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
Preliminary
Prospectus dated November 12, 2010
Global
X FTSE Andean 30 ETF
NYSE
Arca, Inc: [ ]
Global
X FTSE ASEAN 40 ETF
NYSE
Arca, Inc: [ ]
Global
X S&P/TSX Venture ETF
NYSE
Arca, Inc: [ ]
Global
X Next 11 ETF
NYSE
Arca, Inc: [ ]
Prospectus
[ ],
2010
The Securities and Exchange Commission
(“SEC”) has not approved or disapproved these securities or passed upon the
adequacy of this Prospectus. Any representation to the contrary is a
criminal offense. Shares in a Fund are not guaranteed or insured by
the Federal Deposit Insurance Corporation (“FDIC”) or any other agency of the
U.S. Government, nor are shares deposits or obligations of any
bank. Such shares in a Fund involve investment risks, including the
loss of principal.
TABLE OF CONTENTS
FUND
SUMMARIES
|
1
|
ADDITIONAL INFORMATION ABOUT THE
FUNDS’ STRATEGIES AND
RISKS
|
21
|
PORTFOLIO HOLDINGS
INFORMATION
|
30
|
FUND
MANAGEMENT
|
30
|
DISTRIBUTOR
|
32
|
BUYING AND SELLING FUND
SHARES
|
32
|
FREQUENT
TRADING
|
33
|
DISTRIBUTION AND SERVICE
PLAN
|
34
|
DIVIDENDS AND
DISTRIBUTIONS
|
34
|
TAXES
|
34
|
DETERMINATION OF NET ASSET
VALUE
|
37
|
PREMIUM/DISCOUNT
INFORMATION
|
38
|
INFORMATION REGARDING THE INDEXES
AND THE INDEX PROVIDER
|
38
|
OTHER SERVICE
PROVIDERS
|
40
|
FINANCIAL
HIGHLIGHTS
|
40
|
OTHER
INFORMATION
|
40
|
FUND
SUMMARIES
Global
X FTSE Andean 30 ETF
Ticker:
[ ] Exchange: NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X Andean 30 ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the FTSE Andean 30 Index (“Underlying Index”).
FEES
AND EXPENSES
This
table describes the fees and expenses that you may pay if you buy and hold
shares (“Shares”) of the Fund. You will also incur usual and
customary brokerage commission when buying and selling Shares.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
Management
Fees:
|
[ %]
|
|
Distribution
and Service (12b-1) Fees:
|
None
|
|
Other
Expenses: 1
|
[ %]
|
|
Total
Annual Fund Operating Expenses:
|
[ %]
|
|
Example: The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling shares of the Fund
in the secondary market. The example assumes that you invest $10,000 in the Fund
for the time periods indicated and then sell all of your shares at the end of
those periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
One
Year
|
Three
Years
|
$[ ]
|
$[ ]
|
Portfolio Turnover: The Fund
pays transaction costs, such as commissions, when it buys and sells securities
(or "turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. As of the
date of this Prospectus, the Fund had not yet commenced operations.
1
|
The
Fund bears other expenses that are not covered under the supervisory and
administration 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).
|
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is a free-float adjusted, modified capitalization-weighted
index designed to measure performance of the 30 largest and most liquid
companies in the Chile, Colombia, and Peru markets. As of
[ ], the Underlying Index’s three largest stocks were
[ ], [ ] and [ ]. The Fund’s
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 Global X Management Company LLC, the investment
adviser for the Fund (“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 Fund’s Index
Provider is FTSE Group (“FTSE”).
The
Adviser uses a “passive” or indexing approach to try to achieve the Fund’s
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 depositary receipts based on the securities in 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 the Underlying Index when a replication strategy might
be detrimental to shareholders, such as when there are practical difficulties or
substantial costs involved in compiling a portfolio of equity securities to
follow the Underlying Index, in instances in which a security in the Underlying
Index becomes temporarily illiquid, unavailable or less liquid, or as a result
of legal restrictions or limitations (such as tax diversification requirements)
that apply to the Fund but not the Underlying Index.
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 or limitations, illiquid or unavailable
securities, and timing variances.
The
Adviser expects that, over time, the correlation between the Fund’s performance
and that of the Underlying Index, before fees and expenses, will exceed
95%. A correlation percentage of 100% would indicate perfect
correlation. If the Fund uses a replication strategy, it can be
expected to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy.
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 the Underlying Index is concentrated.
SUMMARY
OF PRINCIPAL RISKS
As with
any investment, you could lose all or part of your investment in the Fund, and
the Fund's performance could trail that of other investments. The Fund is
subject to the principal risks noted below, any of which may adversely affect
the Fund's net asset value ("NAV"), trading price, yield, total return and
ability to meet its investment objective, as well as other risks that are
described in greater detail in the Additional Information About the
Fund’s Strategies and Risks section of the Prospectus and in the
Statement of Additional Information ("SAI").
Asset Class Risk: Securities
in the Underlying Index or the Fund's portfolio may underperform in comparison
to the general securities markets or other asset classes.
Commodity Exposure Risk: The
Fund invests in the Chile, Colombia and Peru markets, which are susceptible to
fluctuations in certain commodity markets. Any negative changes in
commodity markets could have a great impact on these economies.
Concentration Risk: To the
extent that the Fund’s investments are concentrated in a particular country,
market, industry or asset class, the Fund will be susceptible to loss due to
adverse occurrences affecting that country, market, industry or asset
class.
Custody Risk: Less developed
markets are more likely to experience problems with the clearing and settling of
trades.
Emerging Market Risk: The Fund
is expected to invest in securities in the following emerging market countries:
Chile, Colombia and Peru. The Fund’s investment in an emerging market country
may be subject to a greater risk of loss than investments in developed
markets.
Foreign Security Risk:
Investments in the securities of foreign issuers are subject to the risks
associated with investing in those foreign markets, such as heightened risks of
inflation or nationalization. You may lose money due to political, economic and
geographic events affecting a foreign issuer or market.
Geographic Risk: The Fund is
expected to invest in securities in South America, where a natural disaster
could occur.
Issuer Risk: Fund performance
depends on the performance of individual companies in which the Fund invests.
Changes to the financial condition of any of those companies may cause the value
of their securities to decline.
Management Risk: The Fund is
subject to the risk that the Adviser’s investment management strategy may not
produce the intended results.
Market Risk: The Fund's NAV
could decline over short periods due to short-term market movements and over
longer periods during market downturns.
Market Trading Risks: The Fund
faces numerous market trading risks, including the potential lack of an active
market for Shares, losses from trading in secondary markets, and disruption in
the creation/redemption process of the Fund. Any of these factors may lead to
the Shares trading at a premium or discount to NAV.
Non-Diversification Risk: The
Fund may invest a large percentage of its assets in securities issued by or
representing a small number of issuers. As a result, the Fund’s performance may
depend on the performance of a small number of issuers.
Reliance on Trading Partners
Risk: The Fund invests in economies that are heavily dependent upon
trading with key partners. Any reduction in this trading may cause an adverse
impact on the economies in which the Fund invests. The Fund is specifically
exposed to Asian Economic Risk,
Central and South American Economic Risk, European Economic Risk and U.S. Economic
Risk.
Securities Market Risk:
Because certain securities markets in the countries in which the Fund may
invest are small in size, underdeveloped and are less correlated to global
economic cycles than those markets located in more developed countries, the
securities markets in such countries are subject to greater risks associated
with market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations and uncertainty regarding the
existence of trading markets.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
PERFORMANCE
INFORMATION
As of the
date of this Prospectus, the Fund has not yet commenced investment operations
and therefore does not report its performance information.
FUND
MANAGEMENT
Investment Adviser: Global X
Management Company LLC.
Portfolio Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Bruno del Ama and Jose C. Gonzalez. Mr. del Ama and Mr. Gonzalez have been
Portfolio Managers of the Fund since inception.
PURCHASE
AND SALE OF FUND SHARES
Shares
will be listed and traded at market prices on an exchange. Shares may
only be purchased and sold on the exchange through a
broker-dealer. The price of Shares is based on market price, and
because exchange-traded fund shares trade at market prices rather than at NAV,
shares may trade at a price greater than NAV (a premium) or less than NAV (a
discount). Only Authorized Participants who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem shares that have been aggregated
into blocks of [ ] shares or multiples thereof ("Creation
Units"). The Fund will issue or redeem Creation Units in return for a
basket of assets that the Fund specifies each day.
TAX
INFORMATION
The Fund
intends to make distributions that may be taxable to you as ordinary income or
capital gains, unless you are investing through a tax-deferred arrangement such
as a 401(k) plan or an individual retirement account ("IRA").
For more
information regarding the tax consequences that may be associated with investing
in the Fund, please refer to the Taxes section of the
Prospectus.
Global
X FTSE ASEAN 40 ETF
Ticker:
[ ] Exchange: NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X FTSE ASEAN 40 ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the FTSE/ASEAN 40 Index (“Underlying Index”).
FEES
AND EXPENSES
This
table describes the fees and expenses that you may pay if you buy and hold
shares (“Shares”) of the Fund. You will also incur usual and
customary brokerage commission when buying and selling Shares.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
Management
Fees:
|
[ %]
|
|
Distribution
and Service (12b-1) Fees:
|
None
|
|
Other
Expenses: 1
|
[ %]
|
|
Total
Annual Fund Operating Expenses:
|
[ %]
|
|
Example: The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling shares of the Fund
in the secondary market. The example assumes that you invest $10,000 in the Fund
for the time periods indicated and then sell all of your shares at the end of
those periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
One
Year
|
Three
Years
|
$[ ]
|
$[ ]
|
Portfolio Turnover: The Fund
pays transaction costs, such as commissions, when it buys and sells securities
(or "turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. As of the
date of this Prospectus, the Fund had not yet commenced operations.
1
|
The
Fund bears other expenses that are not covered under the supervisory and
administration 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).
|
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index tracks the performance of the 40 largest and most liquid
companies in the five ASEAN regions: Indonesia, Philippines, Singapore, Malaysia
and Thailand. As of [ ], the Underlying Index’s three largest
stocks were [ ], [ ] and [ ].
The Fund’s 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 Global X Management Company LLC, the investment
adviser for the Fund (“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 Fund’s Index
Provider is FTSE Group (“FTSE”).
The
Adviser uses a “passive” or indexing approach to try to achieve the Fund’s
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 depositary receipts based on the securities in 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 the Underlying Index when a replication strategy might
be detrimental to shareholders, such as when there are practical difficulties or
substantial costs involved in compiling a portfolio of equity securities to
follow the Underlying Index, in instances in which a security in the Underlying
Index becomes temporarily illiquid, unavailable or less liquid, or as a result
of legal restrictions or limitations (such as tax diversification requirements)
that apply to the Fund but not the Underlying Index.
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 or limitations, illiquid or unavailable
securities, and timing variances.
The
Adviser expects that, over time, the correlation between the Fund’s performance
and that of the Underlying Index, before fees and expenses, will exceed
95%. A correlation percentage of 100% would indicate perfect
correlation. If the Fund uses a replication strategy, it can be
expected to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy.
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 the Underlying Index is concentrated.
SUMMARY
OF PRINCIPAL RISKS
As with
any investment, you could lose all or part of your investment in the Fund, and
the Fund's performance could trail that of other investments. The Fund is
subject to the principal risks noted below, any of which may adversely affect
the Fund's net asset value ("NAV"), trading price, yield, total return and
ability to meet its investment objective, as well as other risks that are
described in greater detail in the Additional Information About the
Fund’s Strategies and Risks section of the Prospectus and in the
Statement of Additional Information ("SAI").
Asset Class Risk: Securities
in the Underlying Index or the Fund's portfolio may underperform in comparison
to the general securities markets or other asset classes.
Concentration Risk: To the
extent that the Fund’s investments are concentrated in a particular country,
market, industry or asset class, the Fund will be susceptible to loss due to
adverse occurrences affecting that country, market, industry or asset
class.
Custody Risk: Less developed
markets are more likely to experience problems with the clearing and settling of
trades.
Emerging Market Risk: The Fund
is expected to invest in securities in the following emerging market countries:
Indonesia, Philippines, Malaysia and Thailand. The Fund’s investment in an
emerging market country may be subject to a greater risk of loss than
investments in developed markets.
Foreign Security Risk:
Investments in the securities of foreign issuers are subject to the risks
associated with investing in those foreign markets, such as heightened risks of
inflation or nationalization. You may lose money due to political, economic and
geographic events affecting a foreign issuer or market.
Geographic Risk: The Fund is
expected to invest in securities in Asia, where a natural disaster could
occur.
Issuer Risk: Fund performance
depends on the performance of individual companies in which the Fund invests.
Changes to the financial condition of any of those companies may cause the value
of their securities to decline.
Management Risk: The Fund is
subject to the risk that the Adviser’s investment management strategy may not
produce the intended results.
Market Risk: The Fund's NAV
could decline over short periods due to short-term market movements and over
longer periods during market downturns.
Market Trading Risks: The Fund
faces numerous market trading risks, including the potential lack of an active
market for Shares, losses from trading in secondary markets, and disruption in
the creation/redemption process of the Fund. Any of these factors may lead to
the Shares trading at a premium or discount to NAV.
Non-Diversification Risk: The
Fund may invest a large percentage of its assets in securities issued by or
representing a small number of issuers. As a result, the Fund’s performance may
depend on the performance of a small number of issuers.
Reliance on Trading Partners
Risk: The Fund invests in economies that are heavily dependent upon
trading with key partners. Any reduction in this trading may cause an adverse
impact on the economies in which the Fund invests. The Fund is specifically
exposed to Asian Economic Risk,
European Economic Risk and U.S. Economic Risk.
Securities Market Risk:
Because certain securities markets in the countries in which the Fund may
invest are small in size, underdeveloped and are less correlated to global
economic cycles than those markets located in more developed countries, the
securities markets in such countries are subject to greater risks associated
with market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations and uncertainty regarding the
existence of trading markets.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
PERFORMANCE
INFORMATION
As of the
date of this Prospectus, the Fund has not yet commenced investment operations
and therefore does not report its performance information.
FUND
MANAGEMENT
Investment Adviser: Global X
Management Company LLC.
Portfolio Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Bruno del Ama and Jose C. Gonzalez. Mr. del Ama and Mr. Gonzalez have been
Portfolio Managers of the Fund since inception.
PURCHASE
AND SALE OF FUND SHARES
Shares
will be listed and traded at market prices on an exchange. Shares may
only be purchased and sold on the exchange through a
broker-dealer. The price of Shares is based on market price, and
because exchange-traded fund shares trade at market prices rather than at NAV,
shares may trade at a price greater than NAV (a premium) or less than NAV (a
discount). Only Authorized Participants who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem shares that have been aggregated
into blocks of [ ] shares or multiples thereof ("Creation
Units"). The Fund will issue or redeem Creation Units in return for a
basket of assets that the Fund specifies each day.
TAX
INFORMATION
The Fund
intends to make distributions that may be taxable to you as ordinary income or
capital gains, unless you are investing through a tax-deferred arrangement such
as a 401(k) plan or an individual retirement account ("IRA").
For more
information regarding the tax consequences that may be associated with investing
in the Fund, please refer to the Taxes section of the
Prospectus.
Global
X S&P/TSX Venture
ETF
Ticker:
[ ] Exchange: NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X S&P/TSX Venture ETF (“Fund”) seeks to provide investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the S&P/TSX Venture 30 Index (“Underlying Index”).
FEES
AND EXPENSES
This
table describes the fees and expenses that you may pay if you buy and hold
shares (“Shares”) of the Fund. You will also incur usual and
customary brokerage commission when buying and selling Shares.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
Management
Fees:
|
[ %]
|
|
Distribution
and Service (12b-1) Fees:
|
None
|
|
Other
Expenses: 1
|
[ %]
|
|
Total
Annual Fund Operating Expenses:
|
[ %]
|
|
Example: The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling shares of the Fund
in the secondary market. The example assumes that you invest $10,000 in the Fund
for the time periods indicated and then sell all of your shares at the end of
those periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
One
Year
|
Three
Years
|
$[ ]
|
$[ ]
|
Portfolio Turnover: The Fund
pays transaction costs, such as commissions, when it buys and sells securities
(or "turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. As of the
date of this Prospectus, the Fund had not yet commenced operations.
1
|
The
Fund bears other expenses that are not covered under the supervisory and
administration 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).
|
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is a free-float adjusted, modified capitalization-weighted
index designed to provide exposure to the 30 most liquid securities of the TSX
Venture Exchange. The TSX Venture Exchange is Canada’s junior listings market
for emerging companies. As of [ ], the Underlying Index’s three
largest stocks were [ ], [ ] and
[ ]. The Fund’s 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 Global X Management Company LLC, the investment
adviser for the Fund (“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 Fund’s Index
Provider is Standard & Poor’s Financial Services LLC (a subsidiary of The
McGraw-Hill Companies) (“S&P”).
The
Adviser uses a “passive” or indexing approach to try to achieve the Fund’s
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 depositary receipts based on the securities in 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 the Underlying Index when a replication strategy might
be detrimental to shareholders, such as when there are practical difficulties or
substantial costs involved in compiling a portfolio of equity securities to
follow the Underlying Index, in instances in which a security in the Underlying
Index becomes temporarily illiquid, unavailable or less liquid, or as a result
of legal restrictions or limitations (such as tax diversification requirements)
that apply to the Fund but not the Underlying Index.
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 or limitations, illiquid or unavailable
securities, and timing variances.
The
Adviser expects that, over time, the correlation between the Fund’s performance
and that of the Underlying Index, before fees and expenses, will exceed
95%. A correlation percentage of 100% would indicate perfect
correlation. If the Fund uses a replication strategy, it can be
expected to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy.
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 the Underlying Index is concentrated.
SUMMARY
OF PRINCIPAL RISKS
As with
any investment, you could lose all or part of your investment in the Fund, and
the Fund's performance could trail that of other investments. The Fund is
subject to the principal risks noted below, any of which may adversely affect
the Fund's net asset value ("NAV"), trading price, yield, total return and
ability to meet its investment objective, as well as other risks that are
described in greater detail in the Additional Information About the
Fund’s Strategies and Risks section of the Prospectus and in the
Statement of Additional Information ("SAI").
Asset Class Risk: Securities
in the Underlying Index or the Fund's portfolio may underperform in comparison
to the general securities markets or other asset classes.
Commodity Exposure Risk: The
Fund invests in Canada, which is susceptible to fluctuations in certain
commodity markets. Any negative changes in commodity markets could
have a great impact on the Canadian economy.
Concentration Risk: To the
extent that the Fund’s investments are concentrated in a particular country,
market, industry or asset class, the Fund will be susceptible to loss due to
adverse occurrences affecting that country, market, industry or asset
class.
Foreign Security Risk:
Investments in the securities of foreign issuers are subject to the risks
associated with investing in those foreign markets, such as heightened risks of
inflation or nationalization. You may lose money due to political, economic and
geographic events affecting a foreign issuer or market.
Issuer Risk: Fund performance
depends on the performance of individual companies in which the Fund invests.
Changes to the financial condition of any of those companies may cause the value
of their securities to decline.
Management Risk: The Fund is
subject to the risk that the Adviser’s investment management strategy may not
produce the intended results.
