange is formally linked to
a domestic market so that a position taken on the market may be liquidated by a
transaction on another market. Moreover, such laws or regulations will vary
depending on the foreign country in which the foreign futures or foreign
options transaction occurs. For these reasons, persons who trade foreign
futures or foreign options contracts may not be afforded certain of the
protective measures provided by the Commodity Exchange Act, the Commodity
Futures Trading Commissions (CFTC) regulations and the rules of the NFA and
any domestic exchange, including the right to use reparations proceedings
before the CFTC and arbitration proceedings provided them by the NFA or any
domestic futures exchange. In particular, the Funds investments in foreign
futures or foreign options transactions may not be provided the same
protections in respect of transactions on United States futures exchanges. In
addition, the price of any foreign futures or foreign options contract may be
affected by any variance in the foreign exchange rate between the time an order
is placed and the time it is liquidated, offset or exercised. In connection with the Funds position in a futures
contract or related option, the Fund will segregate liquid assets or will
otherwise cover its position in accordance with applicable SEC requirements. For a further description of futures contracts and
related options, see Appendix B to this Additional Statement. ILLIQUID
OR RESTRICTED SECURITIES. To the extent consistent with its
investment policies, the Fund may invest up to 15% of its net assets in
securities that are illiquid. The Fund may purchase commercial paper issued
pursuant to Section 4(2) of the Securities Act of 1933, as amended (1933 Act)
and securities that are not registered under the 1933 Act but can be sold to
qualified institutional buyers in accordance with Rule 144A under the 1933
Act. These securities will not be considered illiquid so long as the Adviser
determines, under guidelines approved by the Trusts Board of Trustees that an
adequate trading market exists. This practice could increase the level of
illiquidity during any period that qualified institutional buyers become
uninterested in purchasing these securities. INVESTMENT
COMPANIES. To the extent consistent with its investment
policies, the Fund may invest in the securities of other investment companies.
Such investments will be limited so that, as determined after a purchase is
made, either: (a) not more than 3% of the total outstanding stock of such
investment company will be owned by the Fund, the Trust as a whole and its
affiliated persons (as defined in the 1940 Act); or (b) (i) not more than 5% of
the value of the total assets of the Fund will be invested in the securities of
any one investment company, (ii) not more than 10% of the value of its total
assets will be invested in the aggregate securities of investment companies as
a group and (iii) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund. Investments by the Fund in other investment
companies, including exchange-traded funds (ETFs), will be subject to the
limitations of the 1940 Act except as permitted by SEC orders. The Fund may
rely on SEC orders that permit them to invest in certain ETFs beyond the limits
contained in the 1940 Act, subject to certain terms and conditions. Generally,
these terms and conditions require the Board to approve policies and procedures
relating to certain of the Funds investments in ETFs. These policies and
procedures require, among other things, that (i) the Adviser conduct the Funds
investment in ETFs without regard to any consideration received by the Fund or
any of its affiliated persons and (ii) the Adviser certify to the Board
quarterly that it has not received any consideration in connection with an
investment by the Fund in an ETF, or if it has, the amount and purpose of the
consideration will be reported to the Board and an equivalent amount of
advisory fees shall be waived by the Adviser. Certain investment companies whose securities are
purchased by the Fund may not be obligated to redeem such securities in an
amount exceeding 1% of the investment companys total outstanding securities
during any period of less than 30 days. Therefore, such securities that exceed
this amount may be illiquid. If required by the 1940 Act, the Fund expects to vote
the shares of other investment companies that are held by it in the same
proportion as the vote of all other holders of such securities. 7 OPTIONS.
To the extent consistent with its investment policies, the
Fund may invest up to 20% of net assets in put options and buy call options and
write covered call and secured put options. Such options may relate to
particular securities, foreign and domestic stock indices, financial
instruments, foreign currencies or the yield differential between two
securities (yield curve options) and may or may not be listed on a domestic
or foreign securities exchange or issued by the Options Clearing Corporation. A
call option for a particular security or currency gives the purchaser of the
option the right to buy, and a writer the obligation to sell, the underlying
security at the stated exercise price prior to the expiration of the option,
regardless of the market price of the security or currency. The premium paid to
the writer is in consideration for undertaking the obligation under the option
contract. A put option for a particular security or currency gives the
purchaser the right to sell the security or currency at the stated exercise
price to the expiration date of the option, regardless of the market price of
the security or currency. In contrast to an option on a particular security, an
option on an index provides the holder with the right to make or receive a cash
settlement upon exercise of the option. The amount of this settlement will be
equal to the difference between the closing price of the index at the time of
exercise and the exercise price of the option expressed in dollars, times a
specified multiple. Options trading is a highly specialized activity,
which entails greater than ordinary investment risk. Options on particular
securities 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. The Fund will write call options only if they are
covered. In the case of a call option on a security or currency, the option
is covered if the Fund owns the security or currency underlying the call or
has an absolute and immediate right to acquire that security without additional
cash consideration (or, if additional cash consideration is required, liquid
assets in such amount are segregated) upon conversion or exchange of other
securities held by it. For a call option on an index, the option is covered if
the Fund maintains with its custodian a portfolio of securities substantially
replicating the index, or liquid assets equal to the contract value. A call
option also is covered if the Fund holds a call on the same security, currency
or index as the call written where the exercise price of the call held is (i)
equal to or less than the exercise price of the call written, or (ii) greater
than the exercise price of the call written provided the Fund segregates liquid
assets in the amount of the difference. All put options written by the Fund would be covered,
which means that such Fund will segregate cash or liquid assets with a value at
least equal to the exercise price of the put option or will use the other
methods described in the next sentence. A put option also is covered if the
Fund holds a put option on the same security or currency as the option written
where the exercise price of the option held is (i) equal to or higher than the
exercise price of the option written, or (ii) less than the exercise price of
the option written provided the Fund segregates liquid assets in the amount of
the difference. With respect to yield curve options, a call (or put)
option is covered if the Fund holds another call (or put) option on the spread
between the same two securities and segregates liquid assets sufficient to
cover the Funds net liability under the two options. Therefore, the Funds
liability for such a covered option generally is limited to the difference
between the amount of the Funds liability under the option written by the Fund
less the value of the option held by the Fund. Yield curve options also may be
covered in such other manner as may be in accordance with the requirements of
the counterparty with which the option is traded and applicable laws and
regulations. The Funds obligation to sell subject to a covered
call option written by it, or to purchase a security or currency subject to a
secured put option written by it, may be terminated prior to the expiration
date of the option by the Funds execution of a closing purchase transaction,
which is effected by purchasing on an exchange an option of the same series (i.e., same underlying security or
currency, exercise price and expiration date) as the option previously written.
Such a purchase does not result in the ownership of an option. 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 security or currency or to permit the writing
of a new option containing different terms on such underlying security. The
cost of such a liquidation purchase plus transaction 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 security or currency (in the case of a covered call option) or
liquidate the segregated assets (in the case of a secured put option) until the
option expires or 8 the optioned security or currency is delivered upon
exercise with the result that the writer in such circumstances will be subject
to the risk of market decline or appreciation in the instrument during such
period. When the Fund purchases an option, the premium paid by
it is recorded as an asset of the Fund. When the Fund writes an option, an
amount equal to the net premium (the premium less the commission) received by
the Fund is included in the liability section of the Funds statement of assets
and liabilities as a deferred credit. The amount of this asset or deferred
credit will be subsequently marked-to-market to reflect the current value of
the option purchased or written. The current value of the traded option is the
last sale price or, in the absence of a sale, the current bid price. 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) and the deferred credit related to such option will be eliminated. 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. There are several risks associated with transactions
in certain options. For example, there are significant differences between the
securities, currency 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. REPURCHASE
AGREEMENTS. To the extent consistent with its investment
policies, the Fund may agree to purchase portfolio securities from financial
institutions subject to the sellers agreement to repurchase them at a mutually
agreed upon date and price (repurchase agreements). Repurchase agreements are
considered to be loans under the 1940 Act. Although the securities subject to a
repurchase agreement may bear maturities exceeding one year, settlement for the
repurchase agreement will never be more than one year after the Funds
acquisition of the securities and normally will be within a shorter period of
time. Securities subject to repurchase agreements normally are held either by
the Trusts custodian or sub-custodian (if any), or in the Federal
Reserve/Treasury Book-Entry System. The seller under a repurchase agreement
will be required to maintain the value of the securities subject to the
agreement in an amount exceeding the repurchase price (including accrued
interest). Default by the seller would, however, expose the Fund to possible
loss because of adverse market action or delay in connection with the
disposition of the underlying obligations. In addition, in the event of a
bankruptcy, the Fund could suffer additional losses if a court determines that
the Funds interest in the collateral is unenforceable. REVERSE REPURCHASE AGREEMENTS. To
the extent consistent with its investment policies, the Fund may borrow funds
by selling portfolio securities to financial institutions such as banks and
broker/dealers and agreeing to repurchase them at a mutually specified date and
price (reverse repurchase agreements). The Fund may use the proceeds of
reverse repurchase agreements to purchase other securities either maturing, or
under an agreement to resell, on a date simultaneous with or prior to the
expiration of the reverse repurchase agreement. Reverse repurchase agreements
are considered to be borrowings under the 1940 Act. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Fund may decline below the repurchase price. The Fund will pay interest on
amounts obtained pursuant to a reverse repurchase agreement. While reverse
repurchase agreements are outstanding, the Fund will segregate liquid assets in
an amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement. 9 SECURITIES LENDING. Collateral
for loans of portfolio securities made by the Fund may consist of cash, cash
equivalents, securities issued or guaranteed by the U.S. government or its
agencies or irrevocable bank letters of credit (or any combination thereof).
The borrower of securities will be required to maintain the market value of the
collateral at not less than the market value of the loaned securities, and such
value will be monitored on a daily basis. When the Fund lends its securities,
it continues to receive payments equal to the dividends and interest paid on
the securities loaned and simultaneously may earn interest on the investment of
the cash collateral. Investing the collateral subjects it to market
depreciation or appreciation, and the Fund is responsible for any loss that may
result from its investment in borrowed collateral. The Fund will have the right
to terminate a loan at any time and recall the loaned securities within the
normal and customary settlement time for securities transactions. Although
voting rights, or rights to consent, attendant to securities on loan pass to
the borrower, such loans may be called so that the securities may be voted by
the Fund if a material event affecting the investment is to occur. As with
other extensions of credit there are risks of delay in recovering, or even loss
of rights in, the collateral should the borrower of the securities fail
financially. TRACKING VARIANCE. As
discussed in the Prospectus, the Fund is subject to the risk of tracking
variance. Tracking variance may result from share purchases and redemptions,
transaction costs, expenses and other factors. Share purchases and redemptions
may necessitate the purchase and sale of securities by the Fund and the
resulting transaction costs which may be substantial because of the number and
the characteristics of the securities held. In addition, transaction costs are
incurred because sales of securities received in connection with spin-offs and
other corporate reorganizations are made to conform the Funds holdings to its
investment objective. Tracking variance also may occur due to factors such as
the size of the Fund, the maintenance of a cash reserve pending investment or
to meet expected redemptions, changes made in the Funds designated index or the
manner in which the index is calculated or because the indexing and investment
approach of the Adviser does not produce the intended goal of the Fund.
Tracking variance is monitored by the Adviser at least quarterly. In the event
the performance of the Fund is not comparable to the performance of its
designated index, the Board of Trustees will evaluate the reasons for the
deviation and the availability of corrective measures. WARRANTS. To the
extent consistent with its investment policies, the Fund may purchase warrants
and similar rights, which are privileges issued by corporations enabling the
owners to subscribe to and purchase a specified number of shares of the
corporation at a specified price during a specified period of time. The prices
of warrants do not necessarily correlate with the prices of the underlying
shares. The purchase of warrants involves the risk that the Fund could lose the
purchase value of a warrant if the right to subscribe to additional shares is
not exercised prior to the warrants expiration. Also, the purchase of warrants
involves the risk that the effective price paid for the warrant added to the
subscription price of the related security may exceed the value of the
subscribed securitys market price such as when there is no movement in the
level of the underlying security. FSTE Nordic 30 Index The FTSE
Nordic 30 Index tracks the performance of the 30 largest and most liquid
companies in Sweden, Denmark, Norway and Finland. The index uses the universe
of the FTSE All-World Index - Nordic Region. The FTSE Nordic 30 Index is free
float adjusted, liquidity tested and managed by an independent committee. The Fund is
subject to the investment policies enumerated in this section, which may be
changed with respect to the Fund only by a vote of the holders of a majority of
the Funds outstanding shares. The Fund: 1. May not
issue any senior security, except as permitted under the 1940 Act, and as
interpreted or modified by regulatory authority having jurisdiction, from
time to time; 2. May not
borrow money, except as permitted under the 1940 Act, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time; 3. May not act
as an underwriter of securities within the meaning of the 1933 Act, except as
permitted under the 1933 Act, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time. Among other things, to the
extent that a Fund may be deemed to be an underwriter within the meaning of 10 the 1933
Act, this would permit a Fund to act as an underwriter of securities in
connection with the purchase and sale of its portfolio securities in the
ordinary course of pursuing its investment objective, investment policies and
investment program; 4. May not
purchase or sell real estate or any interests therein, except as permitted
under the 1940 Act, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time. Notwithstanding this limitation, a
Fund may, among other things: (i) acquire or lease office space for its own
use; (ii) invest in securities of issuers that invest in real estate or
interests therein; (iii) invest in mortgage-related securities and other
securities that are secured by real estate or interests therein; or (iv) hold
and sell real estate acquired by a Fund as a result of the ownership of
securities; 5. May not
purchase physical commodities or contracts relating to physical commodities,
except as permitted under the 1940 Act, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time; 6. May not make
loans, except as permitted under the 1940 Act, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time; 7. May not
concentrate its investments in a particular industry or group of
industries: (I) except that a Fund will concentrate to approximately the same
extent that its Underlying Index concentrates in the securities of such
particular industry or group of industries; and (II) except as permitted
under the 1940 Act, and as interpreted or modified by regulatory authority
having jurisdiction from time to time, provided that, without limiting the
generality of the foregoing: (a) this limitation will not apply to a Funds
investments in: (i) securities of other investment companies; (ii) securities
issued or guaranteed as to principal and/or interest by the U.S. government,
its agencies or instrumentalities; (iii) repurchase agreements (collateralized
by the instruments described in clause (ii)) or (iv) securities of state or
municipal governments and their political subdivisions are not considered to
be issued by Members of any industry; (b) wholly-owned finance companies will
be considered to be in the industries of their parents if their activities
are primarily related to the financing activities of the parents; and (c)
utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, electric and telephone will each be
considered a separate industry. Notwithstanding
these fundamental investment restrictions, the Fund may purchase securities of
other investment companies to the full extent permitted under Section 12 or any
other provision of the 1940 Act (or any successor provision thereto) or under
any regulation or order of the SEC. If a
percentage limitation is satisfied at the time of investment, a later increase
or decrease in such percentage resulting from a change in the value of the
Funds investments will not constitute a violation of such limitation, except
that any borrowing by the Fund that exceeds the fundamental investment
limitations stated above must be reduced to meet such limitations within the
period required by the 1940 Act (currently three days). In addition, if the
Funds holdings of illiquid securities exceed 15% of net assets because of
changes in the value of the Funds investments, the Fund will take action to
reduce its holdings of illiquid securities within a time frame deemed to be in
the best interest of the Fund. Otherwise, a Fund may continue to hold a
security even though it causes the Fund to exceed a percentage limitation
because of fluctuation in the value of the Funds assets. Any Investment
Restriction which involves a maximum percentage (other than the restriction set
forth above in Investment Restriction No. 2) will not be considered violated
unless an excess over the percentage occurs immediately after, and is caused
by, an acquisition or encumbrance of securities or assets of the Fund. The 1940
Act requires that if the asset coverage for borrowings at any time falls below
the limits described in Investment Restriction No. 2, the Fund will, within
three days thereafter (not including Sundays and holidays), reduce the amount
of its borrowings to an extent that the net asset coverage of such borrowings
shall conform to such limits. The method by
which Creation Unit Aggregations of shares are created and traded may raise
certain issues under applicable securities laws. Because new Creation Unit
Aggregations of shares are issued and sold by the Fund on an ongoing basis, at
any point a distribution, as such term is used in the Securities Act, may
occur. Broker-dealers and other persons are cautioned that some activities on
their part may, depending on the circumstances, result in 11 their being
deemed participants in a distribution in a manner which could render them
statutory underwriters and subject them to the prospectus delivery requirement and
liability provisions of the Securities Act. For example, a
broker-dealer firm or its client may be deemed a statutory underwriter if it
takes Creation Unit Aggregations after placing an order with the Distributor,
breaks them down into constituent shares, and sells such shares directly to
customers, or if it chooses to couple the creation of a supply of new shares
with an active selling effort involving solicitation of secondary market demand
for shares. A determination of whether one is an underwriter for purposes of
the Securities Act must take into account all the facts and circumstances
pertaining to the activities of the broker-dealer or its client in the
particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter. Broker-dealer firms should also note that dealers who are
not underwriters but are effecting transactions in shares, whether or not
participating in the distribution of shares, generally are required to deliver
a prospectus. This is because the prospectus delivery exemption in Section 4(3)
of the Securities Act is not available in respect of such transactions as a
result of Section 24(d) of the 1940 Act. Firms that incur a prospectus delivery
obligation with respect to shares of the Fund are reminded that, pursuant to
Rule 153 under the Securities Act, a prospectus delivery obligation under
Section 5(b)(2) of the Securities Act owed to an exchange member in connection
with a sale on the Exchange is satisfied by the fact that the prospectus is
available at the Exchange upon request. The prospectus delivery mechanism
provided in Rule 153 is only available with respect to transactions on an
exchange. Policy On Disclosure Of Portfolio Holdings The Board of
Trustees of the Trust has adopted a policy on disclosure of portfolio holdings,
which it believes is in the best interest of the Funds shareholders. The
policy provides that neither the Fund nor the Adviser, Distributor or any
agent, or any employee thereof (Fund Representative) will disclose the Funds
portfolio holdings information to any person other than in accordance with the
policy. For purposes of the policy, portfolio holdings information means the Funds
actual portfolio holdings, as well as non-public information about its trading
strategies or pending transactions including the portfolio holdings, trading
strategies or pending transactions of any commingled fund portfolio which
contains identical holdings as the Fund. Under the policy, neither the Fund nor
any Fund Representative may solicit or accept any compensation or other
consideration in connection with the disclosure of portfolio holdings
information. The Fund Representative may provide portfolio holdings information
to third parties if such information has been included in the Funds public
filings with the SEC or is disclosed on the Funds publicly accessible Website.
