Unassociated Document
As
filed with the U.S. Securities and Exchange Commission
on
February 17, 2011
Securities
Act File No. 333-151713
Investment
Company Act File No. 811-22209
U.S.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D. C. 20549
FORM
N-1A
Registration Statement Under The
Securities Act Of 1933 þ
Pre-Effective
Amendment No. ________ o
Post-Effective
Amendment No. 24 þ
and/or
Registration
Statement Under The Investment Company Act Of 1940 þ
Amendment
No. 27 þ
(Check
appropriate box or boxes)
Global
X Funds
(Exact
Name of Registrant as Specified in Charter)
410
Park Avenue, 4th
Floor
New
York, NY 10022
(Address
of Principal Executive Office)
Registrant’s
Telephone Number, including Area Code: (212) 644-6440
Bruno
del Ama
Global
X Management Company LLC
410
Park Avenue, 4th
Floor
New
York, NY 10022
(Name and
Address of Agent for Service)
With
a copy to:
Daphne
Tippens Chisolm, Esq.
Law
Offices of DT Chisolm, P.C.
11508
H-236 Providence Road
Charlotte,
NC 28277
It is
proposed that this filing will become effective (check appropriate
box)
¨ immediately upon filing
pursuant to paragraph (b)
¨ on (date) pursuant to
paragraph (b)
¨ 60 days after filing
pursuant to paragraph (a)(1)
¨ on (date) pursuant to
paragraph (a)(1)
þ 75 days after
filing pursuant to paragraph (a)(2)
¨ on (date) pursuant to
paragraph (a)(2) of rule 485.
If
appropriate, check the following box:
¨ this post-effective
amendment designates a new effective date for a previously filed post-effective
amendment.
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 February 17, 2011
Global
X UK Mid-Cap ETF
NYSE
Arca, Inc: [ ]
Global
X Germany Small-Cap ETF
NYSE
Arca, Inc: [ ]
Global
X Mexico Small-Cap ETF
NYSE
Arca, Inc: [ ]
Global
X Hong Kong Small-Cap ETF
NYSE
Arca, Inc: [ ]
Global
X Singapore Small-Cap ETF
NYSE
Arca, Inc: [ ]
Global
X South Korea Small-Cap ETF
NYSE
Arca, Inc: [ ]
Global
X Taiwan Small-Cap ETF
NYSE
Arca, Inc: [ ]
Prospectus
February
17, 2011
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 FUND’S STRATEGIES
AND RISKS
|
|
36
|
PORTFOLIO HOLDINGS
INFORMATION
|
|
46
|
FUND MANAGEMENT
|
|
47
|
DISTRIBUTOR
|
|
48
|
BUYING AND SELLING FUND
SHARES
|
|
48
|
FREQUENT TRADING
|
|
49
|
DISTRIBUTION AND SERVICE
PLAN
|
|
50
|
DIVIDENDS AND DISTRIBUTIONS
|
|
50
|
TAXES
|
|
50
|
DETERMINATION OF NET ASSET
VALUE
|
|
54
|
PREMIUM/DISCOUNT
INFORMATION
|
|
55
|
INFORMATION REGARDING THE INDEXES AND THE INDEX
PROVIDER
|
|
55
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OTHER SERVICE PROVIDERS
|
|
57
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FINANCIAL HIGHLIGHTS
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|
57
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OTHER INFORMATION
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57
|
FUND
SUMMARIES
Global
X UK Mid-Cap ETF
Ticker:
[ ] Exchange:
NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X UK Mid-Cap ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the FTSE 250 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
|
"Other
Expenses" are estimates for the current fiscal
year.
|
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is designed to measure equity market performance of mid-market
capitalization companies in the United Kingdom (UK), as defined by
FTSE. It is comprised of the next 250 UK companies by market
capitalization not covered by the 100 largest capitalization companies in the
FTSE 100 Index. As of [ ] the Underlying Index’s three largest holdings 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.
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 invest at least 80% of its total assets in the securities of the Underlying
Index and in ADRs and GDRs based on the securities in the Underlying
Index.
The Fund
uses a representative sampling strategy with respect to the Underlying
Index. “Representative sampling” is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index in terms of key risk
factors, performance attributes and other characteristics. These
include country weightings, market capitalization and other financial
characteristics of securities. The Fund may or may not hold all of
the securities in 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.
Currency Risk: Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
UK's currency depreciates against the U.S. dollar.
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. The Fund may lose value 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.
Mid-Capitalization Companies Risk:
Mid-cap companies may have greater volatility in price than the stocks of
large companies due to limited product lines or resources or a dependency upon a
particular market niche.
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 an economy that is heavily dependent upon trading with key
partners. Any reduction in this trading may cause an adverse impact
on the economy in which the Fund invests. The Fund is particularly
exposed to European Economic
Risk and U.S. Economic
Risk. For more information about these risks, please see page
[ ] of this prospectus.
Risks Related to Investing in the UK:
Although not a member of the European Union, the UK economy may be
materially affected by developments in the member states or the European Union
as a whole. Pension reform, union regulation, and further cuts in liberal social
programs will likely need to be addressed in the near future, which may
adversely impact investments in the Fund. Continued governmental involvement or
control in certain sectors may stifle competition or cause adverse effects on
economic growth.
Securities Lending Risk:
Securities lending involves the risk that the Fund loses money because the
borrower fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of the collateral
provided for loaned securities or of investments made with cash collateral.
These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
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.
Valuation Risk: The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
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 (“Portfolio Managers”). Mr. del Ama, who
is the Chief Executive Officer of the Adviser, and Mr. Gonzalez, who is the
Chief Operating Officer of the Adviser, 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 50,000 shares or multiples thereof ("Creation
Units"). The Fund will issue or redeem Creation Units in return for a
basket of cash and/or securities that the Fund specifies each business
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.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker/dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments create a conflict of interest by influencing your
broker/dealer or other intermediary or its employees or associated persons to
recommend the Funds over another investment. Ask your financial adviser or visit
your financial intermediary’s website for more information.
Global
X Germany Small-Cap ETF
Ticker:
[ ] Exchange:
NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X Germany Small-Cap ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Germany Small-Cap 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
|
"Other
Expenses" are estimates for the current fiscal
year.
|
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is designed to measure equity market performance of
small-market capitalization companies in Germany, as defined by Structured
Solutions. As of [ ] the Underlying Index had [ ]
constituents. The Underlying Index’s three largest holdings 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.
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 invest at least 80% of its total assets in the securities of the Underlying
Index and in ADRs and GDRs based on the securities in the Underlying
Index.
The Fund
uses a representative sampling strategy with respect to the Underlying
Index. “Representative sampling” is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index in terms of key risk
factors, performance attributes and other characteristics. These
include country weightings, market capitalization and other financial
characteristics of securities. The Fund may or may not hold all of
the securities in 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.
Currency Risk: Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Germany’s currency depreciates against the U.S. dollar.
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. The Fund may lose value 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.
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 an economy that is heavily dependent upon trading with key
partners. Any reduction in this trading may cause an adverse impact
on the economy in which the Fund invests. Through its trading
partners, the Fund is specifically exposed to European Economic Risk and
U.S. Economic
Risk. For more information about these risks, please see page
[ ] of this prospectus.
Risks Related to Investing in
Germany: Germany is subject to risks of social unrest and heavy
governmental control, any of which may adversely affect investments in
Germany. Certain sectors and regions of Germany have experienced high
unemployment and labor and social unrest. These issues may cause
downturns in the German markets. Heavy regulation of labor and
product markets is pervasive in Germany. These regulations may at
times stifle German economic growth or cause prolonged periods of
recession.
Securities Lending Risk:
Securities lending involves the risk that the Fund loses money because the
borrower fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of the collateral
provided for loaned securities or of investments made with cash collateral.
These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
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.
Small-Capitalization Companies Risk:
Small cap companies may have greater volatility in price than the stocks
of mid- and large-capitalization companies due to limited product lines or
resources or a dependency upon a particular market niche.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
Valuation Risk: The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
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 (“Portfolio Managers”). Mr. del Ama, who
is the Chief Executive Officer of the Adviser, and Mr. Gonzalez, who is the
Chief Operating Officer of the Adviser, 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 50,000 shares or multiples thereof ("Creation
Units"). The Fund will issue or redeem Creation Units in return for a
basket of cash and/or securities that the Fund specifies each business
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.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker/dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments create a conflict of interest by influencing your
broker/dealer or other intermediary or its employees or associated persons to
recommend the Funds over another investment. Ask your financial adviser or visit
your financial intermediary’s website for more information.
Global
X Mexico Small-Cap ETF
Ticker:
[ ] Exchange: NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X Mexico Small-Cap ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Mexico Small-Cap 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
|
"Other
Expenses" are estimates for the current fiscal
year.
|
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is designed to measure equity market performance of
small-market capitalization companies in Mexico, as defined by Structured
Solutions. As of [ ] the Underlying Index had
[ ] constituents. The underlying Index’s three largest holdings 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.
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 invest at least 80% of its total assets in the securities of the Underlying
Index and in ADRs and GDRs based on the securities in the Underlying
Index.
The Fund
uses a representative sampling strategy with respect to the Underlying
Index. “Representative sampling” is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index in terms of key risk
factors, performance attributes and other characteristics. These
include country weightings, market capitalization and other financial
characteristics of securities. The Fund may or may not hold all of
the securities in 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.
Currency Risk: Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Mexico's currency depreciates against the U.S. dollar.
Custody Risk: Less developed
markets are more likely to experience problems with the clearing and settling of
trades.
Emerging Market Risk: Mexico
is an emerging market country, which 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.
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:
Economies in emerging market countries generally are dependent heavily
upon commodity prices and international trade and, accordingly, may be affected
adversely by the economies of their trading partners, trade barriers, exchange
controls, managed adjustments in relative currency values, and may suffer from
extreme and volatile debt burdens or inflation rates. The Fund is
specifically exposed to Central
and South American Economic Risk, European Economic Risk and
U.S. Economic
Risk. For more information about these risks, please see page
[ ] of this prospectus.
Risk Related to Investing in
Mexico: Mexico has experienced high interest rates, economic volatility,
inflation, currency devaluations and high unemployment rates. The
economy is heavily dependent on exports and commodities.
Securities Lending Risk:
Securities lending involves the risk that the Fund loses money because the
borrower fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of the collateral
provided for loaned securities or of investments made with cash collateral.
These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
Securities Market Risk: The
securities markets of Mexico are small and underdeveloped, and thus are subject
to risks associated with market volatility, lower market capitalization, lower
trading volume, illiquidity, inflation, greater price fluctuations and
uncertainty regarding the existence of trading markets.
Security Risk: The geographic
area in which the Fund invests has experienced security
concerns. Incidents involving Mexico’s security may cause uncertainty
in Mexican markets and may adversely affect its economy.
Small-Capitalization Companies Risk:
Small cap companies may have greater volatility in price than the stocks
of mid- and large-capitalization companies due to limited product lines or
resources or a dependency upon a particular market niche.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
Valuation Risk: The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
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 (“Portfolio Managers”). Mr. del Ama, who
is the Chief Executive Officer of the Adviser, and Mr. Gonzalez, who is the
Chief Operating Officer of the Adviser, 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 50,000 shares or multiples thereof ("Creation
Units"). The Fund will issue or redeem Creation Units in return for a
basket of cash and/or securities that the Fund specifies each business
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.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker/dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments create a conflict of interest by influencing your
broker/dealer or other intermediary or its employees or associated persons to
recommend the Funds over another investment. Ask your financial adviser or visit
your financial intermediary’s website for more information.
Global
X Hong Kong Small-Cap ETF
Ticker:
[ ] Exchange:
NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X Hong Kong Small-Cap ETF (“Fund”) seeks to provide investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Hong Kong Small-Cap 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
|
"Other
Expenses" are estimates for the current fiscal
year.
|
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is designed to measure equity market performance of
small-market capitalization companies in Hong Kong, as defined by Structured
Solutions. As of [ ] the Underlying Index had [ ]
constituents. The Underlying Index’s three largest holdings 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.
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 invest at least 80% of its total assets in the securities of the Underlying
Index and in ADRs and GDRs based on the securities in the Underlying
Index.
The Fund
uses a representative sampling strategy with respect to the Underlying
Index. “Representative sampling” is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index in terms of key risk
factors, performance attributes and other characteristics. These
include country weightings, market capitalization and other financial
characteristics of securities. The Fund may or may not hold all of
the securities in 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.
Currency Risk: Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if Hong
Kong’s currency depreciates against the U.S. dollar.
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. The Fund may lose value due to political, economic
and geographic events affecting a foreign issuer or market.
Geographic Risk: A natural
disaster could occur in the Hong Kong.
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.
Lack of Natural Resources
Risk: The Fund invests in Hong Kong, which has few natural
resources. Any fluctuation or shortage in the commodity markets could
have a negative impact on the Hong Kong economy.
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 an economy that is heavily dependent upon trading with key
partners. Any reduction in this trading may cause an adverse impact
on the economy in which the Fund invests. Through its trading
partners, the Fund is specifically exposed to Asian Economic Risk, European
Economic Risk and U.S.
Economic Risk. For more information about these risks, please
see page [ ] of this prospectus.
Risks Related to Investing in Hong
Kong: Any attempt by China to tighten its control over Hong Kong’s
political, economic or social policies may result in an adverse effect on Hong
Kong’s economy.
Securities Lending Risk:
Securities lending involves the risk that the Fund loses money because the
borrower fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of the collateral
provided for loaned securities or of investments made with cash collateral.
These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
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.
Small-Capitalization Companies Risk:
Small cap companies may have greater volatility in price than the stocks
of mid- and large-capitalization companies due to limited product lines or
resources or a dependency upon a particular market niche.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
Valuation Risk: The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
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 (“Portfolio Managers”). Mr. del Ama, who
is the Chief Executive Officer of the Adviser, and Mr. Gonzalez, who is the
Chief Operating Officer of the Adviser, 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 50,000 shares or multiples thereof ("Creation
Units"). The Fund will issue or redeem Creation Units in return for a
basket of cash and/or securities that the Fund specifies each business
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.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker/dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments create a conflict of interest by influencing your
broker/dealer or other intermediary or its employees or associated persons to
recommend the Funds over another investment. Ask your financial adviser or visit
your financial intermediary’s website for more information.
Global
X Singapore Small-Cap ETF
Ticker:
[ ] Exchange:
NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X Singapore Small-Cap ETF (“Fund”) seeks to provide investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Singapore Small-Cap 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
|
"Other
Expenses" are estimates for the current fiscal
year.
|
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is designed to measure equity market performance of
small-market capitalization companies in Singapore, as defined by Structured
Solutions. As of [ ] the Underlying Index had [ ]
constituents. The Underlying Index’s three largest holdings 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.
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 invest at least 80% of its total assets in the securities of the Underlying
Index and in ADRs and GDRs based on the securities in the Underlying
Index.
The Fund
uses a representative sampling strategy with respect to the Underlying
Index. “Representative sampling” is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index in terms of key risk
factors, performance attributes and other characteristics. These
include country weightings, market capitalization and other financial
characteristics of securities. The Fund may or may not hold all of
the securities in 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.
Currency Risk: Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Singapore’s currency depreciates against the U.S. dollar.
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. The Fund may lose value due to political, economic
and geographic events affecting a foreign issuer or market.