Market Risk: The Fund's NAV
could decline over short periods due to short-term market movements and over
longer periods during market downturns.
Market Trading Risks: The Fund
faces numerous market trading risks, including the potential lack of an active
market for Shares, losses from trading in secondary markets, and disruption in
the creation/redemption process of the Fund. Any of these factors may lead to
the Shares trading at a premium or discount to NAV.
Micro-Capitalization
Risk: The Fund may invest in micro-capitalization companies. These
companies are subject to substantially greater risks of loss and price
fluctuations because their earnings and revenues tend to be less predictable and
their share prices tend to be more volatile and their markets less liquid than
companies with larger market capitalizations. Micro-capitalization companies may
be newly formed or in the early stages of development, with limited product
lines, markets or financial resources and may lack management
depth.
Non-Diversification Risk: The
Fund may invest a large percentage of its assets in securities issued by or
representing a small number of issuers. As a result, the Fund’s performance may
depend on the performance of a small number of issuers.
Reliance on Trading Partners
Risk: The Fund invests in economies that are heavily dependent upon
trading with key partners. Any reduction in this trading may cause an adverse
impact on the economies in which the Fund invests. The Fund is specifically
exposed to European Economic
Risk and U.S. Economic Risk.
Risk
Related to Investing in Resource Exploration Companies: The TSX Venture Exchange
includes many resource exploration companies. The exploration and
development of mineral deposits involve significant financial risks and may be
significantly affected by competitive pressures in the gold exploration
industry, the price of gold bullion, import and export controls, liability for
environmental damage and mandated expenditures for safety and pollution control
devices.
Risk
Related to Investing in Technology Ventures: The TSX Venture Exchange
includes high technology ventures. Technology ventures can be
significantly affected by the failure to obtain, or delays in obtaining,
financing or regulatory approval, intense competition, product compatibility,
consumer preferences, corporate capital expenditure, rapid obsolescence and
research and development expenses. Companies in the technology sector also face
competition with numerous alternative technologies.
Securities Market Risk:
Because certain securities markets in the countries in which the Fund may
invest are small in size, underdeveloped and are less correlated to global
economic cycles than those markets located in more developed countries, the
securities markets in such countries are subject to greater risks associated
with market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations and uncertainty regarding the
existence of trading markets.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
PERFORMANCE
INFORMATION
As of the
date of this Prospectus, the Fund has not yet commenced investment operations
and therefore does not report its performance information.
FUND
MANAGEMENT
Investment Adviser: Global X
Management Company LLC.
Portfolio Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Bruno del Ama and Jose C. Gonzalez. Mr. del Ama and Mr. Gonzalez have been
Portfolio Managers of the Fund since inception.
PURCHASE
AND SALE OF FUND SHARES
Shares
will be listed and traded at market prices on an exchange. Shares may
only be purchased and sold on the exchange through a
broker-dealer. The price of Shares is based on market price, and
because exchange-traded fund shares trade at market prices rather than at NAV,
shares may trade at a price greater than NAV (a premium) or less than NAV (a
discount). Only Authorized Participants who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem shares that have been aggregated
into blocks of [ ] shares or multiples thereof ("Creation
Units"). The Fund will issue or redeem Creation Units in return for a
basket of assets that the Fund specifies each day.
TAX
INFORMATION
The Fund
intends to make distributions that may be taxable to you as ordinary income or
capital gains, unless you are investing through a tax-deferred arrangement such
as a 401(k) plan or an individual retirement account ("IRA").
For more
information regarding the tax consequences that may be associated with investing
in the Fund, please refer to the Taxes section of the
Prospectus.
Global
X Next 11 ETF
Ticker:
[ ] Exchange: NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X Next 11 ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solatvie Next 11 Index (“Underlying Index”).
FEES
AND EXPENSES
This
table describes the fees and expenses that you may pay if you buy and hold
shares (“Shares”) of the Fund. You will also incur usual and
customary brokerage commission when buying and selling Shares.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
Management
Fees:
|
[ %]
|
|
Distribution
and Service (12b-1) Fees:
|
None
|
|
Other
Expenses: 1
|
[ %]
|
|
Total
Annual Fund Operating Expenses:
|
[ %]
|
|
Example: The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling shares of the Fund
in the secondary market. The example assumes that you invest $10,000 in the Fund
for the time periods indicated and then sell all of your shares at the end of
those periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
One
Year
|
Three
Years
|
$[ ]
|
$[ ]
|
Portfolio Turnover: The Fund
pays transaction costs, such as commissions, when it buys and sells securities
(or "turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. As of the
date of this Prospectus, the Fund had not yet commenced operations.
1
|
The
Fund bears other expenses that are not covered under the supervisory and
administration 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).
|
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is a free-float adjusted, modified capitalization-weighted
index intended to measure performance of the investable universe of companies in
the "next eleven" countries, as defined by Structured Solutions AG. The next
eleven countries include Egypt, Bangladesh, Indonesia, Iran, Mexico, Nigeria,
Pakistan, the Philippines, South Korea, Turkey and Vietnam.
Only
shares open to foreign ownership by U.S investors are eligible for inclusion in
the Underlying Index and as a result Iran is not currently included in the
Underlying Index by the Index Provider. As of [ ],
the Underlying Index’s three largest stocks were [ ],
[ ] and [ ]. The Fund’s 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 Global X Management Company LLC, the investment
adviser for the Fund (“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 Fund’s Index
Provider is Structured Solutions AG.
The
Adviser uses a “passive” or indexing approach to try to achieve the Fund’s
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 depositary receipts based on the securities in 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 the Underlying Index when a replication strategy might
be detrimental to shareholders, such as when there are practical difficulties or
substantial costs involved in compiling a portfolio of equity securities to
follow the Underlying Index, in instances in which a security in the Underlying
Index becomes temporarily illiquid, unavailable or less liquid, or as a result
of legal restrictions or limitations (such as tax diversification requirements)
that apply to the Fund but not the Underlying Index.
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 or limitations, illiquid or unavailable
securities, and timing variances.
The
Adviser expects that, over time, the correlation between the Fund’s performance
and that of the Underlying Index, before fees and expenses, will exceed
95%. A correlation percentage of 100% would indicate perfect
correlation. If the Fund uses a replication strategy, it can be
expected to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy.
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 the Underlying Index is concentrated.
SUMMARY
OF PRINCIPAL RISKS
As with
any investment, you could lose all or part of your investment in the Fund, and
the Fund's performance could trail that of other investments. The Fund is
subject to the principal risks noted below, any of which may adversely affect
the Fund's net asset value ("NAV"), trading price, yield, total return and
ability to meet its investment objective, as well as other risks that are
described in greater detail in the Additional Information About the
Fund’s Strategies and Risks section of the Prospectus and in the
Statement of Additional Information ("SAI").
Asset Class Risk: Securities
in the Underlying Index or the Fund's portfolio may underperform in comparison
to the general securities markets or other asset classes.
Commodity Exposure Risk: The
Fund invests in securities and markets that are susceptible to fluctuations in
certain commodity markets. Any negative changes in commodity markets
could have a great impact on these economies.
Concentration Risk: To the
extent that the Fund’s investments are concentrated in a particular country,
market, industry or asset class, the Fund will be susceptible to loss due to
adverse occurrences affecting that country, market, industry or asset
class.
Custody Risk: Less developed
markets are more likely to experience problems with the clearing and settling of
trades.
Emerging Market Risk: The Fund
is expected to invest in securities in the following emerging market countries:
Egypt, Indonesia, Mexico, the Philippines, South Korea and Turkey. The Fund’s
investment in an emerging market country may be subject to a greater risk of
loss than investments in developed markets.
Foreign Security Risk:
Investments in the securities of foreign issuers are subject to the risks
associated with investing in those foreign markets, such as heightened risks of
inflation or nationalization. You may lose money due to political, economic and
geographic events affecting a foreign issuer or market.
Frontier Market Risk: The Fund
is expected to invest in securities in the following frontier market countries:
Bangladesh, Nigeria, Pakistan and Vietnam. Frontier countries generally have
smaller economies or less developed capital markets than traditional emerging
markets, and, as a result, the risks of investing in emerging market countries
are magnified in frontier countries.
Geographic Risk: The Fund is
expected to invest in securities in Africa, Asia, the Middle East and North
America, where a natural disaster could occur.
Issuer Risk: Fund performance
depends on the performance of individual companies in which the Fund invests.
Changes to the financial condition of any of those companies may cause the value
of their securities to decline.
Management Risk: The Fund is
subject to the risk that the Adviser’s investment management strategy may not
produce the intended results.
Market Risk: The Fund's NAV
could decline over short periods due to short-term market movements and over
longer periods during market downturns.
Market Trading Risks: The Fund
faces numerous market trading risks, including the potential lack of an active
market for Shares, losses from trading in secondary markets, and disruption in
the creation/redemption process of the Fund. Any of these factors may lead to
the Shares trading at a premium or discount to NAV.
Non-Diversification Risk: The
Fund may invest a large percentage of its assets in securities issued by or
representing a small number of issuers. As a result, the Fund’s performance may
depend on the performance of a small number of issuers.
Reliance on Trading Partners
Risk: The Fund invests in economies that are heavily dependent upon
trading with key partners. Any reduction in this trading may cause an adverse
impact on the economies in which the Fund invests. The Fund is specifically
exposed to Asian Economic Risk,
European Economic Risk and U.S. Economic
Risk.
Securities Market Risk:
Because certain securities markets in the countries in which the Fund may
invest are small in size, underdeveloped and are less correlated to global
economic cycles than those markets located in more developed countries, the
securities markets in such countries are subject to greater risks associated
with market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations and uncertainty regarding the
existence of trading markets.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
PERFORMANCE
INFORMATION
As of the
date of this Prospectus, the Fund has not yet commenced investment operations
and therefore does not report its performance information.
FUND
MANAGEMENT
Investment Adviser: Global X
Management Company LLC.
Portfolio Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Bruno del Ama and Jose C. Gonzalez. Mr. del Ama and Mr. Gonzalez have been
Portfolio Managers of the Fund since inception.
PURCHASE
AND SALE OF FUND SHARES
Shares
will be listed and traded at market prices on an exchange. Shares may
only be purchased and sold on the exchange through a
broker-dealer. The price of Shares is based on market price, and
because exchange-traded fund shares trade at market prices rather than at NAV,
shares may trade at a price greater than NAV (a premium) or less than NAV (a
discount). Only Authorized Participants who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem shares that have been aggregated
into blocks of [ ] shares or multiples thereof ("Creation
Units"). The Fund will issue or redeem Creation Units in return for a
basket of assets that the Fund specifies each day.
TAX
INFORMATION
The Fund
intends to make distributions that may be taxable to you as ordinary income or
capital gains, unless you are investing through a tax-deferred arrangement such
as a 401(k) plan or an individual retirement account ("IRA").
For more
information regarding the tax consequences that may be associated with investing
in the Fund, please refer to the Taxes section of the
Prospectus.
ADDITIONAL INFORMATION ABOUT
THE FUNDS’ STRATEGIES AND RISKS
ADDITIONAL
STRATEGIES
In
addition to the investment strategies discussed above under Fund Summaries—Principal Investment
Strategies, each Fund may use the following investment
strategies:
Derivative Instruments, Cash or
Stocks not included in the Underlying Index: Each Fund may invest up to
20% of its assets in (i) certain futures, options and swap contracts (which may
be leveraged and are considered derivatives), (ii) cash and cash equivalents and
(iii) stocks not included in the Underlying Index that the Adviser believes will
help the Fund track the Underlying Index.
Leverage: Each Fund may borrow
money from a bank as permitted under the 1940 Act, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time. Specifically, the Funds may borrow money at fiscal quarter ends
to maintain the required level of diversification to qualify as a “regulated
investment company” for purposes of the Internal Revenue Code. Any money
borrowed for this purpose will be temporary and will only be invested in cash
and cash equivalents.
Securities Lending: Each Fund
may lend its portfolio securities. In connection with such loans, each Fund
receives liquid collateral equal to at least 102% of the value of domestic
equity securities and ADRs and 105% of the value of the foreign equity
securities (other than ADRs) being lent. This collateral is marked-to-market on
a daily basis.
ADDITIONAL RISKS
Each Fund
is subject to the risks described below. Some or all of these risks
may adversely affect the Fund’s 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 a Fund invests may under-perform
returns from the various general securities markets or different asset
classes. The stocks in the Underlying Indexes 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.
Commodity
Exposure Risk
To the
extent that its Underlying Index or portfolio invests in securities and markets
that are susceptible to fluctuations in certain commodity markets, any negative
changes in commodity markets could have a great impact on a Fund. Commodity
prices may be influenced of characterized by unpredictable factors, including,
where applicable, high volatility, changes in supply and demand relationships,
weather, agriculture, trade, changes in interest rates and monetary and other
governmental policies, action and inaction. Securities of companies held by a
Fund that are dependent on a single commodity, or are concentrated on a single
commodity sector, may typically exhibit even higher volatility attributable to
commodity prices.
Concentration
Risk
To the
extent that its Underlying Index or portfolio is concentrated in the securities
of companies in a particular country, market, industry, group of industries,
sector or asset class, a 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 a
Fund. Such a default may cause the value of an investment in a Fund
to decrease.
Currency
Risk
Currency
risk is the potential for price fluctuations in the dollar value of foreign
securities because of changing currency exchange rates. Because each
Fund’s 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 Fund’s 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 country’s securities
market is, the greater the likelihood of custody problems
occurring.
Derivatives
Risk
Derivatives
risk is the risk that loss may result from a Fund’s 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 Funds may use these
instruments to help the Funds track their Underlying
Indexes. Compared to conventional securities, derivatives can be more
sensitive to changes in interest rates or to sudden fluctuations in market
prices and thus a Fund’s losses may be greater if it invests in derivates than
if it invests only in conventional securities.
Emerging
Market Risk
The risks
of foreign investment are heightened when the issuer is located in an emerging
country. A Fund’s purchase and sale of portfolio securities in certain emerging
countries may be constrained by limitations relating to daily changes in the
prices of listed securities, periodic trading or settlement volume and/or
limitations on aggregate holdings of foreign investors. Such limitations may be
computed based on the aggregate trading volume by or holdings of a Fund, the
Adviser, its affiliates and their respective clients and other service
providers. A Fund may not be able to sell securities in circumstances
where price, trading or settlement volume limitations have been
reached.
Foreign
investment in the securities markets of certain emerging countries is restricted
or controlled to varying degrees, which may limit investment in such countries
or increase the administrative costs of such investments. In
addition, certain countries may restrict or prohibit investment opportunities in
issuers or industries deemed important to national interests. Such
restrictions may affect the market price, liquidity and rights of securities
that may be purchased by a Fund. The repatriation of both investment
income and capital from certain emerging countries is subject to restrictions
such as the need for governmental consents.
A Fund’s
investment in emerging countries may also be subject to withholding or other
taxes, which may be significant and may reduce the return from an investment in
such countries to the Fund.
The
creditworthiness of the local securities firms used by a Fund in emerging
countries may not be as sound as the creditworthiness of firms used in more
developed countries. As a result, the Fund may be subject to a
greater risk of loss if a securities firm defaults in the performance of its
responsibilities.
Foreign
Security Risk
Each
Fund’s assets may be invested 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 and capital controls; less availability of public
information about issuers; limitations on foreign ownership of securities;
imposition of withholding or other taxes; imposition of restrictions on the
expatriation of the assets of the Funds; 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 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 a Fund’s
total assets in securities located in one country or region will subject the
Fund to increased country or region risk with respect to that country or
region.
Frontier
Market Risk
Frontier
Market Risk applies to the Global X Next 11 ETF.
The Fund
is expected to invest in securities in the following frontier market countries:
Bangladesh, Nigeria, Pakistan and Vietnam. To the extent that the Underlying
Index is focused on securities of any one country, including Bangladesh,
Nigeria, Pakistan and Vietnam, the value of the Underlying Index, and thus the
Fund, will be especially affected by adverse developments in such
country.
Frontier
countries generally have smaller economies or less developed capital markets
than traditional emerging markets, and, as a result, the risks of investing in
emerging market countries are magnified in frontier countries. The economies of
frontier countries are less correlated to global economic cycles than those of
their more developed counterparts and their markets have low trading volumes and
the potential for extreme price volatility and illiquidity. This volatility may
be further heightened by the actions of a few major investors. For example, a
substantial increase or decrease in cash flows of mutual funds investing in
these markets could significantly affect local stock prices and, therefore, the
price of Fund Shares. These factors make investing in frontier countries
significantly riskier than in other countries and any one of them could cause
the price of the Fund’s Shares to decline.
Governments
of many frontier countries in which the Fund may invest may exercise substantial
influence over many aspects of the private sector. In some cases, the
governments of such frontier countries may own or control certain companies.
Accordingly, government actions could have a significant effect on economic
conditions in a frontier country and on market conditions, prices and yields of
securities in the Fund’s portfolio. Moreover, the economies of frontier
countries may be heavily dependent upon international trade and, accordingly,
have been and may continue to be, adversely affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade. These economies also have been and may continue to be adversely affected
by economic conditions in the countries with which they trade.
Certain
foreign governments in countries in which the Fund may invest levy withholding
or other taxes on dividend and interest income. Although in some countries a
portion of these taxes are recoverable, the non-recovered portion of foreign
withholding taxes will reduce the income received from investments in such
countries.
From time
to time, certain of the companies in which the Fund may invest may operate in,
or have dealings with, countries subject to sanctions or embargoes imposed by
the U.S. government and the United Nations and/or countries identified by the
U.S. government as state sponsors of terrorism. A company may suffer damage to
its reputation if it is identified as a company which operates in, or has
dealings with, countries subject to sanctions or embargoes imposed by the U.S.
government and the United Nations and/or countries identified by the U.S.
government as state sponsors of terrorism. As an investor in such companies, the
Fund will be indirectly subject to those risks. Iran is subject to
several United Nations sanctions and is an embargoed country by the Office of
Foreign Assets Control (OFAC) of the US Department of Treasury and as a result
it is currently not considered an investible market by Structured Solutions with
regards to the Solactive Next 11 Index.
Investment
in equity securities of issuers operating in certain frontier countries is
restricted or controlled to varying degrees. These restrictions or controls may
at times limit or preclude foreign investment in equity securities of issuers
operating in certain frontier countries and increase the costs and expenses of
the Fund. Certain frontier countries require governmental approval prior to
investments by foreign persons, limit the amount of investment by foreign
persons in a particular issuer, limit the investment by foreign persons only to
a specific class of securities of an issuer that may have less advantageous
rights than the classes available for purchase by domiciliaries of the countries
and/or impose additional taxes on foreign investors. Certain frontier countries
may also restrict investment opportunities in issuers in industries deemed
important to national interests.
Frontier
countries may require governmental approval for the repatriation of investment
income, capital or the proceeds of sales of securities by foreign investors,
such as the Fund. In addition, if deterioration occurs in a frontier country’s
balance of payments, the country could impose temporary restrictions on foreign
capital remittances. The Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for repatriation of
capital, as well as by the application to the Fund of any restrictions on
investments. Investing in local markets in frontier countries may require the
Fund to adopt special procedures, seek local government approvals or take other
actions, each of which may involve additional costs to the Fund.