Under the policy, each business day portfolio holdings information will be provided
to the Transfer Agent or other agent 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, (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 Fund
in the secondary market. Information with respect to the Funds portfolio
holdings is also disseminated daily on the Funds website. The Distributor may
also make available portfolio holdings information to other institutional
market participants and entities that provide information services. This
information typically reflects the Funds anticipated holdings on the following
business day. Authorized Participants are generally large institutional
investors that have been authorized by the Distributor to purchase and redeem
large blocks of shares (known as Creation Units) pursuant to legal
requirements, including the exemptive order granted by the SEC, to which the
Fund offers and redeems shares (Global X Order). Other than portfolio
holdings information made available in connection with the creation/redemption
process, as discussed above, portfolio holdings information that is not filed
with the SEC or posted on the publicly available Website may be provided to
third parties only in limited circumstances. Third-party recipients will be
required to keep all portfolio holdings information confidential and prohibited
from trading on the information they receive. Disclosure to such third parties
must be approved in advance by the Trusts Chief Compliance Officer (CCO).
Disclosure to providers of auditing, custody, proxy voting and other similar
services for the Fund, as well as rating and ranking organizations, will
generally be permitted; however, information may be disclosed to other third
parties (including, without limitation, individuals, institutional investors,
and Authorized Participants that sell shares of the Fund) only upon approval by
the CCO, who must first determine that the Fund has a legitimate business
purpose for doing so. In general, each recipient of non-public portfolio
holdings information must sign a confidentiality and non-trading agreement,
although this requirement will not apply when the recipient is otherwise
subject to a duty of confidentiality as determined by the 12 CCO. In
accordance with the policy, the recipients who may receive non-public portfolio
holdings information are as follows: the Adviser and its affiliates, the Funds
independent registered public accounting firm, the Funds distributor,
administrator and custodian, the Funds legal counsel, the Funds financial
printer, and the Funds proxy voting service. These entities are obligated to
keep such information confidential. Third-party providers of custodial or
accounting services to the Fund may release non-public portfolio holdings
information of the Fund only with the permission of Fund Representatives. From
time to time, portfolio holdings information may be provided to broker-dealers
solely in connection with the Fund seeking portfolio securities trading
suggestions. In providing this information reasonable precautions, including
limitations on the scope of the portfolio holdings information disclosed, are
taken in an effort to avoid any potential misuse of the disclosed information.
Portfolio holdings will be disclosed through required filings with the SEC. The
Fund files its portfolio holdings with the SEC for each fiscal quarter on Form
N-CSR (with respect to each annual period and semiannual period) and Form N-Q
(with respect to the first and third quarters of the Funds fiscal year). Shareholders
may obtain the Funds Forms N-CSR and N-Q filings on the SECs Website at
sec.gov. In addition, the Funds Forms N-CSR and N-Q filings may be reviewed
and copied at the SECs public reference room in Washington, DC. You may call
the SEC at 1-800-SEC-0330 for information about the SECs Website or the
operation of the public reference room. Under the
policy, the Board is to receive information, on a quarterly basis, regarding
any other disclosures of non-public portfolio holdings information that were
permitted during the preceding quarter. BOARD OF TRUSTEES AND
OFFICERS As a Delaware
trust, the business and affairs of the Trust are managed by its officers under
the direction of its Board of Trustees. The Trustees set broad policies for the
Trust and may appoint officers. The Board of Trustees oversees the performance
of the Adviser and the Trusts other service providers. Each Trustee serves
until his or her successor is duly elected or appointed and qualified. One of the Trustees
of the Trust is an officer and employee of the Adviser. This Trustee is an
Interested Person (as defined under Section 2(a)(19) of the 1940 Act) of the
Trust (Interested Trustee). The Trusts other Trustees are not Interested
Persons of the Trust (Independent Trustees). The Fund is
not part of a fund complex as defined in the 1940 Act. The name, year of
birth, address, principal occupations during the past five years with respect
to each of the Trustees and officers of the Trust is set forth below, along
with other public directorships held by the Trustees. 13 Name,
Address Position(s) Held Principal Occupation(s) During Other Directorships Held Independent
Trustees Sanjay Ram
Bharwani Trustee (since 2008) President of Risk Advisors
Inc. (since 2007); Chief Information Officer, M. Safra & Co (2004-2006);
President, Atze Consulting Inc. (2002-2004) None. Scott R.
Chichester1 Trustee (since 2008) Founder and President,
DirectPay USA LLC (since 2006); Chief Financial Officer, Ong Corporation
(2002-2008). None. Kartik Kiran Shah Trustee (since 2008) Senior Product Manager,
Wireless Generation (since 2008); Manager, Amgen (2003-2006) None. Interested Trustee / Officers Bruno del Ama Trustee (since 2008),
President, Chief Executive Officer and Chief Compliance Officer (since 2008) Chief Executive Officer,
Global X Management Company LLC (since 2008); Head of Global Structured
Products Operations at Radian Asset Assurance (2004-2008); Senior Manager at
Oliver Wyman (1998-2004). None. Jose C. Gonzalez Chief Operating Officer
and Chief Financial Officer (since 2008) Founder and President of
GWM Group, Inc. (since 2006); Financial Advisor, BroadStreet Securities, Inc.
(2004-2006); Financial Advisor, Lloyd, Scott, & Valenti, Ltd.
(2002-2004). N/A The Board of
Trustees currently has two standing committees: an Audit Committee and
Corporate Governance, Nomination and Compensation Committee. Currently, each
Independent Trustee serves on each of those committees. The purposes
of the Audit Committee are to assist the Board of Trustees in (1) its oversight
of the Trusts accounting and financial reporting principles and policies and
related controls and procedures maintained by or on behalf of the Trust; (2)
its oversight of the Trusts financial statements and the independent audit thereof;
(3) selecting, evaluating and, where deemed appropriate, replacing the
independent accountants (or nominating the independent accountants to be
proposed for shareholder approval in any proxy statement); and (4) evaluating
the independence of the independent accountants. The purposes
of the Corporate Governance, Nomination and Compensation Committee are, among
other things, to assist the Board of Trustees in (1) its assessment of the
adequacy of the Boards adherence to industry corporate governance best
practices; (2) periodic evaluation of the operation of the Trust and meetings
with management of the Trust concerning the Trusts operations and the policies
and procedures application to the Fund; (3) review, consideration and
recommendation to the full Board regarding Independent Trustee compensation;
(4) its identification and evaluation of potential candidates to fill a vacancy
on the Board; and (5) selection from among potential candidates of a nominee to
be presented to the full Board for its consideration. TRUSTEE OWNERSHIP OF FUND
SHARES As of the date
of this SAI, the Trustees and officers of the Trust own no Shares. The Adviser
currently does not sponsor and the Trustees oversee no other registered
investment companies. The Interested
Trustee is not compensated by the Trust. The Trust pays each Independent
Trustee $1,000 per Board of Trustee meeting attended. All Trustees are
reimbursed for their travel expenses and other reasonable out-of- 14 pocket
expenses incurred in connection with attending Board meetings (these other
expenses are subject to Board review to ensure that they are not excessive).
The Trust does not accrue pension or retirement benefits as part of the Funds
expenses, and Trustees are not entitled to benefits upon retirement from the
Board of Trustees. The Trusts officers receive no compensation directly from
the Trust. The estimated
compensation shown in this chart is for the period beginning on September 1,
2008, through December 31, 2009. This compensation is estimated only, based on
current compensation levels. There is no assurance that this estimate is
reliable and actual compensation may be higher or lower than that reflected
above. Name of Independent Trustee Aggregate Pension or Total Compensation Sanjay Ram
Bharwani $6,000 0 $6,000 Scott R.
Chichester $6,000 0 $6,000 Kartik Kiran
Shah $6,000 0 $6,000 The Trust, the
Adviser, and the Distributor each have adopted a code of ethics, as required by
applicable law, which is designed to prevent affiliated persons of the Trust,
the Adviser, and the Distributor from engaging in deceptive, manipulative or
fraudulent activities in connection with securities held or to be acquired by
the Fund (which may also be held by persons subject to a code of ethics). There
can be no assurance that the codes of ethics will be effective in preventing
such activities. The codes permit personnel subject to them to invest in
securities, including securities that may be held or purchased by the Fund. The
codes are on file with the SEC and are available to the public. The Adviser,
Global X Management Company LLC, oversees the performance of the Fund and
arranges for transfer agency, custody and all other services necessary for the
Fund to operate, and exercises day-to-day oversight over the Funds service
providers. The Adviser is responsible for overseeing the management of the
investment portfolio of the Fund. These services are provided under the terms
of an Investment Advisory Agreement dated October 20, 2008 between the Trust
and the Adviser. The Adviser is a registered investment adviser and is located
at 220 Fifth Avenue, 20th Floor New York, NY 10001. The Adviser was organized
in Delaware on March 28, 2008 as a limited liability company. The Adviser has
no prior experience managing an investment company. The ability of the Adviser
to successfully implement the Funds investment strategies will influence
the Funds performance significantly. The Fund pays
for the investment advisory and supervisory and administrative services it
requires under what is essentially an all-in fee structure. The Adviser
provides or procures supervisory and administrative services for the Fund and
also bears the costs of various third-party services required by the Fund,
including audit, custodial, portfolio accounting, legal, transfer agency and
printing costs. The Fund does bear other expenses which are not covered under
the supervisory and administrative fee which may vary and affect the total
level of expenses paid by the Fund, such as taxes and governmental fees,
brokerage fees, commissions and other transaction expenses, costs of borrowing
money, including interest expenses and extraordinary expenses (such as
litigation and indemnification expenses). For its
investment advisory, supervisory and administrative services, the Fund will pay
monthly a fee to the Adviser at the annual rate (stated as a percentage of the
average daily net assets of the Fund) of 0.50%. 15 The Adviser
and its affiliates deal, trade and invest for their own accounts in the types
of securities in which the Fund also may invest. The Adviser does not use inside
information in making investment decisions on behalf of the Fund. The Investment
Advisory Agreement remains in effect for two (2) years from its effective date
and thereafter continues in effect for as long as its continuance is
specifically approved at least annually, by (1) the Board of Trustees of the
Trust, or by the vote of a majority (as defined in the 1940 Act) of the
outstanding shares of the Fund, and (ii) by the vote of a majority of the
Trustees of the Trust who are not parties to the Investment Advisory Agreement
or interested persons of the Adviser, cast in person at a meeting called for
the purpose of voting on such approval. The Investment Advisory Agreement
provides that it may be terminated at any time without the payment of any
penalty, by the Board of Trustees of the Trust or by vote of a majority of the
Funds shareholders, on 60 calendar days written notice to the Adviser, and by
the Adviser on the same notice to the Trust and that it shall be automatically
terminated if it is assigned. The Investment
Advisory Agreement provides that the Adviser shall not be liable to the Fund or
its shareholders for anything other than willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations or duties. The Investment Advisory
Agreement also provides that the Adviser may engage in other businesses, devote
time and attention to any other business whether of a similar or dissimilar
nature, and render investment advisory services to others. The Fund is newly
organized and as of the date of this SAI has not yet incurred any management
fees under the Investment Advisory Agreement. Bruno del Ama
and Jose Gonzalez, are primarily responsible for the day-to-day management of
the Funds investments. Portfolio Managers
Compensation The Adviser
believes that its compensation program is competitively positioned to attract
and retain high-caliber investment professionals. Portfolio managers receive a
salary and are eligible to receive an annual bonus. The portfolio managers
salary compensation is designed to be competitive with the marketplace and
reflect the portfolio managers relative experience and contribution to the
Fund. Base salary compensation is reviewed and adjusted annually to reflect
increases in the cost of living and market rates. The annual incentive bonus
opportunity provides cash bonuses based upon the Funds performance and
individual contributions. Other Accounts
Managed by Portfolio Manager It is
anticipated that the portfolio manager will be responsible for multiple
investment accounts, including other investment companies registered under the
1940 Act. As a general matter, certain conflicts of interest may arise in
connection with the portfolio managers management of the Funds investments,
on the one hand, and the investments of other accounts for which the portfolio
manager is responsible, on the other. For example, it is possible that the
various accounts managed could have different investment strategies that, at
times, might conflict with one another to the possible detriment of the Fund.