Geographic Risk: A natural
disaster could occur in Singapore.
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.
Lack of Natural Resources Risk:
The Fund invests in Singapore, which has few natural
resources. Any fluctuation or shortage in the commodity markets could
have a negative impact on the Singaporean economy.
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 an economy that is heavily dependent upon trading with key
partners. Any reduction in this trading may cause an adverse impact
on the economy in which the Fund invests. Through its trading
partners, the Fund is specifically exposed to Asian Economic Risk and U.S. Economic
Risk. For more information about these risks, please see page
[ ] of this prospectus.
Risks Related to Investing in
Singapore: The economy in which the Fund invests may be subject to
considerable degrees of economic, political and social instability.
Securities Lending Risk:
Securities lending involves the risk that the Fund loses money because the
borrower fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of the collateral
provided for loaned securities or of investments made with cash collateral.
These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
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.
Small-Capitalization Companies Risk:
Small cap companies may have greater volatility in price than the stocks
of mid- and large-capitalization companies due to limited product lines or
resources or a dependency upon a particular market niche.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
Valuation Risk: The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
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 (“Portfolio Managers”). Mr. del Ama, who
is the Chief Executive Officer of the Adviser, and Mr. Gonzalez, who is the
Chief Operating Officer of the Adviser, 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 50,000 shares or multiples thereof ("Creation
Units"). The Fund will issue or redeem Creation Units in return for a
basket of cash and/or securities that the Fund specifies each business
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 South Korea Small-Cap ETF
Ticker:
[ ] Exchange:
NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X South Korea Small-Cap ETF (“Fund”) seeks to provide investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the Solactive South Korea Small-Cap 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
|
"Other
Expenses" are estimates for the current fiscal
year.
|
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is designed to measure equity market performance of
small-market capitalization companies in South Korea, as defined by Structured
Solutions. As of [ ] the Underlying Index had [ ]
constituents. The Underlying Index’s three largest holdings 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.
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 invest at least 80% of its total assets in the securities of the Underlying
Index and in ADRs and GDRs based on the securities in the Underlying
Index.
The Fund
uses a representative sampling strategy with respect to the Underlying
Index. “Representative sampling” is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index in terms of key risk
factors, performance attributes and other characteristics. These
include country weightings, market capitalization and other financial
characteristics of securities. The Fund may or may not hold all of
the securities in 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.
Currency Risk: Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if South
Korea’s currency depreciates against the U.S. dollar.
Custody Risk: Less developed
markets are more likely to experience problems with the clearing and settling of
trades.
Emerging Market Risk: South
Korea is an emerging market country, which 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. The Fund may lose value due to political, economic
and geographic events affecting a foreign issuer or market.
Geographic Risk: A natural
disaster could occur in South Korea.
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 an economy that is heavily dependent upon trading with key
partners. Any reduction in this trading may cause an adverse impact
on the economy in which the Fund invests. Through its trading
partners, the Fund is specifically exposed to Asian Economic Risk and U.S. Economic
Risk. For more information about these risks, please see page
[ ] of this prospectus.
Risks Related to Investing in South
Korea: The economy in which the Fund invests may be subject to
considerable degrees of economic, political and social instability.
Securities Lending Risk:
Securities lending involves the risk that the Fund loses money because the
borrower fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of the collateral
provided for loaned securities or of investments made with cash collateral.
These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
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.
Security Risk: The geographic
area in which the Fund invests has experienced security
concerns. Incidents involving the country’s security may cause
uncertainty in these markets and may adversely affect its economy.
Small-Capitalization Companies Risk:
Small cap companies may have greater volatility in price than the stocks
of mid- and large-capitalization companies due to limited product lines or
resources or a dependency upon a particular market niche.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
Valuation Risk: The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
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 (“Portfolio Managers”). Mr. del Ama, who
is the Chief Executive Officer of the Adviser, and Mr. Gonzalez, who is the
Chief Operating Officer of the Adviser, 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 50,000 shares or multiples thereof ("Creation
Units"). The Fund will issue or redeem Creation Units in return for a
basket of cash and/or securities that the Fund specifies each business
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 Taiwan Small-Cap ETF
Ticker:
[ ] Exchange:
NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X Taiwan Small-Cap ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Taiwan Small-Cap 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
|
|
Foreign
Taxes: 1
|
|
|
[
] |
|
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
|
“Foreign
Taxes” and "Other Expenses" are estimates for the current fiscal
year.
|
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is designed to measure equity market performance of
small-market capitalization companies in Taiwan, as defined by Structured
Solutions. As of [ ] the Underlying Index had [ ]
constituents. The Underlying Index’s three largest holdings 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.
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 invest at least 80% of its total assets in the securities of the Underlying
Index and in ADRs and GDRs based on the securities in the Underlying
Index.
The Fund
uses a representative sampling strategy with respect to the Underlying
Index. “Representative sampling” is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index in terms of key risk
factors, performance attributes and other characteristics. These
include country weightings, market capitalization and other financial
characteristics of securities. The Fund may or may not hold all of
the securities in 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.
Currency Risk: Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Taiwan’s currency depreciates against the U.S. dollar.
Custody Risk: Less developed
markets are more likely to experience problems with the clearing and settling of
trades.
Emerging Market Risk: Taiwan
is an emerging market country, which 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. The Fund may lose value due to political, economic
and geographic events affecting a foreign issuer or market.
Geographic Risk: A natural
disaster could occur in Taiwan.
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.
Lack of Natural Resources Risk:
The Fund invests in Taiwan, which has few natural
resources. Any fluctuation or shortage in the commodity markets could
have a negative impact on the Taiwanese economy.
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 an economy that is heavily dependent upon trading with key
partners. Any reduction in this trading may cause an adverse impact
on the economy in which the Fund invests. Through its trading
partners, the Fund is specifically exposed to Asian Economic Risk and U.S. Economic
Risk. For more information about these risks, please see page
[ ] of this prospectus.
Risks Related to Investing in Taiwan:
The economy in which the Fund invests may be subject to considerable
degrees of economic, political and social instability.
Securities Lending Risk:
Securities lending involves the risk that the Fund loses money because the
borrower fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of the collateral
provided for loaned securities or of investments made with cash collateral.
These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
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.
Small-Capitalization Companies Risk:
Small cap companies may have greater volatility in price than the stocks
of mid- and large-capitalization companies due to limited product lines or
resources or a dependency upon a particular market niche.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
Valuation Risk: The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
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 (“Portfolio Managers”). Mr. del Ama, who
is the Chief Executive Officer of the Adviser, and Mr. Gonzalez, who is the
Chief Operating Officer of the Adviser, 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 50,000 shares or multiples thereof ("Creation
Units"). The Fund will issue or redeem Creation Units in return for a
basket of cash and/or securities that the Fund specifies each business
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 FUND’S 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.
Securities Lending: Each Fund
may lend its portfolio securities. In connection with such loans,
each Fund will receive liquid collateral equal to at least 102% of the value of
domestic equity securities and ADRs and 105% of the value of 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.
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
Emerging
Market Risk applies to the Global X Mexico Small Cap ETF, Global X South Korea
Small Cap ETF and Global X Taiwan Small-Cap ETF.
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 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.
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.
Lack of
Natural Resources Risk
Lack
of Natural Resources Risk only applies to the Global X Hong Kong Small-Cap ETF,
Global X Singapore Small-Cap ETF and Global X Taiwan Small-Cap ETF.
Hong
Kong, Singapore and Taiwan have few natural resources and limited land area and
are reliant on imports for their commodity needs. Any fluctuation or
shortage in the commodity markets could have a negative impact on these
economies.
Leverage
Risk
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.
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.
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.
Secondary
market trading in Fund shares may be halted by a stock exchange because of
market conditions or other reasons. In addition, trading in Fund
shares on a stock exchange or in any market may be subject to trading halts
caused by extraordinary market volatility pursuant to "circuit breaker" rules on
the stock exchange or market. There can be no assurance that the
requirements necessary to maintain the listing or trading of Fund 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. The trading prices of a Fund's shares may
deviate significantly from NAV during periods of market
volatility. Any of these factions may lead to the Fund's shares
trading at a premium or discount to NAV. While the
creation/redemption feature is designed to make it likely that Shares normally
will trade close to the Fund’s NAV, exchange prices are not expected to
correlate exactly with a Fund's NAV due to timing reasons as well as market
supply and demand factors. In addition, disruptions to creations and
redemptions or the existence of extreme market volatility may result in trading
prices that differ significantly from NAV. If a shareholder purchases at a time
when the market price is at a premium to the NAV or sells at a time when the
market price is at a discount to the NAV, the shareholder may sustain
losses.
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.
Costs of Buying or Selling
Fund Shares
Buying or
selling Fund shares involves two types of costs that apply to all securities
transactions. When buying or selling shares of a Fund through a broker, you will
likely incur a brokerage commission or other charges imposed by brokers as
determined by that broker. In addition, you may incur the cost of the "spread" -
that is, the difference between what professional investors are willing to pay
for Fund shares (the "bid" price) and the price at which they are willing to
sell Fund shares (the "ask" price). Because of the costs inherent in buying or
selling Fund shares, frequent trading may detract significantly from investment
results and an investment in Fund shares may not be advisable for investors who
anticipate regularly making small investments.
Mid-Capitalization Companies
Risk
Mid-Capitalization
Companies Risk applies to the Global X UK Mid-Cap ETF.
Mid-cap
companies may have greater volatility in price than the stocks of large
companies due to limited product lines or resources or a dependency upon a
particular market niche. Further, stocks of mid-sized companies could be more
difficult to liquidate during market downturns compared to larger, more widely
traded companies.
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
Economies
in emerging market countries generally are dependent heavily upon commodity
prices and international trade and, accordingly, may be affected adversely by
the economies of their trading partners, trade barriers, exchange controls,
managed adjustments in relative currency values, and may suffer from extreme and
volatile debt burdens or inflation rates:
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 one country can have a
significant economic effect on the entire Asian region as well as on major
trading partners outside Asia and any adverse events in the Asian markets may
have a significant adverse effect on certain emerging markets.
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
Economic and Monetary Union of the European Union (the “EMU”) requires
compliance with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in
governmental or EMU regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by an EMU member country or its sovereign
debt, and recessions in an EMU member country may have a significant adverse
effect on the economies of EMU member countries and their trading
partners. The European financial markets have recently experienced
volatility and adverse trends due to concerns about rising government debt
levels of several European countries, including Greece, Spain, Ireland, Italy
and Portugal. These events have adversely affected the exchange rate
of the euro and may continue to significantly affect every country in
Europe. Outside of the European Union (“EU”), Iceland has also
experienced adverse trends due to high debt levels and excessive
lending.
U.S. Economic
Risk
The
United States is a significant trading partner of many emerging markets in which
the fund invests. Decreasing U.S. imports, new trade regulations,
changes in the U.S. dollar exchange rate, a recession in the United States or
continued increases in foreclosures rates may have a material adverse effect on
economies of the countries in which each Fund invests. In addition,
high levels of unemployment continue to persist in the U.S., and the effects of
the subprime mortgage market may continue to weigh on U.S. economic growth in
the future.
Risks
Related to Investing in Germany
Risks
Related to Investing in Germany only applies to the Global X Germany Small-Cap
ETF.
Germany
is subject to risks of social unrest and heavy governmental control, any of
which may adversely affect investments in Germany. Certain sectors
and regions of Germany have experience high unemployment and labor and social
unrest. These issues may cause downturns in the German
markets. Heavy regulation of labor and product markets is pervasive
in Germany. These regulations may at times stifle German economic
growth or cause prolonged periods of recession.
Risks
Related to Investing in Hong Kong
Risks
Related to Investing in Hong Kong only applies to the Global X Hong Kong
Small-Cap ETF.
Hong Kong
is located in a part of the world that has historically been prone to natural
disasters such as earthquakes and tsunamis and is economically sensitive to
environmental events. Any such event could result in a significant
adverse impact on the Hong Kong economy.
Hong Kong
is a small island state with few raw material resources and limited land area
and is reliant on imports for its commodity needs. Any fluctuations
or shortages in the commodity markets could have a negative impact on the Hong
Kong economy.
Hong Kong
reverted to Chinese sovereignty on July 1, 1997 as a Special Administrative
Region (SAR) of the People’s Republic of China under the principle of “one
country, two systems.” Althuogh China is obligated to maintain the
current capitalist economic and social system of Hong Kong through June 30,
2047, the continuation of economic and social freedoms enjoyed in Hong Kong is
dependent on the government of China. Any attempts by China to
tighten its control over Hong Kong’s political, economic or social policies may
result in an adverse effect on Hong Kong’s economy.
Risks
Related to Investing in Mexico
Risks
Related to Investing in Mexico only applies to the Global X Mexico Small-Cap
ETF.
Mexico
has begun a process of privatization of certain entities and
industries. In some instances, investors in some newly privatized
entities have suffered losses due to the inability of newly privatized entities
to adjust quickly to a competitive environment or to changing regulatory and
legal standards. There is no assurance that such losses will not
recur.
Mexico
has historically experienced acts of terrorism, significant criminal activity
and strained international relations related to border disputes; historical
animosities; the drug trade; and other defense concerns. Recently,
criminal gang activity related to the drug trade has been on the
rise. These situations may cause uncertainty in the Mexican market
and adversely affect the performance of the Mexican economy.
Certain
political and currency instability risks have contributed to a high level of
price volatility in the Mexican equity and currency markets and could adversely
affect investments in the Fund. Mexico has been destabilized by local
insurrections, social upheavals, drug related violence, and the recent public
health crisis related to the H1N1 influenza outbreak. Recurrence of
these or similar conditions may adversely impact the Mexican
economy. In addition, changes in political parties or other Mexican
political events may affect the economy and cause instability.
Historically,
Mexico has experienced substantial economic instability resulting from, among
other things, periods of very high inflation and significant devaluations of the
Mexican currency, the peso.
Risks
Related to Investing in Singapore
Risks
Related to Investing in Singapore only applies to the Global X Singapore
Small-Cap ETF.
Rising
labor costs and increasing environmental consciousness have led some
labor-intensive industries to relocate to countries with cheaper work forces,
and continued labor outsourcing may adversely affect the Singaporean
economy.
Singapore
is a small island state with few raw material resources and limited land area
and is reliant on imports for its commodity needs. Any fluctuations
or shortages in the commodity markets could have a negative impact on the
Singaporean economy. Given its size and position, Singapore is also
sensitive to the socio-political and economic developments of its neighbors,
Indonesia and Malaysia, relying on both as markets for Singapore’s service
industry and on Malaysia for its raw water supply.
Risks
Related to Investing in South Korea
Risks
Related to Investing in South Korea only applies to the Global X South Korea
Small-Cap ETF.
South
Korea is located in a part of the world that has historically been prone to
natural disasters such as earthquakes and tsunamis and is economically sensitive
to environmental events. Any such event could result in a significant
adverse impact on the South Korean economy.
North and
South Korea each have substantial military capabilities, and historical tensions
between the two present the ongoing risk of war. Recent incidents
involving the North Korean military have heightened tensions between North and
South Korea. Any outbreak of hostilities between the two countries
could have a severe adverse effect on the South Korean economy and its
securities markets.