Geographic
Risk
Geographic
risk is the risk that a Fund’s assets may be concentrated in countries located
in the same geographic region. This concentration will subject a Fund
to risks associated with that particular region, such as a natural
disaster.
Issuer
Risk
Issuer
risk is the risk that any of the individual companies that a 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.
Leverage
Each Fund
(i) may invest up to 20% of its assets in certain futures, options and swap
contracts, and (ii) borrow money at fiscal quarter ends to maintain the required
level of diversification to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code. As a result, the fund
may be exposed to the risks of leverage, which may be considered a speculative
investment technique. Leverage magnifies the potential for gain and
loss on amounts invested and therefore increase the risks associated with
investing in our Funds. If the value of a Fund's assets increases,
then leveraging would cause the Fund's net asset value to increase more sharply
than it would have had the Fund not leveraged. Conversely, if the value of a
Fund's assets decreases, leveraging would cause the Fund's net asset value to
decline more sharply than it otherwise would have had the Fund not leveraged. In
addition, the costs associated with our borrowings, including any increase in
the management fee payable to the Adviser will be borne by Fund
shareholders.
Management
Risk
Each Fund
may not fully replicate its Underlying Index and may hold securities not
included in its Underlying Index. Therefore, each Fund is subject to
management risk. That is, the Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may not produce
the intended results. The Adviser has limited experience managing an
investment company. The ability of the Adviser to successfully
implement each Fund’s investment strategies will influence each Fund’s
performance significantly.
The Funds
are not actively managed. Each Fund may be affected by a general
decline in the market segments relating to its Underlying Index. Each
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 a 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 a Fund’s NAV in response to market movements, and over longer
periods during market downturns.
Market
Trading Risks
Absence
of Active Market
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 Funds May Trade at Prices Other Than NAV
Shares of
the Funds may trade at, above or below their NAV. The per share NAV
of each Fund will fluctuate with changes in the market value of such Fund’s
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 Fund’s 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 Funds do not price Shares, the
value of the securities in the Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell Shares.
Risks of Secondary
Listings
The
Funds’ shares may be listed or traded on U.S. and non-U.S. stock exchanges other
than the U.S. stock exchange where the Fund’s primary listing is maintained.
There can be no assurance that the Funds’ shares will continue to trade on any
such stock exchange or in any market or that the Funds’ shares will continue to
meet the requirements for listing or trading on any exchange or in any market.
The Funds’ Shares may be less actively traded in certain markets than others,
and investors are subject to the execution and settlement risks and market
standards of the market where they or their broker direct their trades for
execution. Certain information available to investors who trade Shares on a U.S.
stock exchange during regular U.S. market hours may not be available to
investors who trade in other markets, which may result in secondary market
prices in such markets being less efficient.
Secondary Market Trading
Risk
Shares of
a Fund may trade in the secondary market on days when the Fund does 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.
Micro-Capitalization
Risk
Each Fund
may invest in micro-capitalization companies. These companies are subject to
substantially greater risks of loss and price fluctuations because their
earnings and revenues tend to be less predictable (and some companies may be
experiencing significant losses), and their share prices tend to be more
volatile and their markets less liquid than companies with larger market
capitalizations. Micro-capitalization companies may be newly formed or in the
early stages of development, with limited product lines, markets or financial
resources and may lack management depth. In addition, there may be less public
information available about these companies. The shares of micro-capitalization
companies tend to trade less frequently than those of larger, more established
companies, which can adversely affect the pricing of these securities and the
future ability to sell these securities. Also, it may take a long time before
each Fund realizes a gain, if any, on an investment in a micro-capitalization
company.
Non-Diversification
Risk
Each Fund
is classified as “non-diversified.” This means that each Fund may invest most of
its assets in securities issued by or representing a small number of
companies. As a result, each 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.
Reliance on Trading Partners
Risk
The Funds
invests in economies that are heavily dependent upon trading with key partners.
Any reduction in this trading, institution of tariffs or other trade barriers or
a slowdown in the economies of any of their key trading partners may cause an
adverse impact on the economies of the markets in which the Funds
invest.
Asian
Economic Risk
Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Economic events in any one country can have a significant
effect on the entire Asian region and on some or all of the developed economies.
Some Asian economies may have underdeveloped financial markets and a general
lack of regulatory transparency.
Central
and South American Economic Risk
The
economies of certain Central and South American countries have experienced high
interest rates, economic volatility, inflation, currency devaluations,
government defaults and high unemployment rates. In addition,
commodities (such as oil, gas and minerals) represent a significant percentage
of the region’s exports and many economies in this region are particularly
sensitive to fluctuations in commodity prices. Adverse economic events in one
country may have a significant adverse effect on other countries of this
region.
European
Economic Risk
The Funds
are significant trading partners of the European Union (the “EU”). Decreasing
imports or exports, changes in governmental regulations on trade, changes in the
exchange rate of the euro and recessions in EU economies may have a significant
adverse effect on the economies of EU member countries and their trading
partners.
U.S.
Economic Risk
The
United States is a significant, and in some cases the most significant, trading
partner of or foreign investor in certain countries covered by the Funds and the
economies of these countries may be particularly affected by adverse changes in
the U.S. economy. Decreasing U.S. imports, new trade regulations, changes in the
U.S. dollar exchange rates or a recession in the United States may have an
adverse impact on the economies of these nations.
Risk Related to Investing in
Resource Exploration Companies
Risk
Related to Investing in Resource Exploration Companies applies to the Global X
S&P/TSX Venture ETF.
The TSX
Venture Exchange includes many resource exploration companies. The exploration
and development of mineral deposits involve significant financial risks over a
significant period of time which even a combination of careful evaluation,
experience and knowledge may not eliminate. Few properties which are explored
are ultimately developed into producing mines. Major expenditures may be
required to establish reserves by drilling and to construct mining and
processing facilities at a site. In addition, mineral exploration companies
typically operate at a loss and are dependent on securing equity and/or debt
financing, which might be more difficult to secure for an exploration company
than for a more established counterpart. In addition, exploration companies may
be significantly affected by competitive pressures in the exploration industry,
the price of mineral deposits, import and export controls, liability for
environmental damage and mandated expenditures for safety and pollution control
devices.
Risk Related to Investing in
Technology Ventures
Risk
Related to Investing in Technology Ventures applies to the Global X S&P/TSX
Venture ETF.
The TSX
Venture Exchange includes many high technology ventures. Technology ventures can be
significantly affected by the failure to obtain, or delays in obtaining,
financing or regulatory approval, intense competition, product compatibility,
consumer preferences, corporate capital expenditure, rapid obsolescence and
research and development expenses. Companies in the technology sector also face
competition or potential competition with numerous alternative
technologies. In addition, the highly competitive technology sector may
cause the prices for products and services to decline in the future. The
technology sector is subject to rapid and significant changes in technology that
are evidenced by the increasing pace of technological upgrades, evolving
industry standards, ongoing improvements in the capacity and quality of digital
technology, shorter development cycles for new products and enhancements,
developments in emerging wireless transmission technologies and changes in
customer requirements and preferences. The success of the sector participants
depends in substantial part on the timely and successful introduction of new
products.
Securities
Lending Risk
Each Fund
may engage in lending its portfolio securities. Although a Fund will receive
collateral in connection with all loans of its securities holdings, a 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 a Fund). In addition, a Fund will
bear the risk of loss of any cash collateral that it invests.
Securities
Market Risk
Because
certain securities markets in the countries in which each Fund may invest are
small in size, underdeveloped and are less correlated to global economic cycles
than those markets located in more developed countries (such as the United
States, Japan and most Western European countries), the securities markets in
such countries are subject to greater risks associated with market volatility,
lower market capitalization, lower trading volume, illiquidity, inflation,
greater price fluctuations and uncertainty regarding the existence of trading
markets. Moreover, trading on securities markets may be suspended
altogether. A Fund’s investment in securities in these countries are
subject to the risk that the liquidity of a particular security or investments
generally, will shrink or disappear suddenly and without warning as a result of
adverse economic, market or political conditions or adverse investor
perceptions, whether or not accurate. Because of the lack of
sufficient market liquidity, a Fund may incur losses because it will be required
to effect sales at a disadvantageous time and then only at a substantial drop in
price. Investments in these countries may be more difficult to price
precisely because of the characteristics discussed above and lower trading
volumes.
Market
volatility in the countries in which each Fund invests may also be heightened by
the actions of a small number of investors. Brokerage firms in these
countries may be fewer in number and less established than brokerage firms in
more developed markets. Since the Funds may need to effect securities
transactions through these brokerage firms, the Funds are subject to the risk
that these brokerage firms will not be able to fulfill their obligations to the
Funds (counterparty risk). This risk is magnified to the extent the
Funds effect securities transactions through a single brokerage firm or a small
number of brokerage firms.
Small-
and Mid-Cap Risk
Each Fund
may invest in small- or medium-capitalization companies. If it does so, it may
be subject to certain risks associated with small- or medium-capitalization
companies. These companies are often subject to less analyst coverage and may be
in early and less predictable periods of their corporate existences. In
addition, these companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. These
companies tend to have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than larger
companies.
Tracking
Error Risk
Tracking
risk is the risk that a Fund’s performance may vary substantially from the
performance of the Underlying Index it tracks as a result of imperfect
correlation between the Fund’s 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 Funds but not to the Underlying Index) and timing
variances, among other factors.
PORTFOLIO
HOLDINGS INFORMATION
A
description of the Trust’s 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 each Fund can be found at www.globalxfunds.com and Fund Fact sheets
provide information regarding each Fund’s top holdings and may be requested by
calling 1-888-GX-Fund-1 (1-888-493-8631).
FUND
MANAGEMENT
Investment
Adviser
Global X
Management Company LLC serves as the Adviser and the administrator for the
Fund. Subject to the supervision of the Board of Trustees, the
Adviser is responsible for managing the investment activities of the Fund and
the Fund’s business affairs and other administrative matters. The
Adviser is a Delaware limited liability company with its principal offices
located at 410 Park Avenue, 4th floor,
New York, New York 10022.
Pursuant to the Supervision and
Administration Agreement and subject to the general supervision of the Board of
Trustees of the Trust, the Adviser provides or causes to be
furnished, all supervisory, administrative and
other services reasonably necessary for the operation of the Funds, including
certain distribution services (provided pursuant to a separate Distribution
Agreement), certain shareholder and distribution-related services (provided
pursuant to a separate Rule 12b-1 Plan and related agreements) and investment
advisory services (provided pursuant to a separate Investment Advisory
Agreement), under what is
essentially an all-in fee structure.
For its service to the Funds, under the
Supervision and Administration Agreement, each Fund that has commenced
operations pays monthly a fee to the Adviser at the annual rate set forth in the
table below (stated as a percentage of each Fund’s respective average daily net
assets):
Fund
|
Management
Fee
|
|
Global
X FTSE Andean 30 ETF
|
[ %]
|
|
Global
X FTSE ASEAN 40 ETF
|
[ %]
|
|
Global
X S&P/TSX Venture ETF
Global
X Next 11 ETF
|
[ %]
[ %]
|
|
In
addition, each Fund bears other fees and expenses that are not covered by the
Supervision and Administration Agreement, which may vary and will affect the
total ratio of 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
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 each 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 Funds. The Codes are on file with the SEC and are
available to the public.
The Adviser may make payments out of its
internal resources and
profits from all sources to other financial intermediaries to encourage the sale
of Shares. The payments are intended to
compensate financial intermediaries (including broker-dealers) for, among other
things, marketing Shares, which may consist of payments relating to a Fund,
including but not limited to: inclusion on preferred or recommended fund lists
or in certain sales programs sponsored by the financial
intermediaries; access to the financial intermediaries registered sales persons;
and/or other specified services or persons intended to assist in the marketing
of the Fund. Such payments may be based on various factors, including
levels of assets and/or sales (based on gross or net sales or some other
criteria). These payments may create an incentive for a financial
intermediary to recommend and sell certain investment products, including
the Funds, over other products for which it may receive less
compensation. You may contact your financial intermediary if you want
information regarding the any payment it receives from the
Adviser.
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 Fund’s 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. Mr. del
Ama received a Masters in Business Administration from the Wharton Business
School and holds the series 65.
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. Mr. Gonzalez holds
the Series 7, 24, 63 and 65.
The SAI
provides additional information about the portfolio managers’ compensation
structure, other accounts managed by the portfolio managers, and the portfolio
manager’s ownership of securities of the Funds.
DISTRIBUTOR
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 Funds or
the securities that are purchased or sold by each Fund. The Distributor’s
principal address is One Freedom Valley Drive Oaks, PA 19456. The
Distributor is not affiliated with the Adviser.
BUYING AND SELLING FUND
SHARES
Shares of
the Funds 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 Fund’s 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.
Shares of
a 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 in the SAI. Once created, Shares generally trade in the secondary market
in amounts less than a Creation Unit.
Shares of
the Funds trade under the trading symbols listed for each Fund in the
Description of the Funds section.
The Funds
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 Year’s 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 Funds 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.
FREQUENT
TRADING
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 Funds shareholders
because these trades does not involve the Funds directly. A few
institutional investors are authorized to purchase and redeem each Shares
directly with the Fund. When these trades are effected in-kind (i.e.,
for securities, and not for cash), they do not cause any of the harmful effects
(noted above) that may result from frequent cash trades. Moreover,
the Fund imposes transaction fees on in-kind purchases and redemptions of the
Fund to cover the custodial and other costs incurred by the Funds 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 Funds.
DISTRIBUTION
AND SERVICE PLAN
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, each 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 Funds, 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 each Fund’s assets on an
ongoing basis, these fees will increase the cost of your investment in the
Funds. 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 Funds.
DIVIDENDS
AND DISTRIBUTIONS
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
Funds.
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 a
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.
TAXES
The
following is a summary of certain tax considerations that may be relevant to an
investor in the Funds. 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. Each
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 a Fund’s
distributions to you. For federal income tax purposes, Fund
distributions attributable to short-term capital gains and net investment income
are taxable to you as ordinary income. Distributions attributable to
net capital gains (the excess of net long-term capital gains over net short-term
capital losses) of a 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 of 15% is currently scheduled to expire after
2010. 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. After
2010, qualifying dividends are currently scheduled to be taxed as ordinary
income, rather than at capital gain rates. In general, if 95% or more
of the gross income of a Fund (other than net capital gain) consists of
dividends received from domestic corporations or “qualified” foreign
corporations (“qualifying dividends”), then all distributions paid by a Fund to
individual shareholders will be treated as qualifying dividends. But
if less than 95% of the gross income of a Fund (other than net capital gain)
consists of qualifying dividends, then distributions paid by such Fund to
individual shareholders will be qualifying dividends only to the extent they are
derived from qualifying dividends earned by such 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 such Fund’s ex-dividend date
(and such 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 a Fund’s distributions that qualify for this
favorable treatment may be reduced as a result of such Fund’s securities lending
activities (if any), a high portfolio turnover rate or investments in debt
securities or “non-qualified” foreign corporations. In addition,
whether distributions received from foreign corporations are qualifying
dividends will depend on several factors including the country of residence of
the corporation making the distribution. Accordingly, distributions from many of
the Fund’s holdings may not be qualifying dividends.
A portion
of distributions paid by a 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 such Fund’s securities lending
activities, by a high portfolio turnover rate or by investments in debt
securities or foreign corporations.
Distributions
from a Fund will generally be taxable to you in the year in which they are paid,
with one exception. Dividends and distributions declared by a Fund in October,
November or December and paid in January of the following year are taxed as
though they were paid on December 31.
You
should note that if you buy Shares of a 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. Each 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 a Fund’s assets consists of stock in foreign corporations, such Fund will be
eligible to make an election to treat a proportionate amount of those taxes as
constituting a distribution to each shareholder, which would allow you either
(subject to certain limitations) (1) to credit that proportionate amount of
taxes against U.S. Federal income tax liability as a foreign tax credit or (2)
to take that amount as an itemized deduction. If a 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 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
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 a
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. Each 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 a Fund, when required to do so, that he or she is not subject to backup
withholding or 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 or in respect of capital gain dividends (i.e., dividends
attributable to long-term capital gains of a Fund) unless, in the case of a
shareholder who is a non-resident alien individual, the shareholder is present
in the United States for 183 days or more during the taxable year and certain
other conditions are met. 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 such 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 Fund’s distributions, if any, that
are attributable to interest earned by a Fund on U.S. government securities. You
should consult your tax advisor regarding the tax status of distributions in
your state and locality.
Consult Your Tax
Professional. Your investment in a Fund could have additional
tax consequences. You should consult your tax professional for information
regarding all tax consequences applicable to your investments in a Fund. More
tax information relating to the Funds is also provided in the Statement of
Additional Information. This short summary is not intended as a substitute for
careful tax planning.
DETERMINATION
OF NET ASSET VALUE
Each 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 each Fund is calculated by dividing the value of
the net assets of such 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 Fund’s NAV, the Fund’s investments are generally valued using
market valuations. A market valuation generally means a valuation (i)
obtained from an exchange, 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 Fund’s published
NAV per share. A 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 service’s 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 Fund’s Board of Trustees. The frequency with which a
Fund’s investments are valued using fair value pricing is primarily a function
of the types of securities and other assets in which the Fund invests pursuant
to its investment objective, strategies and limitations.
Investments
that may be valued using fair value pricing include, but are not limited to: (i)
an unlisted security related to corporate actions; (ii) a restricted security
(i.e., one that may not be publicly sold without registration under the
Securities Act of 1933, as amended (the “Securities Act”)); (iii) a security
whose trading has been suspended or which has been de-listed from its primary
trading exchange; (iv) a security that is thinly traded; (v) a security in
default or bankruptcy proceedings for which there is no current market
quotation; (vi) a security affected by currency controls or restrictions; and
(vii) a security affected by a significant event (i.e., an event that occurs
after the close of the markets on which the security is traded but before the
time as of which the Fund’s NAV is computed and that may materially affect the
value of the Fund’s investments). Examples of events that may be “significant
events” are government actions, natural disasters, armed conflict, acts of
terrorism, and significant market fluctuations.
Valuing a
Fund’s investments using fair value pricing will result in using prices for
those investments that may differ from current market valuations. Use
of fair value prices and certain current market valuations could result in a
difference between the prices used to calculate the Fund’s net asset value and
the prices used by the Fund’s Underlying Index, which, in turn, could result in
a difference between the Fund’s performance and the performance of the Fund’s
Underlying Index.
Because
foreign markets may be open on different days than the days during which a
shareholder may purchase Shares, the value of the Fund’s investments may change
on days when shareholders are not able to purchase
Shares. Additionally, due to varying holiday schedules redemption
requests made on certain dates may result in a settlement period exceeding seven
calendar days. A list of the holiday schedules of the foreign
exchanges of the Funds’ Underlying Indexes, as well as the dates on which a
settlement period would exceed seven calendar days in 2011 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 each
Index Provider may adversely affect the Fund’s ability to track its Underlying
Index.
PREMIUM/DISCOUNT
INFORMATION
Information
regarding how often the Shares of each Fund traded on the Exchange at a price
above (i.e., at a premium) or below (i.e., at a discount) the net asset value of
the Fund during the past calendar year can be found at
www.GlobalXFunds.com.