Alternatively, to the extent that the same investment opportunities might be
desirable for more than one account, possible conflicts could arise in
determining how to allocate them. Other potential conflicts might include
conflicts created by specific portfolio manager compensation arrangements and
conflicts relating to selection of brokers or dealers to execute the Funds
trades. The Adviser has structured the portfolio managers compensation in a manner,
and the Fund and the Adviser have adopted policies, procedures and a code of
ethics, reasonably designed to safeguard the Fund from being negatively
affected as a result of any such conflicts that may arise. As of the date
of this Statement of Additional Information, Bruno del Ama and Jose Gonzalez,
were not responsible for the management of any other accounts, including
accounts subject to a performance fee. 16 Disclosure of
Securities Ownership As of the date
of this Statement of Additional Information, no shares of the Fund were
outstanding and the Funds portfolio managers
did not beneficially own any shares of the Fund. The Fund has
delegated proxy voting responsibilities to the Adviser, subject to the Board of
Trustees oversight. In delegating proxy responsibilities, the Board has
directed that proxies be voted consistent with the Funds and its shareholders
best interests and in compliance with all applicable proxy voting rules and
regulations. The Adviser has adopted its own proxy voting policies and
guidelines for this purpose (Proxy Voting Procedures). The Proxy Voting
Procedures address, among other things, material conflicts of interest that may
arise between the interests of the Fund and the interests of the Adviser. Information on
how the Fund voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available (1) without charge, upon
request, by calling 1-888-843-7824 and (2) on the SECs website at www.sec.gov. SEI
Investments Global Trusts Services (SEI Global), located at Freedom Valley
Drive Oaks, PA 19456, serves as Sub-Administrator to the Fund. As
sub-administrator, SEI Investments Global Trusts Services provides the Fund
with all required general administrative services, including, without
limitation, office space, equipment, and personnel; clerical and general back
office services; bookkeeping, internal accounting and secretarial services; the
calculation of NAV; and the preparation and filing of all reports, registration
statements, proxy statements and all other materials required to be filed or
furnished by the Fund under federal and state securities laws. As compensation
for these services, the Sub-Administrator receives certain out-of-pocket costs,
transaction fees and asset-based fees which are accrued daily and paid monthly
by the Adviser from its fees. The Trust has
entered into a Distribution Agreement under which SEI Investments Distribution
Co. (SEI), with principal offices at Freedom Valley Drive Oaks, PA 19456, as
agent, receives orders to create and redeem shares in Creation Unit
Aggregations and transmits such orders to the Trusts Custodian and Transfer
Agent. The Distributor has no obligation to sell any specific quantity of Fund
shares. SEI bears the following costs and expenses relating to the distribution
of shares: (i) the costs of processing and maintaining records of creations of
Creation Units; (ii) all costs of maintaining the records required of a
registered broker/dealer; (iii) the expenses of maintaining its registration or
qualification as a dealer or broker under federal or state laws; (iv) filing
fees; and (v) all other expenses incurred in connection with the distribution
services as contemplated in the Distribution Agreement. No compensation is
payable by the Trust to SEI for such distribution services. The Distribution
Agreement provides that the Trust will indemnify SEI against certain
liabilities relating to untrue statements or omissions of material fact except
those resulting from the reliance on information furnished to the Trust by SEI,
or those resulting from the willful misfeasance, bad faith or gross negligence
of SEI, or SEIs reckless disregard of its duties and obligations under the
Distribution Agreement. The Distributor, its affiliates and officers have no
role in determining the investment policies or which securities are to be
purchased or sold by the Trust or the Fund. The Distributor is not affiliated
with the Trust, the Adviser or any stock exchange. Additionally,
the Adviser or its affiliates may, from time to time, and from its own
resources, pay, defray or absorb costs relating to distribution, including
payments out of its own resources to the Distributor or to otherwise promote
the sale of shares. CUSTODIAN AND
TRANSFER AGENT Brown Brothers
Harriman & Co., located at 40 Water Street, Boston, MA 02109, serves as
Custodian of Funds assets. The custodian relationship is managed through SEI
Investments Global Trusts Services. As Custodian, Brown Brothers Harriman &
Co. has agreed to (1) make receipts and disbursements of money on behalf of the
Fund, (2) collect and receive all income and other payments and distributions
on account of the Funds portfolio 17 investments,
(3) respond to correspondence from shareholders, security brokers and others
relating to its duties; and (4) make periodic reports to the Fund concerning
the Funds operations. Brown Brothers Harriman & Co. does not exercise any
supervisory function over the purchase and sale of securities. As compensation
for these services, the Custodian receives certain out-of-pocket costs,
transaction fees and asset-based fees which are accrued daily and paid monthly
by the Adviser from its fees. As Transfer
Agent, Brown Brothers Harriman & Co. has agreed to (1) issue and redeem
shares of the Fund, (2) make dividend and other distributions to shareholders
of the Fund, (3) respond to correspondence by Fund shareholders and others
relating to its duties; (4) maintain shareholder accounts, and (5) make
periodic reports to the Fund. As compensation for these services, the Transfer
Agent receives certain out-of-pocket costs, transaction fees and asset-based
fees which are accrued daily and paid monthly by the Adviser from its fees. The
Declaration of Trust of the Trust (Declaration) permits the Trusts Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest of one or more separate series representing interests in
one or more investment portfolios. The Trustees or Trust may create additional
series and each series may be divided into classes. Under the
terms of the Declaration, each share of the Fund has a par value of $0.0001,
which represents a proportionate interest in the Fund with each other share of
its class in the same Fund and is entitled to such dividends and distributions
out of the income belonging to the Fund as are authorized by the Trustees and
declared by the Trust. Upon any liquidation of the Fund, shareholders of each
class of the Fund are entitled to share pro rata in the net assets belonging to
that class available for distribution. Shares do not have any preemptive or
conversion rights. The right of redemption is described in the Prospectus. In
addition, pursuant to the terms of the 1940 Act, the right of a shareholder to
redeem shares and the date of payment by the Fund may be suspended for more
than seven days (i) for any period during which the New York Stock Exchange is
closed, other than the customary weekends or holidays, or trading in the
markets the Fund normally utilizes is closed or is restricted as determined by
the SEC, (ii) during any emergency, as determined by the SEC, as a result of
which it is not reasonably practicable for the Fund to dispose of instruments
owned by it or fairly to determine the value of its net assets, or (iii) for
such other period as the SEC may by order permit for the protection of the
shareholders of the Fund. The Trust also may suspend or postpone the recording
of the transfer of its shares upon the occurrence of any of the foregoing
conditions. In addition, shares of the Fund are redeemable at the unilateral
option of the Trust. The Declaration permits the Board to alter the number of
shares constituting a Creation Unit or to specify that shares of beneficial
interest of the Trust may be individually redeemable. Shares when issued as
described in the Prospectus are validly issued, fully paid and nonassessable.
In the interests of economy and convenience, certificates representing shares
of the Fund are not issued. Following the
creation of the initial Creation Unit Aggregation(s) of the Fund and
immediately prior to the commencement of trading in such Funds shares, a
holder of shares may be a control person of the Fund, as defined in the 1940
Act. The Fund cannot predict the length of time for which one or more
shareholders may remain a control person of the Fund. The proceeds
received by the Fund for each issue or sale of its shares, and all net
investment income, realized and unrealized gain and proceeds thereof, subject
only to the rights of creditors of that Fund, will be specifically allocated to
and constitute the underlying assets of that Fund. The underlying assets of the
Fund will be segregated on the books of account, and will be charged with the
liabilities in respect to that Fund and with a share of the general liabilities
of the Trust. Expenses with respect to the Fund normally are allocated in
proportion to the NAV of the respective Fund except where allocations of direct
expenses can otherwise be fairly made. Shareholders
are entitled to one vote for each full share held and proportionate fractional
votes for fractional shares held. The Fund and other funds of the Trust
entitled to vote on a matter will vote in the aggregate and not by Fund, except
as required by law or when the matter to be voted on affects only the interests
of shareholders of a particular Fund or class. 18 Rule 18f-2
under the 1940 Act provides that any matter required by the provisions of the
1940 Act or applicable state law, or otherwise, to be submitted to the holders
of the outstanding voting securities of an investment company such as the Trust
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each investment portfolio
affected by such matter. Rule 18f-2 further provides that an investment
portfolio shall be deemed to be affected by a matter unless the interests of
each investment portfolio in the matter are substantially identical or the
matter does not affect any interest of the investment portfolio. Under the
Rule, the approval of an investment advisory agreement, a distribution plan
subject to Rule 12b-1 under the 1940 Act or any change in the fundamental
investment policy would be effectively acted upon with respect to an investment
portfolio only if approved by a majority of the outstanding shares of such
investment portfolio. However, the Rule also provides that the ratification of
the appointment of independent accountants, the approval of principal
underwriting contracts and the election of Trustees are exempt from the
separate voting requirements stated above. The Trust is
not required to hold annual meetings of shareholders and does not intend to
hold such meetings. In the event that a meeting of shareholders is held, each
share of the Trust will be entitled, as determined by the Trustees without the
vote or consent of shareholders to one vote for each share represented by such
shares on all matters presented to shareholders, including the election of
Trustees (this method of voting being referred to as dollar-based voting).
However, to the extent required by the 1940 Act or otherwise determined by the
Trustees, series and classes of the Trust will vote separately from each other.
Shareholders of the Trust do not have cumulative voting rights in the election
of Trustees and, accordingly, the holders of more than 50% of the aggregate
voting power of the Trust may elect all of the Trustees, irrespective of the
vote of the other shareholders. Meetings of shareholders of the Trust, or any
series or class thereof, may be called by the Trustees, the President or
Secretary of the Trust or upon the written request of holders of at least a
majority of the shares entitled to vote at such meeting. The shareholders of
the Trust will have voting rights only with respect to the limited number of
matters specified in the Declaration and such other matters as the Trustees may
determine or may be required by law. The
Declaration authorizes the Trustees, without shareholder approval (except as
stated in the next paragraph), to cause the Trust, or any series thereof, to
merge or consolidate with any corporation, association, trust or other
organization or sell or exchange all or substantially all of the property
belonging to the Trust, or any series thereof. In addition, the Trustees,
without shareholder approval, may adopt a master-feeder structure by
investing substantially all of the assets of a series of the Trust in the
securities of another open-end investment company or pooled portfolio. The
Declaration also authorizes the Trustees, in connection with the termination or
other reorganization of the Trust or any series or class by way of merger,
consolidation, the sale of all or substantially all of the assets, or
otherwise, to classify the shareholders of any class into one or more separate
groups and to provide for the different treatment of shares held by the
different groups, provided that such termination or reorganization is approved
by a majority of the outstanding voting securities (as defined in the 1940 Act)
of each group of shareholders that are so classified. The
Declaration permits the Trustees to amend the Declaration without a shareholder
vote. However, shareholders of the Trust have the right to vote on any
amendment: (i) that would adversely affect the voting rights of shareholders
specified in the Declaration; (ii) that is required by law to be approved by
shareholders; (iii) to the amendment section of the Declaration; or (iv) that
the Trustees determine to submit to shareholders. The
Declaration permits the termination of the Trust or of any series or class of
the Trust: (i) by a majority of the affected shareholders at a meeting of
shareholders of the Trust, series or class; or (ii) by a majority of the
Trustees without shareholder approval if the Trustees determine that such
action is in the best interest of the Trust or its shareholders. The factors
and events that the Trustees may take into account in making such determination
include: (i) the inability of the Trust or any series or class to maintain its
assets at an appropriate size; (ii) changes in laws or regulations governing
the Trust, or any series or class thereof, or affecting assets of the type in
which it invests; or (iii) economic developments or trends having a significant
adverse impact on their business or operations. In the event
of a termination of the Trust or the Fund, the Board, in its sole discretion,
could determine to permit the shares to be redeemable in aggregations smaller
than Creation Unit Aggregations or to be individually redeemable. In such
circumstance, the Trust may make redemptions in-kind, for cash, or for a
combination of cash or securities. 19 The Declaration
provides that the Trustees will not be liable to any person other than the
Trust or a shareholder and that a Trustee will not be liable for any act as a
Trustee. Additionally, subject to applicable federal law, no person who is or
who has been a Trustee or officer of the Trust shall be liable to the Trust or
to any shareholder for money damages except for liability resulting from (a)
actual receipt of an improper benefit or profit in money, property or services
or (b) active and deliberate dishonesty established by a final judgment and
which is material to the cause of action. However, nothing in the Declaration
protects a Trustee against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
The Declaration provides for indemnification of Trustees and officers of the
Trust unless the indemnitee is liable to the Trust or any shareholder by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such persons office. The
Declaration provides that each shareholder, by virtue of becoming such, will be
held to have expressly assented and agreed to the terms of the Declaration. The
Declaration provides that a shareholder of the Trust may bring a derivative
action on behalf of the Trust only if the following conditions are met: (i) the
shareholder was a shareholder at the time of the action complained of; (ii) the
shareholder was a shareholder at the time demand is made; (iii) the shareholder
must make demand to the Trustees before commencing at derivative action on
behalf of the Trust; (iv) any shareholders that hold at least 10% of the
outstanding shares of the Trust (or 10% of the outstanding shares of the series
or class to which such action relates) must join in the request for the
Trustees to commence such action; and (v) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and to
investigate the basis of such claim. The Declaration also provides that no
person, other than the Trustees, who is not a shareholder of a particular
series or class shall be entitled to bring any derivative action, suit or other
proceeding on behalf of or with respect to such series or class. The Trustees
will be entitled to retain counsel or other advisers in considering the merits
of the request and will require an undertaking by the shareholders making such
request to reimburse the Trust for the expense of any such advisers in the
event that the Trustees determine not to bring such action. The term
majority of the outstanding shares of either the Trust or a particular Fund
or investment portfolio means, with respect to the approval of an investment
advisory agreement, a distribution plan or a change in the Fundamental
investment policy, the vote of the lesser of (i) 67% or more of the shares of
the Trust or such Fund or portfolio present at a meeting, if the holders of more
than 50% of the outstanding shares of the Trust or such Fund or portfolio are
present or represented by proxy, or (ii) more than 50% of the outstanding
shares of the Trust or such Fund or portfolio. The following
information supplements and should be read in conjunction with the Shareholder
Information section in the Prospectus. The Depository Trust Company (DTC)
Acts as Securities Depository for the Shares of the Trust. Shares of the Fund
are represented by securities registered in the name of DTC or its nominee and
deposited with, or on behalf of, DTC. DTC, a
limited-purpose trust company, was created to hold securities of its
participants (the DTC Participants) and to facilitate the clearance and
settlement of securities transactions among the DTC Participants in such
securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is a
subsidiary of the Depository Trust and Clearing Corporation (DTCC), which is
owned by its member firms including international broker/dealers, correspondent
and clearing banks, mutual fund companies and investment banks. Access to the
DTC system is also available to others such as banks, brokers, dealers and
Trust companies that clear through or maintain a custodial relationship with a
DTC Participant, either directly or indirectly (the Indirect Participants). Beneficial
ownership of shares is limited to DTC Participants, Indirect Participants and
persons holding interests through DTC Participants and Indirect Participants.
Ownership of beneficial interests in shares (owners of such beneficial
interests are referred to herein as Beneficial Owners) is shown on, and the
transfer of ownership is effected only through, records maintained by DTC (with
respect to DTC Participants) and on the records of DTC 20 Participants
(with respect to Indirect Participants and Beneficial Owners that are not DTC
Participants). Beneficial Owners will receive from or through the DTC
Participant a written confirmation relating to their purchase of shares. The
laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability of certain investors to acquire beneficial interests in
shares. Beneficial
Owners of shares are not entitled to have shares registered in their names,
will not receive or be entitled to receive physical delivery of certificates in
definitive form and are not considered the registered holder thereof.
Accordingly, each Beneficial Owner must rely on the procedures of DTC, the DTC
Participant and any Indirect Participant through which such Beneficial Owner
holds its interests, to exercise any rights of a holder of shares. The Trust
understands that under existing industry practice, in the event the Trust
requests any action of holders of shares, or a Beneficial Owner desires to take
any action that DTC, as the record owner of all outstanding shares, is entitled
to take, DTC would authorize the DTC Participants to take such action and that
the DTC Participants would authorize the Indirect Participants and Beneficial
Owners acting through such DTC Participants to take such action and would
otherwise act upon the instructions of Beneficial Owners owning through them.