South
Korea may be subject to economic and labor risks. Among these
structural concerns are the country’s underdeveloped financial markets and a
general lack of regulatory transparency. The restructuring of the
South Korean economy and the need to create a more liberalized economy with a
mechanism for bankrupt firms to exit the market, remain important unfinished
economic reform tasks. These factors may adversely affect the South
Korean economy and cause a diversion of corporate investment to China and other
lower wage countries. South Korea’s economic growth potential is
susceptible to problems from large scale emigration, rigid labor regulations and
ongoing labor relational issues. In addition, the average age of
South Korea’s workforce is rapidly increasing.
Risks
Related to Investing in Taiwan
Risks
Related to Investing in Taiwan only applies to the Global X Taiwan Small-Cap
ETF.
Taiwan is
located in a part of the world that has historically been prone to natural
disasters such as earthquakes and tsunamis and is economically sensitive to
environmental events. Any such event could result in a significant
adverse impact on the Taiwanese economy.
Taiwan’s
size and geographic proximity to the People’s Republic of China and its history
of political contention with China which regards Taiwan as a renegade province,
have resulted in ongoing tensions with China, including the continual risk of
war with China. These tensions may materially impact the Taiwanese
economy and securities markets.
Rising
labor costs and increasing environmental consciousness have led some
labor-intensive industries to relocate to countries with cheaper work forces,
and continued labor outsourcing may adversely affect the Taiwanese
economy.
Risks
Related to Investing in the UK
Risks
Related to Investing in the UK only applies to the Global X UK Mid-Cap
ETF.
Continued
governmental involvement or control in certain sectors may stifle competition or
cause adverse effects on economic growth. The UK has also experienced
acts of terrorism and other defense concerns. These situations may
cause uncertainty in the British market and may adversely affect the performance
of the British economy.
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.
Security
Risk
Security
Risk applies to the Global X Mexico Small-Cap ETF.
Mexico
has historically experienced acts of terrorism, significant criminal activity
and strained international relations related to border disputes; historical
animosities; the drug trade; and other defense concerns. Recently,
criminal gang activity related to the drug trade has been on the
rise. These situations may cause uncertainty in Mexican market and
adversely affect the performance of the Mexican economy.
Small-Capitalization
Companies Risk
Small-cap
companies may have greater volatility in price than the stocks of large
companies due to limited product lines or resources or a dependency upon a
particular market niche. Further, stocks of small-sized companies could be more
difficult to liquidate during market downturns compared to larger, more widely
traded 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.
Valuation
Risk
Because
non-US exchanges may be open on days when each Fund does not price its 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 the Fund's
Shares.
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 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 has been an investment adviser since 2008. 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 an Investment Advisory Agreement and subject to the general supervision of
the Board of Trustees of the Trust, the Adviser provides investment advisory
services to the Funds and is responsible for the day-to-day investment
management of the Funds. 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 and also bears the costs of various third-party services
required by the Funds, including audit, certain custody, portfolio accounting,
legal, transfer agency and printing costs.
Each Fund
pays the Adviser fees in return for providing investment advisory, supervisory
and administrative services under an all-in fee structure. The advisory,
supervisory and administrative fees are (stated as a percentage of the average
daily net assets of each Fund taken separately):
Fund
|
|
Management
Fee
|
Global
X UK Mid-Cap ETF
|
|
[ ]
|
Global
X Germany Small-Cap ETF
|
|
[ ]
|
Global
X Mexico Small-Cap ETF
|
|
[ ]
|
Global
X Hong Kong Small-Cap ETF
|
|
[ ]
|
Global
X Singapore Small-Cap ETF
|
|
[ ]
|
Global
X South Korea Small-Cap ETF
|
|
[ ]
|
Global
X Taiwan Small-Cap 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 Adviser may earn a profit on the
management fee paid by the Funds. Also, the Adviser, and not Fund shareholders,
would benefit from any price decreases in third-party services, including
decreases resulting from an increase in net assets.
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.
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 Chief Operating Officer of
the Adviser since March 2008. Mr. Gonzalez is also the founder and
president of GWM Group, Inc. (“GWM”), a registered broker-dealer and an
affiliate of the Adviser. Mr. Gonzalez has been affiliated with GWM
since 2006. 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 receives income generally in the form of dividends and interest on its
investments.
This income, less expenses, incurred in the operation of such Funds, constitutes
the Funds’
net investment income from which dividends may be paid to you. 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 or whether
you take distributions in cash of additional
Shares. The maximum long-term capital gain rate applicable to
individuals is 15%.
Distributions
of “qualifying dividends” will also generally be taxable to you at long-term
capital gain rates through 2012, as long as certain requirements are
met. 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 Funds’ 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. All dividends (including the
deducted portion) must be included in a corporation’s alternative minimum
taxable income calculations.
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.”
You will
be informed of the amount of your ordinary income dividends, qualifying dividend
income and capital gains distributions at the time they are paid, and will
advise you of the tax status for federal income tax purposes shortly after the
close of each calendar year. If you have not held Shares for a full year, a Fund
may designate and distribute to you, as ordinary income or capital gain, a
percentage of income that is not equal to the actual amount of such income
earned during the period of your investment in such Fund.
A Fund’s
investments in partnerships, including in Qualified Publicly Traded
Partnerships, may result in such Fund being subject to state, local or foreign
income, franchise or withholding tax liabilities.
Excise Tax Distribution
Requirements. Under the Code, a nondeductible excise tax of 4% is imposed
on the excess of a RIC’s “required distribution” for the calendar year ending
within the RIC’s taxable year over the “distributed amount” for such calendar
year. The term “required distribution” means the sum of (a) 98% of ordinary
income (generally net investment income) for the calendar year, (b) 98% of
capital gain (both long-term and short-term) for the one-year period ending on
October 31 (or December 31, if such Fund so elects), and (c) the sum of any
untaxed, undistributed net investment income and net capital gains of the RIC
for prior periods. The term “distributed amount” generally means the sum of (a)
amounts actually distributed by such Fund from its current year’s ordinary
income and capital gain net income and (b) any amount on which such Fund pays
income tax for the taxable year ending in the calendar year. Although such Fund
intends to distribute its net investment income and net capital gains so as to
avoid excise tax liability, such Fund may determine that it is in the interest
of shareholders to distribute a lesser amount. The Funds intend to declare and
pay these amounts in December (or in January which must be treated by you as
received in December) to avoid these excise taxes, but can give no assurances
that its distributions will be sufficient to eliminate all such
taxes.
Foreign Currencies. Under the
Code, gains or losses attributable to fluctuations in exchange rates which occur
between the time a Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time
such Fund actually collects such receivables or pays such liabilities are
treated as ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies, from the disposition of debt securities
denominated in a foreign currency, or from the disposition of a forward foreign
currency contract which are attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the asset and the date of
disposition also are treated as ordinary income or loss. These gains or losses,
referred to under the Code as “section 988” gains or losses, increase or
decrease the amount of such Fund’s investment company taxable income available
to be distributed to its shareholders as ordinary income, rather than increasing
or decreasing the amount of such Fund’s net capital gain.
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 re-characterized 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 the applicable back up withholding rate
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, 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 Funds.
State and Local
Taxes. You may also be subject to state and local taxes on
income and gain attributable to your ownership of Shares. State income taxes may
not apply, however, to the portions of the Funds’ distributions, if any, that
are attributable to interest earned by 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 is 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 250
Index
The UK
Mid-Cap Index is designed to represent the performance of mid-cap UK
companies. It is comprised of the next 250 UK companies by market
capitalization not covered by the 100 largest capitalization companies in the
FTSE 100 Index. The index is comprised of UK companies as defined by FTSE that
are listed in the London Stock Exchange. The stocks are screened for
liquidity and weighted according to free-float market
capitalization. The index is maintained by FTSE International
Limited.
Solactive
Germany Small-Cap Index
The
Solactive Germany Small-Cap Index is designed to reflect the performance of
German small cap companies. It is comprised of the [ ] highest ranked
companies whose market capitalization is less than [ ] billion as of
the date of its inclusion in the index. The index is comprised of
companies that are domiciled or have their main business operations in Germany.
The stocks are screened for liquidity and weighted according to free-float
market capitalization. The index is maintained by Structured Solutions
AG.
Solactive
Mexico Small-Cap Index
The
Solactive Mexico Small-Cap Index is designed to reflect the performance of
Mexican small cap companies. It is comprised of the [ ] highest
ranked companies whose market capitalization is less than [ ] billion
as of the date of its inclusion in the index. The index is comprised
of companies that are domiciled or have their main business operations in
Mexico. The stocks are screened for liquidity and weighted according to
free-float market capitalization. The index is maintained by Structured
Solutions AG.
Solactive
Hong Kong Small-Cap Index
The
Solactive Hong Kong Small-Cap Index is designed to reflect the performance of
Hong Kong small cap companies. It is comprised of the [ ] highest
ranked companies whose market capitalization is less than [ ] billion
as of the date of its inclusion in the index. The index is comprised
of companies that are domiciled or have their main business operations in Hong
Kong. The stocks are screened for liquidity and weighted according to free-float
market capitalization. The index is maintained by Structured Solutions
AG.
Solactive
Singapore Small-Cap Index
The
Solactive Singapore Small-Cap Index is designed to reflect the performance of
Singaporean small cap companies. It is comprised of the [ ] highest
ranked companies whose market capitalization is less than [ ] billion
as of the date of its inclusion in the index. The index is comprised
of companies that are domiciled or have their main business operations in
Singapore. The stocks are screened for liquidity and weighted according to
free-float market capitalization. The index is maintained by Structured
Solutions AG.
Solactive
South Korea Small-Cap Index
The
Solactive South Korea Small-Cap Index is designed to reflect the performance of
Singaporean small cap companies. It is comprised of the [ ] highest
ranked companies whose market capitalization is less than [ ] billion
as of the date of its inclusion in the index. The index is comprised
of companies that are domiciled or have their main business operations in South
Korea. The stocks are screened for liquidity and weighted according to
free-float market capitalization. The index is maintained by Structured
Solutions AG.
Solactive
Taiwan Small-Cap Index
The
Solactive Taiwan Small-Cap Index is designed to reflect the performance of
Singaporean small cap companies. It is comprised of the [ ] highest
ranked companies whose market capitalization is less than [ ] billion
as of the date of its inclusion in the index. The index is comprised
of companies that are domiciled or have their main business operations in
Taiwan. The stocks are screened for liquidity and weighted according to
free-float market capitalization. The index is maintained by Structured
Solutions AG.
Each
Index Provider is described separately below:
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.
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 the Fund and is not in any way connected to it and
does not accept any liability in relation to its 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 February 17, 2011, 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 and its investments 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
20549-1520.
PROSPECTUS
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
February
17, 2011
Investment
Company Act File No.: 811-22209
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 February 17, 2011
Global
X SuperDividend ETF*
NYSE
Arca, Inc: [ ]
Global
X Canada Preferred ETF*
NYSE
Arca, Inc: [ ]
Prospectus
February
17, 2011
*Not open
for investment
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 FUND’S STRATEGIES AND RISKS
|
22
|
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
|
38
|
PREMIUM/DISCOUNT
INFORMATION
|
39
|
TOTAL
RETURN INFORMATION
|
39
|
INFORMATION
REGARDING THE INDEXES AND THE INDEX PROVIDER
|
40
|
OTHER
SERVICE PROVIDERS
|
41
|
FINANCIAL
HIGHLIGHTS
|
41
|
OTHER
INFORMATION
|
42
|
Global
X SuperDividend ETF
Ticker:
[ ] Exchange: NYSE Arca,
Inc.
INVESTMENT
OBJECTIVE
The
Global X SuperDividend ETF (“Fund”) seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
Solactive Global SuperDividendTM 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
|
|
[ ]
|
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. The Fund had not yet
commenced investment operations as of the most recent fiscal year end. Thus, no
portfolio turnover rate is provided for the Fund.
1 "Other
Expenses" are estimates for the current fiscal year.
PRINCIPAL
INVESTMENT STRATEGIES
The Fund
seeks to replicate, before the Fund’s fees and expenses, the performance of the
Solactive Global SuperDividendTM
Index. The Underlying Index tracks the performance of a selected
group of [ ] companies that rank among the highest dividend yielding
equity securities in the world. The companies are equally weighted
subject to maximum concentration limits by industries and
regions. The index applies filters to eliminate those companies
that are most likely to cut their dividends, as defined by Structured Solutions
AG. As of [ ], 2011 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
invests at least 80% of its total assets in the securities of the Underlying
Index and in ADRs and GDRs based on the securities in the Underlying
Index.
The Fund
uses 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 concentrates 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. The Fund may be concentrated in Basic Materials, Energy Infrastructure and
Financials, and as such
the Fund may be susceptible to adverse economic or regulatory occurrences
affecting these sectors. For more information about these risks, please see page
[ ] of this prospectus.
Currency Risk: Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S.
dollar.
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 emerging market countries, currently
including [ ], [ ] and [ ], a list that might
be expanded as the index rebalances over time. The Fund’s investment in an
emerging market country may be subject to a greater risk of loss than
investments in developed markets.
Equity Securities
Risk: Equity securities are subject to changes in value and
their values may be more volatile than other asset classes.
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. The Fund may lose value due to political, economic
and geographic events affecting a foreign issuer or market.
Geographic Risk: A natural
disaster could occur in a geographic region in which the Fund
invests.
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.
Passive Investment Risk: The
Fund is not actively managed and the Adviser does not attempt to take defensive
positions in declining markets.
Risk of High Dividend Yield Stocks:
High yielding stocks are
often speculative, high risk investments. These companies can be
paying out more than they can support and may reduce their dividends or stop
paying dividends at any time, which could have a material adverse effect on the
stock price of these companies and the Fund’s performance.
Securities Lending Risk:
Securities lending involves the risk that the Fund loses money because the
borrower fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of the collateral
provided for loaned securities or of investments made with cash collateral.
These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
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.
Small and Medium Capitalization
Companies Risk: Small and medium cap companies may have greater
volatility in price than the stocks of large-capitalization companies due to
limited product lines or resources or a dependency upon a particular market
niche.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
Valuation Risk: The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The Fund
does not have a full calendar year of performance. Thus, no bar chart or Average
Annual Total Returns table is included for the Fund.
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 (“Portfolio Managers”). Mr. del Ama, who
is Chief Executive Officer of the Adviser, and Mr. Gonzalez, who is Chief
Operating Officer of the Adviser, have been Portfolio Managers of the Fund since
inception.
OTHER
IMPORTANT INFORMATION REGARDING FUND SHARES
For
important information about purchase and sale of Fund Shares, tax information
and financial intermediary compensation, please turn to the sections of this
Prospectus entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and
“Payments to Broker-Dealers and Other Financial Intermediaries” on page
[ ] of the Prospectus.
Global
X Canada Preferred ETF
Ticker:
[ ] Exchange:
NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X Canada Preferred ETF (“Fund”) seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
Solactive Canada Preferred Stock 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
|
|
[ ]
|
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. The Fund had not yet
commenced investment operations as of the most recent fiscal year
end. Thus, no portfolio turnover rate is provided for the
Fund.
2 "Other
Expenses" are estimates for the current fiscal year.
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index tracks the performance of a select group of preferred stocks
from Canadian issuers traded in the Toronto Stock Exchange. The
Underlying Index does not seek to directly reflect the performance of the
companies issuing the preferred stock. The Underlying Index is comprised of
preferred shares that meet certain criteria relating to size, liquidity, issuer
rating, maturity and other requirements as determined by Structured Solutions
AG.