INFORMATION REGARDING THE
INDEXES AND THE INDEX PROVIDER
FTSE
Andean 30 Index
The FTSE
Andean 30 Index tracks the performance of the 30 largest companies in Chile,
Colombia, and Peru. The index is free-float adjusted and weighted by
market capitalization. Stocks are liquidity screened to ensure that the index is
tradable, and a unique capping methodology makes it suitable for the use as the
basis for investment products such as derivatives and Exchange Traded Funds
(ETFs). The index is maintained by FTSE Group (“FTSE”).
FTSE/ASEAN
40 Index
The
FTSE/ASEAN 40 Index tracks the performance of the 40 largest companies in the
five ASEAN regions: Indonesia, Philippines, Singapore, Malaysia and Thailand.
The index is free-float adjusted and weighted by market capitalization and
designed using eligible stocks within the FTSE All-World universe. Stocks are
liquidity screened to ensure that the index is tradable. The index is maintained
by FTSE Group (“FTSE”).
S&P/TSX
Venture 30 Index
The
S&P/TSX Venture 30 Index is designed to provide exposure to 30 most liquid
securities of the S&P/TSX Venture Composite Index. For eligibility, as
of the reference date, securities must have USD $100 million and above in market
capitalization. Stocks must trade at least 100,000 shares in each of the
previous six months preceding the rebalancing reference date. The top 30
securities, ranked by their 6 month average daily value traded, form the
index. The weighting mechanism employs an optimization algorithm as such
the overall basket liquidity of the index is maximized, subject to stock level
constraints. The maximum weight of the security is capped at 8%, and the
sum of the securities with weight over 5% does not exceed 50%. The index is
maintained by Standard & Poor’s Financial Services LLC (a subsidiary of The
McGraw-Hill Companies) (“S&P”).
Solactive
Next 11 Index
The
Solactive Next 11 Index is intended to measure performance of the investable
universe of companies in the "next eleven" countries, as defined by Structured
Solutions AG. The next eleven countries include Egypt, Bangladesh, Indonesia,
Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey and
Vietnam. Only shares open to foreign ownership by U.S investors are eligible for
inclusion in the Underlying Index and as a result Iran is not currently included
in the index. The index is comprised of common stocks, ADRs and GDRs of selected
companies globally that are domiciled or have their main business operations in
these countries. The stocks are screened for liquidity and weighted according to
free-float market capitalization. A specific capping methodology is applied at
the semi-annual index review to facilitate compliance with the rules governing
the listing of financial products on exchanges in the United States. The index
is maintained by Structured Solutions AG.
FTSE
International Limited (FTSE) is a world-leader in the creation and management of
over 100,000 equity, bond and hedge fund indices. With offices in Beijing,
London, Frankfurt, Hong Kong, Boston, Shanghai, Madrid, Paris, New York, San
Francisco, Sydney and Tokyo, FTSE Group services clients in 77 countries
worldwide. FTSE is an independent company owned by The Financial Times and the
London Stock Exchange. FTSE does not give financial advice to clients, which
allows for the provision of truly objective market information. FTSE indices are
used extensively by investors world-wide such as consultants, asset owners,
asset managers, investment banks, stock exchanges and brokers. FTSE does not
sponsor, endorse or promote any of the Funds and is not in any way connected to
them and does not accept any liability in relation to their issue, operation and
trading.
S&P
provides financial, economic and investment information and analytical services
to the financial community. S&P calculates and maintains the S&P Global
1200 IndexTM, which
includes the S&P 500® for the U.S., the S&P Europe 350 IndexTM for
Continental Europe and the U.K., the S&P/TOPIX 150 IndexTM for
Japan, the S&P Asia 50 IndexTM, the
S&P/TSX 60 IndexTM for
Canada, the S&P/ASX 50 IndexTM, and
the S&P Latin America 40 IndexTM.
S&P also publishes the S&P MidCap 400 IndexTM,
S&P SmallCap 600 IndexTM,
S&P Composite 1500® and S&P REIT Composite IndexTM for the
U.S. S&P calculates and maintains the S&P Global BMI Equity Index
SeriesTM, a set
of comprehensive rules-based benchmarks covering developed and emerging
countries around the world. Company additions to and deletions from a S&P
equity index do not in any way reflect an opinion on the investment merits of
the company. S&p does not sponsor, endorse or promote any of the Funds and
is not in any way connected to them and does not accept any liability in
relation to their issue, operation and trading.
Structured
Solutions AG (Structured Solutions) is a leading company in the structuring and
indexing business for institutional clients. Structured Solutions runs the
Solactive index platform (formerly S-BOX platform). Solactive indices are used
by issuers worldwide as underlying indices for financial products. Furthermore,
Structured Solutions cooperates with various stock exchanges and index providers
worldwide, e.g. Karachi Stock Exchange, Shenzhen Securities Information Company
and Dubai Gold & Commodities Exchange. Structured Solutions does not
sponsor, endorse or promote any of the Funds and is not in any way connected to
them and does not accept any liability in relation to their issue, operation and
trading.
OTHER
SERVICE PROVIDERS
SEI
Investments Global Fund Services is the sub-administrator for each
Fund.
Brown
Brothers Harriman & Co. is the custodian and transfer agent for each
Fund.
Dechert
LLP serves as legal counsel to the Independent Trustees of each
Fund.
[ ]
serves as the Funds’ independent registered public accounting
firm. The independent registered public accounting firm is
responsible for auditing the annual financial statements of each
Fund.
FINANCIAL
HIGHLIGHTS
Because
the Funds have not commenced operations as of the date of this prospectus,
financial highlights are not yet available.
OTHER
INFORMATION
The Funds
are 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 Funds particularly or the ability of the Funds to
achieve their objectives. The Exchange has no obligation or liability
in connection with the administration, marketing or trading of the
Funds.
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.
For more
information visit our website at or
call
1-888-GXFund-1 (1-888-493-8631)
www.globalxfunds.com
Investment
Adviser
Global X
Management Company LLC
410 Park
Avenue, 4th
floor
New York,
NY 10022
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks, PA
19456
Custodian
and Transfer Agent
Brown
Brothers Harriman & Co.
40 Water
Street
Boston,
MA 02109
Sub-Administrator
SEI
Investments Global Fund Services
One
Freedom Valley Drive
Oaks, PA
19456
Legal Counsel to
the Independent Trustees
Dechert
LLP
1775 I
Street
Washington,
DC 20006-2401
Independent
Registered Public Accounting Firm
[ ]
A
Statement of Additional Information dated
[ ], 2010, which contains
more details about the Funds, 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 each Fund in its annual and semi-annual
reports to shareholders, when available. The annual report will
explain the market conditions and investment strategies affecting each Fund’s
performance during its last fiscal year.
You can
ask questions or obtain a free copy of each Fund’s shareholder report or the
Statement of Additional Information by calling 1-888-GXFund-1
(1-888-493-8631). Free copies of the Fund’s shareholder report and
the Statement of Additional Information are available from our website at
www.globalxfunds.com.
Information
about each Fund, including its reports and the Statement of Additional
Information, has been filed with the SEC. It can be reviewed and
copied at the SEC’s Public Reference Room in Washington, DC or on the EDGAR
database on the SEC’s internet site (http://www.sec.gov). Information
on the operation of the SEC’s 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 SEC’s
e-mail address (publicinfo@sec.gov) or by writing the Public Reference section
of the SEC, 100 F Street N.E., Room 1580, Washington, DC 20549.
PROSPECTUS
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
[ ],
2010
Investment
Company Act File No.: 811-22209
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 12, 2010
Subject
to Completion
Statement
of Additional Information
Dated
[ ], 2010
This
Statement of Additional Information (“Additional Statement”) is not a
prospectus. It should be read in conjunction with the current
Prospectus (“Prospectus”) for the following Funds (“Funds”) of Global X Funds
(“Trust”) as such Prospectus may be revised or supplemented from time to
time:
Global X
FTSE Andean 30 ETF
Global X
FTSE ASEAN 40 ETF
Global X
S&P/TSX Venture ETF
Global X
Next 11 ETF
The
Prospectus for the various Funds is dated
[ ], 2010. 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 Fund Services, Freedom Valley Drive Oaks, PA
19456, calling 1-888-GXFund-1 (1-888-493-8631) or visiting
www.globalxfunds.com.
TABLE
OF CONTENTS
GENERAL
DESCRIPTION OF THE TRUST AND ITS FUNDS
|
1
|
ADDITIONAL
INVESTMENT INFORMATION
|
2
|
EXCHANGE
LISTING AND TRADING
|
2
|
INVESTMENT
OBJECTIVE, STRATEGIES AND RISKS
|
2
|
INFORMATION
REGARDING THE INDEXES AND THE INDEX PROVIDER
|
12
|
INVESTMENT
RESTRICTIONS
|
13
|
CONTINUOUS
OFFERING
|
15
|
PORTFOLIO
HOLDINGS
|
15
|
MANAGEMENT
OF THE TRUST
|
16
|
BOARD
OF TRUSTEES AND OFFICERS
|
16
|
STANDING
BOARD COMMITTEES
|
20
|
TRUSTEE
OWNERSHIP OF FUND SHARES
|
20
|
TRUSTEE
OWNERSHIP OF SECURITIES OF THE ADVISER AND RELATED
COMPANIES
|
20
|
TRUSTEE
COMPENSATION
|
20
|
CODE
OF ETHICS
|
21
|
INVESTMENT
ADVISER
|
21
|
PORTFOLIO
MANAGERS
|
22
|
BROKERAGE
TRANSACTIONS
|
23
|
PROXY
VOTING
|
24
|
SUB-ADMINISTRATOR
|
24
|
DISTRIBUTOR
|
24
|
CUSTODIAN
AND TRANSFER AGENT
|
24
|
DESCRIPTION
OF SHARES
|
25
|
BOOK-ENTRY
ONLY SYSTEM
|
28
|
PURCHASE
AND REDEMPTION OF CREATION UNITS
|
28
|
CREATION
UNIT AGGREGATIONS
|
28
|
PURCHASE
AND ISSUANCE OF CREATION UNIT AGGREGATIONS
|
29
|
REDEMPTION
OF CREATION UNITS
|
32
|
TAXES
|
35
|
FEDERAL
- GENERAL INFORMATION
|
35
|
BACK-UP
WITHHOLDING
|
37
|
SECTIONS
351 AND 362
|
37
|
QUALIFIED
DIVIDEND INCOME
|
37
|
CORPORATE
DIVIDENDS RECEIVED DEDUCTION
|
38
|
NET
CAPITAL LOSS CARRYFORWARDS
|
38
|
EXCESS
INCLUSION INCOME
|
38
|
TAXATION
OF INCOME FROM CERTAIN FINANCIAL INSTRUMENTS AND PFICS
|
38
|
SALES
OF SHARES
|
38
|
OTHER
TAXES
|
38
|
FOREIGN
TAXES
|
39
|
TAXATION
OF NON-U.S. SHAREHOLDERS
|
39
|
REPORTING
|
40
|
NET
ASSET VALUE
|
40
|
DIVIDENDS
AND DISTRIBUTIONS
|
41
|
GENERAL
POLICIES
|
41
|
DIVIDEND
REINVESTMENT SERVICE
|
41
|
OTHER
INFORMATION
|
41
|
COUNSEL
|
41
|
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
|
41
|
ADDITIONAL
INFORMATION
|
41
|
APPENDIX
A
|
A-1
|
APPENDIX
B
|
B-1
|
GENERAL
DESCRIPTION OF THE TRUST AND ITS FUNDS
The Trust
currently consists of 44 investment portfolios. 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 Trust’s shares is registered under the
Securities Act of 1933, as amended (“Securities Act”). This Statement of
Additional Information relates only to the following Funds:
Global X
FTSE Andean 30 ETF
Global X
FTSE ASEAN 40 ETF
Global X
S&P/TSX Venture ETF
Global X
Next 11 ETF
The
investment objective of each Fund is to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of a specified benchmark index (“Underlying Index”). The Fund’s
investment objective and Underlying Index may be changed without shareholder
approval. Shareholders will be given 60 days’ prior notice of any such change.
If the Adviser changes the Underlying Index, the name of the Fund may be changed
as well. Each Fund is managed by Global X Management Company LLC
(“Adviser”).
The Funds
offer and issue 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 Funds are, or 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 each Fund are as follows:
Fund
|
Number of Shares per Creation
Unit
|
Global
X FTSE Andean 30 ETF
|
[ ]
|
Global
X FTSE ASEAN 40 ETF
|
[ ]
|
Global
X S&P/TSX Venture ETF
|
[ ]
|
Global
X Next 11 ETF
|
[ ]
|
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 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
EXCHANGE
LISTING AND TRADING
A
discussion of exchange listing and trading matters associated with an investment
in each Fund is contained in the Prospectus. The discussion below supplements,
and should be read in conjunction with, that section of the
Prospectus.
Shares of
each 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 any
Fund will continue to be met. The Exchange may, but is not required to, remove
the shares of a Fund from its listing if (1) following the initial twelve-month
period beginning upon the commencement of trading of a 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 a 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 a 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
each Fund, the Exchange disseminates every fifteen seconds, through the
facilities of the Consolidated Tape Association, an updated IOPV for each 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 applicable 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 applicable 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, a
Fund’s IOPV disseminated during the Exchange trading hours should not be viewed
as a real time update of the Fund’s NAV, which is calculated only once a
day.
In
addition to the equity component described in the preceding paragraph, the IOPV
for each 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 Funds 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
Each 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. Each Fund operates as an index fund and will not be actively managed.
Adverse performance of a security in a Fund’s portfolio will ordinarily not
result in the elimination of the security from the Fund’s 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. Each
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 Funds
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 Funds 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
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 Funds but not the Underlying Indexes).
Each 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 Fund’s Underlying Index and in Depositary
Receipts based on securities in the Underlying Index. Each 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, a Fund’s 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 Funds.
DEPOSITARY RECEIPTS. Each 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 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 a Fund invests in ADRs, such ADRs will be listed on a national securities
exchange. To the extent a Fund invests in GDRs or EDRs, such GDRs and EDRs will
be listed on a foreign exchange. A 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. Each 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 such a Fund and, consequently, the Fund’s
investment portfolio. Each 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 such a Fund and, consequently, the Fund’s investment
portfolio. This may adversely affect its performance or subject the Fund’s
shares to greater price volatility than that experienced by less concentrated
investment companies.
Each 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 certain Funds and may make it less likely
that such Funds will meet their investment objectives.
SHORT-TERM INSTRUMENTS AND TEMPORARY
INVESTMENTS. To the extent consistent with its investment policies, each
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
Moody’s Investors Service, Inc. (“Moody’s”), “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 a 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 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 bank’s 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. Congress has temporarily
increased FDIC deposit insurance on deposit notes from $100,000 to $250,000 per
depositor through December 31, 2013.
Each 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 Funds 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. Each Fund may invest up to 20% of its total
assets in swap contracts.
A 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 a
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 Funds also may enter into currency swaps, which involve the exchange of the
rights of a Fund and another party to make or receive payments in specific
currencies. Currency swaps involve the exchange of rights of a 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 a Fund receiving or paying, as the case may be, only the
net amount of the two payments. A 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 such 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, a Fund’s 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 party to the swap will default on its
contractual delivery obligations. To the extent that the amount payable by a
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 a Fund’s
borrowing restrictions.
A 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 Moody’s, 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, a 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 such Fund’s rights
as a creditor (e.g., a
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, each Fund may
invest in forward foreign currency exchange contracts and foreign currency
futures contracts. No Fund, however, expects to engage in currency transactions
for speculative purposes or for the purpose of hedging against declines in the
value of a Fund’s assets that are denominated in a foreign currency. A 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 a 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. A 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 a Fund’s 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 a 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 Fund’s price to sell the
currency or (ii) greater than the Fund’s 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 a 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 Fund’s price to buy the currency
or (ii) lower than the Fund’s price to buy the currency provided the Fund
segregates liquid assets in the amount of the difference.
FOREIGN INVESTMENTS - GENERAL.
To the extent consistent with its investment policies, each Fund may
invest 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 a 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 otherwise affect
the value of a foreign security (such as a change in the political climate or an
issuer’s credit quality), appreciation in the value of the foreign currency
generally can be expected to increase the value of a foreign
currency-denominated security in terms of U.S. dollars. A rise in foreign
interest rates or decline in the value of the foreign currency relative to the
U.S. dollar generally can be expected to depress the value of a foreign
currency-denominated security.
There are
other risks and costs involved in investing in foreign securities, which are in
addition to the usual risks inherent in domestic investments. Investment in
foreign securities involves higher costs than investment in U.S. securities,
including higher transaction and custody costs as well as the imposition of
additional taxes by foreign governments. Foreign investments also involve risks
associated with the level of currency exchange rates, less complete financial
information about the issuers, less market liquidity, more market volatility and
political instability. Future political and economic developments, the possible
imposition of withholding taxes on dividend income, the possible seizure or
nationalization of foreign holdings, the possible establishment of exchange
controls, or the adoption of other governmental restrictions might adversely
affect an investment in foreign securities. Additionally, foreign banks and
foreign branches of domestic banks are subject to less stringent reserve
requirements, and to different accounting, auditing and recordkeeping
requirements. Also, the legal remedies for investors may be more limited than
the remedies available in the U.S.
Although
a 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, a Fund’s NAV to fluctuate as well. Currency exchange rates can be
affected unpredictably by the intervention or the failure to intervene by U.S.
or foreign governments or central banks, or by currency controls or political
developments in the U.S. or abroad. To the extent that a Fund’s total assets,
adjusted to reflect a Fund’s net position after giving effect to currency
transactions, are denominated in the currencies of foreign countries, a Fund
will be more susceptible to the risk of adverse economic and political
developments within those countries.
A 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 Funds may expose them to risks independent of their
securities positions.
A 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.
FOREIGN INVESTMENTS –
EMERGING MARKETS. Countries
with emerging markets are generally located in the Asia and Pacific regions, the
Middle East, Eastern Europe, Central America, South America and Africa. To the
extent permitted by their investment policies, the Funds may invest their assets
in countries with emerging economies or securities markets.
Emerging country securities markets are
typically marked by a high concentration of market capitalization and trading
volume in a small number of issuers representing a limited number of industries,
as well as a high concentration of ownership of such securities by a limited
number of investors. The markets for securities in certain emerging countries
are in the earliest stages of their development. Even the markets for relatively
widely traded securities in emerging countries may not be able to absorb,
without price disruptions, a significant increase in trading volume or trades of
a size customarily undertaken by institutional investors in the securities
markets of developed countries. The limited size of many of these securities
markets can cause prices to be erratic for reasons apart from factors that
affect the soundness and competitiveness of the securities issuers. For example,
prices may be unduly influenced by traders who control large positions in these
markets. Additionally, market making and arbitrage activities are generally less
extensive in such markets, which may contribute to increased volatility and
reduced liquidity of such markets. The limited liquidity of emerging country
securities may also affect a Fund’s ability to accurately value its portfolio
securities or to acquire or dispose of securities at the price and time it
wishes to do so or in order to meet redemption requests.