As described above, the Trust recognizes DTC or its nominee as the owner of all
shares for all purposes. Conveyance of
all notices, statements and other communications to Beneficial Owners is
effected as follows. Pursuant to the Depositary Agreement between the Trust and
DTC, DTC is required to make available to the Trust upon request and for a fee
to be charged to the Trust a listing of the share holdings of each DTC
Participant. The Trust shall inquire of each such DTC Participant as to the
number of Beneficial Owners holding shares of the Fund, directly or indirectly,
through such DTC Participant. The Trust shall provide each such DTC Participant
with copies of such notice, statement or other communication, in such form,
number and at such place as such DTC Participant may reasonably request, in
order that such notice, statement or communication may be transmitted by such
DTC Participant, directly or indirectly, to such Beneficial Owners. In
addition, the Trust shall pay to each such DTC Participant a fair and
reasonable amount as reimbursement for the expenses attendant to such
transmittal, all subject to applicable statutory and regulatory requirements. Share
distributions shall be made to DTC or its nominee, Cede & Co., as the registered
holder of all shares of the Trust. DTC or its nominee, upon receipt of any such
distributions, shall credit immediately DTC Participants accounts with
payments in amounts proportionate to their respective beneficial interests in
shares as shown on the records of DTC or its nominee. Payments by DTC
Participants to Indirect Participants and Beneficial Owners of shares held
through such DTC Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in a street name, and will be the
responsibility of such DTC Participants. The Trust has no responsibility or
liability for any aspects of the records relating to or notices to Beneficial Owners,
or payments made on account of beneficial ownership interests in such shares,
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests or for any other aspect of the relationship
between DTC and the DTC Participants or the relationship between such DTC
Participants and the Indirect Participants and Beneficial Owners owning through
such DTC Participants. DTC may
determine to discontinue providing its service with respect to shares of the
Trust at any time by giving reasonable notice to the Trust and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the Trust shall take action either to find a replacement for DTC
to perform its functions at a comparable cost or, if such a replacement is
unavailable, to issue and deliver printed certificates representing ownership
of shares, unless the Trust makes other arrangements with respect thereto
satisfactory to the Exchange on which shares are listed. PURCHASE AND REDEMPTION OF
CREATION UNITS The Trust
issues and sells shares of the Fund only in Creation Unit Aggregations. The
Board reserves the right to declare a split or a consolidation in the number of
shares outstanding of any Fund of the Trust, and to make a corresponding change
in the number of shares constituting a Creation Unit, in the event that the per
share price in the secondary market rises (or declines) to an amount that falls
outside the range deemed desirable by the Board. 21 PURCHASE AND ISSUANCE OF
CREATION UNIT AGGREGATIONS General. The
Trust issues and sells shares of the Fund only in Creation Units on a
continuous basis through the Distributor, without a sales load, at the Funds
NAV next determined after receipt, on any Business Day (as defined herein), of
an order in proper form. A Business
Day with respect to the Fund is any day on which the NYSE, the Funds Exchange
and the Funds Custodian are open for business. As of the date of this Additional
Statement, the Exchange observes the following holidays: New Years Day, Martin
Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Portfolio Deposit. The consideration for purchase of a
Creation Unit of shares of the Fund generally consists of the in-kind deposit
of a designated portfolio of equity securities (the Deposit Securities)
constituting an optimized representation of the Funds Underlying Index and an
amount of cash in U.S. dollars computed as described below (the Cash
Component). Together, the Deposit Securities and the Cash Component constitute
the Portfolio Deposit, which represents the minimum initial and subsequent
investment amount for a Creation Unit of the Fund. The Cash Component is an
amount equal to the Balancing Amount (as defined below). The Balancing Amount
is an amount equal to the difference between (x) the net asset value (per
Creation Unit) of the Fund and (y) the Deposit Amount which is the market
value (per Creation Unit) of the Deposit Securities. The Balancing Amount
serves the function of compensating for any differences between the net asset
value per Creation Unit and the Deposit Amount. If the Balancing Amount is a
positive number (i.e., the net
asset value per Creation Unit is more than the Deposit Amount), the Authorized
Participant will deliver the Balancing Amount. If the Balancing Amount is a
negative number (i.e., the net
asset value per Creation Unit is less than the Deposit Amount), the Authorized
Participant will receive the Balancing Amount. Payment of any stamp duty or
other similar fees and expenses payable upon transfer of beneficial ownership
of the Deposit Securities shall be the sole responsibility of the Authorized
Participant that purchased the Creation Unit. The Authorized Participant must
ensure that all Deposit Securities properly denote change in beneficial
ownership. The Adviser
makes available through the National Securities Clearing Corporation (NSCC)
on each Business Day, prior to the opening of business on the Exchange
(currently 9:30 a.m., Eastern Time), the list of the names and the required
number of shares of each Deposit Security to be included in the current
Portfolio Deposit (based on information at the end of the previous Business
Day) for the Fund. Such Portfolio Securities are applicable, subject to any
adjustments as described below, to purchases of Creation Units of a given Fund
until such time as the next-announced Deposit Securities composition is made
available. The identity
and number of shares of the Deposit Securities required for a Portfolio Deposit
for the Fund changes pursuant to changes in the composition of the Funds
Portfolio and as rebalancing adjustments and corporate action events are
reflected from time to time by the Adviser with a view to the investment
objective of the Fund. The composition of the Deposit Securities may also
change in response to adjustments to the weighting or composition of the
securities constituting the Underlying Index. In addition,
the Trust reserves the right to permit or require the substitution of an amount
of cash (that is a cash in lieu amount) to be added to the Cash Component to
replace any Deposit Security which may not be available in sufficient quantity
for delivery or that may not be eligible for transfer through the systems of
DTC or the Clearing Process (discussed below) or for other similar reasons. The
Trust also reserves the right to permit or require a cash in lieu amount
where the delivery of Deposit Securities by the Authorized Participant (as
described below) would be restricted under the securities laws or where
delivery of Deposit Securities to the Authorized Participant would result in the
disposition of Deposit Securities by the Authorized Participant becoming
restricted under the securities laws, and in certain other situations. The
adjustments described above will reflect changes, known to the Adviser on the
date of announcement to be in effect by the time of delivery of the Portfolio
Deposit, in the composition of the Underlying Index, or resulting from stock
splits and other corporate actions. In addition to
the list of names and numbers of securities constituting the current Deposit Securities
of a Portfolio Deposit, on each Business Day, the Cash Component effective
through and including the previous Business Day, per outstanding Creation Unit
of the Fund, will be made available. 22 Role of the Authorized
Participant. Creation Units of shares may be purchased
only by or through a DTC Participant that has entered into an Authorized
Participant Agreement with the Distributor (an Authorized Participant). Such
Authorized Participant will agree pursuant to the terms of such Authorized
Participant Agreement on behalf of itself or any investor on whose behalf it
will act, as the case may be, to certain conditions, including that such
Authorized Participant will make available in advance of each purchase of
Creation Units an amount of cash sufficient to pay the Cash Component, once the
net asset value of a Creation Unit is next determined after receipt of the
purchase order in proper form, together with the transaction fee described below.
The Authorized Participant may require the investor to enter into an agreement
with such Authorized Participant with respect to certain matters, including
payment of the Cash Component. Investors who are not Authorized Participants
must make appropriate arrangements with an Authorized Participant. Investors
should be aware that their particular broker may not be a DTC Participant or
may not have executed an Authorized Participant Agreement, and that therefore
orders to purchase Creation Units may have to be placed by the investors
broker through an Authorized Participant. As a result, purchase orders placed
through an Authorized Participant may result in additional charges to such
investor. The Trust does not expect to enter into an Authorized Participant Agreement
with more than a small number of DTC Participants that have international
capabilities. A list of the current Authorized Participants may be obtained
from the Distributor. Purchase Order. To initiate an order for a Creation Unit
of shares of the Fund, the Authorized Participant must submit to the
Distributor an irrevocable order to purchase shares of the Fund. With respect
to the Fund, the Distributor will notify the Adviser and the Custodian of such
order. The Custodian will then provide such information to the appropriate
local sub-custodian(s). The Custodian shall cause the appropriate local
sub-custodian(s) of the Fund to maintain an account into which the Authorized
Participant shall deliver, on behalf of itself or the party on whose behalf it
is acting, the securities included in the designated Portfolio Deposit (or the
cash value of all or a part of such securities, in the case of a permitted or
required cash purchase or cash in lieu amount), with any appropriate
adjustments as advised by the Trust. Deposit Securities must be delivered to an
account maintained at the applicable local sub-custodian. Those placing orders
to purchase Creation Units through an Authorized Participant should allow
sufficient time to permit proper submission of the purchase order to the
Distributor by the Cut-Off Time (as defined below) on such Business Day. The Authorized
Participant must also make available on or before the contractual settlement
date, by means satisfactory to the Trust, immediately available or same day
funds in U.S. dollars estimated by the Trust to be sufficient to pay the Cash
Component next determined after acceptance of the purchase order, together with
the applicable purchase transaction fee. Any excess funds will be returned
following settlement of the issue of the Creation Unit. Those placing orders
should ascertain the applicable deadline for cash transfers by contacting the
operations department of the broker or depositary institution effectuating the
transfer of the Cash Component. This deadline is likely to be significantly
earlier than the closing time of the regular trading session on the Exchange. Investors
should be aware that an Authorized Participant may require orders for purchases
of shares placed with it to be in the particular form required by the
individual Authorized Participant. 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 trading session on the relevant Funds
Exchange, on any Business Day in order to receive that Business Days NAV. Acceptance of Purchase Order. Subject to the conditions that (i) an
irrevocable purchase order has been submitted by the Authorized Participant
(either on its own or another investors behalf) and (ii) arrangements
satisfactory to the Trust are in place for payment of the Cash Component and
any other cash amounts which may be due, the Trust will accept the order,
subject to its right (and the right of the Distributor and the Adviser) to
reject any order until acceptance. Once the Trust
has accepted an order, upon next determination of the NAV of the shares, the
Trust will confirm the issuance of a Creation Unit of the Fund, against receipt
of payment, at such NAV. The Distributor will then transmit a confirmation of
acceptance to the Authorized Participant that placed the order. The Trust
reserves the absolute right to reject or revoke acceptance of a purchase order
transmitted to it by the Distributor in respect of the Fund if (a) the order is
not in proper form; (b) the investor(s), upon obtaining the shares 23 ordered, would
own 80% or more of the currently outstanding shares of the Fund; (c) the
Deposit Securities delivered do not conform to the identify and number of
shares disseminated through the facilities of the NSCC for that date by the
Adviser, as described above; (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 or the Adviser, have an adverse effect on the Trust 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 Funds Custodian, a sub-custodian or
any other participant in the creation process; and similar extraordinary
events. The Trust shall notify a prospective purchaser and/or the Authorized
Participant acting on behalf of such person of its rejection of the order of
such person. The Trust, the Funds 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 nor shall either of them
incur any liability for the failure to give any such notification. Issuance of a Creation Unit. Except as provided herein, a Creation
Unit of shares of the Fund will not be issued until the transfer of good title
to the Trust of the Deposit Securities and the payment of the Cash Component
have been completed. When the applicable local sub-custodian(s) have confirmed
to the Custodian that the required securities included in the Portfolio Deposit
(or the cash value thereof) have been delivered to the account of the
applicable local sub-custodian or sub-custodians, the Distributor and the
Adviser shall be notified of such delivery, and the Trust will issue, and cause
the delivery of the Creation Unit. Creation Units typically are issued on a
T+3 basis (that is three Business Days after trade date). However, as
discussed in Appendix A, the Fund reserves the right to settle Creation Unit
transactions on a basis other than T+3 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. To the extent
contemplated by an Authorized Participants agreement with the Distributor, the
Trust will issue Creation Units to such Authorized Participant notwithstanding
the fact that the corresponding Portfolio Deposits have not been received in
part or in whole, in reliance on the undertaking of the Authorized Participant
to deliver the missing Deposit Securities as soon as possible, which
undertaking shall be secured by such Authorized Participants delivery and
maintenance of collateral having a value at least equal to 110%, which the
Adviser may change from time to time, of the value of the missing Deposit
Securities in accordance with the Trusts then-effective procedures. Such
collateral must be delivered no later than 2:00 p.m., Eastern Time, on the
contractual settlement date. The only collateral that is acceptable to the
Trust is cash in U.S. Dollars or an irrevocable letter of credit in form, and
drawn on a bank, that is satisfactory to the Trust. The cash collateral posted
by the Authorized Participant may be invested at the risk of the Authorized
Participant, and income, if any, on invested cash collateral will be paid to
that Authorized Participant. Information concerning the Trusts current
procedures for collateralization of missing Deposit Securities is available
from the Distributor. The Authorized Participant Agreement will permit the
Trust to buy the missing Deposit Securities at any time and will subject the
Authorized Participant to liability for any shortfall between the cost to the
Trust of purchasing such securities and the cash collateral or the amount that
may be drawn under any letter of credit. 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. 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, and the Trusts determination shall be final and binding. 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 thereof. In addition, the Trust may in its
discretion make Creation Units of any of the other funds available for purchase
and redemption in U.S. dollars. In the case of a cash purchase, the investor
must pay the cash equivalent of the Deposit Securities it would otherwise be
required to provide through an in-kind purchase, plus the same Cash Component
required to be paid by an in-kind purchaser. In addition, to offset the Trusts
brokerage and other transaction costs associated with using the cash to
purchase the 24 requisite
Deposit Securities, the investor will be required to pay a fixed purchase
transaction fee, plus an additional variable charge for cash purchases, which
is expressed as a percentage of the value of the Deposit Securities. The
transaction fees for in-kind and cash purchases of Creation Units are described
below. Purchase Transaction Fee. A purchase transaction fee payable to the
Trust is imposed to compensate the Trust for the transfer and other transaction
costs of the Fund associated with the issuance of Creation Units. Purchasers of
Creation Units for cash are required to pay an additional variable charge to
compensate the relevant Fund for brokerage and market impact expenses relating
to investing in portfolios securities. Where the Trust permits an in-kind
purchaser to substitute cash in lieu of depositing a portion of the Deposit
Securities, the purchaser will be assessed the additional variable charge for
cash purchases on the cash in lieu portion of its investment. Purchasers of
Creation Units are responsible for the costs of transferring the securities
constituting the Deposit Securities to the account of the Trust. Investors who
use the services of a broker, or other such intermediary may be charged a fee
for such services. The Standard Fee for In-Kind and Cash Creations for the Fund
will be $1,500. The Maximum Additional Variable Charge for Cash Creations for
the Fund will be 0.30% (expressed as a percentage of the value of the amount
invested). Shares of the
Fund may be redeemed only in Creation Units at their NAV next determined after
receipt of a redemption request in proper form by the Distributor. The Trust
will not redeem shares in amounts less than Creation Units. Beneficial owners
also may sell shares in the secondary market, but must accumulate enough shares
to constitute a Creation Unit in order to have such shares redeemed by the
Trust. There can be no assurance, however, that there will be sufficient liquidity
in the public trading market at any time to permit assembly of a Creation Unit.
Investors should expect to incur brokerage and other costs in connection with
assembling a sufficient number of shares to constitute a redeemable Creation
Unit. With respect
to the Fund the Adviser makes available through the NSCC prior to the opening
of business on the Exchange (currently 9:30 a.m., Eastern Time) on each
Business Day, the identity and number of shares that will be applicable
(subject to possible amendment or correction) to redemption requests received
in proper form (as defined below) on that day (Portfolio Securities).