In
general, preferred stock is a class of equity security that pays a specified
dividend that must be paid before any dividends can be paid to common
stockholders, and which takes precedence over common stock in the event of the
company’s liquidation.
Although
preferred stocks represent a partial ownership interest in a company, preferred
stocks generally do not carry voting rights and have economic characteristics
similar to fixed-income securities. Preferred stocks generally are issued with a
fixed par value and pay dividends based on a percentage of that par value at a
fixed or variable rate. Additionally, preferred stocks often have a liquidation
value that generally equals the original purchase price of the preferred stock
at the date of issuance. The Underlying Index may include many different
categories of preferred stock, such as floating and fixed rate preferreds,
cumulative and non-cumulative preferreds or preferred stocks with a callable or
conversion feature.
As of
[ ], 2011 the Underlying Index had [ ]
components. The Underlying Index 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
invests at least 80% of its total assets in the securities of the Underlying
Index and in ADRs and GDRs based on the securities in the Underlying
Index.
The Fund
uses 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 concentrates 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. The
Fund is concentrated in Financials, and as such the
Fund may be susceptible to adverse economic or regulatory occurrences affecting
the financial sector. For more information about these risks, please see page
[ ] of this prospectus.
Currency Risk: Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Canada's currency depreciates against the U.S. dollar.
Equity Securities
Risk: Equity securities are subject to changes in value and
their values may be more volatile than other asset classes.
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. The Fund may lose value due to political, economic
and geographic events affecting a foreign issuer or market.
Geographic Risk: A natural
disaster could occur in a geographic region in which the Fund
invests.
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.
Passive Investment Risk: The
Fund is not actively managed and the Adviser does not attempt to take defensive
positions in declining markets.
Preferred Stock Risk:
Preferred stock is subject to many of the risks associated with debt
securities, including interest rate risk. In addition, preferred stock may not
pay a dividend, an issuer may suspend payment of dividends on preferred stock at
any time, and in certain situations an issuer may call or redeem its preferred
stock or convert it to common stock.
Risks Related to Investing in Canada:
Any negative changes in the agricultural or mining industries could have
an adverse impact on the Canadian economy. The Canadian economy is
heavily dependent upon trading with its key partners. Any reduction in this
trading may cause an adverse impact on the economy in which the Fund
invests. Past demands for sovereignty by the province of Quebec have
significantly affected equity valuations and foreign currency movements in the
Canadian market.
Securities Lending Risk:
Securities lending involves the risk that the Fund loses money because
the borrower fails to return the securities in a timely manner or at all. The
Fund could also lose money in the event of a decline in the value of the
collateral provided for loaned securities or of investments made with cash
collateral. These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
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.
Valuation Risk: The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The Fund
does not have a full calendar year of performance. Thus, no bar chart
or Average Annual Total Returns table is included for the Fund.
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 ("Portfolio Managers"). Mr. del Ama, who
is Chief Executive Officer of the Adviser, and Mr. Gonzalez, who is Chief
Operating Officer of the Adviser, have been Portfolio Managers of the Fund since
inception.
OTHER
IMPORTANT INFORMATION REGARDING FUND SHARES
For
important information about purchase and sale of Fund Shares, tax information
and financial intermediary compensation, please turn to the sections of this
Prospectus entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and
“Payments to Broker-Dealers and Other Financial Intermediaries” on page
[ ] of the Prospectus.
ADDITIONAL
INFORMATION ABOUT THE FUND’S 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.
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.
The
Global X SuperDividend ETF may be concentrated in Basic Materials, Energy Infrastructure and
Financials, and as such
the Fund may be susceptible to adverse economic or regulatory occurrences
affecting these sectors.
The
Global X Canada Preferred ETF is concentrated in Financials, and as such the
Fund may be susceptible to adverse economic or regulatory occurrences affecting
the Financial sector.
Energy Infrastructure
Risk
To the
extent the Fund's investments include securities of issuers in the energy
infrastructure industry, the Fund may be susceptible to adverse economic or
regulatory occurrences affecting this industry. Energy infrastructure companies
are subject to risks specific to the industry they serve including, but not
limited to, reduced volumes of natural gas or other energy commodities available
for transporting, processing or storing; new construction risks and acquisition
risk which can limit growth potential; a sustained reduced demand for crude oil,
natural gas and refined petroleum products resulting from a recession or an
increase in market price or higher taxes; changes in the regulatory environment;
extreme weather; rising interest rates which could result in a higher cost of
capital and drive investors into other investment opportunities; and threats of
attack by terrorists.
Basic Materials
Risk
To the
extent the Fund's investments include securities of issuers in the international
basic materials sector, the Fund may be susceptible to adverse economic or
regulatory occurrences affecting this sector. This sector includes,
for example, metals and mining, commercial fishing and forest product companies.
This sector can be significantly affected by, among other things, commodity
price volatility, demand for basic materials, world economic growth, depletion
of natural resources, technological progress, and government
regulations.
Financial Sector
Risk
Companies
in the financial sector are subject to governmental regulation and, recently,
government intervention, which may adversely affect the scope of their
activities, the prices they can charge and the amount of capital they must
maintain. Governmental regulation may change frequently and may have significant
adverse consequences for companies in the financial sector, including effects
not intended by such regulation. The impact of recent legislation on the
financials sector cannot be predicted. Certain risks may impact the value of
investments in the financial services sector more severely than investments
outside this sector, including the risks associated with operating with
substantial financial leverage. The financial services sector may also be
adversely affected by increases in interest rates and loan losses, decreases in
the availability of money or asset valuations and adverse conditions in other
related markets. Recently, the deterioration of the credit markets has caused an
adverse impact in a broad range of mortgage, asset-backed, auction rate and
other markets, including U.S. and international credit and interbank money
markets generally, thereby affecting a wide range of financial services
institutions and markets. This situation has created instability in the
financial services markets and caused certain financial services companies to
incur large losses. Some financial services companies have experienced declines
in the valuations of their assets, taken action to raise capital (such as the
issuance of debt or equity securities), or even ceased operations. Some
financial services companies have been required to accept or borrow significant
amounts of capital from the U.S. and other governments and may face future
government-imposed restrictions on their businesses or increased government
intervention. These actions have caused the securities of many financial
services companies to decline in value. Insurance companies, in particular, may
be subject to severe price competition, which may have an adverse impact on
their profitability.
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 derivatives than
if it invests only in conventional securities.
Emerging
Market Risk
Emerging
Market Risk only applies to the Global X SuperDividend ETF.
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.
Equity
Securities Risk
The Fund
invests in equity securities, which are subject to changes in value that may be
attributable to market perception of a particular issuer or to general stock
market fluctuations that affect all issuers. Investments in equity securities
may be more volatile than investments in other asset classes.
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 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.
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
Risk
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
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.
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.
Secondary
market trading in Fund shares may be halted by a stock exchange because of
market conditions or other reasons. In addition, trading in Fund
shares on a stock exchange or in any market may be subject to trading halts
caused by extraordinary market volatility pursuant to "circuit breaker" rules on
the stock exchange or market. There can be no assurance that the
requirements necessary to maintain the listing or trading of Fund 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. The trading prices of a Fund's shares may
deviate significantly from NAV during periods of market
volatility. Any of these factions may lead to the Fund's shares
trading at a premium or discount to NAV. While the
creation/redemption feature is designed to make it likely that Shares normally
will trade close to the Fund’s NAV, exchange prices are not expected to
correlate exactly with a Fund's NAV due to timing reasons as well as market
supply and demand factors. In addition, disruptions to creations and
redemptions or the existence of extreme market volatility may result in trading
prices that differ significantly from NAV. If a shareholder purchases at a time
when the market price is at a premium to the NAV or sells at a time when the
market price is at a discount to the NAV, the shareholder may sustain
losses.
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.
Costs of Buying or Selling
Fund Shares
Buying or
selling Fund shares involves two types of costs that apply to all securities
transactions. When buying or selling shares of a Fund through a broker, you will
likely incur a brokerage commission or other charges imposed by brokers as
determined by that broker. In addition, you may incur the cost of the "spread" -
that is, the difference between what professional investors are willing to pay
for Fund shares (the "bid" price) and the price at which they are willing to
sell Fund shares (the "ask" price). Because of the costs inherent in buying or
selling Fund shares, frequent trading may detract significantly from investment
results and an investment in Fund shares may not be advisable for investors who
anticipate regularly making small investments.
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.
Passive
Investment Risk
The Fund
is not actively managed and may be affected by a general decline in market
segments relating to the Underlying Index. The Fund invests in securities
included in, or representative of, the Underlying Index regardless of their
investment merits. The Adviser does not attempt to take defensive positions in
declining markets.
Preferred
Stock Risk
Preferred
Stock Risk only applies to the Global X Canada Preferred ETF.
Unlike
interest payments on debt securities, dividend payments on a preferred stock
typically must be declared by the issuer’s board of directors. An issuer’s board
of directors is generally not under any obligation to pay a dividend (even if
such dividends have accrued), and may suspend payment of dividends on preferred
stock at any time. In the event an issuer of preferred stock experiences
economic difficulties, the issuer’s preferred stock may lose substantial value
due to the reduced likelihood that the issuer’s board of directors will declare
a dividend and the fact that the preferred stock may be subordinated to other
securities of the same issuer. Certain additional risks associated with
preferred stock could adversely affect investments in the Fund.
Interest Rate
Risk
Because
many preferred stocks pay dividends at a fixed rate, their market price can be
sensitive to changes in interest rates in a manner similar to bonds - that is,
as interest rates rise, the value of the preferred stocks held by the Fund are
likely to decline. To the extent that the Fund invests a substantial portion of
its assets in fixed rate preferred stocks, rising interest rates may cause the
value of the Fund’s investments to decline significantly.
Issuer
Risk
Because
many preferred stocks allow holders to convert the preferred stock into common
stock of the issuer, their market price can be sensitive to changes in the value
of the issuer’s common stock. To the extent that the Fund invests a substantial
portion of its assets in convertible preferred stocks, declining common stock
values may also cause the value of the Fund’s investments to
decline.
Dividend
Risk
There is
a chance that the issuer of any of the Fund’s holdings will have its ability to
pay dividends deteriorate or will default (fail to make scheduled dividend
payments on the preferred stock or scheduled interest payments on other
obligations of the issuer not held by the Fund), which would negatively affect
the value of any such holding.
Call
Risk
Preferred
stocks are subject to market volatility and the prices of preferred stocks will
fluctuate based on market demand. Preferred stocks often have call features
which allow the issuer to redeem the security at its discretion. If a preferred
stock is redeemed by the issuer, it will be removed from the Underlying Index.
The redemption of preferred stocks having a higher than average yield may cause
a decrease in the yield of the Underlying Index and the Fund.
Risk of
High Dividend Yield Stocks
Risk
of High Dividend Yield Stocks only applies to the Global X SuperDividend
ETF.
High yielding stocks are
often speculative, high risk investments. These companies can be
paying out more than they can support and may reduce their dividends or stop
paying dividends at any time, which could have a material adverse effect on the
stock price of these companies and the Fund’s performance.
Risks
Related to Investing in Canada
Preferred
Stock Risk only applies to the Global X Canada Preferred ETF.
Commodity Exposure
Risk
The
Canadian economy is highly dependent on the demand for and price of natural
resources. As a result, the Canadian market is relatively concentrated in
issuers involved in the production and distribution of natural resources and any
changes in these sectors could have an adverse impact on the Canadian
economy.
Trading Partners
Risk.
The
Canadian economy is dependent on the economies of the United States, Mexico and
Europe as key trading partners. Reduction in spending by any of these economies
on Canadian products and services or negative changes in any of these economies
may cause an adverse impact on the Canadian economy:
|
·
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North
American Economic Risk. The United States is Canada’s largest trade and
investment partner and the Canadian economy is significantly affected by
developments in the U.S. economy. Since the implementation of the North
American Free Trade Agreement (“NAFTA”) in 1994 among Canada, the U.S. and
Mexico, total two-way merchandise trade between the United States and
Canada has more than doubled. To further this relationship, the three
NAFTA countries entered into the security and prosperity partnership of
North America in March 2005, which may further affect Canada’s dependency
on the U.S. economy. Any downturn in U.S. or Mexican economic activity is
likely to have an adverse impact on the Canadian
economy.
|
|
·
|
European
Economic Risk. Decreasing European imports or exports, changes in European
governmental regulations on trade, changes in the exchange rate of the
Euro and recessions in European Union (“EU”) economies may have a
significant adverse effect on the economies of EU members and their trade
with Canada. The economic and monetary union of the EU requires compliance
with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly
affect every country in Europe and may impact trade with
Canada.
|
Political
Risk
Past
demands for sovereignty by the province of Quebec have significantly affected
equity valuations and foreign currency movements in the Canadian
market.
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
Medium Capitalization Companies Risk
Small and
medium cap companies may have greater volatility in price than the stocks of
large companies due to limited product lines or resources or a dependency upon a
particular market niche. Further, stocks of small and mid-sized companies could
be more difficult to liquidate during market downturns compared to larger, more
widely traded 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.
Valuation
Risk
Because
non-U.S. exchanges may be open on days when the Fund does not price its 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 the Fund's
shares.
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 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 has been an investment
adviser since 2008. 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 an Investment Advisory Agreement and subject
to the general supervision of the Board of Trustees of the Trust, the Adviser
provides investment advisory services to the Funds and is responsible for the
day-to-day investment management of the Funds. 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, and also bears the costs of various third-party
services required by the Funds, including audit, certain custody, portfolio
accounting, legal, transfer agency and printing costs.
Each Fund
pays the Adviser fees in return for providing investment advisory, supervisory
and administrative services under an all-in fee structure. The
advisory, supervisory and administrative fees are (stated as a percentage of the
average daily net assets of each Fund taken separately):
Fund
|
Management
Fee
|
Global
X SuperDividend ETF
|
[ ]
|
Global
X Canada Preferred 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 Adviser may earn a profit on the
management fee paid by the Funds. Also, the Adviser, and not Fund shareholders,
would benefit from any price decreases in third-party services, including
decreases resulting from an increase in net assets.
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.
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.
Jose Gonzalez: Jose
Gonzalez has been Chief Operating Officer 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 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 listing 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 listing 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 listing exchange. The listing 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 receives income generally in the form of dividends and interest on its
investments. This income, less expenses, incurred in the operation of such
Funds, constitutes the Funds’ net investment income from which dividends may be
paid to you. 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 or whether you take distributions
in cash of additional Shares. The maximum long-term capital gain rate applicable
to individuals, estates and trusts is 15%.
Distributions
of “qualifying dividends” will also generally be taxable to you at long-term
capital gain rates through 2012, as long as certain requirements are met. 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 Funds’ 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. All dividends (including the deducted portion) must be
included in a corporation’s alternative minimum taxable income
calculations.
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.”
You will
be informed of the amount of your ordinary income dividends, qualifying dividend
income and capital gains distributions at the time they are paid, and will
advise you of the tax status for federal income tax purposes shortly after the
close of each calendar year. If you have not held Shares for a full year, a Fund
may designate and distribute to you, as ordinary income or capital gain, a
percentage of income that is not equal to the actual amount of such income
earned during the period of your investment in such Fund.
A Fund’s
investments in partnerships, including in Qualified Publicly Traded
Partnerships, may result in such Fund being subject to state, local or foreign
income, franchise or withholding tax liabilities.