Certain emerging market countries may
have antiquated legal systems, which may adversely impact the Funds. For
example, while the potential liability of a shareholder in a U.S. corporation
with respect to acts of the corporation is generally limited to the amount of
the shareholder’s investment, the notion of limited liability is less clear in
certain emerging market countries. Similarly, the rights of investors in
emerging market companies may be more limited than those of shareholders in U.S.
corporations.
Transaction costs, including brokerage
commissions or dealer mark-ups, in emerging countries may be higher than in
developed securities markets. In addition, existing laws and regulations are
often inconsistently applied. As legal systems in emerging countries develop,
foreign investors may be adversely affected by new or amended laws and
regulations. In circumstances where adequate laws exist, it may not be possible
to obtain swift and equitable enforcement of the law.
Certain emerging countries may restrict
or control foreign investments in their securities markets. These restrictions
may limit a Fund’s investment in certain emerging countries and may increase the
expenses of the Fund. Certain emerging countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer’s outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. In
addition, the repatriation of both investment income and capital from emerging
countries may be subject to restrictions which require governmental consents or
prohibit repatriation entirely for a period of time. Even where there is no
outright restriction on repatriation of capital, the mechanics of repatriation
may affect certain aspects of the operation of the Fund. A Fund may be required
to establish special custodial or other arrangements before investing in certain
emerging countries.
Emerging countries may be subject to a
substantially greater degree of economic, political and social instability and
disruption than more developed countries. This instability may result from,
among other things, the following: (i) authoritarian governments or military
involvement in political and economic decision making, including changes or
attempted changes in governments through extra-constitutional means; (ii)
popular unrest associated with demands for improved political, economic or
social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; (v) ethnic, religious and racial disaffection or
conflict; and (vi) the absence of developed legal structures governing foreign
private investments and private property. Such economic, political and social
instability could disrupt the principal financial markets in which a Fund may
invest and adversely affect the value of the Fund’s assets. A Fund’s investments
can also be adversely affected by any increase in taxes or by political,
economic or diplomatic developments.
The economies of emerging countries may
suffer from unfavorable growth of gross domestic product, rates of inflation,
capital reinvestment, resources, self-sufficiency and balance of payments. Many
emerging countries have experienced in the past, and continue to experience,
high rates of inflation. In certain countries inflation has at times accelerated
rapidly to hyperinflationary levels, creating a negative interest rate
environment and sharply eroding the value of outstanding financial assets in
those countries. Other emerging countries, on the other hand, have recently
experienced deflationary pressures and are in economic recessions. The economies
of many emerging countries are heavily dependent upon international trade and
are accordingly affected by protective trade barriers and the economic
conditions of their trading partners. In addition, the economies of some
emerging countries are vulnerable to weakness in world prices for their
commodity exports.
Foreign markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. Such
delays in settlement could result in temporary periods when a portion of the
assets of a Fund remain uninvested and no return is earned on such assets. The
inability of a Fund to make intended security purchases or sales due to
settlement problems could result either in losses to a Fund due to subsequent
declines in value of the portfolio securities or, if a Fund has entered into a
contract to sell the securities, could result in possible liability to the
purchaser.
FUTURES CONTRACTS AND RELATED
OPTIONS. To the extent consistent with its investment policies, each 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. Each Fund will only enter into futures contracts and options on futures
contracts that are traded on a U.S. or foreign exchange. No Fund will use
futures or options for speculative purposes.
The
Trust, on behalf of each 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 Funds. The Funds 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 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 Commission’s (“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, a Fund’s
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 a Fund’s 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.
GOVERNMENT
INTERVENTION IN FINANCIAL MARKETS. Recent
instability in the financial markets has led the U.S. Government to take a
number of unprecedented actions designed to support certain financial
institutions and segments of the financial markets that have experienced extreme
volatility, and in some cases a lack of liquidity. Federal, state, and other
governments, their regulatory agencies, or self regulatory organizations may
take actions that affect the regulation of the instruments in which the Fund
invests, or the issuers of such instruments, in ways that are unforeseeable.
Legislation or regulation may also change the way in which the Fund itself is
regulated. Such legislation or regulation could limit or preclude the Fund’s
ability to achieve its investment objective.
Governments
or their agencies may also acquire distressed assets from financial institutions
and acquire ownership interests in those institutions. The implications of
government ownership and disposition of these assets are unclear, and such a
program may have positive or negative effects on the liquidity, valuation and
performance of the Fund’s portfolio holdings. Furthermore, volatile financial
markets can expose the Fund to greater market and liquidity risk and potential
difficulty in valuing portfolio instruments held by the Fund. The Fund has
established procedures to assess the liquidity of portfolio holdings and to
value instruments for which market prices may not be readily available. The
Adviser will monitor developments and seek to manage the Fund in a manner
consistent with achieving the Fund’s investment objective, but there can be no
assurance that it will be successful in doing so.
ILLIQUID OR RESTRICTED SECURITIES.
To the extent consistent with its investment policies, each 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
and securities that are not registered under the Securities Act but can be sold
to “qualified institutional buyers” in accordance with Rule 144A under the
Securities Act. These securities will not be considered illiquid so
long as the Adviser determines, under guidelines approved by the Trust’s 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, each 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 a 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 a 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 Funds 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 Funds 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 Funds 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 Funds 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 Funds may not be
obligated to redeem such securities in an amount exceeding 1% of the investment
company’s 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, each 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.
NEW
FUND RISKS. The Funds are new funds, with no operating
history, which may result in additional risks for investors in the
Funds. There can be no assurance that the Funds will grow to or
maintain an economically viable size, in which case the Board of Trustees may
determine to liquidate the Funds. While shareholder interests will be the
paramount consideration, the timing of any liquidation may not be favorable to
certain individual shareholders.
OPTIONS. To the extent
consistent with its investment policies, each 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 Funds
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 a 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 a 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 a 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 a 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 a 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 a Fund
holds another call (or put) option on the spread between the same two securities
and segregates liquid assets sufficient to cover the Fund’s net liability under
the two options. Therefore, the Fund’s liability for such a covered option
generally is limited to the difference between the amount of the Fund’s
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.
A Fund’s
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 Fund’s
execution of a closing purchase transaction, which is effected by purchasing on
an exchange an option of the same series (i.e., same underlying
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 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 a
Fund purchases an option, the premium paid by it is recorded as an asset of the
Fund. When a 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 Fund’s 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 a
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 a Fund expires on the stipulated expiration
date or if a 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 a 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, each Fund may agree to purchase
portfolio securities from financial institutions subject to the seller’s
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 Fund’s 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 Trust’s 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, a Fund could suffer additional losses if a court
determines that the Fund’s interest in the collateral is
unenforceable.
REVERSE REPURCHASE AGREEMENTS.
To the extent consistent with its investment policies, each 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 Funds 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 Funds will pay interest on
amounts obtained pursuant to a reverse repurchase agreement. While reverse
repurchase agreements are outstanding, the Funds will segregate liquid assets in
an amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement.
SECURITIES LENDING. Collateral
for loans of portfolio securities made by a 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 a 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 each Fund is responsible for any loss that may result from its
investment in borrowed collateral. A 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 Funds are 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 a 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 a Fund’s holdings to its
investment objective. Tracking variance also may occur due to factors such as
the size of a Fund, the maintenance of a cash reserve pending investment or to
meet expected redemptions, changes made in the Fund’s 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 a 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, each 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 a Fund could lose the purchase value of a
warrant if the right to subscribe to additional shares is not exercised prior to
the warrant’s 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 security’s market price
such as when there is no movement in the level of the underlying
security.
FTSE
Andean 30 Index
The FTSE
Andean 30 Index tracks the performance of the 30 largest companies in Chile,
Colombia, and Peru. The index is free-float adjusted and weighted by
market capitalization. Stocks are liquidity screened to ensure that the index is
tradable, and a unique capping methodology makes it suitable for the use as the
basis for investment products such as derivatives and Exchange Traded Funds
(ETFs). The index is maintained by FTSE Group (“FTSE”).
FTSE/ASEAN
40 Index
The
FTSE/ASEAN 40 Index tracks the performance of the 40 largest companies in the
five ASEAN regions: Indonesia, Philippines, Singapore, Malaysia and Thailand.
The index is free-float adjusted and weighted by market capitalization and
designed using eligible stocks within the FTSE All-World universe. Stocks are
liquidity screened to ensure that the index is tradable. The index is maintained
by FTSE Group (“FTSE”).
S&P/TSX
Venture 30 Index
The
S&P/TSX Venture 30 Index is designed to provide exposure to 30 most liquid
securities of the S&P/TSX Venture Composite Index. For eligibility, as
of the reference date, securities must have USD $100 million and above in market
capitalization. Stocks must trade at least 100,000 shares in each of the
previous six months preceding the rebalancing reference date. The top 30
securities, ranked by their 6 month average daily value traded, form the
index. The weighting mechanism employs an optimization algorithm as such
the overall basket liquidity of the index is maximized, subject to stock level
constraints. The maximum weight of the security is capped at 8%, and the
sum of the securities with weight over 5% does not exceed 50%. The index is
maintained by Standard & Poor’s Financial Services LLC (a subsidiary of The
McGraw-Hill Companies) (“S&P”).
Solactive
Next 11 Index
The
Solactive Next 11 Index is intended to measure performance of the investable
universe of companies in the "next eleven" countries, as defined by Structured
Solutions AG. The next eleven countries include Egypt, Bangladesh, Indonesia,
Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey and
Vietnam. Only shares open to foreign ownership by U.S investors are eligible for
inclusion in the Underlying Index and as a result Iran is not currently included
in the index. The index is comprised of common stocks, ADRs and GDRs of selected
companies globally that are domiciled or have their main business operations in
these countries. The stocks are screened for liquidity and weighted according to
free-float market capitalization. A specific capping methodology is applied at
the semi-annual index review to facilitate compliance with the rules governing
the listing of financial products on exchanges in the United States. The index
is maintained by Structured Solutions AG.
FTSE
International Limited (FTSE) is a world-leader in the creation and management of
over 100,000 equity, bond and hedge fund indices. With offices in Beijing,
London, Frankfurt, Hong Kong, Boston, Shanghai, Madrid, Paris, New York, San
Francisco, Sydney and Tokyo, FTSE Group services clients in 77 countries
worldwide. FTSE is an independent company owned by The Financial Times and the
London Stock Exchange. FTSE does not give financial advice to clients, which
allows for the provision of truly objective market information. FTSE indices are
used extensively by investors world-wide such as consultants, asset owners,
asset managers, investment banks, stock exchanges and brokers. FTSE does not
sponsor, endorse or promote any of the Funds and is not in any way connected to
them and does not accept any liability in relation to their issue, operation and
trading.
S&P
provides financial, economic and investment information and analytical services
to the financial community. S&P calculates and maintains the S&P Global
1200 IndexTM, which
includes the S&P 500® for the U.S., the S&P Europe 350 IndexTM for
Continental Europe and the U.K., the S&P/TOPIX 150 IndexTM for
Japan, the S&P Asia 50 IndexTM, the
S&P/TSX 60 IndexTM for
Canada, the S&P/ASX 50 IndexTM, and
the S&P Latin America 40 IndexTM.
S&P also publishes the S&P MidCap 400 IndexTM,
S&P SmallCap 600 IndexTM,
S&P Composite 1500® and S&P REIT Composite IndexTM for the
U.S. S&P calculates and maintains the S&P Global BMI Equity Index
SeriesTM, a set
of comprehensive rules-based benchmarks covering developed and emerging
countries around the world. Company additions to and deletions from a S&P
equity index do not in any way reflect an opinion on the investment merits of
the company. S&p does not sponsor, endorse or promote any of the Funds and
is not in any way connected to them and does not accept any liability in
relation to their issue, operation and trading.
Structured
Solutions AG (Structured Solutions) is a leading company in the structuring and
indexing business for institutional clients. Structured Solutions runs the
Solactive index platform (formerly S-BOX platform). Solactive indices are used
by issuers worldwide as underlying indices for financial products. Furthermore,
Structured Solutions cooperates with various stock exchanges and index providers
worldwide, e.g. Karachi Stock Exchange, Shenzhen Securities Information Company
and Dubai Gold & Commodities Exchange. Structured Solutions does not
sponsor, endorse or promote any of the Funds and is not in any way connected to
them and does not accept any liability in relation to their issue, operation and
trading.
INVESTMENT
RESTRICTIONS
Each Fund
is subject to the investment policies enumerated in this section, which may be
changed with respect to a particular Fund only by a vote of the holders of a
majority of such Fund’s outstanding shares.
The
Funds:
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1.
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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;
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2.
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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;
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3.
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May
not act as an underwriter of securities within the meaning of the
Securities Act, except as permitted under the Securities 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 the Securities 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;
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4.
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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;
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5.
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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;
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6.
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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;
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7.
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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 Fund’s 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.
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Notwithstanding
these fundamental investment restrictions, each 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 a Fund’s
investments will not constitute a violation of such limitation, except that any
borrowing by a 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 a Fund’s holdings of illiquid
securities exceed 15% of net assets because of changes in the value of the
Fund’s 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
Fund’s 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 a Fund. The 1940 Act requires that if the asset coverage for
borrowings at any time falls below the limits under the 1940 Act described in
Investment Restriction No. 2, a 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.
CONTINUOUS
OFFERING
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 Funds 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 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 Funds 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.
PORTFOLIO
HOLDINGS
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 Funds nor the Adviser, Distributor or any
agent, or any employee thereof (“Fund Representative”) will disclose a Fund’s
portfolio holdings information to any person other than in accordance with the
policy. For purposes of the policy, “portfolio holdings information” means a
Fund’s 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 a Fund
nor any Fund Representative may solicit or accept any compensation or other
consideration in connection with the disclosure of portfolio holdings
information. A Fund Representative may provide portfolio holdings information to
third parties if such information has been included in the Fund’s public filings
with the SEC or is disclosed on the Fund’s 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 Funds
in the secondary market. Information with respect to each Fund’s 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 each Fund’s 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 Funds offer and redeem 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 Trust’s Chief Compliance Officer
(“CCO”). Disclosure to providers of auditing, custody, proxy voting and other
similar services for the Funds, 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 a 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 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 Fund’s
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 a 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 a 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. Each
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 Fund’s fiscal year).
Shareholders may obtain a Fund’s Forms N-CSR and N-Q filings on the SEC’s
Website at sec.gov. In addition, the Funds’ Forms N-CSR and N-Q filings may be
reviewed and copied at the SEC’s public reference room in Washington, DC. You
may call the SEC at 1-800-SEC-0330 for information about the SEC’s 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.
MANAGEMENT
OF THE TRUST
BOARD
OF TRUSTEES AND OFFICERS
The Trust
is governed by its Board of Trustees. The Board is responsible for
and oversees the overall management and operations of the Trust and the Funds,
which includes the general oversight and review of each Fund’s investment
activities, in accordance with federal law, Delaware law and the stated policies
and restrictions of the Funds. (For purposes of this discussion and
that in the sections below, the term “Funds” means each Fund that has commenced
operations.) The Board appoints and oversees the Trust’s officers and
service providers, including the Adviser, who is responsible for the management
of the day-to-day operations of the Funds based on each Fund’s investment
policies and restrictions as well as certain agreements reviewed and approved by
the Board. In carrying out these responsibilities, the Board
regularly interacts with and receives reports from the senior personnel of the
Trust’s service providers and the Trust’s Chief Compliance Officer
(“CCO”). The Board also is assisted by the Trust’s independent
auditor (who reports directly to the Trust’s Audit Committee), independent
counsel to the Independent Trustees (as defined below), separate counsel to the
Trust and other experts as appropriate, all of whom are selected by the
Board.
BOARD STRUCTURE AND RELATED
MATTERS. Board members who are not “interested persons” of the
Funds, as defined in Section 2(a)(19) of the 1940 Act (“Independent Trustees”),
constitute 75 percent of the Board. Kartik Kiran Shah, an Independent
Trustee, serves as Independent Chairman of the Board. The Independent
Chairman’s responsibilities include facilitating communication among the
Independent Trustees as well as communication between the Independent Trustees
and management of the Trust. The Independent Chairman assumes such
other duties and performs such activities as he deems necessary or appropriate
or which the Board may, from time to time, determine should be handled by the
Independent Chairman. The Board considers leadership by an
Independent Chairman and the fact that 75 percent of the Board is composed of
Independent Trustees to be integral to promoting effective independent oversight
of the Funds’ operations and meaningful representation of shareholders’
interests.
The
Trustees discharge their responsibilities collectively as a Board, as well as
through Board committees, each of which operates pursuant to a charter and
procedures approved by the Board that delineate the specific responsibilities of
that committee. The Board has established two standing committees: an
Audit Committee and a Corporate Governance, Nomination and Compensation
Committee. Currently, each of the Independent Trustee serves on each
of these committees.
The Board
periodically evaluates its structure and composition as well as various aspects
of its operations. The Board believes that its leadership structure,
including its Independent Chairman position and its committees, is appropriate
for the Trust in light of, among other factors, the asset size and nature of the
Funds, the number of Funds overseen by the Board, the arrangements for the
conduct of the Funds’ operations, the number of Trustees, and the Board’s
responsibilities. On an annual basis, the Board conducts a
self-evaluation process that, among other things, considers (i) whether the
Board and its committees are functioning effectively, (ii) given the size and
composition of the Board and each if its committees, whether the Trustees are
able to effectively oversee the number of Funds in the complex and (iii) whether
the mix of skills, perspectives, qualifications, attributes, education, and
relevant experience of the Trustees enhances the Board’s
effectiveness.
There are
no specific required qualifications for Board membership. The Board
believes that different perspectives, viewpoints, professional experience,
education and the individual qualities of each of the Board members represent a
diversity of experiences and a variety of complementary skills. The
Trustees believe that this allows the Board, as a whole, to oversee the business
of the Trust (and each of the Funds) in a manner consistent with the best
interests of the Funds’ shareholders. However, this discussion
shouldn’t be understood to mean that any of the Trustees is an “expert” within
the meaning of the federal securities laws.
The Board
of Trustees met [ ] times during the fiscal period ended
October 31, 2010. The Board may hold special meetings, as needed, either in
person or by telephone, to address matters arising between regular
meetings.
The
Trustees are identified in the table below, which provides information as to
their principal business occupations held during the last five years and certain
other information. As of [ ], each of the Trustees oversees
[ ] Funds. Each Trustee serves until his or her death,
resignation or removal and replacement. The address for all Trustees
and officers is c/o Global X Funds, 410 Park Avenue, 4th floor, New York, New
York 10022. Mr. del Ama is considered an interested Trustee due to
his affiliation with the Adviser. The Board believes that having an
interested person on the Board helps to bring corporate and financial viewpoints
that are critical elements in the Board’s decision-making process.
Name, Address
(Year of
Birth)
|
Position(s)
Held
with Funds
|
Principal Occupation(s)
During
the Past 5
Years
|
Other Directorships
Held
by
Trustees
|
Independent
Trustees
|
Sanjay Ram
Bharwani
(1974)
|
Trustee (since
2008)
|
President of Risk Advisors Inc.
(since 2007); Chief Information Officer, M. Safra & Co
(2004-2006).
|
Director of Kellton Financial
Services (since
2009).
|
Scott R. Chichester1
(1970)
|
Trustee (since
2008)
|
Founder and President, DirectPay
USA LLC (since 2006); Chief Financial Officer, Ong Corporation
(2002-2008).
|
None.
|
Kartik Kiran
Shah
(1977)
|
Trustee (since
2008)
|
Senior Product Manager, Wireless
Generation (since 2008); Manager, Amgen (2003-2006)
|
None.
|
1
|
Mr.