Portfolio Securities received on redemption may not be identical to Deposit
Securities that are applicable to creation of Creation Units. Unless cash
redemptions are available or specified for the Fund, the redemption proceeds
for a Creation Unit generally consist of Portfolio Securities on the Business
Day of the request for redemption, plus cash in an amount equal to the
difference between the NAV of the shares being redeemed, as next determined
after a receipt of a request in proper form, and the value of the Portfolio
Securities, less the redemption transaction fee described below. The redemption
transaction fee described below is deducted from such redemption proceeds. A redemption
transaction fee payable to the Trust is imposed to offset transfer and other
transaction costs that may be incurred by the relevant Fund, including market
impact expenses relating to disposing of portfolio securities. The redemption
transaction fee for redemptions in kind and for cash and the additional
variable charge for cash redemptions (when cash redemptions are available or
specified) are listed in the table below. Investors will also bear the costs of
transferring the Portfolio Deposit from the Trust to their account or on their
order. Investors who use the services of a broker or other such intermediary
may be charged a fee for such services. The Standard Fee for In-Kind and Cash
Redemptions for the Fund will be $1,500. The Maximum Additional Variable Charge
for Cash Redemption for the Fund will be 0.30% (expressed as a percentage of
the value of the amount invested). Redemption
requests in respect of Creation Units must be submitted to the Distributor by or
through an Authorized Participant. Investors other than Authorized Participants
are responsible for making arrangements for a redemption request through an
Authorized Participant. An Authorized Participant must submit an irrevocable
redemption request no later than the earlier of (i) 4:00 p.m., Eastern Time or
(ii) the closing time of the trading session on the relevant Funds Exchange,
on any Business Day in order to receive that Business Days NAV. The
Distributor will provide a list of current Authorized Participants upon
request. The Authorized Participant must transmit the request for redemption,
in the form required by the Trust, to the Distributor in accordance with 25 procedures set
forth in the Authorized Participant Agreement. Investors should be aware that
their particular broker may not have executed an Authorized Participant
Agreement, and that, therefore, requests to redeem Creation Units may have to
be placed by the investors broker through an Authorized Participant who has
executed an Authorized Participant Agreement. At any given time there will be
only a limited number of broker-dealers that have executed an Authorized
Participant Agreement. Investors making a redemption request should be aware
that such request must be in the form specified by such Authorized Participant.
Investors making a request to redeem Creation Units should allow sufficient
time to permit proper submission of the request by an Authorized Participant
and transfer of the shares to the Trusts Transfer Agent; such investors should
allow for the additional time that may be required to effect redemptions
through their banks, brokers or other financial intermediaries if such
intermediaries are not Authorized Participants. Orders to
redeem Creation Unit Aggregations of funds based on foreign indexes must be
delivered through an Authorized Participant that has executed an Authorized
Participant Agreement. Investors other than Authorized Participants are
responsible for making arrangements for a redemption request to be made through
an Authorized Participant. An order to redeem Creation Unit Aggregations of the
Fund is deemed received by the Trust on the Business Day if: (i) such order is
received by the Funds Distributor not later than the closing time of the
applicable Exchange on the applicable Business Day; (ii) such order is
accompanied or followed by the requisite number of shares of the Fund specified
in such order, which delivery must be made through DTC to the Funds Custodian
no later than 10:00 a.m., Eastern Time, on the next Business Day following the
day the order was transmitted; and (iii) all other procedures set forth in the
Authorized Participant Agreement are properly followed. Deliveries of Fund
securities to redeeming investors generally will be made within three Business
Days. Due to the schedule of holidays in certain countries, however, the
delivery of in-kind redemption proceeds for the Fund may take longer than three
Business Days after the day on which the redemption request is received in
proper form. In such cases, the local market settlement procedures will not
commence until the end of the local holiday periods as described in Appendix A.
A redemption
request is considered to be in proper form if (i) an Authorized Participant
has transferred or caused to be transferred to the Trusts Transfer Agent the
Creation Unit of shares being redeemed through the book-entry system of DTC so
as to be effective by the Exchange closing time on any Business Day and (ii) a
request in form satisfactory to the Trust is received by the Distributor from
the Authorized Participant on behalf of itself or another redeeming investor
within the time periods specified above. If the Transfer Agent does not receive
the investors shares through DTCs facilities by 10:00 a.m., Eastern Time, on
the Business Day next following the day that the redemption request is
received, the redemption request shall be rejected. Investors should be aware
that the deadline for such transfers of shares through the DTC system may be
significantly earlier than the close of business on the Exchange. Those making
redemption requests should ascertain the deadline applicable to transfers of
shares through the DTC system by contacting the operations department of the
broker or depositary institution effecting the transfer of the shares. Upon receiving
a redemption request, the Distributor shall notify the Trust and the Trusts
Transfer Agent of such redemption request. The tender of an investors shares
for redemption and the distribution of the cash redemption payment in respect
of Creation Units redeemed will be effected through DTC and the relevant
Authorized Participant to the beneficial owner thereof as recorded on the
book-entry system of DTC or the DTC Participant through which such investor holds,
as the case may be, or by such other means specified by the Authorized
Participant submitting the redemption request. In connection
with taking delivery of shares of Portfolio Securities upon redemption of
shares of the Fund, a redeeming Beneficial Owner, or Authorized Participant
acting on behalf of such Beneficial Owner, must maintain appropriate security
arrangements with a qualified broker-dealer, bank or other custody providers in
each jurisdiction in which any of the Portfolio Securities are customarily
traded, to which account such Portfolio Securities will be delivered. Deliveries of
redemption proceeds by the Fund generally will be made within three Business
Days (that is T+3). However, as discussed in Appendix A, the Fund reserves
the right to settle redemption transactions and deliver redemption proceeds on
a basis other than T+3 to accommodate foreign market holiday schedules, to
account for different treatment among foreign and U.S. markets of dividend
record dates and dividend ex-dates (that is the last date the holder of a
security can sell the security and still receive dividends payable on the
security sold), and in 26 certain other
circumstances. For each country relating to the Fund, Appendix A hereto
identifies the instances where more than seven days would be needed to deliver
redemption proceeds. Pursuant to an order of the SEC, in respect of the Fund,
the Trust will make delivery of in-kind redemption proceeds within the number
of days stated in Appendix A to be the maximum number of days necessary to
deliver redemption proceeds. If neither the
redeeming Beneficial Owner nor the Authorized Participant acting on behalf of
such redeeming Beneficial Owner has appropriate arrangements to take delivery
of the portfolio securities in the applicable jurisdiction and it is not
possible to make other such arrangements, or if it is not possible to effect
deliveries of the Portfolio Securities in such jurisdiction, the Trust may in
its discretion redeem such shares in cash, and the redeeming Beneficial Owner
will be required to receive its redemption proceeds in cash. In addition, an
investor may request a redemption in cash that the Trust may, in its sole
discretion, permit. In either case, the investor will receive a cash payment
equal to the net asset value of its shares based on the NAV of shares of the
relevant Fund next determined after the redemption request is received in
proper form (minus a redemption transaction fee and additional variable charge
for cash redemptions specified above, to offset the Trusts brokerage and other
transaction costs associated with the disposition of Portfolio Securities). The
Trust may also, in its sole discretion, upon request of a shareholder, provide
such redeemer a portfolio of securities that differ from the exact composition
of the Portfolio Securities but does not differ in NAV. Redemptions of shares
for Deposit Securities will be subject to compliance with applicable U.S.
federal and state securities laws and the Fund (whether or not it otherwise permits
cash redemptions) reserves the right to redeem Creation Units for cash to the
extent that the Fund could not lawfully deliver specific Deposit Securities
upon redemptions or could not do so without first registering the Deposit
Securities under such laws. In the event
that cash redemptions are permitted or required by the Trust, proceeds will be
paid to the Authorized Participant redeeming shares on behalf of the redeeming
investor as soon as practicable after the date of redemption (within seven
calendar days thereafter, except for the instances listed in Appendix A hereto
where more than seven calendar days would be needed). To the extent
contemplated by an Authorized Participants agreement with the Distributor, in
the event the Authorized Participant that has submitted a redemption request in
proper form is unable to transfer all or part of the Creation Units to be
redeemed to the Trust, at or prior to 10:00 a.m., Eastern Time, on the Business
Day after the date of submission of such redemption request, the Distributor
will nonetheless accept the redemption request in reliance on the undertaking
by the Authorized Participant to deliver the missing shares as soon as
possible. Such undertaking shall be secured by the Authorized Participants
delivery and maintenance of collateral consisting of cash having a value at
least equal to 110%, which the Adviser may change from time to time, of the
value of the missing shares in accordance with the Trusts then-effective
procedures. The only collateral that is acceptable to the Trust is cash in U.S.
dollars or an irrevocable letter of credit in form, and drawn on a bank, that
is satisfactory to the Trust. The Trusts current procedures for
collateralization of missing shares require, among other things, that any cash
collateral shall be held by the Trusts Custodian, and that the fees of the
Custodian and any sub-custodians in respect of the delivery, maintenance and
redelivery of the cash collateral shall be payable by the Authorized
Participant. The cash collateral posted by the Authorized Participant may be
invested at the risk of the Authorized Participant, and income, if any, on
invested cash collateral will be paid to that Authorized Participant. The
Authorized Participant Agreement permits the Trust to purchase the missing
shares or acquire the portfolio securities and the Cash Component underlying
such shares at any time and subjects the Authorized Participant to liability
for any shortfall between the cost to the Trust of purchasing such shares,
Portfolio Securities or Cash Component and the cash collateral or the amount
that may be drawn under any letter of credit. Because the
portfolio securities of the Fund may trade on the relevant exchange(s) on days
that the Exchange is closed or are otherwise not Business Days for such Fund,
shareholders may not be able to redeem their shares of such Fund, or to
purchase or sell shares of such Fund on the Exchange, on days when the NAV of
such Fund could be significantly affected by events in the relevant foreign
markets. The right of
redemption may be suspended or the date of payment postponed with respect to
any Fund (1) for any period during which the New York Stock Exchange is closed
(other than customary weekend and holiday closings); (2) for any period during
which trading on the New York Stock Exchange is suspended or restricted; (3)
for any period during which an emergency exists as a result of which disposal
of the shares of the Funds portfolio securities 27 or
determination of its net asset value is not reasonably practicable; or (4) in
such other circumstance as is permitted by the SEC. The following
summarizes certain additional tax considerations generally affecting the Fund
and its shareholders that are not described in the Prospectus. No attempt is
made to present a detailed explanation of the tax treatment of the Fund or its
shareholders, and the discussions here and in the Prospectus are not intended
as a substitute for careful tax planning. Potential investors should consult
their tax advisers with specific reference to their own tax situations. The
discussions of the federal tax consequences in the Prospectus and this
Additional Statement are based on the Code and the regulations, rulings and
decision under it, as in effect on the date of this Additional Statement.
Future legislative or administrative changes or court decisions may
significantly change the statements included herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein. The Fund
intends to qualify as a regulated investment company under Subchapter M of
Subtitle A, Chapter 1, of the Code. As a regulated investment company, the Fund
generally will be exempt from federal income tax on its net investment income
and realized capital gains that it distributes to shareholders, provided that
it distributes an amount equal to at least the sum of 90% of its tax-exempt
income and 90% of its investment company taxable income (net investment income
and the excess of net short-term capital gain over net long-term capital loss),
if any, for the year (the Distribution Requirement) and satisfies certain
other requirements of the Code that are described below. The Fund intends to
make sufficient distributions or deemed distributions each year to avoid
liability for corporate income tax. If the Fund were to fail to make sufficient
distributions, it could be liable for corporate income tax and for excise tax
in respect of the shortfall or, if the shortfall is large enough, such Fund
could be disqualified as a regulated investment company. In addition to
satisfaction of the Distribution Requirement, the Fund must derive with respect
to a taxable year at least 90% of its gross income from dividends, interest,
certain payments with respect to securities loans and gains from the sale or
other disposition of stock or securities or foreign currencies, or from other
income derived with respect to its business of investing in such stock,
securities, or currencies or net income derived from an interest in a qualified
publicly traded partnership. Also, at the close of each quarter of its taxable
year, at least 50% of the value of the Funds assets must consist of cash and
cash items, U.S. government securities, securities of other regulated
investment companies and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of its total assets in securities of
such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities (including equity securities of a qualified
publicly traded partnership) of such issuer), and no more than 25% of the value
of the Funds total assets may be invested in the securities of (i) any one
issuer (other than U.S. government securities and securities of other regulated
investment companies), (ii) two or more issuers which such Fund controls and
which are engaged in the same or similar trades or businesses or (iii) one or
more qualified publicly traded partnerships. The Fund intends to comply with
these requirements. If for any
taxable year any Fund does not qualify as a regulated investment company, all
of its taxable income will be subject to tax at regular corporate rates without
any deduction for distributions to shareholders. In such event, the
shareholders would recognize dividend income on distributions to the extent of
such Funds current and accumulated earnings and profits. The Code
imposes a nondeductible 4% excise tax on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). The Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and capital gain net income
each calendar year to avoid liability for this excise tax. The Fund
intends to distribute annually to its shareholders substantially all of its
investment company taxable income, and any net realized long-term capital gains
in excess of net realized short-term capital losses (including 28 any capital
loss carryovers). However, if the Fund retains for investment an amount equal
to all or a portion of its net long-term capital gains in excess of its net
short-term capital losses (including any capital loss carryovers), it will be
subject to a corporate tax (currently at a maximum rate of 35%) on the amount
retained. In that event, such Fund may designate such retained amounts as
undistributed capital gains in a notice to its shareholders who (a) will be
required to include in income for U.S. federal income tax purposes, as
long-term capital gains, their proportionate shares of the undistributed
amount, (b) will be entitled to credit their proportionate shares of the tax
paid by such Fund on the undistributed amount against their U.S. federal income
tax liabilities, if any, and to claim refunds to the extent their credits
exceed their liabilities, if any, and (c) will be entitled to increase their
tax basis, for U.S. federal income tax purposes, in their shares by an amount
equal to the difference between the amount of undistributed capital gains
included in the shareholders income and the tax deemed paid by the
shareholder. Organizations or persons not subject to U.S. federal income tax on
such capital gains will be entitled to a refund of their pro rata share of such
taxes paid by such Fund upon filing appropriate returns or claims for refund
with the Internal Revenue Service. Distributions
of net realized long-term capital gains, if any, that the Fund designates as
capital gains dividends are taxable as long-term capital gains, whether paid in
cash or in shares and regardless of how long a shareholder has held shares of
such Fund. All other dividends of the Fund (including dividends from short-term
capital gains) from its current and accumulated earnings and profits (regular
dividends) are generally subject to tax as ordinary income except as described
below for qualified dividends. If an
individual, trust or estate receives a regular dividend or qualified dividends
qualifying for the long-term capital gains rates and such dividend constitutes
an extraordinary dividend, and the individual subsequently recognizes a loss
on the sale or exchange of stock in respect of which the extraordinary dividend
was paid, then the loss will be long-term capital loss to the extent of such
extraordinary dividend. An extraordinary dividend on common stock for this
purpose is generally a dividend (i) in an amount greater than or equal to 10%
of the taxpayers tax basis (or trading value) in a share of stock, aggregating
dividends with ex-dividend dates within an 85-day period or (ii) in an amount
greater than 20% of the taxpayers tax basis (or trading value) in a share of
stock, aggregating dividends with ex-dividend dates within a 365-day period. Distributions
in excess of the Funds current and accumulated earnings and profits will, as
to each shareholder, be treated as a tax-free return of capital to the extent
of a shareholders basis in his shares of such Fund, and as a capital gain
thereafter (if the shareholder holds his shares of such Fund as capital
assets). Shareholders receiving dividends or distributions in the form of
additional shares should be treated for U.S. federal income tax purposes as
receiving a distribution in an amount equal to the amount of money that the
shareholders receiving cash dividends or distributions will receive, and should
have a cost basis in the shares received equal to such amount. Dividends paid
by the Fund that are attributable to dividends received by the Fund from
domestic corporations may qualify for the federal dividends-received deduction
for corporations. Investors
considering buying shares just prior to a dividend or capital gain distribution
should be aware that, although the price of shares just purchased at that time
may reflect the amount of the forthcoming distribution, such dividend or
distribution may nevertheless be taxable to them. If the Fund is the holder of
record of any stock on the record date for any dividends payable with respect
to such stock, such dividends will be included in such Funds gross income not
as of the date received but as of the later of (a) the date such stock became
ex-dividend with respect to such dividends (that is, the date on which a buyer
of the stock would not be entitled to receive the declared, but unpaid,
dividends) or (b) the date such Fund acquired such stock. Accordingly, in order
to satisfy its income distribution requirements, the Fund may be required to
pay dividends based on anticipated earnings, and shareholders may receive
dividends in an earlier year than would otherwise be the case. In certain
cases, the Fund will be required to withhold at the applicable withholding rate,
and remit to the U.S. Treasury such amounts withheld from any distributions
paid to a shareholder who: (1) has failed to provide a correct taxpayer
identification number; (2) is subject to backup withholding by the Internal
Revenue Service; (3) has failed to certify to the Fund that such shareholder is
not subject to backup withholding; or (4) has not certified that such
shareholder is a U.S. person (including a U.S. resident alien). 29 The Trust on
behalf of the Fund has the right to reject an order for a purchase of shares of
the Fund if the purchaser (or group of purchasers) would, upon obtaining the
shares so ordered, own 80% or more of the outstanding shares of a given Fund
and if, pursuant to Sections 351 and 362 of the Code, that Fund would have a
basis in the securities different from the market value of such securities on
the date of deposit. If the Funds basis in such securities on the date of
deposit was less than market value on such date, such Fund, upon disposition of
the securities, would recognize more taxable gain or less taxable loss than if
its basis in the securities had been equal to market value. It is not
anticipated that the Trust will exercise the right of rejection except in a
case where the Trust determines that accepting the order could result in
material adverse tax consequences to the Fund or its shareholders. The Trust
also has the right to require information necessary to determine beneficial
share ownership for purposes of the 80% determination. Distributions
by the Fund of investment company taxable income (excluding any short-term
capital gains) whether received in cash or shares will be taxable either as
ordinary income or as qualified dividend income, eligible for the reduced
maximum rate to individuals of 15% (5% for individuals in lower tax brackets)
to the extent the Fund receives qualified dividend income on the securities it
holds and such Fund designates the distribution as qualified dividend income.