Excise Tax Distribution
Requirements. Under the Code, a nondeductible excise tax of 4%
is imposed on the excess of a RIC’s “required distribution” for the calendar
year ending within the RIC’s taxable year over the “distributed amount” for such
calendar year. The term “required distribution” means the sum of (a) 98% of
ordinary income (generally net investment income) for the calendar year, (b) 98%
of capital gain (both long-term and short-term) for the one-year period ending
on October 31 (or December 31, if such Fund so elects), and (c) the sum of any
untaxed, undistributed net investment income and net capital gains of the RIC
for prior periods. The term “distributed amount” generally means the sum of (a)
amounts actually distributed by such Fund from its current year’s ordinary
income and capital gain net income and (b) any amount on which such Fund pays
income tax for the taxable year ending in the calendar year. Although such Fund
intends to distribute its net investment income and net capital gains so as to
avoid excise tax liability, such Fund may determine that it is in the interest
of shareholders to distribute a lesser amount. The Funds intend to declare and
pay these amounts in December (or in January which must be treated by you as
received in December) to avoid these excise taxes, but can give no assurances
that its distributions will be sufficient to eliminate all such
taxes.
Foreign
Currencies. Under the Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time a Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time such Fund actually collects such
receivables or pays such liabilities are treated as ordinary income or ordinary
loss. Similarly, gains or losses from the disposition of foreign currencies,
from the disposition of debt securities denominated in a foreign currency, or
from the disposition of a forward foreign currency contract which are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also are treated as
ordinary income or loss. These gains or losses, referred to under the Code as
“section 988” gains or losses, increase or decrease the amount of such Fund’s
investment company taxable income available to be distributed to its
shareholders as ordinary income, rather than increasing or decreasing the amount
of such Fund’s net capital gain.
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 re-characterized 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 the
applicable back up withholding rate 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, 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 is 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 listing 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
Solactive
Global SuperDividend™ Index
The
Solactive Global SuperDividendTM Index
tracks the performance of a selected group of [ ] companies that rank
among the highest dividend yielding equity securities in the
world. The companies are equally weighted subject to maximum
concentration limits by industries and regions. The index
applies filters to eliminate those companies that are most likely to cut their
dividends, as defined by Structured Solutions AG. The index is
calculated as a total return index in USD and adjusted semi-annually. The index
is maintained by Structured Solutions AG.
Solactive
Canada Preferred Stock Index
The
Solactive Canada Preferred Stock Index tracks the performance of a select group
of preferred stocks from Canadian issuers traded in the Toronto Stock
Exchange. The Underlying Index is comprised of preferred shares that
meet certain criteria relating to size, liquidity, issuer rating, maturity and
other requirements as determined by Structured Solutions AG. The
stocks are screened for liquidity and weighted according to free-float market
capitalization. A specific capping methodology is used at the time of the
semi-annual index review to seek to assure compliance with the rules governing
the listing of financial products on exchanges in the United
States. The index is maintained by Structured Solutions
AG.
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 the Fund and is not in any way connected to it and
does not accept any liability in relation to its issue, operation and
trading.
OTHER
SERVICE PROVIDERS
SEI
Investments Global Funds 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 listing exchange. The
listing 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 listing 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 Funds 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 February 17, 2011, 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.
Additional
information about each Fund and its investments is available in its annual and
semi-annual reports to shareholders. 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, 20549-1520.
PROSPECTUS
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
February
17, 2011
Investment
Company Act File No.: 811-22209
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 February 17, 2011
Global
X Fertilizers/Potash ETF*
NYSE
Arca, Inc: [ ]
Global
X Rare Earths ETF*
NYSE
Arca, Inc: [ ]
Global
X Strategic Metals ETF*
NYSE
Arca, Inc: [ ]
Prospectus
February
17, 2011
*Not open
for investment
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 FUND’S STRATEGIES
AND RISKS
|
37
|
PORTFOLIO HOLDINGS
INFORMATION
|
45
|
FUND MANAGEMENT
|
45
|
DISTRIBUTOR
|
47
|
BUYING AND SELLING FUND
SHARES
|
47
|
FREQUENT TRADING
|
48
|
DISTRIBUTION AND SERVICE
PLAN
|
48
|
DIVIDENDS AND DISTRIBUTIONS
|
49
|
TAXES
|
|
DETERMINATION OF NET ASSET
VALUE
|
52
|
PREMIUM/DISCOUNT
INFORMATION
|
54
|
TOTAL RETURN INFORMATION
|
54
|
INFORMATION REGARDING THE INDEXES AND THE INDEX
PROVIDER
|
55
|
OTHER SERVICE PROVIDERS
|
57
|
FINANCIAL HIGHLIGHTS
|
57
|
OTHER INFORMATION
|
58
|
FUND
SUMMARIES
Global
X Fertilizers/Potash ETF
Ticker:
[ ] Exchange: NYSE Arca,
Inc.
INVESTMENT
OBJECTIVE
The
Global X Fertilizers/Potash ETF (“Fund”) seeks to provide investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Global Fertilizers/Potash 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. The Fund
had not yet commenced investment operations as of the most recent fiscal year
end. Thus, no portfolio turnover rate is provided for the
Fund.
___________________
1"Other
Expenses" are estimates for the current fiscal year.
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is designed to tracks the performance of the largest and most
liquid listed companies globally that are active in some aspect of the
fertilizer industry, as defined by Structured Solutions AG. As of
[ ], 2011 the Underlying Index had __ constituents, __ of which are
foreign companies. The 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 will use 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 invest at least 80% of its total assets in the securities of the Underlying
Index and in ADRs and GDRs 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 fertilizers, which are susceptible to fluctuations in certain
commodity markets. Any negative changes in commodity markets could have a great
impact on fertilizers.
Concentration Risk: Because
the Fund's investments are concentrated in the fertilizer industry, the Fund
will be susceptible to loss due to adverse occurrences affecting the fertilizer
industry.
Currency Risk: The Fund may
invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if a
foreign currency depreciates against the U.S. dollar.
Custody Risk: Less developed
markets are more likely to experience problems with the clearing and settling of
trades.
Emerging Market Risk: The Fund
targets mining companies globally and is expected to invest in securities in
emerging market countries, currently including _______ and _________, a list
that might be expanded as the index rebalances over time. The Fund’s investment
in an emerging market country may be subject to a greater risk of loss than
investments in developed markets.
Equity Securities
Risk: Equity securities are subject to changes in value and
their values may be more volatile than other asset classes.
Foreign Security Risk: The
Fund targets mining companies globally and is expected to invest in securities
in foreign countries, currently including _______ and _________, a list that
might be expanded as the index rebalances over time. 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
targets mining companies globally and is expected to invest in securities in
geographies currently including _______ and _________, a list that might change
as the index rebalances over time. A natural disaster could occur in a
geographic region in which the Fund invests.
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 Companies Risk:
Micro-capitalization 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. 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.
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.
Passive Investment Risk: The
Fund is not actively managed and the Adviser does not attempt to take defensive
positions in declining markets.
Relationship to Fertilizer
Commodities Prices: The Underlying Index measures the performance of
companies involved in the fertilizer industry and not the performance of
fertilizer commodities themselves. The securities of companies involved in the
fertilizer industry may under- or over-perform fertilizer commodities prices
over the short-term or the long-term.
Risks of Cash Transactions:
Unlike most other exchange-traded funds (“ETFs”), the Fund expects to
effect a portion of its creations and redemptions for cash, rather than in-kind
securities. As such, investments in Shares may be less tax efficient than an
investment in a conventional ETF.
Risk Related to Investing in the
Fertilizer Industry: Securities in the Fund’s portfolio may be
significantly subject to the effects of competitive pressures in the fertilizer
industry and the price of fertilizer commodities. These prices may fluctuate
substantially over short periods of time so the Fund’s share price may be more
volatile than other types of investments. In addition, fertilizer companies may
also be significantly affected by import controls, worldwide competition,
liability for environmental damage, depletion of resources, and mandated
expenditures for safety and pollution control devices.
Securities Lending Risk:
Securities lending involves the risk that the Fund loses money because the
borrower fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of the collateral
provided for loaned securities or of investments made with cash collateral.
These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
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.
Small- and Mid-Capitalization
Companies Risk: The Fund may invest a significant percentage of its
assets in small- or medium-capitalization companies, which are typically subject
to lower trading volume, less liquidity, greater price volatility and less
analyst coverage than larger more established companies.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
Valuation Risk: The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The Fund
does not have a full calendar year of performance. Thus, no bar chart
or Average Annual Total Returns table is included for the Fund.
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 (“Portfolio Managers”). Mr. del Ama, who
is the Chief Executive Officer of the Adviser, and Mr. Gonzalez, who is the
Chief Operating Officer of the Adviser, have been Portfolio Managers of the Fund
since inception.
OTHER
IMPORTANT INFORMATION REGARDING FUND SHARES
For
important information about purchase and sale of Fund Shares, tax information
and financial intermediary compensation, please turn to the sections of this
Prospectus entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and
“Payments to Broker-Dealers and Other Financial Intermediaries” on page
[ ] of the Prospectus.
Global
X Rare Earths ETF
Ticker:
[ ] Exchange: NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X Rare Earths ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Global Rare Earths 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. The Fund
had not yet commenced investment operations as of the most recent fiscal year
end. Thus, no portfolio turnover rate is provided for the
Fund.
___________________
1"Other
Expenses" are estimates for the current fiscal year.
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is designed to measure broad based equity market performance of
global companies primarily involved in the rare earths industry, as defined by
Structured Solutions AG. Rare earth elements or rare earth metals are
a collection of seventeen chemical elements in the periodic table: scandium,
yttrium, lanthanum, cerium, praseodymium, neodymium, promethium, samarium,
europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium
and lutetium. Rare earths are crucial to many of the world’s most
advanced technologies, such as cellular phones, high performance batteries, flat
screen televisions, green energy technology, and are critical to the future of
hybrid and electric cars, high-tech military applications and superconductors
and fiber-optic communication systems.
As of
[ ], 2011 the Underlying Index had __ constituents, ___ of which are
foreign companies. The 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 will use 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 invest at least 80% of its total assets in the securities of the Underlying
Index and in ADRs and GDRs 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 Rare Earths miners and producers, which are susceptible to
fluctuations in certain commodity markets. Any negative changes in commodity
markets could have a great impact on Rare Earths miners and
producers.
Concentration Risk: Because
the Fund's investments are concentrated in the rare earths industry, the Fund
will be susceptible to loss due to adverse occurrences affecting the rare earths
industry.
Currency Risk: The Fund may
invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if a
foreign currency depreciates against the U.S. dollar.
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 emerging market countries, currently
including ________, __________, and ___________, a list that might be expanded
as the index rebalances over time. The Fund’s investment in an emerging market
country may be subject to a greater risk of loss than investments in developed
markets.
Equity Securities
Risk: Equity securities are subject to changes in value and
their values may be more volatile than other asset classes.
Foreign Security Risk: The
Fund is expected to invest in securities in foreign countries, currently
including _________, _________, and __________, a list that might be
expanded as the index rebalances over time. 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 geographies currently including ________,
and __________, a list that might change as the index rebalances over time. A
natural disaster could occur in a geographic region in which the Fund
invests.
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 Companies Risk:
Micro-capitalization 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. 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.
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.
Passive Investment Risk: The
Fund is not actively managed and the Adviser does not attempt to take defensive
positions in declining markets.
Relationship to Rare Earths Price:
The Underlying Index measures the performance of companies primarily
involved in the rare earths industry and not the performance of rare earths
themselves. The securities of companies involved in the rare earths industry may
under- or over-perform the rare earths prices themselves over the short-term or
the long-term.
Risks of Cash Transactions:
Unlike most other ETFs, the Fund expects to effect a portion of its
creations and redemptions for cash, rather than in-kind securities. As such,
investments in Shares may be less tax efficient than an investment in a
conventional ETF.
Risks of Regulatory Action and
Changes in Governments: The producing, refining and recycling of rare
earths may be significantly affected by regulatory action and changes in
governments. China, which produces more than 90% of the world’s rare earth
supplies, has implemented a reduction in its export quota of rare earths and has
considered a complete ban on the export of such metals. Such moves could have a
significant impact on industries around the globe and on the values of the
businesses in which the Fund expect to invest. Moreover, while it is expected
that China will consume most if not all, of the rare earths produced within the
country to support its growing economy, China has shown a willingness to flood
the market for rare earths as it did in the late 1990s, thereby causing many
operations to shut down.
Risk Related to Investing in the Rare
Earths Industry: Rare earths are industrial metals that are typically
mined as by-products or secondary metals in operations focused on precious
metals and base metals. Compared to base metals, they have more specialized uses
and are often more difficult to extract. The use of rare earths in modern
technology has increased dramatically over the past years. Consequently, the
demand for rare earths has strained the supply, which has the potential to
result in a shortage of such materials which could adversely affect the
companies in the Fund’s portfolio. Companies involved in the various activities
that are related to the producing, refining and recycling of rare earths tend to
be small-, medium- and micro-capitalization companies with volatile share
prices, are highly dependent on the price of rare earths which may fluctuate
substantially over short periods of time and can be significantly affected by
events relating to international, national and local political and economic
developments, energy conservation, the success of exploration projects,
commodity prices, and tax and other government regulations. The producing,
refining and recycling of rare earths can be capital intensive and, if companies
involved in such activities are not managed well, the share prices of such
companies could decline even as prices for the underlying rare earth/strategic
metals are rising. In addition, companies involved in the various activities
that are related to the producing, refining and recycling of rare earths may be
at risk for environmental damage claims.
Securities Lending Risk:
Securities lending involves the risk that the Fund loses money because the
borrower fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of the collateral
provided for loaned securities or of investments made with cash collateral.
These events could also trigger adverse tax consequences for the Fund. As
securities on loan may not be voted by the Fund, there is a risk that the Fund
may not be able to recall the securities in sufficient time to vote on material
proxy matters.
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.
Small- and Mid-Capitalization
Companies Risk: The Fund may invest a significant percentage of its
assets in small- or medium-capitalization companies, which are typically subject
to lower trading volume, less liquidity, greater price volatility and less
analyst coverage than larger more established companies.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
Valuation Risk: The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The Fund
does not have a full calendar year of performance. Thus, no bar chart
or Average Annual Total Returns table is included for the Fund.
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 (“Portfolio Managers”). Mr. del Ama, who
is the Chief Executive Officer of the Adviser, and Mr. Gonzalez, who is the
Chief Operating Officer of the Adviser, have been Portfolio Managers of the Fund
since inception.
OTHER
IMPORTANT INFORMATION REGARDING FUND SHARES
For
important information about purchase and sale of Fund Shares, tax information
and financial intermediary compensation, please turn to the sections of this
Prospectus entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and
“Payments to Broker-Dealers and Other Financial Intermediaries” on page
[ ] of the Prospectus.
Global
X Strategic Metals ETF
Ticker:
[ ] Exchange: NYSE Arca, Inc.
INVESTMENT
OBJECTIVE
The
Global X Strategic Metals ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Global Strategic Metals 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. The Fund
had not yet commenced investment operations as of the most recent fiscal year
end. Thus, no portfolio turnover rate is provided for the
Fund
___________________
1"Other
Expenses" are estimates for the current fiscal year.