Chichester is
currently married to a sister of Mr. del Ama’s 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.
|
Interested Trustee /
Officers
|
Bruno del Ama
(1976)
|
Trustee (since 2008), President
and Chief Executive Officer (since 2008)
|
Chief Executive Officer and Chief
Compliance Officer, Global X Management Company LLC (since 2008); Head of
Global Structured Products Operations at Radian Asset Assurance
(2004-2008).
|
None.
|
Jose C.
Gonzalez
(1976)
|
Chief Compliance Officer Chief
Financial Officer, and Secretary (since 2008)
|
Chief Operating Officer, Global X
Management Company (since 2008); Founder and President of GWM Group, Inc.
(since 2006); Financial Advisor, BroadStreet Securities, Inc.
(2004-2006).
|
None
|
Joseph Gallo
(1973)
|
Assistant Secretary (since
2008)
|
Attorney at SEI Investments (since
2007); Officer of
various investment companies administered by Administrator (since
2007); Associate Counsel at ICMA-RC
(2004-2007); Asst.
Secretary of the VantageTrust Company (2007); Assistant Secretary of the
Vantagepoint Funds (2006-2007).
|
None
|
Stephen Panner
(1970)
|
Assistant Treasurer (since
2008)
|
Fund Accounting Director of the
Administrator (since 2005); Controller and Chief Financial Officer for
various investment companies administered by Administrator (since 2005);
Fund Administration Manager, Old Mutual Fund Services (2000-2005); Chief
Financial Officer, Controller and Treasurer, PBHG Funds and PBHG Insurance
Series Fund (2004-2005); Assistant Treasurer, Old Mutual Fund Advisors
Fund (2004-2005).
|
None
|
In
addition to the information set forth in the table above, each Trustee possesses
other relevant skills, perspectives, qualifications, attributes, education, and
relevant experience. The following provides additional information
about certain qualifications and experience of each of the
Trustees.
Sanjay Ram Bharwani: Mr.
Bharwani has experience in capital markets, technology, risk management
and security valuation, having served as Chief Information Officer of a
multi-strategy hedge fund; experience at a capital markets consultancy for
emerging markets; and experience at a risk solutions provider.
Scott R.
Chichester: Mr. Chichester, CPA, has experience in accounting and
finance, having served as CEO of a payroll business; experience as CFO of a
technology start-up; experience as an accountant at a bulge bracket investment
bank; experience as an auditor at a Big Four accounting firm.
Kartik
Kiran Shah: Mr. Shah has experience in organizational design,
strategic planning, financial analysis and product development, having served as
a senior manager in an education software and consulting business; manager of
corporate strategy at a biotechnology company; and as consultant with a major
management consulting firm.
Bruno del
Ama: Mr. del Ama has experience in the investment management
industry, including organizational experience as chief executive officer of a
fund service provider; experience as a manager at a bond insurance company;
experience as a consultant.
RISK OVERSIGHT. The
Funds are subject to a variety of risks, including (but not limited to)
investment risk, financial risk, compliance risk, and operational
risk. Consistent with its responsibility for oversight of the Trust
and the Funds, the Board oversees the management of the Trust’s risk management
structure by the Adviser. The Adviser, as part of its
responsibilities for the day-to-day management and operations of the Funds, is
responsible for the day-to-day risk management of the Trust and the
Funds. The Adviser seeks to address the day-to-day risk management of
the Funds by relying on various procedures, compliance programs, controls and
other risk oversight mechanism as well as the assistance of the Trust’s
sub-administrator. The Board, in the exercise of its reasonable
business judgment, also separately considers potential risks that may impact the
individual Funds. The Board performs its oversight of the risk
management structure of the Trust and the Funds directly and, as to certain
matters, through its committees (described below). The following
provides an overview of the principal aspects of the Board’s oversight of the
risk management structure of the Trust and the Funds. The discussion
below is not intended to be a complete description of the Board’s oversight of
risk management structure of the Trust and the Funds.
The Board
recognizes that it is not possible to identity all of the risks that may affect
one or more of the Funds nor is it practical to develop processes and controls
to eliminate or mitigate their occurrence or effects. Moreover, the
Board understands that (i) it may be necessary to bear certain risks to achieve
each Fund’s investment objective and (ii) the processes, procedures and controls
employed to address certain risks may be limited in their
effectiveness.
Moreover,
reports received by the Board as to risk management matters are typically
summaries of the relevant information. As a result, the Board’s risk
management oversight is subject to substantial limitations.
However,
the Board has adopted, and periodically reviews, policies and procedures that
are designed to address certain of risks to the Trust and the
Funds. In addition, under the general oversight of the Board, the
Adviser and the Trust’s other service providers have themselves adopted a
variety of processes, policies, procedures and controls designed to address
particular risks. Different processes, policies, procedures and
controls are employed with respect to different types of
risks. Further, the Adviser oversees and regularly monitors the
investments, operations and compliance of the Funds’ investments.
In
addition, the Board oversees the management of the Trust’s risk management
structure by the Adviser through its review of regular reports, presentations
and other information from officers of the Trust and other
persons. Senior officers of the Trust, including the Trust’s CCO,
regularly report to the Board on a range of matters, including those relating to
risk management. In this regard, the Board periodically receives
reports regarding the Trust’s service providers, either directly or through the
CCO. On at least a quarterly basis, the Independent Trustees meet
with the CCO to discuss matters relating to the Trust’s compliance program and,
in accordance with Rule 38a-1 under the 1940 Act, the Board receives at least
annually a written report from the CCO regarding the effectiveness of the
Trust’s compliance program. In connection with the CCO’s annual Rule
38a-1 compliance report to the Board, the Independent Trustees meet with the CCO
in executive session to discuss the Trust’s compliance program.
Further,
the Board regularly receives reports from the Adviser with respect to the Funds’
investments and securities trading and, as necessary, any fair valuation
determinations made by the Advisers with respect to certain investments held by
the Funds. As required by law, within two years of the initial
approval by the Board of the advisory agreement for each Fund, the Board will be
asked to consider the approval of the investment advisory agreement for that
Fund. In connection with that process, independent counsel to the
Independent Trustees will request on behalf of the Independent Trustees that
certain necessary and appropriate information be provided by the Adviser to the
Independent Trustees in connection with that consideration and approval
process. In addition, the Board members receive reports,
presentations and other information from the Adviser regarding each of the
Funds. If applicable, in connection with the Board’s consideration of
any distribution plan of a Fund under Rule 12b-1 under the 1940 Act, the Board
receives reports from the Adviser and other service providers.
Senior
officers of the Trust and Adviser also report regularly to the Board on
valuation matters, internal controls and accounting and financial reporting
policies and practices. In addition, the Audit Committee receives
information on internal controls and financial reporting with respect to the
Funds matters from the Trust’s independent registered public accounting
firm.
STANDING
BOARD COMMITTEES
The Board
of Trustees currently has two standing committees: an Audit Committee and a
Corporate Governance, Nomination and Compensation
Committee. Currently, each Independent Trustee serves on each of
these committees.
AUDIT
COMMITTEE. The purposes of the Audit Committee are to assist
the Board of Trustees in (1) its oversight of the Trust’s 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 Trust’s
financial statements and the independent audit thereof; (3) selecting,
evaluating and, where deemed appropriate, replacing the independent registered
public accounting firm (or nominating the independent registered public
accounting firm to be proposed for shareholder approval in any proxy statement);
and (4) evaluating the independence of the independent registered public
accounting firm. During the fiscal period ended October 31, 2010, the
Audit Committee held [ ] meetings.
CORPORATE GOVERNANCE, NOMINATION AND
COMPENSATION COMMITTEE. 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
Board’s 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 Trust’s 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. During the fiscal period ended
October 31, 2010, the Corporate Governance, Nomination and Compensation
Committee held [ ] meetings.
TRUSTEE
OWNERSHIP OF FUND SHARES
As of
December 31, 2010, the Trustees and officers of the Trust owned the following
Shares of the Funds:
[ ]
TRUSTEE
OWNERSHIP OF SECURITIES OF THE ADVISER AND RELATED COMPANIES
As of December 31, 2010, no Independent
Trustee (or any of his immediate family members) owned beneficially or of record
securities of any Trust investment adviser, its principal underwriter, or any
person directly or indirectly, controlling, controlled by or under common
control with any Trust investment adviser or principal
underwriter.
TRUSTEE
COMPENSATION
The
Interested Trustee is not compensated by the Trust. For 2011, the
Trust pays each of the Independent Trustees total annual compensation of
$[ ]. All of the Independent Trustees are reimbursed for
their travel expenses and other reasonable out-of-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 Trust’s officers receive no compensation directly from
the Trust.
The
compensation shown in this chart is for the fiscal period ended October 31,
2010.
Name
of Independent Trustee
|
Aggregate
Compensation from Funds
|
Pension
or Retirement Benefits Accrued as Part of Funds
Expenses
|
Total
Compensation from Trust
|
|
|
|
|
Sanjay
Ram Bharwani
|
[ ]
|
[ ]
|
[ ]
|
Scott
R. Chichester
|
[ ]
|
[ ]
|
[ ]
|
Kartik
Kiran Shah
|
[ ]
|
[ ]
|
[ ]
|
CODE
OF ETHICS
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 Funds (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 Funds. The codes are on file with the SEC and are available to
the public.
INVESTMENT
ADVISER
Under the
Supervision and Administration Agreement, the Adviser oversees the operation of
the Funds, arranges for the advisory, distribution, transfer agency, custody and
all other services necessary for the Fund to operate, and exercises day-to-day
oversight over the Funds’ service providers. Under the Investment
Advisory Agreement between the Trust and the Adviser, the Adviser is responsible
for the management of the investment portfolio of each Fund. The
Adviser is a registered investment adviser under the Investment Advisers Act of
1940 and is located at 410 Park Avenue, 4th Floor New York, NY
10022. The Adviser was organized in Delaware on March 28, 2008 as a
limited liability company. The ability of the Adviser to successfully
implement the Fund's investment strategies will influence the Fund's performance
significantly.
Pursuant
to the Supervision and Administration Agreement and subject to the general
supervision of the Board of Trustees of the Trust, the Adviser provides or
causes to be furnished all supervisory, administrative and other services
reasonably necessary for the operation of the Funds, including audit, portfolio
accounting, legal, transfer agency, printing costs, certain distribution
services (provided pursuant to a separate Distribution Agreement), certain
shareholder and distribution-related services (provided pursuant to a separate
Rule 12b-1 Plan and related agreements) and investment advisory services
(provided pursuant to a separate Investment Advisory Agreement).
The Fund
does bear other expenses which are not covered under the supervisory and
administrative fee that may vary and will 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
supervisory and administrative services, each Fund will pay monthly a fee to the
Adviser at annual rates set forth in the table below (stated as a percentage of
each Fund’s respective average daily net assets).
Fund
|
Management Fee
|
Global
X FTSE Andean 30 ETF
|
[ %]
|
Global
X FTSE ASEAN 40 ETF
|
[ %]
|
Global
X S&P/TSX Venture ETF
|
[ %]
|
Global
X Next 11 ETF
|
[ %]
|
The
Adviser and its affiliates deal, trade and invest for their own accounts in the
types of securities in which a Fund also may invest. The Adviser does
not use inside information in making investment decisions on behalf of the
Funds.
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 Funds 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.
PORTFOLIO
MANAGERS
Bruno del
Ama and Jose Gonzalez are primarily responsible for the day-to-day management of
the Fund’s investments.
Portfolio
Manager’s 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 manager’s salary compensation is designed to be
competitive with the marketplace and reflect the portfolio manager’s relative
experience and contribution to the Funds. 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 each Fund’s 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 manager’s management of a Fund’s
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 a 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 a Fund’s trades. The Adviser has structured the
portfolio manager’s compensation in a manner, and the Funds and the Adviser have
adopted policies, procedures and a code of ethics, reasonably designed to
safeguard the Funds from being negatively affected as a result of any such
conflicts that may arise.
As of
October 31, 2010, Bruno del Ama and Jose Gonzalez were responsible for the
management of the following accounts:
Name of Portfolio
Manager
|
Other Accounts
Managed
(As of October 31,
2010)
|
Accounts with respect to which the
advisory fee is based on the performance of the
account
|
Category of
Account
|
Number of Accounts in
Category
|
Total Assets in Accounts in
Category
|
Number of Accounts in
Category
|
Total Assets in Accounts in
Category
|
Bruno del
Ama
|
Registered investment
companies
|
[ ]
|
[ ]
|
[ ]
|
[ ]
|
|
Other pooled investment
vehicles
|
[ ]
|
[ ]
|
[ ]
|
[ ]
|
|
Other
accounts
|
[ ]
|
[ ]
|
[ ]
|
[ ]
|
Jose C.
Gonzalez
|
Registered investment
companies
|
[ ]
|
[ ]
|
[ ]
|
[ ]
|
|
Other pooled investment
vehicles
|
[ ]
|
[ ]
|
[ ]
|
[ ]
|
|
Other
accounts
|
[ ]
|
[ ]
|
[ ]
|
[ ]
|
Although
the funds in the Trust that are managed by Messrs. del Ama and Gonzalez may have
different investment strategies, each has an investment objective of seeking to
replicate, before fees and expenses, its respective underlying index. The
Adviser does not believe that management of the various accounts presents a
material conflict of interest for Messrs. del Ama and Gonzalez or the
Adviser.
Disclosure
of Securities Ownership
As of
[ ], the Fund’s portfolio managers own the following
shares of the Funds:
[ ]
BROKERAGE
TRANSACTIONS
The
policy of the Trust regarding purchases and sales of securities is that primary
consideration will be given to obtaining the most favorable prices and efficient
executions of transactions. Consistent with this policy, when
securities transactions are effected on a stock exchange, the Trust’s policy is
to pay commissions that are considered fair and reasonable without necessarily
determining that the lowest possible commissions are paid in all
circumstances. In seeking to determine the reasonableness of
brokerage commissions paid in any transaction, the Adviser relies upon its
experience and knowledge regarding commissions generally charged by various
brokers and in various jurisdictions. The Adviser effects
transactions for the Funds with those brokers and dealers that the Adviser
believes provide the most favorable prices and are capable of providing the most
efficient and best execution of trades. The primary consideration of
the Adviser is to seek prompt execution of orders at the most favorable net
price. The sale of Shares by a broker-dealer is not a factor in the
selection of broker-dealers. The Adviser and its affiliates do not
currently participate in any soft dollar transactions, although the Adviser
relies on Section 28(e) of the 1934 Act in effecting or executing transactions
for the Funds. Accordingly, in selecting broker-dealers to execute a
particular transaction, the Adviser may consider the brokerage and research
services (as those terms are defined in Section 28(e) of the 1934 Act) provided
to the Funds and/or other accounts over which the Adviser or its affiliates
exercise investment discretion. The Adviser may cause a Fund to pay a
broker-dealer that furnishes brokerage and research services a higher commission
than that which might be charged by another broker-dealer for effecting the same
transaction, provided that the Adviser determines in good faith that such
commission is reasonable in relation the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either the
particular transaction or the overall responsibilities of the Adviser to the
Funds. Such brokerage and research services might consist of reports and
statistics on specific companies or industries or broad overviews of the
securities markets and the economy. Shareholders of the Funds should understand
that the services provided by such brokers may be useful to the Adviser in
connection with its services to other clients.
The
Adviser assumes general supervision over placing orders on behalf of the Funds
for the purchase or sale of portfolio securities. If purchases or
sales of portfolio securities by the Funds are considered at or about the same
time, transactions in such securities are allocated among the Funds in a manner
deemed equitable to all of the Funds by the Adviser. Bundling or
bunching transactions for the Funds is intended to result in better prices for
portfolio securities and lower brokerage commissions, which should be beneficial
to all of the Funds.
PROXY
VOTING
The Funds
have delegated proxy voting responsibilities to the Adviser, subject to the
Boards 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 Funds and the interests of the
Adviser.
Information
on how the Funds voted proxies relating to portfolio securities during the most
recent 12 month period ended June 30 is available (1) without charge, upon
request, by calling 1-888-843-7824 and (2) on the SEC’s website at
www.sec.gov.
SUB-ADMINISTRATOR
SEI
Investments Global Fund Services (“SEI Global”), located at Freedom Valley Drive
Oaks, PA 19456, serves as Sub-Administrator to the Funds. As sub-administrator,
SEI Global provides the Funds 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 Funds 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.
DISTRIBUTOR
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 Trust’s 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 SEI’s 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 Funds. 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 Global. As Custodian, Brown Brothers Harriman
& Co. has agreed to (1) make receipts and disbursements of money on behalf
of each Fund, (2) collect and receive all income and other payments and
distributions on account of each Fund’s portfolio investments, (3) respond to
correspondence from shareholders, security brokers and others relating to its
duties; and (4) make periodic reports to the Funds concerning the Fund’s
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 each Fund, (3) respond to correspondence by Funds shareholders
and others relating to its duties; (4) maintain shareholder accounts, and (5)
make periodic reports to the Funds. 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.
DESCRIPTION
OF SHARES
The
Declaration of Trust of the Trust (“Declaration”) permits the Trust’s 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 particular 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 a Fund, shareholders
of each class of a 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 each 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 Funds are not issued.
Following
the creation of the initial Creation Unit Aggregation(s) of a Fund and
immediately prior to the commencement of trading in such Fund’s shares, a holder
of shares may be a “control person” of the Fund, as defined in the 1940 Act. A
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 each 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 each
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 Funds 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. Each 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.
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 a 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.
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 person’s
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.
BOOK-ENTRY
ONLY SYSTEM
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 each 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 (“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 (“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 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 Funds, 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
CREATION
UNIT AGGREGATIONS
The Trust
issues and sells shares of each 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.
PURCHASE
AND ISSUANCE OF CREATION UNIT AGGREGATIONS
General. The Trust
issues and sells shares of each Fund only in Creation Units on a continuous
basis through the Distributor, without a sales load, at the Fund’s NAV next
determined after receipt, on any Business Day (as defined herein), of an order
in proper form.
A
“Business Day” with respect to each Fund is any day on which the NYSE, the
Fund’s Exchange and the Fund’s Custodian is open for business. As of the date of
this Additional Statement, the Exchange observes the following holidays: New
Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
Portfolio
Deposit. The consideration for purchase of a Creation Unit of
shares of a Fund generally consists of the in-kind deposit of a designated
portfolio of equity securities (the “Deposit Securities”) constituting an
optimized representation of the Fund’s 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 each 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 each Fund changes pursuant to changes in the composition of the
Fund’s 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 each Fund, will be made available.
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 investor’s 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 a Fund, the Authorized Participant must
submit to the Distributor an irrevocable order to purchase shares of the Funds.