Qualified dividend income is, in general, dividend income from taxable domestic
corporations and certain foreign corporations (e.g.,
foreign corporations incorporated in a possession of the United States or in
certain countries with a comprehensive tax treaty with the United States, or
the stock of which is readily tradable on an established securities market in
the United States). A dividend will not be treated as qualified dividend income
to the extent that (i) the shareholder has not held the shares on which the
dividend was paid for more than 60 days during the 121-day period that begins
on the date that is 60 days before the date on which the shares become ex
dividend with respect to such dividend (and the Fund also satisfies those
holding period requirements with respect to the securities it holds that paid
the dividends distributed to the shareholder), (ii) the shareholder is under an
obligation (whether pursuant to a short sale or otherwise) to make related
payments with respect to substantially similar or related property, or (iii)
the shareholder elects to treat such dividend as investment income under
section 163(d)(4)(B) of the Code. Absent further legislation, the maximum 15%
rate on qualified dividend income will not apply to dividends received in
taxable years beginning after December 31, 2010. Distributions by the Fund of
its net short-term capital gains will be taxable as ordinary income. Capital
gain distributions consisting of the Funds net capital gains will be taxable
as long-term capital gains. CORPORATE DIVIDENDS RECEIVED DEDUCTION The Funds
dividends that are paid to its corporate shareholders and are attributable to
qualifying dividends it received from U.S. domestic corporations may be
eligible, in the hands of such shareholders, for the corporate dividends
received deduction, subject to certain holding period requirements and debt
financing limitations. NET CAPITAL LOSS CARRYFORWARDS Net capital
loss carryforwards may be applied against any net realized capital gains in
each succeeding year, or until their respective expiration dates, whichever
occurs first. Certain types
of income received by the Fund from real estate investment Trusts (REITs),
real estate mortgage investment conduits (REMICs), taxable mortgage pools or
other investments may cause the Fund to designate some or all of its
distributions as excess inclusion income. To Fund shareholders such excess
inclusion income may (1) constitute taxable income, as unrelated business
taxable income (UBTI) for those shareholders who would otherwise be
tax-exempt such as individual retirement accounts, 401(k) accounts, Keogh
plans, pension plans and certain charitable entities; (2) as UBTI cause a
charitable remainder Trust to be subject to a 100% excise tax on its UBTI; (3)
not be offset against net operating losses for tax purposes; (4) not be
eligible for reduced U.S. 30 withholding
for non-U.S. shareholders even from tax treaty countries; and (5) cause the
Fund to be subject to tax if certain disqualified organizations as defined by
the Code are Fund shareholders. TAXATION OF INCOME FROM CERTAIN FINANCIAL
INSTRUMENTS AND PFICS The tax
principles applicable to transactions in financial instruments and futures
contracts and options that may be engaged in by the Fund including the effect
of fluctuations in the value of foreign currencies, and investments in passive
foreign investment companies (PFICs), are complex and, in some cases,
uncertain. Such transactions and investments may cause the Fund to recognize
taxable income prior to the receipt of cash, thereby requiring such Fund to
liquidate other positions, or to borrow money, so as to make sufficient
distributions to shareholders to avoid corporate-level tax. Moreover, some or
all of the taxable income recognized may be ordinary income or short-term
capital gain, so that the distributions may be taxable to shareholders as
ordinary income. In addition,
in the case of any shares of a PFIC in which the Fund invests, such Fund may be
liable for corporate-level tax on any ultimate gain or distributions on the
shares if such Fund fails to make an election to recognize income annually
during the period of its ownership of the shares. Upon the sale
or exchange of his shares, a shareholder will realize a taxable gain or loss
equal to the difference between the amount realized and his basis in his
shares. A redemption of shares by the Fund will be treated as a sale for this
purpose. Such gain or loss will be treated as capital gain or loss if the
shares are capital assets in the shareholders hands, and will be long-term
capital gain or loss if the shares are held for more than one year and
short-term capital gain or loss if the shares are held for one year or less.
Any loss realized on a sale or exchange will be disallowed to the extent the
shares disposed of are replaced, including replacement through the reinvesting
of dividends and capital gains distributions in the Fund, within a 61-day
period beginning 30 days before and ending 30 days after the disposition of the
shares. In such a case, the basis of the shares acquired will be increased to
reflect the disallowed loss. Any loss realized by a shareholder on the sale of
the Fund share held by the shareholder for six months or less will be treated
for U.S. federal income tax purposes as a long-term capital loss to the extent
of any distributions or deemed distributions of long-term capital gains
received by the shareholder with respect to such share. Dividends,
distributions and redemption proceeds may also be subject to additional state,
local and foreign taxes depending on each shareholders particular situation. TAXATION OF NON-U.S. SHAREHOLDERS Dividends paid
by the Fund to non-U.S. shareholders are generally subject to withholding tax
at a 30% rate or a reduced rate specified by an applicable income tax treaty to
the extent derived from investment income and short-term capital gains. In
order to obtain a reduced rate of withholding, a non-U.S. shareholder will be
required to provide an IRS Form W-8BEN certifying its entitlement to benefits
under a treaty. The withholding tax does not apply to regular dividends paid to
a non-U.S. shareholder who provides a Form W-8ECI, certifying that the
dividends are effectively connected with the non-U.S. shareholders conduct of
a trade or business within the United States. Instead, the effectively
connected dividends will be subject to regular U.S. income tax as if the
non-U.S. shareholder were a U.S. shareholder. A non-U.S. corporation receiving
effectively connected dividends may also be subject to additional branch
profits tax imposed at a rate of 30% (or lower treaty rate). A non-U.S.
shareholder who fails to provide an IRS Form W-8BEN or other applicable form
may be subject to backup withholding at the appropriate rate. In general,
United States federal withholding tax will not apply to any gain or income
realized by a non-U.S. shareholder in respect of any distributions of net
long-term capital gains over net short-term capital losses, exempt-interest dividends,
or upon the sale or other disposition of shares of the Fund. 31 For foreign
shareholders of the Fund a distribution attributable to such Funds sale of a
real estate investment trust or other U.S. real property holding company will
be treated as real property gain subject to 35% withholding tax if 50% or more
of the value of such Funds assets are invested in real estate investment
trusts and other U.S. real property holding corporations and if the foreign
shareholder has held more than 5% of a class of stock at any time during the
one-year period ending on the date of the distribution. A distribution from the
Fund will be treated as attributable to a U.S. real property interest only if
such distribution is attributable to a distribution received by such Fund from
a real estate investment trust. Restrictions apply regarding wash sales and
substitute payment transactions. If a
shareholder recognizes a loss with respect to the Funds shares of $2 million
or more for an individual shareholder or $10 million or more for a corporate
shareholder, the shareholder may be required to file with the Internal Revenue
Service a disclosure statement on Form 8886. Direct shareholders of portfolio
securities are in many cases exempted from this reporting requirement, but
under current guidance, shareholders of a regulated investment company are not
exempted. The fact that a loss is reportable under these regulations does not
affect the legal determination of whether the taxpayers treatment of the loss is
proper. Shareholders should consult their tax advisors to determine the
applicability of these regulations in light of their individual circumstances.
Under recently enacted legislation, certain tax-exempt entities and their
managers may be subject to excise tax if they are parties to certain reportable
transactions. The foregoing
discussion is a summary only and is not intended as a substitute for careful
tax planning. Purchasers of shares should consult their own tax advisers as to
the tax consequences of investing in such shares, including under state, local
and foreign tax laws. Finally, the foregoing discussion is based on applicable
provisions of the Code, regulations, judicial authority and administrative
interpretations in effect on the date of this Statement of Additional
Information. Changes in applicable authority could materially affect the
conclusions discussed above, and such changes often occur. The NAV for
the Fund is calculated by deducting all of the Funds liabilities (including
accrued expenses) from the total value of its assets (including the securities
held by the Fund plus any cash or other assets, including interest and
dividends accrued but not yet received) and dividing the result by the number
of shares outstanding, and generally rounded to the nearest cent, although the
Fund reserves the right to calculate its NAV to more than two decimal places.
The NAV for the Fund will generally be determined by SEI Global once daily
Monday through Friday generally as of the regularly scheduled close of business
of the NYSE (normally 4:00 p.m. Eastern Time) on each day that the NYSE, the
Funds Exchange and the Funds Custodian are open for trading, based on prices
at the time of closing, provided that (a) any assets or liabilities denominated
in currencies other than the U.S. dollar shall be translated into U.S. dollars
at the prevailing market rates on the date of valuation as quoted by one or
more major banks or dealers that makes a two-way market in such currencies (or
a data service provider based on quotations received from such banks or
dealers); and (b) U.S. fixed-income assets may be valued as of the announced
closing time for trading in fixed-income instruments on any day that the Bond
Market Association announces an early closing time. In calculating
the Funds NAV, the Funds investments are generally valued using market
valuations. In the event that current market valuations are not readily
available or such valuations do not reflect current market values, the affected
investments will be valued using fair value pricing pursuant to the pricing
policy and procedures approved by the Board of Trustees. A market valuation
generally means a valuation (i) obtained from an exchange, a pricing service,
or a major market maker (or dealer), (ii) based on a price quotation or other
equivalent indication of value supplied by an exchange, a pricing service, or a
major market maker (or dealer) or (iii) based on amortized cost. In the case of
shares of funds that are not traded on an exchange, a market valuation means
such funds published net asset value per share. SEI Global may use various
pricing services or discontinue the use of any pricing service. A price
obtained from a pricing service based on such pricing services valuation matrix
may be considered a market valuation. The value of
assets denominated in foreign currencies is converted into U.S. dollars using
exchange rates deemed appropriate by the Adviser as investment adviser. Any use
of fair value prices, current market valuations or 32 exchange rates
different from the prices and rates used by the Index Providers may adversely
affect the Funds ability to track its underlying index. Dividends from
net investment income, including any net foreign currency gains, are declared
and paid at least annually and any net realized securities gains are
distributed at least annually. In order to improve tracking error or comply
with the distribution requirements of the Internal Revenue Code of 1986,
dividends may be declared and paid more frequently than annually for the Fund.
Dividends and securities gains distributions are distributed in U.S. dollars
and cannot be automatically reinvested in additional shares of the Fund. The
Trust reserves the right to declare special distributions if, in its reasonable
discretion, such action is necessary or advisable to preserve the status of the
Fund as a registered investment company (RIC) or to avoid imposition of
income or excise taxes on undistributed income. Dividends and
other distributions of shares are distributed on a pro rata basis to Beneficial
Owners of such shares. Dividend payments are made through DTC Participants and
Indirect Participants to Beneficial Owners then of record with proceeds received
from the Fund. No dividend
reinvestment service is provided by the Trust. Broker-dealers may make
available the DTC book-entry Dividend Reinvestment Service for use by
Beneficial Owners of Fund for reinvestment of their dividend distributions.
Beneficial Owners should contact their broker to determine the availability and
costs of the service and the details of participation therein. Brokers may
require Beneficial Owners to adhere to specific procedures and timetables. If
this service is available and used, dividend distributions of both income and
realized gains will be automatically reinvested in additional whole shares of
the same Fund purchased in the secondary market. Dechert LLP,
with offices at 1775 I Street Washington, DC 20006-2401, is counsel to the
Trust. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Sanville &
Company with offices at 1514 Old York Road, Abington, PA 19001 serves as the
independent registered public accounting firm of the Trust, audits the Funds
financial statements and may perform other services. The Prospectus
and this Additional Statement do not contain all the information included in
the Registration Statement filed with the SEC under the 1933 Act with respect
to the securities offered by the Trusts Prospectus. Certain portions of the
Registration Statement have been omitted from the Prospectus and this
Additional Statement pursuant to the rules and regulations of the SEC. The
Registration Statement, including the exhibits filed therewith, may be examined
at the office of the SEC in Washington, D.C. Statements
contained in the Prospectus or in this Additional Statement as to the contents
of any contract or other documents referred to are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement of which the
Prospectus and this Additional Statement form a part, each such statement being
qualified in all respects by such reference. 33 The Fund
generally intends to effect deliveries of Creation Units and portfolio
securities on a basis of T plus three business days. The Fund may effect
deliveries of Creation Units and portfolio securities on a basis other than T
plus three in order to accommodate local holiday schedules, to account for
different treatment among foreign and U.S. markets of dividend record dates and
ex-dividend dates, or under certain other circumstances. The ability of the
Trust to effect in-kind creations and redemptions within three business days of
receipt of an order in good form is subject, among other things, to the
condition that, within the time period from the date of the order to the date
of delivery of the securities, there are no days that are holidays in the
applicable foreign market. For every occurrence of one or more intervening
holidays in the applicable foreign market that are not holidays observed in the
U.S. equity market, the redemption settlement cycle will be extended by the
number of such intervening holidays. In addition to holidays, other
unforeseeable closings in a foreign market due to emergencies may also prevent
the Trust from delivering securities within the normal settlement period. The securities
delivery cycles currently practicable for transferring portfolio securities to
redeeming investors, coupled with foreign market holiday schedules, will
require a delivery process longer than seven calendar days in certain
circumstances. The holidays applicable to the Fund during such periods are
listed below, as are instances where more than seven days will be needed to
deliver redemption proceeds. Although certain holidays may occur on different
dates in subsequent years, the number of days required to deliver redemption
proceeds in any given year is not expected to exceed the maximum number of days
listed below for the Fund. The proclamation of new holidays, the treatment by
market participants of certain days as informal holidays (e.g., days on which no or limited
securities transactions occur, as a result of substantially shortened trading
hours), the elimination of existing holidays, or changes in local securities
delivery practices, could affect the information set forth herein at some time
in the future. Denmark: Regular
Holidays: The dates of the Regular Holidays: in
calendar year 2008 are: Jan.1 Apr. 18 Dec. 24 Mar. 20 May 1 Dec. 25 Mar. 21 May 12 Dec. 26 Mar. 24 June 5 Dec. 31 Redemption:
A redemption request made on one of the dates set forth below would result in a
settlement period exceeding 7 calendar days (examples are based on the day
certain holidays occur in calendar year 2008): Redemption Redemption Settlement
Period 03/17/2008 03/25/2008 8 03/18/2008 03/26/2008 8 03/19/2008 03/27/2008 8 12/19/2008 12/29/2008 10 12/22/2008 12/30/2008 8 12/23/2008 1/2/2009 10 Finland: Regular
Holidays: The dates of the Regular Holidays: in
calendar year 2008 are: Jan.1 June 20 Dec. 31 Mar. 21 Dec. 24 Mar. 24 Dec. 25 May 1 Dec. 26 Redemption:
A redemption request made on one of the dates set forth below would result in a
settlement period exceeding 7 calendar days (examples are based on the day
certain holidays occur in calendar year 2008): Redemption Redemption Settlement
Period 12/19/2008 12/29/2008 10 12/22/2008 12/30/2008 8 12/23/2008 1/2/2009 10 A-1 Norway: Regular
Holidays: The dates of the Regular Holidays: in
calendar year 2008 are: Jan.1 May 1 Mar. 20 May 12 Mar. 21 Dec. 25 Mar. 24 Dec. 26 Redemption:
A redemption request made on one of the dates set forth below would result in a
settlement period exceeding 7 calendar days (examples are based on the day
certain holidays occur in calendar year 2008): Redemption Redemption Settlement
Period 03/17/2008 03/25/2008 8 03/18/2008 03/26/2008 8 03/19/2008 03/27/2008 8 Sweden: Regular
Holidays: The dates of the Regular Holidays: in
calendar year 2008 are: Jan.1 June 6 Dec. 26 Mar. 21 June 20 Dec. 31 Mar. 24 Dec. 24 May 1 Dec. 25 Redemption:
A redemption request made on one of the dates set forth below would result in a
settlement period exceeding 7 calendar days (examples are based on the day
certain holidays occur in calendar year 2008): Redemption Redemption Settlement
Period 12/19/2008 12/29/2008 10 12/22/2008 12/30/2008 8 12/23/2008 1/2/2009 10 A-2 As stated in
the Prospectus, the Fund may enter into certain futures transactions. Some of
these transactions are described in this Appendix. The Fund may also enter into
other futures transactions or other securities and instruments that are
available in the markets from time to time. I. Index and Security Futures Contracts A stock index
assigns relative values to the stocks included in the index, which fluctuates
with changes in the market values of the stocks included. Some stock index
futures contracts are based on broad market indices, such as the S&P 500 or
the New York Stock Exchange Composite Index. In contrast, certain futures
contracts relate to narrower market indices, such as the S&P 100® or
indexes based on an industry or market segment, such as oil and gas stocks.