PRINCIPAL
INVESTMENT STRATEGIES
The
Underlying Index is designed to measure broad based equity market performance of
global companies involved in the strategic metals industry. Structured Solutions
AG defines rare metals as metals of special economic importance that have supply
risks, which currently include: antimony, beryllium, cobalt, fluorspar, gallium,
germanium, graphite, indium, magnesium, niobium, tantalum, tungsten, tellurium,
magnesite, molybdenum, chromium, selenium, vanadium and bauxite.
As of
[ ], 2011 the Underlying Index’s had ___ constituents, ___ of which
are foreign companies. The 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
invests at least 80% of its total assets in the securities of the Underlying
Index and in ADRs and GDRs based on the securities in the Underlying
Index.
The Fund
uses 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 concentrates 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 Strategic Metals miners and producers, which are susceptible to
fluctuations in certain commodity markets. Any negative changes in commodity
markets could have a great impact on strategic metals miners and
producers.
Concentration Risk: Because
the Fund's investments are concentrated in the strategic metals industry, the
Fund will be susceptible to loss due to adverse occurrences affecting the
strategic metals industry.
Currency Risk: The Fund may
invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if a
foreign currency depreciates against the U.S. dollar.
Custody Risk: Less developed
markets are more likely to experience problems with the clearing and settling of
trades.
Emerging Market Risk: The Fund
targets mining companies globally and is expected to invest in securities in
emerging market countries, currently including __________, ________ and
___________, a list that might be expanded as the index rebalances over time.
The Fund’s investment in an emerging market country may be subject to a greater
risk of loss than investments in developed markets.
Equity Securities
Risk: Equity securities are subject to changes in value and
their values may be more volatile than other asset classes.
Foreign Security Risk: The
Fund targets mining companies globally and is expected to invest in securities
in foreign countries, currently including __________, ________ and ___________,
a list that might be expanded as the index rebalances over time. 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
targets mining companies globally and is expected to invest in securities in
geographies currently including __________, ________ and ___________, a list
that might change as the index rebalances over time. A natural disaster could
occur in a geographic region in which the Fund invests.
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 Companies Risk:
Micro-capitalization 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. 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.
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.
Passive Investment Risk. The
Fund is not actively managed and the Adviser does not attempt to take defensive
positions in declining markets.
Relationship to Strategic Metals
Price: The Underlying Index measures the performance of companies
involved in the strategic metals industry and not the performance of strategic
metals themselves. The securities of companies involved in the strategic metals
mining industry may under- or over-perform strategic metals prices themselves
over the short-term or the long-term.
Risks of Cash Transactions:
Unlike most other ETFs, the Fund expects to effect a portion of its
creations and redemptions for cash, rather than in-kind securities. As such,
investments in Shares may be less tax efficient than an investment in a
conventional ETF.
Risk Related to Investing in the
Strategic Metals Industry: Securities in the Fund’s portfolio may be
significantly subject to the effects of competitive pressures in the strategic
metals industry and the price of strategic metals themselves. These prices may
fluctuate substantially over short periods of time so the Fund’s share price may
be more volatile than other types of investments. In addition, strategic metals
companies may also be significantly affected by import controls, worldwide
competition, liability for environmental damage, depletion of resources, and
mandated expenditures for safety and pollution control devices.
Securities Lending Risk:
Securities lending involves the risk that the Fund loses money because the
borrower fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of the collateral
provided for loaned securities or of investments made with cash collateral.
These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
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.
Small- and Mid-Capitalization
Companies Risk: The Fund may invest a significant percentage of its
assets in small- or medium-capitalization companies, which are typically subject
to lower trading volume, less liquidity, greater price volatility and less
analyst coverage than larger more established companies.
Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying
Index.
Valuation Risk. The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The Fund
does not have a full calendar year of performance. Thus, no bar chart
or Average Annual Total Returns table is included for the Fund.
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 (“Portfolio Managers”). Mr. del Ama, who
is the Chief Executive Officer of the Adviser, and Mr. Gonzalez, who is the
Chief Operating Officer of the Adviser, have been Portfolio Managers of the Fund
since inception.
OTHER
IMPORTANT INFORMATION REGARDING FUND SHARES
For
important information about purchase and sale of Fund Shares, tax information
and financial intermediary compensation, please turn to the sections of this
Prospectus entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and
“Payments to Broker-Dealers and Other Financial Intermediaries” on page
[ ] of the Prospectus.
ADDITIONAL
INFORMATION ABOUT THE FUND’S 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
Companies
that mine and produce commodities are largely dependent on the prices of these
commodities. Any changes in these sectors or fluctuations in the commodity
markets could have an adverse impact on the companies.
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 derivatives 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.
Equity
Securities Risk
The Fund
invests in equity securities, which are subject to changes in value that may be
attributable to market perception of a particular issuer or to general stock
market fluctuations that affect all issuers. Investments in equity securities
may be more volatile than investments in other asset classes.
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 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.
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
Risk
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 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 listing 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 listing 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.
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.
Secondary
market trading in Fund shares may be halted by a stock exchange because of
market conditions or other reasons. In addition, trading in Fund
shares on a stock exchange or in any market may be subject to trading halts
caused by extraordinary market volatility pursuant to "circuit breaker" rules on
the stock exchange or market. There can be no assurance that the
requirements necessary to maintain the listing or trading of Fund shares will
continue to be met or will remain unchanged.
Secondary
market trading in Fund shares may be halted by a stock exchange because of
market conditions or other reasons. In addition, trading in Fund shares on a
stock exchange or in any market may be subject to trading halts caused by
extraordinary market volatility pursuant to "circuit breaker" rules on the stock
exchange or market. There can be no assurance that the requirements necessary to
maintain the listing or trading of Fund 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. The
trading prices of a Fund's shares may deviate significantly from NAV during
periods of market volatility. Any of these factions may lead to the
Fund's shares trading at a premium or discount to
NAV. While the creation/redemption feature is designed to
make it likely that Shares normally will trade close to the Fund’s NAV, exchange
prices are not expected to correlate exactly with a Fund's NAV due to timing
reasons as well as market supply and demand factors. In addition,
disruptions to creations and redemptions or the existence of extreme market
volatility may result in trading prices that differ significantly from NAV. If a
shareholder purchases at a time when the market price is at a premium to the NAV
or sells at a time when the market price is at a discount to the NAV, the
shareholder may sustain losses.
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.
Costs of Buying or Selling
Fund Shares
Buying or
selling Fund shares involves two types of costs that apply to all securities
transactions. When buying or selling shares of a Fund through a broker, you will
likely incur a brokerage commission or other charges imposed by brokers as
determined by that broker. In addition, you may incur the cost of the "spread" -
that is, the difference between what professional investors are willing to pay
for Fund shares (the "bid" price) and the price at which they are willing to
sell Fund shares (the "ask" price). Because of the costs inherent in buying or
selling Fund shares, frequent trading may detract significantly from investment
results and an investment in Fund shares may not be advisable for investors who
anticipate regularly making small investments.
Micro-Capitalization
Companies 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 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. Microcapitalization 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
the 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.
Passive
Investment Risk
The Fund
is not actively managed and may be affected by a general decline in market
segments relating to the Underlying Index. The Fund invests in securities
included in, or representative of, the Underlying Index regardless of their
investment merits. The Adviser does not attempt to take defensive positions in
declining markets.
Relationship to Commodity
Prices
Each
Underlying Index measures the performance of companies and not the performance
of commodities themselves. Companies may under- or over-perform commodity prices
over the short-term or the long-term.
Risks of Cash
Transactions
Unlike
most other ETFs, each Fund may effect a portion of its creations and redemptions
for cash, rather than in-kind securities. As a result, an investment in each
Fund may be less tax-efficient than an investment in a more conventional ETF.
Other ETFs generally are able to make in-kind redemptions and avoid being taxed
on gain on the distributed portfolio securities at the Fund level. Because each
Fund currently intends to effect a portion of redemptions for cash, rather than
in-kind distributions, it may be required to sell portfolio securities in order
to obtain the cash needed to distribute redemption proceeds, which involves
transaction costs. If the Fund recognizes gain on these sales, this generally
will cause the Fund to recognize gain it might not otherwise have recognized if
it were to distribute portfolio securities in-kind, or to recognize such gain
sooner than would otherwise be required. Each Fund generally intends to
distribute these gains to shareholders to avoid being taxed on this gain at the
Fund level and otherwise comply with the special tax rules that apply to it.
This strategy may cause shareholders to be subject to tax on gains they would
not otherwise be subject to, or at an earlier date than, if they had made an
investment in a different ETF. Moreover, cash transactions may have to be
carried out over several days if the securities market is relatively illiquid
and may involve considerable brokerage fees and taxes. These brokerage fees and
taxes, which will be higher than if the Fund sold and redeemed its shares
principally in-kind, will be passed on to purchasers and redeemers of Creation
Units in the form of creation and redemption transaction fees. Certain countries
may also impose higher local tax rates on transactions involving certain
companies. In addition, these factors may result in wider spreads between the
bid and the offered prices of the Fund’s Shares than for more conventional
ETFs.
Risk Related to Investing in
the Fertilizer Industry
Risk
Related to Investing in the Fertilizer Industry only applies to the Global X
Fertilizers/Potash ETF.
Economic
forces, including forces affecting the agricultural commodity, energy and
financial markets, as well as government policies and regulations affecting the
agricultural sector and related industries, could adversely affect the Fund’s
portfolio companies and, thus, the Fund’s returns. Agricultural production and
trade flows are significantly affected by government policies and
regulations. In addition, the Fund’s portfolio companies must comply
with a broad range of environmental laws and regulations which could adversely
affect the Fund. Additional or more stringent environmental laws and
regulations may be enacted in the future and such changes could have a material
adverse effect on the business of the Fund’s portfolio companies.
Risks of Regulatory Action
and Changes in Governments
Risks
of Regulatory Action and Changes in Governments apply to the Global X Rare
Earths ETF.
The
producing, refining and recycling of rare earth may be significantly affected by
regulatory action and changes in governments. China, which produces more than
90% of the world’s rare earth supplies, has implemented a reduction in its
export quota of rare earths and has considered a complete ban on the export of
such metals. The Chinese government’s plan of a further reduction in the export
of rare earths, as well as the Chinese government’s consideration of a complete
ban on the export of such materials could have a significant impact on
industries around the globe and on the values of the businesses in which the
Fund expects to invest. Moreover, while it is expected that China will consume
most if not all, of the rare earths produced within the country to support its
growing economy, China has shown a willingness to flood the market for rare
earth/strategic metals as it did in the late 1990s, thereby causing many
operations to shut down.
Risk Related to Investing in
the Rare Earths Industry
Risk
Related to Investing in the Rare Earths Industry only applies to the Global X
Rare Earths ETF.
Rare
earths are industrial metals that are typically mined as by-products or
secondary metals in operations focused on precious metals and base metals.
Compared to base metals, they have more specialized uses and are often more
difficult to extract. Rare earth metals (or rare earth elements) are a
collection of chemical elements that are crucial to many of the world’s most
advanced technologies. Rare earths are used in a variety of technologies
including, but not limited to, cellular phones, high performance batteries, flat
screen televisions, and green energy technology such as wind, solar and
geothermal, and are expected to be critical to the future of hybrid and electric
cars, high-tech military applications including radar, missile guidance systems,
navigation and night vision, and superconductors and fiberoptic communication
systems.
The use
of rare earths in modern technology has increased dramatically over the past
years. Consequently, the demand for rare earths has from time to time strained
the supply, and, as a result, there is a risk of a shortage of such materials in
the world which could adversely affect the companies in the Fund’s portfolio.
Competitive pressures may have a significant effect on the financial condition
of companies involved in the various activities that are related to the
producing, refining and recycling of rare earths. Also, these companies are
highly dependent on the demand for and price of rare earths which may fluctuate
substantially over short periods of time, so the Fund’s Share price may be more
volatile than other types of investments.
Companies
involved in the various activities that are related to the producing, refining
and recycling of rare earths tend to be small- to medium-capitalization
companies with volatile share prices and can be significantly affected by events
relating to international political and economic developments, energy
conservation, the success of exploration projects, commodity prices, and tax and
other government regulations. Moreover, some companies may be subject to the
risks generally associated with extraction of natural resources, such as the
risks of mining, and the risks of the hazards associated with metals and mining,
such as fire, drought, and increased regulatory and environmental costs. The
producing, refining and recycling of rare earths can be capital intensive and,
if companies involved in such activities are not managed well, the share prices
of such companies could decline even as prices for the underlying rare earths
are rising. In addition, companies involved in the various activities that are
related to the producing, refining and recycling of rare earths may be at risk
for environmental damage claims. Furthermore, demand for rare earths may change
rapidly and unpredictably, including in light of the development of less
expensive alternatives.
Risk Related to Investing in
the Strategic Metals Industry
Risk
Related to Investing in the Strategic Metals Industry only applies to the Global
X Strategic Metals ETF.
Securities
in the Fund’s portfolio may be significantly subject to the effects of
competitive pressures in the strategic metals industry and the price of
strategic metals themselves. These prices may fluctuate substantially over short
periods of time so the Fund’s share price may be more volatile than other types
of investments. In addition, strategic metals companies may also be
significantly affected by import controls, worldwide competition, liability for
environmental damage, depletion of resources, and mandated expenditures for
safety and pollution control devices.
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-Capitalization
Companies Risk
Small and
Mid-cap companies may have greater volatility in price than the stocks of large
companies due to limited product lines or resources or a dependency upon a
particular market niche. Further, stocks of small and mid-sized companies could
be more difficult to liquidate during market downturns compared to larger, more
widely traded 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.
Valuation
Risk
Because
non-U.S. exchanges may be open on days when the Fund does not price its 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 the Fund's
shares.
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 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 has been an investment adviser since 2008. 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 an Investment Advisory Agreement and subject to the general
supervision of the Board of Trustees of the Trust, the Adviser provides
investment advisory services to the Funds and is responsible for the day-to-day
investment management of the Funds. 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 and also bears the costs of various third-party services
required by the Funds, including audit, certain custody, portfolio accounting,
legal, transfer agency and printing costs.
Each Fund pays the Adviser fees in return for providing investment
advisory, supervisory and administrative services under an all-in fee
structure. The advisory, supervisory and administrative fees are
(stated as a percentage of the average daily net assets of each Fund taken
separately):
Fund
|
Management Fee
|
Global
X Rare Earths ETF
|
[ ]
|
Global
X Strategic Metals ETF
|
[ ]
|
Global
X Fertilizers/Potash 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 Adviser may earn a profit on the
management fee paid by the Funds. Also, the Adviser, and not Fund shareholders,
would benefit from any price decreases in third-party services, including
decreases resulting from an increase in net assets.
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.
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.
Jose Gonzalez: Jose
Gonzalez has been Chief Operating Officer 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 listing 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 listing 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 listing exchange. The listing 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 receives income generally in the form of dividends and interest on its
investments.
This income, less expenses, incurred in the operation of such Funds, constitutes
the Funds’
net investment income from which dividends may be paid to you. Each
Fund receives income generally in the form of dividends and interest on its
investments. This income, less expenses, incurred in the operation of such
Funds, constitutes the Funds’ net investment income from which dividends may be
paid to you. 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 or whether you take distributions in cash
of additional Shares. The maximum long-term capital gain rate
applicable to individuals, estates and trusts is 15%.