With respect to a 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 Fund’s Exchange, on any
Business Day in order to receive that Business Day’s 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 investor’s 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 any Fund if (a) the order is
not in proper form; (b) the investor(s), upon obtaining the shares ordered,
would own 80% or more of the currently outstanding shares of any 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 Fund’s
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
a 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 Participant’s 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 Participant’s delivery and
maintenance of collateral having a value equal to 110%, which the Adviser may
change from time to time, of the value of the missing Deposit Securities in
accordance with the Trust’s 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 Trust’s 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 Trust’s 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 Trust’s
brokerage and other transaction costs associated with using the cash to purchase
the 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 purchase transaction fees for in-kind purchases and
cash purchases (when available) are listed in the table below. This table is
subject to revision from time to time.
Fund
|
Fee for In-Kind and Cash
Purchases
|
Maximum Additional Variable Charge for
Cash Purchases*
|
Global
X FTSE Andean 30 ETF
|
$[ ]
|
[ ]
|
Global
X FTSE ASEAN 40 ETF
|
$[ ]
|
[ ]
|
Global
X S&P/TSX Venture ETF
|
$[ ]
|
[ ]
|
Global
X Next 11 ETF
|
$[ ]
|
[ ]
|
_____________
* As
a percentage of the value of the amount invested.
REDEMPTION
OF CREATION UNITS
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 each 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 a 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.
Fund
|
Fee for In-Kind and Cash
Redemptions
|
Maximum Additional Variable Charge for Cash
Redemptions*
|
Global
X FTSE Andean 30 ETF
|
$[ ]
|
[ ]
|
Global
X FTSE ASEAN 40 ETF
|
$[ ]
|
[ ]
|
Global
X S&P/TSX Venture ETF
|
$[ ]
|
[ ]
|
Global
X Next 11 ETF
|
$[ ]
|
[ ]
|
_____________
* 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 Fund’s Exchange, on
any Business Day in order to receive that Business Day’s 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 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 investor’s 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 Trust’s 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 Fund’s 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 Fund’s 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 Trust’s 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 investor’s shares through DTC’s 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
Trust’s Transfer Agent of such redemption request. The tender of an investor’s
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 a 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
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 Trust’s 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 Participant’s 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
Participant’s delivery and maintenance of collateral consisting of cash having a
value equal to 110%, which the Adviser may change from time to time, of the
value of the missing shares in accordance with the Trust’s 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 Trust’s current procedures for collateralization
of missing shares require, among other things, that any cash collateral shall be
held by the Trust’s 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 a 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 Fund’s portfolio securities or determination of its net asset
value is not reasonably practicable; or (4) in such other circumstance as is
permitted by the SEC.
TAXES
The
following summarizes certain additional tax considerations generally affecting
the Funds and their shareholders that are not described in the Prospectus. No
attempt is made to present a detailed explanation of the tax treatment of the
Funds or their 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. This discussion does not address all aspects of U.S. federal
income taxation that may be relevant to shareholders in light of their
particular circumstances or to shareholders subject to special treatment under
U.S. federal income tax laws (e.g., certain financial institutions, insurance
companies, dealers in stock or securities, tax-exempt organizations, persons who
have entered into hedging transactions with respect to shares of a Fund, persons
who borrow in order to acquire shares, and certain foreign
taxpayers).
FEDERAL
- GENERAL INFORMATION
Each 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, each 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. Each Fund intends to make
sufficient distributions or deemed distributions each year to avoid liability
for corporate income tax. If a 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, each 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 each Fund’s 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 each Fund does not hold
more than 5% of the value of its total assets in securities of such issuer and
as to which each 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 each Fund’s
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. Each 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 Fund’s 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). Each 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.
Each 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 any capital loss
carryovers). However, if a 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 shareholder’s
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 a 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 a 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 taxpayer’s 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 taxpayer’s 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 a Fund’s 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
shareholder’s 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 a Fund that
are attributable to dividends received by a 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 a 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 Fund’s 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, a 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.
BACK-UP
WITHHOLDING
In
certain cases, a 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 a 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).
SECTIONS
351 AND 362
The Trust
on behalf of each Fund has the right to reject an order for a purchase of shares
of a 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 a Fund’s 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 a
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.
QUALIFIED
DIVIDEND INCOME
Distributions
by each 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 each 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 each 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 each Fund of its net short-term capital gains will be taxable
as ordinary income. Capital gain distributions consisting of each Fund’s net
capital gains will be taxable as long-term capital gains.
CORPORATE
DIVIDENDS RECEIVED DEDUCTION
A Fund’s
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.
EXCESS
INCLUSION INCOME
Certain
types of income received by a Fund from real estate investment Trusts (“REITs”),
real estate mortgage investment conduits (“REMICs”), taxable mortgage pools or
other investments may cause a 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.
withholding for non-U.S. shareholders even from tax treaty countries; and (5)
cause a 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 a 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 a 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 a 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.
SALES
OF 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 a 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 shareholder’s 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 a 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 a 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.
OTHER
TAXES
Dividends,
distributions and redemption proceeds may also be subject to additional state,
local and foreign taxes depending on each shareholder’s particular
situation.
FOREIGN
TAXES
It is
expected that certain income of the Funds will be subject to foreign withholding
taxes and other taxes imposed by countries in which the Funds invest. If a Fund
is liable for foreign income taxes, including such withholding taxes, such Fund
may meet the requirements of the Code for “passing through” to its shareholders
the foreign taxes paid, but there can be no assurance that a Fund will be able
to do so. Under the Code, if more than 50% of the value of a Fund’s
total assets at the close of the taxable year consists of stock or securities of
foreign corporations, such Fund may file an election with the Internal Revenue
Service to “pass through” to the Fund’s shareholders the amount of foreign
income taxes paid by the Fund. The Funds expect to be able to make this
election, though no assurance can be given that they will be able to do
so. Pursuant to this election, a shareholder (a) will include in
gross income (in addition to taxable dividends actually received) the
shareholder’s pro rata share of the foreign income taxes paid by the Fund; (b)
will treat the shareholder’s pro rata share of such foreign income taxes as
having been paid by the shareholder; and (c) may, subject to certain
limitations, be entitled either to deduct the shareholder’s pro rata share of
such foreign income taxes in computing the shareholder’s taxable income or to
use it as a foreign tax credit against U.S. income taxes. Shortly
after any year for which a Fund makes such a pass-through election, the Fund
will report to its shareholders, in writing, the amount per share of such
foreign tax that must be included in each shareholder’s gross income and the
amount which will be available for deduction or credit.
If a Fund
does not make the election, any foreign taxes paid or accrued will represent an
expense to such Fund, which will reduce its net investment income. Absent this
election, shareholders will not be able to claim either a credit or deduction
for their pro rata shares of such taxes paid by the Fund, nor will shareholders
be required to treat their pro rata shares of such taxes as amounts distributed
to them.
The rules
governing foreign tax credits are complex and, therefore, shareholders should
consult their own tax advisors regarding the availability of foreign tax credits
in their particular circumstances.
TAXATION
OF NON-U.S. SHAREHOLDERS
Dividends
paid by a 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. shareholder’s 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 a
Fund.
For
foreign shareholders of a Fund a distribution attributable to such Fund’s 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 Fund’s 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 a
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.
REPORTING
If a
shareholder recognizes a loss with respect to a Fund’s 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 taxpayer’s 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.
NET
ASSET VALUE
The NAV
for each Fund is calculated by deducting all of a Fund’s 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 each Fund
reserves the right to calculate its NAV to more than two decimal places. The NAV
for each 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 Fund’s
Exchange and the Fund’s 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 a Fund’s NAV, the Fund’s 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 fund’s 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 service’s 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 exchange rates different from
the prices and rates used by the Index Providers may adversely affect a Fund’s
ability to track its underlying index.
DIVIDENDS
AND DISTRIBUTIONS
GENERAL
POLICIES
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 certain Funds.
Dividends and securities gains distributions are distributed in U.S. dollars and
cannot be automatically reinvested in additional shares of the Funds. 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 each
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 Funds.
DIVIDEND
REINVESTMENT SERVICE
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 Funds 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.
OTHER
INFORMATION
COUNSEL
Dechert
LLP, with offices at 1775 I Street Washington, DC 20006-2401, is counsel to the
Independent Trustees of each Fund.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
[ ]
serves as the independent registered public accounting firm of the Trust, audits
the Funds’ financial statements and may perform other services.
ADDITIONAL
INFORMATION
The
Prospectus and this Additional Statement do not contain all the information
included in the Registration Statement filed with the SEC under the Securities
Act with respect to the securities offered by the Trust’s 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.
APPENDIX
A
Each Fund
generally intends to effect deliveries of Creation Units and portfolio
securities on a basis of “T” plus three business days. Each 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 Funds 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
Funds. 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.
The dates
of the Regular Holidays in calendar year 2011 are:
Argentina:
April
21
|
August
15
|
|
|
|
April
22
|
October
10
|
|
|
|
May
25
|
December
8
|
|
|
|
June
20
|
December
30
|
|
|
|
Australia:
January
3
|
April
22
|
May
16
|
August
17
|
December
26
|
January
26
|
April
25
|
June
6
|
September
26
|
December
27
|
March
7
|
April
26
|
July
13
|
October
3
|
|
March
14
|
May
2
|
August
1
|
November
1
|
|
Austria:
January
6
|
June
13
|
November
1
|
|
|
April
22
|
June
23
|
December
8
|
|
|
April
25
|
August
15
|
December
26
|
|
|
June
2
|
October
26
|
December
30
|
|
|
Belgium:
April
22
|
June
13
|
November
11
|
|
|
April
25
|
July
21
|
December
26
|
|
|
June
2
|
August
15
|
|
|
|
June
3
|
November
1
|
|
|
|
Brazil:
January
20
|
April
21
|
October
12
|
|
|
January
25
|
April
22
|
November
2
|
|
|
March
7
|
June
23
|
November
15
|
|
|
March
8
|
September
7
|
December
30
|
|
|
Canada:
January
3
|
May
23
|
September
5
|
December
27
|
|
January
4
|
June
24
|
October
10
|
|
|
February
21
|
July
1
|
November
11
|
|
|
April
22
|
August
1
|
December
26
|
|
|
Chile:
April
22
|
September
19
|
|
|
|
June
20
|
October
10
|
|
|
|
June
27
|
November
1
|
|
|
|
August
15
|
December
8
|
|
|
|
China:
January
3
|
February
4
|
May
3
|
September
5
|
October
10
|
January
17
|
February
7
|
May
4
|
October
3
|
November
11
|
January
31
|
February
8
|
May
5
|
October
4
|
November
24
|
February
1
|
February
9
|
May
6
|
October
5
|
December
26
|
February
2
|
February
21
|
May
30
|
October
6
|
|
February
3
|
May
2
|
July
4
|
October
7
|
|
Colombia:
January
10
|
June
6
|
August
15
|
December
8
|
|
March
21
|
June
27
|
October
17
|
December
30
|
|
April
21
|
July
4
|
November
7
|
|
|
April
22
|
July
20
|
November
14
|
|
|
Czech
Republic:
April
25
|
October
28
|
|
|
|
July
5
|
November
17
|
|
|
|
July
6
|
December
26
|
|
|
|
September
28
|
December
30
|
|
|
|
Denmark:
April
21
|
June
2
|
|
|
|
April
22
|
June
13
|
|
|
|
April
25
|
December
26
|
|
|
|
May
20
|
|
|
|
|
Egypt:
February
15
|
August
31
|
November
7
|
|
|
April
24
|
September
1
|
|
|
|
April
25
|
October
6
|
|
|
|
May
1
|
November
6
|
|
|
|
Finland:
January
6
|
June
24
|
|
|
|
April
22
|
December
6
|
|
|
|
April
25
|
December
26
|
|
|
|
June
2
|
|
|
|
|
France:
April
22
|
November
1
|
|
|
|
April
25
|
November
11
|
|
|
|
June
2
|
December
26
|
|
|
|
July
14
|
|
|
|
|
Germany:
January
6
|
June
2
|
October
2
|
|
|
March
7
|
June
13
|
November
1
|
|
|
April
22
|
June
23
|
December
26
|
|
|
April
25
|
August
15
|
|
|
|
Greece:
January
6
|
April
25
|
December
26
|
|
|
March
7
|
June
13
|
|
|
|
March
25
|
August
15
|
|
|
|
April
22
|
October
28
|
|
|
|
Hong
Kong:
February
2
|
April
22
|
June
6
|
December
26
|
|
February
3
|
April
25
|
July
1
|
December
27
|
|
February
4
|
May
2
|
September
13
|
|
|
April
5
|
May
10
|
October
5
|
|
|
Hungary:
March
14
|
October
31
|
|
|
|
March
15
|
November
1
|
|
|
|
April
25
|
December
26
|
|
|
|
June
13
|
|
|
|
|
India:
January
26
|
April
12
|
June
30
|
August
31
|
October
28
|
February
16
|
April
14
|
July
1
|
September
1
|
November
7
|
March
2
|
April
16
|
August
15
|
September
30
|
November
10
|
April
1
|
April
22
|
August
19
|
October
6
|
December
6
|
April 4
|
May 17
|
August 23
|
October 26
|
|
Indonesia:
February
3
|
May
17
|
August
29
|
September
2
|
December
30
|
February
14
|
June
2
|
August
30
|
November
7
|
|
April
4
|
June
27
|
August
31
|
November
28
|
|
April
22
|
August
17
|
September
1
|
December
26
|
|
Ireland:
January
3
|
May
2
|
December
26
|
|
|
March
17
|
June
6
|
December
27
|
|
|
April
22
|
August
1
|
December
28
|
|
|
April
25
|
October
31
|
|
|
|
Israel:
March
20
|
April
25
|
June
8
|
September
30
|
October
19
|
April
18
|
May
8
|
August
9
|
October
7
|
October
20
|
April
19
|
May
9
|
September
28
|
October
12
|
|
April
24
|
June
7
|
September
29
|
October
13
|
|
Italy:
January
6
|
June
29
|
December
26
|
|
|
April
22
|
August
15
|
|
|
|
April
25
|
November
1
|
|
|
|
June
2
|
December
8
|
|
|
|
Japan:
January
3
|
April
29
|
July
18
|
November
3
|
|
January
10
|
May
3
|
September
19
|
November
23
|
|
February
11
|
May
4
|
September
23
|
December
23
|
|
March
21
|
May
5
|
October
10
|
|
|
Luxemburg:
April
22
|
June
23
|
|
|
|
April
25
|
August
15
|
|
|
|
June
2
|
November
1
|
|
|
|
June
13
|
December
26
|
|
|
|
Malaysia:
January
1
|
February
4
|
May
30
|
August
31
|
November
28
|
February
1
|
February
15
|
May
31
|
September
1
|
December
26
|
February
2
|
May
2
|
June
4
|
October
26
|
|
February
3
|
May
17
|
August
29
|
November
7
|
|
Mexico:
February
7
|
September
16
|
|
|
|
March
21
|
November
2
|
|
|
|
April
21
|
November
21
|
|
|
|
April
22
|
December
12
|
|
|
|
Netherlands:
April
22
|
June
13
|
|
|
|
April
25
|
December
26
|
|
|
|
June
2
|
|
|
|
|
New
Zealand:
January
3
|
April
22
|
December
26
|
|
|
January
4
|
April
25
|
December
27
|
|
|
January
24
|
June
6
|
|
|
|
January
31
|
October
24
|
|
|
|
Norway:
April
21
|
June
2
|
|
|
|
April
22
|
June
13
|
|
|
|
April
25
|
December
26
|
|
|
|
May
17
|
|
|
|
|
Peru:
April
21
|
July
29
|
|
|
|
April
22
|
August
30
|
|
|
|
June
29
|
November
1
|
|
|
|
July
28
|
December
8
|
|
|
|
Philippines:
February
25
|
August
31
|
December
30
|
|
|
April
21
|
November
1
|
|
|
|
April
22
|
November
2
|
|
|
|
August
30
|
November
30
|
|
|
|
Poland:
April
22
|
August
15
|
|
|
|
April
25
|
November
1
|
|
|
|
May
3
|
November
11
|
|
|
|
June
23
|
December
26
|
|
|
|
Portugal:
March
8
|
June
13
|
November
1
|
|
|
April
22
|
June
23
|
December
1
|
|
|
April
25
|
August
15
|
December
8
|
|
|
June
10
|
October
5
|
December
26
|
|
|
Russia:
January
3
|
January
7
|
March
8
|
June
13
|
|
January
4
|
January
10
|
May
2
|
November
4
|
|
January
5
|
February
23
|
May
9
|
|
|
January
6
|
March
7
|
May
10
|
|
|
Singapore:
January
1
|
May
2
|
October
26
|
|
|
February
3
|
May
17
|
November
7
|
|
|
February
4
|
August
9
|
December
26
|
|
|
April
22
|
August
30
|
|
|
|
South
Africa:
March
21
|
May
2
|
December
26
|
|
|
April
22
|
June
16
|
|
|
|
April
25
|
August
9
|
|
|
|
April
27
|
December
16
|
|
|
|
South
Korea:
February
2
|
April
5
|
August
15
|
December
30
|
|
February
3
|
May
5
|
September
12
|
|
|
February
4
|
May
10
|
September
13
|
|
|
March
1
|
June
6
|
October
3
|
|
|
Spain:
January
6
|
May
2
|
September
9
|
December
6
|
|
April
21
|
May
3
|
October
12
|
December
8
|
|
April
22
|
July
25
|
November
1
|
December
26
|
|
April
25
|
August
15
|
November
9
|
|
|
Sweden:
January
6
|
June
6
|
|
|
|
April
22
|
June
24
|
|
|
|
April
25
|
December
26
|
|
|
|
June
2
|
|
|
|
|
Switzerland:
January
6
|
June
13
|
August
15
|
|
|
April
22
|
June
23
|
September
8
|
|
|
April
25
|
June
29
|
November
1
|
|
|
June
2
|
August
1
|
December
26
|
|
|
Taiwan:
January
31
|
February
4
|
May
2
|
|
|
February
1
|
February
7
|
May
6
|
|
|
February
2
|
February
28
|
September
12
|
|
|
February
3
|
April
5
|
October
10
|
|
|
Thailand:
January
3
|
April
14
|
May
17
|
October
24
|
|
February
17
|
April
15
|
July
1
|
December
5
|
|
April
6
|
May
2
|
July
18
|
December
12
|
|
April
13
|
May
5
|
August
12
|
|
|
Turkey:
May
19
|
September
1
|
November
8
|
|
|
August
29
|
September
2
|
November
9
|
|
|
August
30
|
October
28
|
|
|
|
August
31
|
November
7
|
|
|
|
United
Kingdom:
January
3
|
May
30
|
|
|
|
April
22
|
August
29
|
|
|
|
April
25
|
December
26
|
|
|
|
May
2
|
December
27
|
|
|
|
Redemption: The longest
redemption cycle for a Fund is a function of the longest redemption cycle among
the countries whose stocks compromise the Fund.