Since 2001, trading has been permitted in futures based on a single stock and
on narrow-based security indices (as defined in the Commodity Futures
Modernization Act of 2000) (together security futures; broader-based index
futures are referred to as index futures). Some futures contracts are traded
on organized exchanges regulated by the CFTC. These exchanges may be either designated
by the CFTC as a contract market or registered with the CFTC as a Derivatives
Transaction Execution Facility (DTEF). Transactions on such exchanges are
cleared through a clearing corporation, which guarantees the performance of the
parties to each contract. Futures contracts also may be traded on electronic
trading facilities or over-the-counter. These various trading facilities are
licensed and/or regulated by varying degrees by the CFTC. The Fund may also
engage in transactions in foreign stock index futures. II. Futures Contracts on Foreign Currencies A futures
contract on foreign currency creates a binding obligation on one party to
deliver, and a corresponding obligation on another party to accept delivery of,
a stated quantity of foreign currency for an amount fixed in U.S. dollars.
Foreign currency futures may be used by the Fund to help the Fund track the
price and yield performance of its Underlying Index. III. Margin Payments Unlike
purchases or sales 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 or in a segregated account with a
custodian or sub-custodian an amount of liquid assets, 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 security 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-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 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 future 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. 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 Funds 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. B-1 IV. Risks of Transactions in Futures
Contracts There are
several risks in connection with the use of futures by the Fund, even for
futures that are used for hedging (non-speculative) purposes. One risk arises
because of the imperfect correlation between movements in the price of the
futures and movements in the price of the instruments which are the subject of
the hedge. The price of the future may move more than or less than the price of
the instruments being hedged. If the price of the futures moves less than the
price of the instruments which are the subject of the hedge, the hedge will not
be fully effective but, if the price of the instruments being hedged has moved
in an unfavorable direction, the Fund would be in a better position than if it
had not hedged at all. If the price of the instruments being hedged has moved
in a favorable direction, this advantage will be partially offset by the loss
on the futures. If the price of the futures moves more than the price of the
hedged instruments, the Fund involved will experience either a loss or gain on
the futures which will not be completely offset by movements in the price of
the instruments that are the subject of the hedge. To compensate for the
imperfect correlation of movements in the price of instruments being hedged and
movements in the price of futures contracts, the Fund may buy or sell futures
contracts in a greater dollar amount than the dollar amount of instruments
being hedged if the volatility over a particular time period of the prices of
such instruments has been greater than the volatility over such time period of
the futures, or if otherwise deemed to be appropriate by the Adviser.
Conversely, the Fund may buy or sell fewer futures contracts if the volatility
over a particular time period of the prices of the instruments being hedged is
less than the volatility over such time period of the futures contract being
used, or if otherwise deemed to be appropriate by the Adviser. In addition to
the possibility that there may be an imperfect correlation, or no correlation
at all, between movements in the futures and the instruments being hedged, the
price of futures may not correlate perfectly with movement in the cash market
due to certain market distortions. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through off-setting
transactions which could distort the normal relationship between the cash and
futures markets. Second, with respect to financial futures contracts, the
liquidity of the futures market depends on participants entering into
off-setting transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures market
could be reduced thus producing distortions. Third, from the point of view of
speculators, the deposit requirements in the futures market are less onerous
than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price distortion in the futures
market, and because of the imperfect correlation between the movements in the
cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the Adviser may still not
result in a successful hedging transaction over a short time frame. In general,
positions in futures may be closed out only on an exchange, board of trade or
other trading facility, which provides a secondary market for such futures.
Although the Fund intends to purchase or sell futures only on trading
facilities where there appear to be active secondary markets, there is no
assurance that a liquid secondary market on any trading facility will exist for
any particular contract or at any particular time. In such an event, it may not
be possible to close a futures investment position, and in the event of adverse
price movements, the Fund would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have been
used to hedge portfolio securities, such securities will not be sold until the
futures contract can be terminated. In such circumstances, an increase in the
price of the securities, if any, may partially or completely offset losses on
the futures contract. However, as described above, there is no guarantee that
the price of the securities will in fact correlate with the price movements in
the futures contract and thus provide an offset on a futures contract. Further, it
should be noted that the liquidity of a secondary market in a futures contract
may be adversely affected by daily price fluctuation limits established by
commodity exchanges which limit the amount of fluctuation in a futures contract
price during a single trading day. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures positions. The trading of futures
contracts is also subject to the risk of trading halts, suspensions, exchange
or clearing house equipment failures, government intervention, insolvency of a
brokerage firm or clearing house or other disruptions of normal B-2 trading
activity, which could at times make it difficult or impossible to liquidate
existing positions or to recover excess variation margin payments. Successful use
of futures by Fund is also subject to the Advisers ability to predict
correctly movements in the direction of the market. In addition, in such
situations, if the Fund has insufficient cash, it may have to sell securities
to meet daily variation margin requirements. Such sales of securities may be,
but will not necessarily be, at increased prices which reflect the rising
market. The Fund may have to sell securities at a time when it may be
disadvantageous to do so. Futures
purchased or sold by the Fund (and related options) may be traded on foreign
exchanges. Participation in foreign futures and foreign options transactions
involves the execution and clearing of trades on or subject to the rules of a
foreign board of trade. Neither the National Futures Association nor any
domestic exchange regulates activities of any foreign boards of trade,
including the execution, delivery and clearing of transactions, or has the
power to compel enforcement of the rules of a foreign board of trade or any
applicable foreign law. This is true even if the exchange is formally linked to
a domestic market so that a position taken on the market may be liquidated by a
transaction on another market. Moreover, such laws or regulations will vary
depending on the foreign country in which the foreign futures or foreign
options transaction occurs. For these reasons, customers who trade foreign
futures or foreign options contracts may not be afforded certain of the
protective measures provided by the Commodity Exchange Act, the CFTC
regulations and the rules of the National Futures Association and any domestic
exchange or other trading facility (including the right to use reparations
proceedings before the CFTC and arbitration proceedings provided by the
National Futures Association or any domestic futures exchange), nor the
protective measures provided by the Securities and Exchange Commissions rules
relating to security futures. In particular, the investments of the Fund in
foreign futures, or foreign options transactions may not be provided the same
protections in respect to transactions on United States futures trading
facilities. In addition, the price of any foreign futures or foreign options
contract may be affected by any variance in the foreign exchange rate between
the time an order is placed and the time it is liquidated, offset or exercised.
V. Options on Futures Contracts The Fund may
purchase and write options on the futures contracts described above. A futures
option gives the holder, in return for the premium paid, the right to buy
(call) from or sell (put) to the writer of the option of a futures contract at
a specified price at any time during the period of the option. Upon exercise,
the writer of the option is obligated to pay the difference between the cash
value of the futures contract and the exercise price. Like the buyer or seller
of a futures contract, the holder, or writer, of an option has the right to
terminate its position prior to the scheduled expiration of the option by
selling, or purchasing an option of the same series, at which time the person
entering into the closing transaction will realize a gain or loss. The Fund
will be required to deposit initial margin and variation margin with respect to
put and call options on futures contracts written by it pursuant to brokers
requirements similar to those described above. Net option premiums received
will be included as initial margin deposits. Investments in
futures options involve some of the same considerations that are involved in
connection with investments in futures contracts (for example, the existence of
a liquid secondary market). See Risks of Transactions in Futures Contracts
above. In addition, the purchase or sale of an option also entails the risk
that changes in the value of the underlying futures contract will not
correspond to changes in the value of the option purchased. Depending on the
pricing of the option compared to either the futures contract upon which it is
based, or upon the price of the securities being hedged, an option may or may
not be less risky than ownership of the futures contract or such securities. In
general, the market prices of options can be expected to be more volatile than
the market prices on the underlying futures contract. Compared to the purchase
or sale of futures contracts, however, the purchase of call or put options on
futures contracts may frequently involve less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). The writing of an option on a futures contract involves
risks similar to those risks relating to the sale of futures contracts. B-3 VI. Other Matters The Fund
intends to comply with the regulations of the CFTC exempting it from
registration as a Commodity Pool Operator. The Fund is operated by persons
who have claimed an exclusion from the definition of the term Commodity Pool
Operator under the Commodity Exchange Act and, therefore, are not subject to
registration or regulations as a pool operator under such Act. Accounting for
futures contracts will be in accordance with generally accepted accounting
principles. B-4 GLOBAL
X FUND The accompanying notes are an integral
part of this financial statement. 1 GLOBAL
X FUNDS - 1. Organization Global
X Funds, a Delaware statutory trust (Trust), was formed on March
6, 2008, and has authorized capital of unlimited shares of beneficial interest.
The Trust has had no operations to date other than matters relating to its
organization and registration as a diversified, open-end management investment
company under the Investment Company Act of 1940, as amended (1940
Act), and the sale and issuance to Global X Management LLC, the investment
adviser (Adviser), of 6,667 shares of beneficial interest (Shares)
at an aggregate purchase price of $15.00 per share in the Global X FTSE
Nordic 30 ETF (Fund). The Fund will list its Shares on the NYSE
Arca. 2. Summary of Significant
Accounting Policies Use
of Estimates and Indemnifications The
preparation of financial statements in conformity with accounting principles
generally accepted in the U.S. requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates. In
the normal course of business the Trust enters into contracts that contain
a variety of representations which provide general indemnifications. The
Trusts maximum exposure under these arrangements cannot be known; however,
the Trust expects any risk of loss to be remote. Federal Income Tax The
Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended. If so qualified,
the Fund will not be subject to federal income tax to the extent it distributes
substantially all of its net investment income and capital gains to shareholders. 3. Agreements Supervision
and Administrative Agreement and Investment Advisory Agreement Global
X Management Company LLC. (Adviser), oversees the performance
of the Fund and arranges for transfer agency, custody and all other services
necessary for the Fund to operate, and exercises day-to-day oversight over
the Funds service providers. The Adviser is responsible for overseeing
the management of the investment portfolio of the Fund. These services are
provided under the terms of a Supervision and Administrative Agreement and
an Investment Advisory Agreement dated October 20, 2008 (Investment
Advisory Agreement) between the Trust and the Adviser, pursuant to
which the Adviser receives an annual management fee equal to 0.50% of the
Funds average daily net assets. 2 GLOBAL
X FUNDS - 3. Agreements (Continued) The
Adviser receives an annual fee equal to pays substantially all expenses of
the Trust, including the cost of transfer agency, custody, fund administration,
legal, audit and other services, except interest expense, brokerage commissions
and other trading expenses, distribution fees or expenses, fees and expenses
of the independent trustees, taxes and other extraordinary costs such as
litigation and other expenses not incurred in the ordinary course of business. The
Investment Advisory Agreement provides that the Adviser shall not be liable
to the Fund or its shareholders for anything other than willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations or duties.
The Investment Advisory Agreement also provides that the Adviser may engage
in other businesses, devote time and attention to any other business whether
of a similar or dissimilar nature, and render investment advisory services
to others. Distribution SEI
Investments Distribution Co. serves as the Funds distributor. Administrator, Transfer Agent and
Custodian SEI
Investments Global Trust Services is the sub-administrator for the Fund.
Brown Brothers Harriman & Co. is the custodian and transfer agent for
the Fund. 4. Organizational
Costs
The
organizational and initial offering expenses of the Fund (which are estimated
to be $150,000) are being bourne directly by the Adviser.
5. Capital The
Fund issues and redeems Shares on a continuous basis at net asset value (NAV)
per Share in groups of 70,000 Shares called Creation Units. 6. Related Parties At
October 21, 2008, certain officers of the Trust were also employees of
the Adviser. 3 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To
the Board of Trustees of Global X Funds and We
have audited the accompanying statement of assets and liabilities of Global
X FTSE Nordic 30 ETF (Fund), as of October 21, 2008. This financial
statement is the responsibility of the Funds management. Our responsibility
is to express an opinion on this financial statement based on our audit. We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board of Trustees (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion. In
our opinion, the financial statement referred to above present fairly, in
all material respects, the financial position Global X FTSE Nordic 30 ETF
at October 21, 2008 in conformity generally accepted accounting principles
in the United States of America.
Item 23. Exhibits (a) (1) Certificate of Trust dated as of March 6, 2008. 1/ (2) Declaration of Trust. 2/ (b) By-Laws of the Registrant. 2/ (c) Not Applicable. (d) Form of Investment Advisory Agreement. 3/ (e) (1) Form of Distribution Agreement. 2/ (2) Form of Authorized Participant Agreement. 3/ (f) Not Applicable. (g) Form of Custodian Agreement. 2/ (h) (1) Form of Transfer Agent Services Agreement. 2/ (2) Form of Administration Agreement. 2/ (3) Form of Supervision and Administration Agreement. 3/ (4) Form of Sub-License Agreement. 3/ (i) Opinion and Consent of Dechert LLP. 3/ (j) Consent of Independent Registered Public Accounting
Firm to be filed herewith. (k) Not Applicable (l) Initial Capital Agreement. 3/ (m) Form of Distribution and Service Plan. 3/ (n) Not applicable (o) Not applicable (p) (1) Code of Ethics of Global X Funds.* (2) Code of Ethics of Global X Management Company LLC.* (3) Code of Ethics of Distributor.* (q) Power of Attorney. 3/ * To be filed by Amendment. 1/
Incorporated by reference from the Registrants initial Registration Statement,
SEC File No. 333-151713, filed June 17, 2008. 2/
Incorporated by reference from the Registrants Pre-effective Amendment #1, SEC
File No. 333-151713, filed August 15, 2008. 3/ Incorporated by reference from the Registrants
Pre-effective Amendment #2, SEC File No. 333-151713, filed October 27,
2008. Item 24. Persons Controlled by
or Under Common Control with the Fund None. Item 25.