Distributions
of “qualifying dividends” will also generally be taxable to you at long-term
capital gain rates through 2012, as long as certain requirements are
met. 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 Funds’ 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. All dividends (including the
deducted portion) must be included in a corporation’s alternative minimum
taxable income calculations.
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.”
You will
be informed of the amount of your ordinary income dividends, qualifying dividend
income and capital gains distributions at the time they are paid, and will
advise you of the tax status for federal income tax purposes shortly
after the close of each calendar year. If you have not held Shares for a full
year, a Fund may designate and distribute to you, as ordinary income or capital
gain, a percentage of income that is not equal to the actual amount of such
income earned during the period of your investment in such Fund.
A Fund’s
investments in partnerships, including in Qualified Publicly Traded
Partnerships, may result in such Fund being subject to state, local or foreign
income, franchise or withholding tax liabilities.
Excise Tax Distribution
Requirements. Under the Code, a nondeductible excise tax of 4%
is imposed on the excess of a RIC’s “required distribution” for the calendar
year ending within the RIC’s taxable year over the “distributed amount” for such
calendar year. The term “required distribution” means the sum of (a) 98% of
ordinary income (generally net investment income) for the calendar year, (b) 98%
of capital gain (both long-term and short-term) for the one-year period ending
on October 31 (or December 31, if such Fund so elects), and (c) the sum of any
untaxed, undistributed net investment income and net capital gains of the RIC
for prior periods. The term “distributed amount” generally means the sum of (a)
amounts actually distributed by such Fund from its current year’s ordinary
income and capital gain net income and (b) any amount on which such Fund pays
income tax for the taxable year ending in the calendar year. Although such Fund
intends to distribute its net investment income and net capital gains so as to
avoid excise tax liability, such Fund may determine that it is in the interest
of shareholders to distribute a lesser amount. The Funds intend to declare and
pay these amounts in December (or in January which must be treated by you as
received in December) to avoid these excise taxes, but can give no assurances
that its distributions will be sufficient to eliminate all such
taxes.
Foreign
Currencies. Under the Code, gains or losses attributable
to fluctuations in exchange rates which occur between the time a Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time such Fund actually collects such
receivables or pays such liabilities are treated as ordinary income or ordinary
loss. Similarly, gains or losses from the disposition of foreign currencies,
from the disposition of debt securities denominated in a foreign currency, or
from the disposition of a forward foreign currency contract which are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also are treated as
ordinary income or loss. These gains or losses, referred to under the Code as
“section 988” gains or losses, increase or decrease the amount of such Fund’s
investment company taxable income available to be distributed to its
shareholders as ordinary income, rather than increasing or decreasing the amount
of such Fund’s net capital gain.
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 re-characterized 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 the applicable back up withholding rate
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, 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 is 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 2010 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 listing 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
Solactive
Global Fertilizers/Potash Index
The
Solactive Global Fertilizers/Potash Index tracks the performance of the largest
and most liquid listed companies globally that are active in some aspect of the
fertilizer industry. The index is calculated as a total return index in USD and
adjusted semi-annually. The stocks are screened for liquidity and weighted
according to free-float market capitalization. A specific capping methodology is
used at the time of the semi-annual index review to seek to assure compliance
with the rules governing the listing of financial products on exchanges in the
United States. The index is maintained by Structured Solutions AG.
Solactive
Global Rare Earths Index
The
Solactive Global Rare Earths Index tracks the performance of the largest and
most liquid listed companies that are active in some aspect of the rare earths
industry. Rare earth elements or rare earth metals are a collection of seventeen
chemical elements in the periodic table: scandium, yttrium, lanthanum, cerium,
praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium,
dysprosium, holmium, erbium, thulium, ytterbium and lutetium. The
index is calculated as a total return index in USD and adjusted semi-annually.
The stocks are screened for liquidity and weighted according to free-float
market capitalization. A specific capping methodology is used at the time of the
semi-annual index review to seek to assure compliance with the rules governing
the listing of financial products on exchanges in the United States. The index
is maintained by Structured Solutions AG.
Solactive
Global Strategic Metals Index
The
Solactive Global Strategic Metals Index tracks the performance of the largest
and most liquid listed companies that are active in some aspect of the strategic
metals industry. Structured Solutions AG defines rare metals as metals of
special economic importance that have supply risks, which currently include:
antimony, beryllium, cobalt, fluorspar, gallium, germanium, graphite, indium,
magnesium, niobium, tantalum, tungsten, tellurium, magnesite, molybdenum,
chromium, selenium, vanadium and bauxite. The index is calculated as a total
return index in USD and adjusted semi-annually. The stocks are screened for
liquidity and weighted according to free-float market capitalization. A specific
capping methodology is used at the time of the semi-annual index review to seek
to assure compliance with the rules governing the listing of financial products
on exchanges in the United States. The index is maintained by Structured
Solutions AG.
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 the Fund and is not in any way connected to it and
does not accept any liability in relation to its 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 listing
exchange. The listing 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 listing 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 February 17, 2011, 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.
Additional
information about each Fund and its investments is available in its annual and
semi-annual reports to shareholders. 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
20549-1520.
PROSPECTUS
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
February
17, 2011
Investment
Company Act File No.: 811-22209
![](logo.jpg)
Statement
of Additional Information
Dated
February 17, 2011
This
Statement of Additional Information (“SAI”) 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 UK Mid-Cap ETF [ ]
|
Global
X Taiwan Small-Cap ETF [ ]
|
Global
X Germany Small-Cap ETF [ ]
|
Global
X Rare Earths ETF [ ]
|
Global
X Mexico Small-Cap ETF [ ]
|
Global
X Strategic Metals ETF [ ]
|
Global
X Hong Kong Small-Cap ETF [ ]
|
Global
X Fertilizers/Potash ETF [ ]
|
Global
X Singapore Small-Cap ETF [ ]
|
Global
X SuperDividend [ ]
|
Global
X South Korea Small-Cap ETF [ ]
|
Global
X Canada Preferred ETF
[ ]
|
The
Prospectus for the various Funds is dated March 1, 2011. Capitalized terms used
herein that are not defined have the same meaning as in the Prospectus, unless
otherwise noted. The financial statements and notes contained in the Annual
Report of the Trust are incorporated by reference into and are deemed to be part
of this SAI. A copy of the Prospectus and Annual Report 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. The principal U.S. national stock exchange on which all
Funds identified in this SAI are listed is NYSE Arca.
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 PROVIDERS
|
13
|
INVESTMENT
RESTRICTIONS
|
15
|
CONTINUOUS
OFFERING
|
16
|
PORTFOLIO
HOLDINGS
|
17
|
MANAGEMENT
OF THE TRUST
|
18
|
BOARD
OF TRUSTEES AND OFFICERS
|
18
|
STANDING
BOARD COMMITTEES
|
22
|
TRUSTEE
OWNERSHIP OF FUND SHARES
|
22
|
TRUSTEE
OWNERSHIP OF SECURITIES OF THE ADVISER AND RELATED
COMPANIES
|
22
|
TRUSTEE
COMPENSATION
|
23
|
CODE
OF ETHICS
|
23
|
PORTFOLIO
MANAGERS
|
24
|
BROKERAGE
TRANSACTIONS
|
25
|
PROXY
VOTING
|
26
|
SUB-ADMINISTRATOR
|
27
|
DISTRIBUTOR
|
27
|
CUSTODIAN
AND TRANSFER AGENT
|
27
|
DESCRIPTION
OF SHARES
|
28
|
BOOK-ENTRY
ONLY SYSTEM
|
30
|
PURCHASE
AND REDEMPTION OF CREATION UNITS
|
31
|
CREATION
UNIT AGGREGATIONS
|
31
|
PURCHASE
AND ISSUANCE OF CREATION UNIT AGGREGATIONS
|
31
|
REDEMPTION
OF CREATION UNITS
|
35
|
TAXES
|
38
|
FEDERAL
- GENERAL INFORMATION
|
38
|
BACK-UP
WITHHOLDING
|
40
|
SECTIONS
351 AND 362
|
40
|
QUALIFIED
DIVIDEND INCOME
|
40
|
CORPORATE
DIVIDENDS RECEIVED DEDUCTION
|
41
|
NET
CAPITAL LOSS CARRYFORWARDS
|
41
|
EXCESS
INCLUSION INCOME
|
41
|
TAXATION
OF INCOME FROM CERTAIN FINANCIAL INSTRUMENTS AND PFICS
|
41
|
SALES
OF SHARES
|
41
|
OTHER
TAXES
|
42
|
FOREIGN
TAXES
|
42
|
TAXATION
OF NON-U.S. SHAREHOLDERS
|
42
|
REPORTING
|
43
|
NET
ASSET VALUE
|
43
|
DIVIDENDS
AND DISTRIBUTIONS
|
44
|
GENERAL
POLICIES
|
44
|
DIVIDEND
REINVESTMENT SERVICE
|
44
|
OTHER
INFORMATION
|
44
|
CONTROL
PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
|
44
|
COUNSEL
|
44
|
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
|
44
|
ADDITIONAL
INFORMATION
|
44
|
APPENDIX
A
|
A-1
|
APPENDIX
B
|
B-1
|
GENERAL
DESCRIPTION OF THE TRUST AND ITS FUNDS
The Trust
currently consists of 54 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 SAI relates only to
the following Funds:
Global
X Mexico Small-Cap ETF
|
Global
X Taiwan Small-Cap ETF
|
Global
X UK Mid-Cap ETF
|
Global
X Rare Earths ETF
|
Global
X Hong Kong Small-Cap ETF
|
Global
X Strategic Metals ETF
|
Global
X Germany Small-Cap ETF
|
Global
X Fertilizers/Potash ETF
|
Global
X Singapore Small-Cap ETF
|
Global
X SuperDividend
|
Global
X South Korea Small-Cap ETF
|
Global
X Canada Preferred 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 Mexico Small-Cap ETF
|
50,000
|
Global
X UK Mid-Cap ETF
|
50,000
|
Global
X Hong Kong Small-Cap ETF
|
50,000
|
Global
X Germany Small-Cap ETF
|
50,000
|
Global
X Singapore Small-Cap ETF
|
50,000
|
Global
X South Korea Small-Cap ETF
|
30,000
|
Global
X Taiwan Small-Cap ETF
|
50,000
|
Global
X Rare Earths ETF
|
50,000
|
Global
X Strategic Metals ETF
|
50,000
|
Global
X Fertilizers/Potash ETF
|
50,000
|
Global
X SuperDividend
|
50,000
|
Global
X Canada Preferred ETF
|
50,000
|
The Trust
reserves the right to offer a “cash” option for creations and redemptions of
shares. Shares may be issued in advance of receipt of Deposit
Securities subject to various conditions including a requirement to maintain on
deposit with the Trust cash 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 SAI 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. Each Fund
invests 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
Global X Mexico Small-Cap ETF, Global X UK Mid-Cap ETF, Global X Hong Kong
Small-Cap ETF, Global X Germany Small-Cap ETF, Global X Singapore Small-Cap ETF,
Global X South Korea Small-Cap ETF and Global X Taiwan Small-Cap ETF use a
representative sampling strategy with respect to the Underlying
Index. “Representative sampling” is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index in terms of key risk
factors, performance attributes and other characteristics. These
include industry weightings, market capitalization and other financial
characteristics of securities. Each Fund may or may not hold all of
the securities in the Underlying Index.
The
Global X Rare Earths ETF, Global X Strategic Metals ETF, Global X
Fertilizers/Potash ETF, Global X SuperDividend, Global X Canada Preferred ETF
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 Depositary 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 depositary 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 SAI.
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 Advisery
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.
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.
NEW
FUND RISKS. Certain of 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 250
Index
The UK
Mid-Cap Index is designed to represent the performance of mid-cap UK
companies. It is comprised of the next 250 UK companies by market
capitalization not covered by the 100 largest capitalization companies in the
FTSE 100 Index. The index is comprised of UK companies as defined by FTSE that
are listed in the London Stock Exchange. The stocks are screened for
liquidity and weighted according to free-float market
capitalization. The index is maintained by FTSE International
Limited.
Solactive
Germany Small-Cap Index
The
Solactive Germany Small-Cap Index is designed to reflect the performance of
German small cap companies. It is comprised of the [ ] highest ranked
companies whose market capitalization is less than [ ] billion as of
the date of its inclusion in the index. The index is comprised of
companies that are domiciled or have their main business operations in Germany.
The stocks are screened for liquidity and weighted according to free-float
market capitalization. The index is maintained by Structured Solutions
AG.
Solactive
Mexico Small-Cap Index
The
Solactive Mexico Small-Cap Index is designed to reflect the performance of
Mexican small cap companies. It is comprised of the [ ] highest
ranked companies whose market capitalization is less than [ ] billion
as of the date of its inclusion in the index. The index is comprised
of companies that are domiciled or have their main business operations in
Mexico. The stocks are screened for liquidity and weighted according to
free-float market capitalization. The index is maintained by Structured
Solutions AG.
Solactive
Hong Kong Small-Cap Index
The
Solactive Hong Kong Small-Cap Index is designed to reflect the performance of
Hong Kong small cap companies. It is comprised of the [ ] highest
ranked companies whose market capitalization is less than [ ] billion
as of the date of its inclusion in the index. The index is comprised
of companies that are domiciled or have their main business operations in Hong
Kong. The stocks are screened for liquidity and weighted according to free-float
market capitalization. The index is maintained by Structured Solutions
AG.
Solactive
Singapore Small-Cap Index
The
Solactive Singapore Small-Cap Index is designed to reflect the performance of
Singaporean small cap companies. It is comprised of the [ ] highest
ranked companies whose market capitalization is less than [ ] billion
as of the date of its inclusion in the index. The index is comprised
of companies that are domiciled or have their main business operations in
Singapore. The stocks are screened for liquidity and weighted according to
free-float market capitalization. The index is maintained by Structured
Solutions AG.
Solactive
South Korea Small-Cap Index
The
Solactive South Korea Small-Cap Index is designed to reflect the performance of
Singaporean small cap companies. It is comprised of the [ ] highest
ranked companies whose market capitalization is less than [ ] billion
as of the date of its inclusion in the index. The index is comprised
of companies that are domiciled or have their main business operations in South
Korea. The stocks are screened for liquidity and weighted according to
free-float market capitalization. The index is maintained by Structured
Solutions AG.
Solactive
Taiwan Small-Cap Index
The
Solactive Taiwan Small-Cap Index is designed to reflect the performance of
Singaporean small cap companies. It is comprised of the [ ] highest
ranked companies whose market capitalization is less than [ ] billion
as of the date of its inclusion in the index. The index is comprised
of companies that are domiciled or have their main business operations in
Taiwan. The stocks are screened for liquidity and weighted according to
free-float market capitalization. The index is maintained by Structured
Solutions AG.
Solactive
Global Fertilizers/Potash Index
The
Solactive Global Fertilizers/Potash Index tracks the performance of the largest
and most liquid listed companies globally that are active in some aspect of the
fertilizer industry. The index is calculated as a total return index in USD and
adjusted semi-annually. The stocks are screened for liquidity and weighted
according to free-float market capitalization. A specific capping methodology is
used at the time of the semi-annual index review to seek to assure compliance
with the rules governing the listing of financial products on exchanges in the
United States. The index is maintained by Structured Solutions AG.