In the
calendar year 2011, the dates of regular holidays affecting the following
securities markets present the worst-case redemption cycle for a Fund as
follows:
Argentina:
Redemption
Request
Date
|
Redemption
Settlement
Date
|
Settlement
Period
|
4/20/2011
|
4/27/2011
|
8
|
Australia:
Redemption
Request
Date
|
Redemption
Settlement
Date
|
Settlement
Period
|
4/19/2011
|
4/27/2011
|
8
|
4/20/2011
|
4/28/2011
|
8
|
4/21/2011
|
4/29/2011
|
8
|
China:
Redemption
Request
Date
|
Redemption
Settlement
Date
|
Settlement
Period
|
1/26/2011
|
2/10/2011
|
15
|
1/27/2011
|
2/11/2011
|
15
|
1/28/2011
|
2/14/2011
|
17
|
4/27/2011
|
5/9/2011
|
12
|
4/28/2011
|
5/10/2011
|
12
|
4/29/2011
|
5/11/2011
|
12
|
9/28/2011
|
10/11/2011
|
13
|
9/29/2011
|
10/12/2011
|
13
|
9/30/2011
|
10/13/2011
|
13
|
Denmark:
Redemption
Request
Date
|
Redemption
Settlement
Date
|
Settlement
Period
|
4/18/2011
|
4/26/2011
|
8
|
4/19/2011
|
4/27/2011
|
8
|
4/20/2011
|
4/28/2011
|
8
|
Ireland:
Redemption
Request
Date
|
Redemption
Settlement
Date
|
Settlement
Period
|
12/21/2011
|
12/29/2011
|
8
|
12/22/2011
|
12/30/2011
|
8
|
12/23/2011
|
1/3/2012
|
11
|
Japan:
Redemption
Request
Date
|
Redemption
Settlement
Date
|
Settlement
Period
|
4/27/2011
|
5/6/2011
|
9
|
4/28/2011
|
5/9/2011
|
11
|
5/2/2011
|
5/10/2011
|
8
|
Malaysia:
Redemption
Request
Date
|
Redemption
Settlement
Date
|
Settlement
Period
|
1/27/2011
|
2/7/2011
|
11
|
1/28/2011
|
2/8/2011
|
11
|
1/31/2011
|
2/9/2011
|
9
|
8/24/2011
|
9/2/2011
|
9
|
8/25/2011
|
9/5/2011
|
11
|
8/26/2011
|
9/6/2011
|
11
|
Norway:
Redemption
Request
Date
|
Redemption
Settlement
Date
|
Settlement
Period
|
4/18/2011
|
4/26/2011
|
8
|
4/19/2011
|
4/27/2011
|
8
|
4/20/2011
|
4/28/2011
|
8
|
Spain:
Redemption
Request
Date
|
Redemption
Settlement
Date
|
Settlement
Period
|
4/18/2011
|
4/26/2011
|
8
|
4/19/2011
|
4/27/2011
|
8
|
4/20/2011
|
4/28/2011
|
8
|
Taiwan:
Redemption
Request
Date
|
Redemption
Settlement
Date
|
Settlement
Period
|
1/27/2011
|
2/8/2011
|
12
|
1/28/2011
|
2/9/2011
|
12
|
Thailand:
Redemption
Request
Date
|
Redemption
Settlement
Date
|
Settlement
Period
|
4/8/2011
|
4/18/2011
|
10
|
4/11/2011
|
4/19/2011
|
8
|
4/12/2011
|
4/20/2011
|
8
|
Turkey:
Redemption
Request
Date
|
Redemption
Settlement
Date
|
Settlement
Period
|
8/25/2011
|
9/5/2011
|
11
|
8/26/2011
|
9/6/2011
|
11
|
APPENDIX
B
As stated
in the Prospectus, the Funds may enter into certain futures transactions. Some
of these transactions are described in this Appendix. The Funds 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. A 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 a 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 a
Fund upon the purchase or sale of a futures contract. Initially, the Funds 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
Funds 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 a 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 a 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 a Fund’s position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Fund, and the Fund realizes a loss or
gain.
IV.
Risks of Transactions in Futures Contracts
There are
several risks in connection with the use of futures by the Funds, 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, a 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 Funds 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, a 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 Funds intend 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 Funds 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 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 Funds is also subject to the Adviser’s ability to predict
correctly movements in the direction of the market. In addition, in such
situations, if a 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 a 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 Commission’s rules relating to security futures. In
particular, the investments of the Funds 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 Funds
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. A 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.
VI.
Other Matters
The Funds
intend to comply with the regulations of the CFTC exempting it from registration
as a “Commodity Pool Operator.” The Funds are 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.
PART
C
OTHER
INFORMATION
(a)
|
|
(1)
|
|
Certificate
of Trust dated as of March 6, 2008. 1/
|
|
|
|
|
|
(2)
|
|
Declaration
of Trust. 2/
|
|
|
|
|
|
(3)
|
|
Amended
and Restated Schedule A to the Declaration of Trust dated December 5,
2008. 5/
|
|
|
|
|
|
|
|
(4)
|
|
Amended
and Restated Schedule A to the Declaration of Trust dated September 18,
2009. 6/
|
|
|
|
|
|
|
|
(5)
|
|
Amended
and Restated Schedule A to the Declaration of Trust dated April 6, 2010.
8/
|
|
|
|
|
|
|
|
(6)
|
|
Amended
and Restated Schedule A to the Declaration of Trust dated June 9, 2010.
9/
|
|
|
|
|
|
|
|
(7)
|
|
Amended
and Restated Schedule A to the Declaration of Trust dated August 27, 2010.
11/
|
|
|
|
|
|
|
|
(8)
|
|
Amended
and Restated Schedule A to the Declaration of Trust dated
[ ]. *
|
|
|
|
|
|
(b)
|
|
|
|
By-Laws
of the Registrant. 2/
|
|
|
|
(c)
|
|
|
|
Not
Applicable.
|
|
|
|
(d)
|
|
(1)
|
|
Form
of Investment Advisory Agreement. 2/
|
|
|
|
|
|
(2)
|
|
Amended
and Restated Exhibit A to the Investment Advisory
Agreement.5/
|
|
|
|
|
|
|
|
(3)
|
|
Amended
and Restated Exhibit A to the Investment Advisory
Agreement.6/
|
|
|
|
|
|
|
|
(4)
|
|
Amended
and Restated Exhibit A to the Investment Advisory
Agreement.8/
|
|
|
|
|
|
|
|
(5)
|
|
Amended
and Restated Exhibit A to the Investment Advisory
Agreement.9/
|
|
|
|
|
|
|
|
(6)
|
|
Amended
and Restated Exhibit A to the Investment Advisory
Agreement.11/
|
|
|
|
|
|
|
|
(7)
|
|
Amended
and Restated Exhibit A to the Investment Advisory
Agreement.*
|
|
|
|
|
|
(e)
|
|
(1)
|
|
Form
of Distribution Agreement. 2/
|
|
|
|
|
|
|
|
(2)
|
|
Form
of Amendment to the Distribution Agreement. 6/
|
|
|
|
|
|
(3)
|
|
Amendment
to the Distribution Agreement. 8/
|
|
|
|
|
|
(4)
|
|
Amendment
to the Distribution Agreement. 9/
|
|
|
|
|
|
|
|
(5)
|
|
Amendment
to the Distribution Agreement. 11/
|
|
|
|
(f)
|
|
|
|
Not
Applicable.
|
|
|
|
(g)
|
|
(1)
|
|
Form
of Custodian Agreement. 2/
|
|
|
|
|
|
|
|
(2)
|
|
Form
of Amendment to the Custodian Agreement. 6/
|
|
|
|
|
|
(3)
|
|
Amendment
to the Custodian Agreement. 8/
|
|
|
|
|
|
(4)
|
|
Amendment
to the Custodian Agreement. 9/
|
|
|
|
|
|
(5)
|
|
Amendment
to the Custodian Agreement. 11/
|
|
|
|
|
|
(6)
|
|
Amendment
to the Custodian Agreement. *
|
(h)
|
|
(1)
|
|
Form
of Transfer Agent Services Agreement. 2/
|
|
|
|
|
|
(2)
|
|
Amendment
to the Transfer Agent Services Agreement. 6/
|
|
|
|
|
|
|
|
(3)
|
|
Amendment
to the Transfer Agent Services Agreement. 8/
|
|
|
|
|
|
|
|
(4)
|
|
Amendment
to the Transfer Agent Services Agreement.9/
|
|
|
|
|
|
|
|
(5)
|
|
Amendment
to the Transfer Agent Services Agreement.11/
|
|
|
|
|
|
|
|
(6)
|
|
Amendment
to the Transfer Agent Services Agreement.*
|
|
|
|
|
|
|
|
(7)
|
|
Form
of Administration Agreement. 2/
|
|
|
|
|
|
(8)
|
|
Form
of Supervision and Administration Agreement. 3/
|
|
|
|
|
|
|
|
(9)
|
|
Amended
and Restated Schedule A dated December 5, 2008 to the Supervision and
Administration Agreement. 5/
|
|
|
|
|
|
|
|
(10)
|
|
Amended
and Restated Schedule A dated September 18, 2009 to the Supervision and
Administration Agreement.6/
|
|
|
|
|
|
|
|
(11)
|
|
Amended
and Restated Schedule A dated February 26, 2010 to the Supervision and
Administration Agreement.7/
|
|
|
|
|
|
|
|
(12)
|
|
Amended
and Restated Schedule A dated April 6, 2010 to the Supervision and
Administration Agreement.8/
|
|
|
|
|
|
|
|
(13)
|
|
Amended
and Restated Schedule A dated June 9, 2010 to the Supervision and
Administration Agreement.9/
|
|
|
|
|
|
|
|
(14)
|
|
Amended
and Restated Schedule A dated August 27, 2010 to the Supervision and
Administration Agreement.11/
|
|
|
|
|
|
|
|
(15)
|
|
Amended
and Restated Schedule A dated [ ] to the
Supervision and Administration Agreement.*
|
|
|
|
|
|
|
|
(16)
|
|
Form
of Amendment to the Sub-Administration Agreement.6/
|
|
|
|
|
|
|
|
(17)
|
|
Amendment
to the Sub-Administration Agreement.8/
|
|
|
|
|
|
|
|
(18)
|
|
Form
of Sub-License Agreement. 3/
|
|
|
|
|
|
(i)
|
|
(1)
|
|
Opinion
and Consent of Fund Counsel. 3./
|
|
|
|
|
|
(2)
|
|
Opinion
and Consent of Fund Counsel. 5/
|
|
|
|
|
|
|
|
(3)
|
|
Opinion
and Consent of Fund Counsel. 6/
|
|
|
|
|
|
|
|
(4)
|
|
Opinion
and Consent of Fund Counsel. 7/
|
|
|
|
|
|
|
|
(5)
|
|
Opinion
and Consent of Fund Counsel. 8/
|
|
|
|
|
|
|
|
(6)
|
|
Opinion
and Consent of Fund Counsel. 9/
|
|
|
|
|
|
|
|
(7)
|
|
Opinion
and Consent of Fund Counsel. 10/
|
|
|
|
|
|
|
|
(8)
|
|
Opinion
and Consent of Fund Counsel. 11/
|
|
|
|
|
|
|
|
(9)
|
|
Opinion
and Consent of Fund Counsel. *
|
(j)
|
|
(1)
|
|
Consent
of Independent Registered Public Accounting Firm. 4/
|
|
|
|
|
|
(2)
|
|
Consent
of Independent Registered Public Accounting Firm. 5/
|
|
|
|
|
|
|
|
(3)
|
|
Consent
of Independent Registered Public Accounting Firm. 6/
|
|
|
|
|
|
|
|
(4)
|
|
Consent
of Independent Registered Public Accounting Firm. 7/
|
|
|
|
|
|
|
|
(5)
|
|
Consent
of Independent Registered Public Accounting Firm. 8/
|
|
|
|
|
|
|
|
(6)
|
|
Consent
of Independent Registered Public Accounting Firm. 9/
|
|
|
|
|
|
|
|
(7)
|
|
Consent
of Independent Registered Public Accounting Firm. 10/
|
|
|
|
|
|
|
|
(8)
|
|
Consent
of Independent Registered Public Accounting Firm. 11/
|
|
|
|
|
|
|
|
(9)
|
|
Consent
of Independent Registered Public Accounting Firm. *
|
|
|
|
|
|
(k)
|
|
|
|
Not
applicable
|
|
|
|
(l)
|
|
|
|
Initial
Capital Agreement. 3./
|
|
|
|
|
|
(m)
|
|
(1)
|
|
Form
of Distribution and Service Plan. 3./
|
|
|
|
|
|
|
|
(2)
|
|
Amended
and Restated Schedule A to the Distribution and Service Plan.
6/
|
|
|
|
|
|
(3)
|
|
Amended
and Restated Schedule A to the Distribution and Service Plan.
9/
|
|
|
|
|
|
(4)
|
|
Amended
and Restated Schedule A to the Distribution and Service Plan.
11/
|
|
|
|
|
|
(5)
|
|
Amended
and Restated Schedule A to the Distribution and Service Plan.
*
|
|
|
|
(n)
|
|
|
|
Not
applicable
|
|
|
|
(o)
|
|
|
|
Not
applicable
|
|
|
|
(p)
|
|
(1)
|
|
Code
of Ethics of Global X Funds and Global X Management Company LLC.
5/
|
|
|
|
|
|
(2)
|
|
Code
of Ethics of Distributor. 5/
|
|
|
|
(q)
|
|
|
|
Power
of Attorney. 3./
|
|
|
|
(r)
|
|
(1)
|
|
Form
of Index Sub-License Agreement. 3./
|
|
|
|
|
|
(2)
|
|
Amendment
and Restated Schedules A and B to the Index Sub-License Agreement.
8/
|
|
|
|
|
|
(3)
|
|
Amendment
and Restated Schedules A and B to the Index Sub-License Agreement.
9/
|
|
|
|
(s)
|
|
|
|
Form
of Authorized Participation Agreement. 3./
|
* To
be filed by Amendment.
1/ Incorporated
by reference from the Registrant’s initial Registration Statement, SEC File
No. 333-151713, filed June 17, 2008.
2/ Incorporated
by reference from the Registrant’s Pre-effective Amendment #1, SEC File
No. 333-151713, filed August 15, 2008.
3/ Incorporated
by reference from the Registrant’s Pre-effective Amendment #1, SEC File
No. 333-151713, filed October 27, 2008.
4/ Incorporated by
reference from the Registrant’s Pre-effective Amendment #1, SEC File
No. 333-151713, filed November 3, 2008.
5/ Incorporated by
reference from the Registrant’s Post-effective Amendment #2, SEC File No.
333-151713, filed January 20, 2009.
6/
Incorporated by reference from the Registrant’s Post-effective Amendment #4, SEC
File No. 333-151713, filed November 16, 2009.
7/
Incorporated by reference from the Registrant’s Post-effective Amendment #7, SEC
File No. 333-151713, filed February 26, 2010.
8/
Incorporated by reference from the Registrant’s Post-effective Amendment #9, SEC
File No. 333-151713, filed April 16, 2010
9/
Incorporated by reference from the Registrant’s Post-effective Amendment #11,
SEC File No. 333-151713, filed June 16, 2010
10/
Incorporated by reference from the Registrant’s Post-effective Amendment #13,
SEC File No. 333-151713, filed July 16, 2010
11/
Incorporated by reference from the Registrant’s Post-effective Amendment #15,
SEC File No. 333-151713, filed October 27, 2010
Item 24.
|
Persons
Controlled by or Under Common Control with the
Fund
|
None.
Section 3
of Article VII of the Registrant’s Declaration of Trust filed as Exhibit (a)(2)
to the Registrant’s 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 or she becomes involved as a party or otherwise by virtue
of being or having been a Trustee or officer of the Trust and against amounts
paid or incurred by him or her 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
Registrant’s 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 Registrant’s 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 Registrant’s By-Laws filed as Exhibit (b) to the
Registrant’s 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 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 Registrant’s Declaration of Trust, filed as Exhibit (a)(2)
to the Registrant’s 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 Person’s acts or omissions,
the Shareholder or former Shareholder (or such Person’s 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 and Chief Compliance Officer, Global X Management
Company LLC (since 2008); Head of Global Structured Products Operations at
Radian Asset Assurance (2004-2008)
|
Jose C. Gonzalez,
Principal
|
Chief
Operating Officer, Global X Management Company LLC (since 2008); Founder
and President of GWM Group, Inc. (since
2006)
|
Item
27.
|
Principal
Underwriters
|
(a)
Registrant's distributor, SEI Investments Distribution Co. serves as underwriter
for the following registered investment companies.
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
|
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
|
BlackRock
Funds III (f/k/a 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
|
Global
X Funds
|
October
24, 2008
|
ProShares
Trust II
|
November
17, 2008
|
FaithShares
Trust
|
August
7, 2009
|
Schwab
Strategic Trust
|
October
12, 2009
|
(b) The
following officers of SEI Investments Distribution Co. hold the following
positions with the Registrant. Unless otherwise noted, the business
address of each officer is One Freedom Valley Drive, Oaks, PA
19456.
Name
|
|
Position
with Underwriter
|
|
Position
with Registrant
|
|
William
M. Doran
|
|
Director
|
|
None
|
|
Edward
D. Loughlin
|
|
Director
|
|
None
|
|
Wayne
M. Withrow
|
|
Director
|
|
None
|
|
Kevin
P. Barr
|
|
President
& Chief Executive Officer
|
|
None
|
|
Maxine
J. Chou
|
|
Chief
Financial Officer, Chief Operations Officer &
Treasurer
|
|
None
|
|
Karen
E. LaTourette
|
|
Chief
Compliance Officer, Anti-Money Laundering Officer & Assistant
Secretary
|
|
None
|
|
John
C. Munch
|
|
General
Counsel & Secretary
|
|
None
|
|
Mark
J. Held
|
|
Senior
Vice President
|
|
None
|
|
Lori
L. White
|
|
Vice
President & Assistant Secretary
|
|
None
|
|
John
P. Coary
|
|
Vice
President & Assistant Secretary
|
|
None
|
|
John
Cronin
|
|
Vice
President
|
|
None
|
|
Robert
M. Silvestri
|
|
Vice
President
|
|
None
|
|
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 410
Park Avenue, 4th
Floor New
York, NY 10022
|
(b)
|
Investment Adviser
Global
X Management Company LLC 410
Park Avenue, 4th
Floor New
York, NY 10022
|
(c)
|
Principal
Underwriter SEI
Investments Distribution Co. One
Freedom Valley Drive Oaks,
PA 19456.
|
(d)
|
Sub-Administrator SEI
Investments Global Funds Services One
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.
Not
Applicable.
SIGNATURES
Pursuant to the requirements of the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Post-Effective Amendment No.
17 to its Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City and State of New York on the 12th day of November, 2010.
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) and Trustee
|
|
November
12, 2010
|
Bruno
del Ama
|
|
|
|
|
/s/
Jose C. Gonzalez
|
|
Chief
Operating Officer, Treasurer (Principal Financial Officer) and
Principal Accounting Officer
|
|
November
12, 2010
|
Jose
C. Gonzalez
|
|
|
|
|
|
|
|
|
|
*
|
|
|
|
|
Sanjay
Ram Bharani
|
|
Trustee
|
|
November
12, 2010
|
|
|
|
|
|
*
|
|
|
|
|
Scott
R. Chichester
|
|
Trustee
|
|
November
12, 2010
|
|
|
|
|
|
*
|
|
|
|
|
Kartik
Kiran Shah
|
|
Trustee
|
|
November
12, 2010
|
|
|
|
|
|
|
|
|
|
|
*/s/
Bruno del Ama
|
|
|
|
|
Attorney-In-Fact,
pursuant to power of attorney
|
|
|
|