Indemnification Section 3 of Article VII of the Registrants
Declaration of Trust filed as Exhibit (a)(2) to the Registrants Registration
Statement provides that, subject to the exceptions and limitations contained in
the By-Laws, each Trustee or officer of the Registrant (Covered Person) shall
be indemnified by the Registrant to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with the defense of any proceeding in which he becomes involved as a
party or otherwise by virtue of his being or having been a Trustee or officer
of the Trust and against amounts paid or incurred by him in the settlement
thereof; and that expenses in connection with the defense of any proceeding of
the character described above shall be advanced by the Trust to the Covered
Person from time to time prior to final disposition of such proceeding to the
fullest extent permitted by law. No indemnification shall be provided hereunder
to a Covered Person who shall have been adjudicated by a court or body before
which the proceeding was brought (i) to be liable to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office or (ii)
not to have acted in good faith in the reasonable belief that his action was in
the best interest of the Registrant. The Registrants financial obligations arising from
the indemnification provided herein or in the By-Laws may be insured by
policies maintained by the Registrant, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person as to acts or omissions as a Covered Person and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Nothing contained herein shall affect any rights to indemnification to which
Registrants personnel, other than Covered Persons, and other persons may be
entitled by contract or otherwise under law. Expenses in connection with the defense of any
proceeding of the character described in paragraph (a) of Section 3 may be
advanced by the Registrant (or its series) from time to time prior to final
disposition of the proceeding upon receipt of an undertaking by or on behalf of
such Covered Person that such amount will be paid over by him to the Registrant
(or series) if it is ultimately determined that he is not entitled to
indemnification under Section 3; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Registrant is insured against losses arising out of any such advance
payments, or (iii) either a majority of the Trustees who are neither
interested persons of the Registrant nor parties to the matter, or
independent legal counsel in a written opinion, shall have determined, based
upon a review of readily available facts (as opposed to a trial-type inquiry or
full investigation), that there is reason to believe that such Covered Person
will be found entitled to indemnification under Section 3. Section 2 of Article VII of the Registrants By-Laws
filed as Exhibit (b) to the Registrants Registration Statement further
provides that, with respect to indemnification of the Trustees and officers,
the Registrant shall, subject to certain exceptions and limitations, indemnify
its Trustees and officers to the fullest extent consistent with state law and
the 1940 Act. Without limitation of the foregoing, the Registrant shall
indemnify each person who was or is a party or is threatened to be made a party
to any proceedings, by reason of alleged acts or omissions within the scope of
his or her service as a Trustee or officer of the Registrant, against
judgments, fines, penalties, settlements and reasonable expenses (including
attorneys fees) actually incurred by him or her in connection with such
proceeding to the maximum extent consistent with state law and the 1940 Act.
The Registrant may, to the fullest extent consistent with law, indemnify each
person who is serving or has served at the request of the Registrant as a
director, officer, partner, trustee, employee, agent or fiduciary of another
domestic or foreign corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan (Other Position) and who was or is a
party or is threatened to be made a party to any proceeding by reason of alleged
acts or omissions while acting within the scope of his or her service in such
Other Position, against judgments, fines, settlements and reasonable expenses (including attorneys fees) actually incurred
by him or her in connection with such proceeding to the maximum extent
consistent with state law and the 1940 Act. The indemnification and other
rights provided by Article VII shall continue as to a person who has ceased to
be a Trustee or officer of the Registrant. In no event will any revision,
amendment or change to the By-Laws affect in any manner the rights of any
Trustee or officer of the Trust to receive indemnification by the Trust against
all liabilities and expenses reasonably incurred or paid by the Trustee or
officer in connection with any proceeding in which the Trustee or officer
becomes involved as a party or otherwise by virtue of being or having been a
Trustee or officer of the Trust (including any amount paid or incurred by the
Trustee or officer in the settlement of such proceeding) with respect to any
act or omission of such Trustee or officer that occurred or is alleged to have
occurred prior to the time such revision, amendment or change to the By-Laws is
made. Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to Trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Investment Company Act of 1940, as amended (1940 Act), and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer or controlling person of Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1940 Act and will be governed by the final
adjudication of such issue. Section 7 of Article III of the Registrants
Declaration of Trust, filed as Exhibit (a)(2) to the Registrants Registration
Statement, also provides for the indemnification of shareholders of the
Registrant. Section 7 states as follows: If any Shareholder or former Shareholder of any
Series shall be held to be personally liable solely by reason of a claim or
demand relating to such Person being or having been a Shareholder, and not
because of such Persons acts or omissions, the Shareholder or former
Shareholder (or such Persons heirs, executors, administrators, or other
legal representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled to be held harmless
from and indemnified against all loss and expense arising from such claim or
demand, but only out of the assets held with respect to the particular Series
of Shares of which such Person is or was a Shareholder and from or in
relation to which such liability arose. The Trust, on behalf of the
applicable Series, may, at its option, assume the defense of any such claim
made against such Shareholder. Neither the Trust nor the applicable Series
shall be responsible for satisfying any obligation arising from such a claim
that has been settled by the Shareholder without the prior written notice to,
and consent of, the Trust. Item 26.
Business and Other Connections of the Investment Adviser Global X Management Company LLC serves as investment
adviser to the Funds and provides investment supervisory services. Information
as to the officers and directors of Global X Management Company LLC is included
in its Form ADV last filed with the Securities and Exchange Commission (SEC
File No. 801-69093) and is incorporated herein by reference. Set forth below is a list of officers and directors of
Global X Management Company LLC, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years. Name and
Position Principal
Business(es) During the Last Two Fiscal Years Bruno del Ama, Chief Executive Officer Chief Executive Officer, Global X Management Company
LLC (since 2008); Head of Global Structured Products Operations at Radian
Asset Assurance (2004-2008) Jose C. Gonzalez, Principal Founder and President of GWM Group, Inc. (since
2006); Financial Advisor, BroadStreet Securities, Inc. (2004-2006) Item 27.
Principal Underwriters (a) Furnish the name of each investment company
(other than the Registrant) for which each principal underwriter currently
distributing the securities of the Registrant also acts as a principal underwriter,
distributor or investment adviser. Registrant's distributor, SEI Investments
Distribution Co. (the "Distributor"), acts as distributor for: The Distributor provides numerous financial
services to investment managers, pension plan sponsors, and bank trust departments.
These services include portfolio evaluation, performance measurement and
consulting services ("Funds Evaluation") and automated execution, clearing
and settlement of securities transactions ("MarketLink"). (b) Furnish the Information required by the
following table with respect to each director, officer or partner of each
principal underwriter named in the answer to Item 20 of Part B. Unless otherwise
noted, the business address of each director or officer is Oaks, PA 19456. Item 28.
Location of Accounts and Records All accounts, books, and other documents required to
be maintained by Section 31(a) of the Investment Company Act of 1940, as
amended, and the rules promulgated thereunder are maintained at the offices of
the: (a) Registrant; (b) Investment Adviser; (c) Principal Underwriter; (d)
Administrator/Transfer Agent and
(e) Custodian. The address of each is as follows: (a) Registrant Global X Funds 220 Fifth Avenue, 20th Floor New York, NY 10001 (b) Investment Adviser Global X Management Company LLC 220 Fifth Avenue, 20th Floor New York, NY 10001 (c) Principal
Underwriter SEI Investments Distribution Co. Freedom Valley Drive Oaks, PA 19456. (d) Sub-Administrator SEI Investments Global Trusts Services Freedom Valley Drive Oaks, PA 19456 (e) Custodian and Transfer Agent Brown Brothers Harriman & Co. 40 Water Street Boston, MA 02109 Item 29.
Management Services Not Applicable. Item 30.
Undertakings Not Applicable. SIGNATURES Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York, on
the 3rd day of November 2008. Global X Funds By: /s/ Bruno del Ama President Pursuant to the requirements of the Securities Act of
1933, the Registration Statement has been signed below by the following persons
in the capacities and on the date indicated. Name Title Date /s/ Bruno del Ama President (Principal Executive Officer) November 3, 2008 Bruno del Ama Chief Operating Officer, Treasurer November 3, 2008 /s/ Jose C. Gonzalez Jose C. Gonzalez * Sanjay Ram Bharani Trustee November 3, 2008 * Scott R. Chichester Trustee November 3, 2008 * Kartik Kiran Shah Trustee November 3, 2008 * /s/ Bruno del Ama Attorney-In-Fact, pursuant to power of EXHIBIT
LIST (j) Consent of Independent Registered Public Accounting
Firm
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
As the independent registered public accounting firm, we hereby consent to the use of our report dated October 21, 2008 on the financial statement of Global X Funds Global X FTSE
Nordic 30 ETF, (the "Fund"), as of October 21, 2008 and for the periods indicated therein and to all references to our firm in the Prospectus and Statement of Additional Information in this Pre-Effective Amendment to the Global X Funds Registration
Statement on Form N-1A.
ACT OF 1940
Preliminary Prospectus dated November 3, 2008
(fees paid directly from your investment, but see the Creation Unit Transactions
Fees and Redemption Transaction Fees below)
call 1-888-GXFund-1 (1-888-493-8631)
www.globalxfunds.com
Global X Management Company LLC
220 Fifth Avenue, 20th Floor
New York, NY 10001
SEI Investments Distribution Co.
Freedom Valley Drive
Oaks, PA 19456
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
SEI Investments Global Trusts Services
Freedom Valley Drive
Oaks, PA 19456
Dechert LLP
1775 I Street
Washington, DC 20006-2401
Accounting
Firm
Sanville & Company
1514 Old York Road
Abington, PA 19001
Freedom Valley Drive
Oaks, PA 19456
Subject to Completion
(Year of Birth)
with Funds
the Past 5 Years
by Trustees
220 Fifth Avenue, 20th floor
New York, New York 10001
(1974)
220 Fifth Avenue, 20th floor
New York, New York 10001
(1970)
220 Fifth Avenue, 20th
floor
New York, New York 10001
(1977)
220 Fifth Avenue, 20th
floor
New York, New York 10001
(1976)
220 Fifth Avenue, 20th
floor
New York, New York 10001
(1976)
1
Mr. Chichester is currently married to a sister of Mr. del
Amas wife. While an immediate family member as defined
in Section 2(a)(19) of the 1940 Act of Mr. del Ama would be considered
an Interested Person, Mr. Chichester is not considered an immediate family
member for this purpose. Although this fact was taken into consideration
in determining whether Mr. Chichester should be considered to be an independent
trustee for purposes of the Section 2(a)(19) of the 1940 Act, it was
determined that this relationship was not one that should disqualify
Mr. Chichester from serving as an independent trustee of the Trust.
Compensation from
Trust
Retirement Benefits
Accrued as Part of
Trust Expenses
from Trust
Request Date
Settlement Date
Request Date
Settlement Date
Request Date
Settlement Date
Request Date
Settlement Date
GLOBAL X FTSE
NORDIC 30 ETF
STATEMENT OF
ASSETS AND LIABILITIES
October 21,
2008
ASSETS
Cash,
at custodian bank
$
100,005
Total
assets
100,005
LIABILITIES
-
Net
assets
$
100,005
Analysis
of Net Assets:
Paid-in-Capital
on shares of beneficial interest of 6,667
$
100,005
Net
asset value (NAV) per share
$
15.00
GLOBAL X FTSE
NORDIC 30 ETF
NOTES TO FINANCIAL
STATEMENTS
October 21, 2008
GLOBAL X FTSE
NORDIC 30 ETF
NOTES TO FINANCIAL
STATEMENTS
October 21, 2008
Shareholders of
Global X FTSE Nordic 30 ETF
Abington,
Pennsylvania
October 21,
2008
SEI Daily Income Trust
July 15, 1982
SEI Liquid Asset Trust
November 29, 1982
SEI Tax Exempt Trust
December 3, 1982
SEI Institutional Managed Trust
January 22, 1987
SEI Institutional International
Trust
August 30, 1988
The Advisors' Inner Circle Fund
November 14, 1991
The Advisors' Inner Circle Fund
II
January 28, 1993
Bishop Street Funds
January 27, 1995
SEI Asset Allocation Trust
April 1, 1996
SEI Institutional Investments Trust
June 14, 1996
Oak Associates Funds
February 27, 1998
CNI Charter Funds
April 1, 1999
iShares Inc.
January 28, 2000
iShares Trust
April 25, 2000
Optique Funds, Inc. (f/k/a JohnsonFamily
Funds, Inc.)
November 1, 2000
Causeway Capital Management Trust
September 20, 2001
Barclays Global Investors Funds
March 31, 2003
SEI Opportunity Fund, LP
October 1, 2003
The Arbitrage Funds
May 17, 2005
The Turner Funds
January 1, 2006
ProShares Trust
November 14, 2005
Community Reinvestment Act Qualified
Investment Fund
January 8, 2007
SEI Alpha Strategy Portfolios, LP
June 29, 2007
TD Asset Management USA Funds
July 25, 2007
SEI Structured Credit Fund, LP
July 31, 2007
Wilshire Mutual Funds, Inc.
July 12, 2008
Wilshire Variable Insurance Trust
July 12, 2008
Forward Funds
August 14, 2008
Position and Office
Positions and Offices
Name
with Underwriter
with Registrant
William M. Doran
Director
--
Edward D. Loughlin
Director
--
Wayne M. Withrow
Director
--
Kevin Barr
President & Chief Executive
Officer
--
Maxine Chou
Chief Financial Officer, Chief Operations
Officer,
& Treasurer
--
Karen LaTourette
Chief Compliance Officer,
Anti-Money Laundering
Officer & Assistant
Secretary
--
John C. Munch
General Counsel & Secretary
--
Mark J. Held
Senior Vice President
--
Lori L. White
Vice President & Assistant Secretary
--
John Coary
Vice President & Assistant Secretary
--
John Cronin
Vice President
--
Robert Silvestri
Vice President
--
and Trustee
(Principal Financial Officer) and Principal
Accounting Officer
attorney
Abington, Pennsylvania
October 30, 2008
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1775 I Street, N.W. |
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Washington, DC 20006-2401 |
+1 202 261 3300 Main |
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+1 202 261 3333 Fax |
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www.dechert.com |
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JANE A. KANTER |
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jane.kanter@dechert.com |
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+1 202 261 3302 Direct |
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+1 202 261 3002 Fax |
November 3, 2008
VIA EDGAR
U.S. Securities and Exchange
Commission
100 F Street, NE
Washington, D.C. 20549-4720
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Re: |
Global X Funds |
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File Nos. 333-151713 and 811-22209 |
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Pre-Effective Amendment No. 2 to the Registration Statement on Form N-1A |
Ladies and Gentlemen:
Enclosed for filing on behalf of Global X Funds (Trust) is Pre-Effective Amendment No. 3 to the Trusts registration statement on Form N-1A (Registration Statement) under the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940 (1940 Act), in electronic format. This filing is being made for the purposes of (i) filing certain required exhibits; and (ii) making certain other non-material changes to the Prospectus and Statement of Additional Information for the Global X FTSE Nordic 30 ETF, a series of the Trust.
Certain additional items required to be contained in the Registration Statement, including the exhibits thereto, will be completed and filed on such date or dates as may be necessary until the Trust shall file a further amendment to the Registration Statement which specifically states that the Registration Statement shall thereafter become effective in accordance with section 8(a) of the 1933 Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.
If you have any questions relating to this filing, please do not hesitate to contact me at 202.261.3302 or Daphne Chisolm at 704.339.3153.
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Sincerely, |
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/s/ Jane A. Kanter |
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