Solactive
Global Rare Earths Index
The
Solactive Global Rare Earths Index tracks the performance of the largest and
most liquid listed companies that are active in some aspect of the rare earths
industry. Rare earth elements or rare earth metals are a collection of seventeen
chemical elements in the periodic table: scandium, yttrium, lanthanum, cerium,
praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium,
dysprosium, holmium, erbium, thulium, ytterbium and lutetium. The
index is calculated as a total return index in USD and adjusted semi-annually.
The stocks are screened for liquidity and weighted according to free-float
market capitalization. A specific capping methodology is used at the time of the
semi-annual index review to seek to assure compliance with the rules governing
the listing of financial products on exchanges in the United States. The index
is maintained by Structured Solutions AG.
Solactive
Global Strategic Metals Index
The
Solactive Global Strategic Metals Index tracks the performance of the largest
and most liquid listed companies that are active in some aspect of the strategic
metals industry. Structured Solutions AG defines rare metals as metals of
special economic importance that have supply risks, which currently include:
antimony, beryllium, cobalt, fluorspar, gallium, germanium, graphite, indium,
magnesium, niobium, tantalum, tungsten, tellurium, magnesite, molybdenum,
chromium, selenium, vanadium and bauxite. The index is calculated as a total
return index in USD and adjusted semi-annually. The stocks are screened for
liquidity and weighted according to free-float market capitalization. A specific
capping methodology is used at the time of the semi-annual index review to seek
to assure compliance with the rules governing the listing of financial products
on exchanges in the United States. The index is maintained by Structured
Solutions AG.
Solactive
Global SuperDividendTM Index
The
Solactive Global SuperDividendTM Index
tracks the performance of a selected group of [ ] companies that rank
among the highest dividend yielding equity securities in the
world. The companies are equally weighted subject to maximum
concentration limits by industries and regions. The index
applies filters to eliminate those companies that are most likely to cut their
dividends, as defined by Structured Solutions AG. The index is
calculated as a total return index in USD and adjusted semi-annually. The index
is maintained by Structured Solutions AG.
Solactive
Canada Preferred Stock Index
The
Solactive Canada Preferred Stock Index tracks the performance of a select group
of preferred stocks from Canadian issuers traded in the Toronto Stock
Exchange. The Underlying Index is comprised of preferred shares that
meet certain criteria relating to size, liquidity, issuer rating, maturity and
other requirements as determined by Structured Solutions AG. The
stocks are screened for liquidity and weighted according to free-float market
capitalization. A specific capping methodology is used at the time of the
semi-annual index review to seek to assure compliance with the rules governing
the listing of financial products on exchanges in the United
States. The index is maintained by Structured Solutions
AG.
Each
Index Provider is described separately below:
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.
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 the Fund and is not in any way connected to it and
does not accept any liability in relation to its issue, operation and
trading.
The Index
Providers do not sponsor, endorse or promote any of the Funds and are not in any
way connected to them and do 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:
|
1.
|
May
not issue any senior security, except as permitted under the 1940 Act, and
as interpreted or modified by regulatory authority having jurisdiction,
from time to time;
|
|
2.
|
May
not borrow money, except as permitted under the 1940 Act, and as
interpreted or modified by regulatory authority having jurisdiction, from
time to time;
|
|
3.
|
May
not act as an underwriter of securities within the meaning of the
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;
|
|
4.
|
May
not purchase or sell real estate or any interests therein, except as
permitted under the 1940 Act, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time. Notwithstanding this
limitation, a Fund may, among other things: (i) acquire or lease office
space for its own use; (ii) invest in securities of issuers that invest in
real estate or interests therein; (iii) invest in mortgage-related
securities and other securities that are secured by real estate or
interests therein; or (iv) hold and sell real estate acquired by a Fund as
a result of the ownership of
securities;
|
|
5.
|
May
not purchase physical commodities or contracts relating to physical
commodities, except as permitted under the 1940 Act, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time;
|
|
6.
|
May
not make loans, except as permitted under the 1940 Act, and as interpreted
or modified by regulatory authority having jurisdiction, from time to
time;
|
|
7.
|
May
not “concentrate” its investments in a particular industry or group of
industries: (I) except that a Fund will concentrate to
approximately the same extent that its Underlying Index concentrates in
the securities of such particular industry or group of industries; and
(II) except as permitted under the 1940 Act, and as interpreted or
modified by regulatory authority having jurisdiction from time to time,
provided that, without limiting the generality of the foregoing: (a) this
limitation will not apply to a 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.
|
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.
CURRENT
1940 ACT LIMITATIONS
BORROWING. Investment
companies may not borrow money, except that an investment company may
borrow money for temporary or emergency purposes in an amount not exceeding 33
1/3% of its total assets (including the amount borrowed) less liabilities (other
than borrowings).
LOANS. Investment
companies may not lend any security or make any other
loan if, as a result, more than 33 1/3% of its total assets would be
lent to other parties, but this limitation does not apply to purchases of debt
securities or to repurchase agreements, or to acquisitions of loans, loan
participations or other forms of debt instruments.
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 is designed to: (i) protect the confidentiality of the Funds’
non-public portfolio holdings information, (ii) prevent the selective disclosure
of such information, and (iii) ensure compliance by Adviser and the Funds with
the federal securities laws, including the 1940 Act and the rules promulgated
thereunder and general principles of fiduciary duty. The Funds’ portfolio
holdings, or information derived from the Funds’ portfolio holdings, may, in the
Adviser’s discretion, be made available to third parties if such
disclosure has been included in the Fund’s public filings with the SEC or is
disclosed on the Fund’s publicly accessible Website, ii) such disclosure is
determined by the Chief Compliance Officer (“CCO”) to be in the best interests
of Fund shareholders and consistent with applicable law; (iii) such disclosure
information is made equally available to anyone requesting it; and (iv) the
Adviser determines that the disclosure does not present the risk of such
information being used to trade against the Funds.
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, as described above.
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. 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 the CCO.
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 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) (consulting firm); Chief Information Officer, M.
Safra & Co (2004-2006) (hedge fund).
|
Director of Kellton Financial
Services (since
2009).
|
Scott R. Chichester1
(1970)
|
Trustee (since
2008)
|
Founder and President, DirectPay
USA LLC (since 2006) (payroll company); Chief Financial Officer, Ong
Corporation (2002-2008) (technology company).
|
None.
|
Kartik Kiran
Shah
(1977)
|
Trustee (since
2008)
|
Senior Product Manager, Wireless
Generation (since 2008) (education consulting firm); Manager, Amgen
(2003-2006)
(biotechnology firm)
|
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) (financial services firm).
|
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) (broker-dealer firm); Financial Adviseor,
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
The
officers and Trustees of the Trust, in the aggregate, own less than 1% of the
Shares of a Fund.
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.
No
Independent Trustee or immediate family member has during the two most recently
completed calendar years had: (i) any material interest, direct or
indirect, in any transaction or series of similar transactions, in which the
amount involved exceeds $120,000; (ii) any securities interest in the
principal underwriter of the Trust or the investment adviser or their affiliates
(other than the Trust); or (iii) any direct or indirect relationship of any
nature, in which the amount involved exceeds $120,000, with:
|
·
|
an
officer of the Funds;
|
|
·
|
an
investment company, or person that would be an investment company but for
the exclusions provided by Sections 3(c)(1) and 3(c)(7) of the 1940 Act,
having the same investment adviser or principal underwriter as the Funds
or having an investment adviser or principal underwriter that directly or
indirectly controls, is controlled by, or is under common control with the
investment adviser or principal underwriter of the
Funds;
|
|
·
|
an
officer or an investment company, or a person that would be an investment
company but for the exclusions provided by Sections 3(c)(1) and 3(c)(7) of
the 1940 Act, having the same investment adviser or principal underwriter
as the Funds or having an investment adviser or principal underwriter that
directly or indirectly controls, is controlled by, or is under common
control with the investment adviser or principal underwriter of the
Funds;
|
|
·
|
the
investment adviser or principal underwriter of the
Funds;
|
|
·
|
an
officer of the investment adviser or principal underwriter of the
Funds;
|
|
·
|
a
person directly or indirectly controlling, controlled by, or under common
control with the investment adviser or principal underwriter of the Funds;
or
|
|
·
|
an
officer of a person directly or indirectly controlling, controlled by, or
under common control with the investment adviser or principal underwriter
of the Funds.
|
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
|
$5,500
|
$0
|
$5,500
|
Scott
R. Chichester
|
$5,500
|
$0
|
$5,500
|
Kartik
Kiran Shah
|
$5,500
|
$0
|
$5,500
|
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.
The
Adviser serves as administrator to the Funds pursuant to a Supervision and
Administration Agreement between the Trust and the 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 Supervision
and Administration Agreement, the Adviser also bears the costs of various
third-party services required by the Funds, including audit, certain custody,
portfolio accounting, legal, transfer agency and printing costs.
For its
advisory, 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 UK Mid-Cap ETF
|
[ ]
|
Global
X Germany Small-Cap ETF
|
[ ]
|
Global
X Mexico Small-Cap ETF
|
[ ]
|
Global
X Hong Kong Small-Cap ETF
|
[ ]
|
Global
X Singapore Small-Cap ETF
|
[ ]
|
Global
X South Korea Small-Cap ETF
|
[ ]
|
Global
X Taiwan Small-Cap ETF
|
[ ]
|
Global
X Rare Earths ETF
|
[ ]
|
Global
X Strategic Metals ETF
|
[ ]
|
Global
X Fertilizers/Potash ETF
|
[ ]
|
Global
X SuperDividend ETF
|
[ ]
|
Global
X Canada Preferred 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 C. 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. As shareholders of the Adviser, Bruno del
Ama and Jose C. Gonzalez also may benefit economically from any profits
generated by the Adviser.
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
|
14
|
$885,839,722
|
0
|
$0
|
|
Other pooled investment
vehicles
|
0
|
$0
|
0
|
$0
|
|
Other
accounts
|
0
|
$0
|
0
|
$0
|
Jose C.
Gonzalez
|
Registered investment
companies
|
14
|
$885,839,722
|
0
|
$0
|
|
Other pooled investment
vehicles
|
0
|
$0
|
0
|
$0
|
|
Other
accounts
|
0
|
$0
|
0
|
$0
|
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 each Funds’ and its
shareholders' best interests and in compliance with all applicable proxy voting
rules and regulations. The Adviser has adopted proxy voting policies and
guidelines for this purpose ("Proxy Voting Policies") and the Adviser
has engaged a third party proxy solicitation firm which is responsible for the
actual voting of all proxies in a timely manner, while the CCO is responsible
for monitoring the effectiveness of the Proxy Voting Policies. The
Proxy Voting Policies have been adopted by the Trust as the policies and
procedures that the Adviser will use when voting proxies on behalf of the Funds.
The Proxy
Voting Policies address, among other things, material conflicts of interest that
may arise between the interests of the Funds and the interests of the Adviser.
The Proxy Voting Policies will ensure that all issues brought to shareholders
are analyzed in light of the Adviser’s fiduciary responsibilities.
In voting
to elect board nominees for uncontested seats, the following factors will be
taken into account: (i) whether majority of the company’s directors are
independent; (ii) whether key board committees are entirely composed of
independent directors; (iii) excessive board memberships and professional time
commitments to effectively serve the company’s board; and (iv) the attendance
record of incumbent directors at board and committee meetings.
Equity
compensation plans will also be reviewed on a case-by-case basis based upon
their specific features. For example, stock option plans will be evaluated using
criteria such as: (i) whether the plan is performance-based; (ii) dilution to
existing shareholders; (iii) the cost of the plan; (iv) whether discounted
options are allowed under the plan; (v) whether the plan authorizes the
repricing of options or reload options without shareholder approval; and (vi)
the equity overhang of all plans. Similarly, employee stock purchase
plans generally will be supported under the guidelines upon consideration of
factors such as (i) whether the plan sets forth adequate limits on share
issuance; (ii) whether participation limits are defined; and (iii) whether
discounts to employees exceed a threshold amount.
The Proxy
Voting Policies review and vote on shareholder proposals on a case-by-case
basis. In accordance with this approach, these guidelines support a shareholder
proposal upon the compelling showing that it has a substantial economic impact
on shareholder value. As such, proposals that request that the company report on
environmental, labor or human rights issues are only supported when such
concerns pose a substantial risk to shareholder value.
II.
|
Record
of Proxy Voting
|
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
non-assessable. 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 NYSEis open for
business. As of the date of this SAI, the NYSE observes the following holidays:
New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
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 UK Mid-Cap ETF
|
$[ ]
|
[ ]
|
Global
X Germany Small-Cap ETF
|
$[ ]
|
[ ]
|
Global
X Mexico Small-Cap ETF
|
$[ ]
|
[ ]
|
Global
X Hong Kong Small-Cap ETF
|
$[ ]
|
[ ]
|
Global
X Singapore Small-Cap ETF
|
$[ ]
|
[ ]
|
Global
X South Korea Small-Cap ETF
|
$[ ]
|
[ ]
|
Global
X Taiwan Small-Cap ETF
|
$[ ]
|
[ ]
|
Global
X Rare Earths ETF
|
$[ ]
|
[ ]
|
Global
X Strategic Metals ETF
|
$[ ]
|
[ ]
|
Global
X Fertilizers/Potash ETF
|
$[ ]
|
[ ]
|
Global
X SuperDividend ETF
|
$[ ]
|
[ ]
|
Global
X Canada Preferred 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 UK Mid-Cap ETF
|
$[ ]
|
[ ]
|
Global
X Germany Small-Cap ETF
|
$[ ]
|
[ ]
|
Global
X Mexico Small-Cap ETF
|
$[ ]
|
[ ]
|
Global
X Hong Kong Small-Cap ETF
|
$[ ]
|
[ ]
|
Global
X Singapore Small-Cap ETF
|
$[ ]
|
[ ]
|
Global
X South Korea Small-Cap ETF
|
$[ ]
|
[ ]
|
Global
X Taiwan Small-Cap ETF
|
$[ ]
|
[ ]
|
Global
X Rare Earths ETF
|
$[ ]
|
[ ]
|
Global
X Strategic Metals ETF
|
$[ ]
|
[ ]
|
Global
X Fertilizers/Potash ETF
|
$[ ]
|
[ ]
|
Global
X SuperDividend ETF
|
$[ ]
|
[ ]
|
Global
X Canada Preferred 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 SAI are
based on the Code and the regulations, rulings and decision under it, as in
effect on the date of this SAI. 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% 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, 2012. 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 carry-forwards 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 SAI. 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 NYSEis 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.
FINANCIAL
STATEMENTS
Audited
financial statements for the Trust as of October 31, 2010, including the
notes thereto, and the reports of Sanville & Company, an
independent registered public accounting firm,
are incorporated herein by reference from the Trust’s
October 31, 2010 Annual Report to shareholders. The Annual Report is delivered
with this SAI to shareholders requesting this SAI.
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 SAI 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 SAI
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 SAI 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 SAI 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
Item
23.
|
|
Exhibits
|
|
|
|
|
(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 November 17,
2010. 13/
|
|
|
|
|
|
(9)
|
|
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.
13/
|
|
|
|
|
|
(8)
|
|
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. 13/
|
|
|
|
|
|
(7)
|
|
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.13/
|
|
|
|
|
|
(7)
|
|
Amendment
to the Transfer Agent Services Agreement.*
|
|
|
|
|
|
(8)
|
|
Form
of Administration Agreement. 2/
|
|
|
|
|
|
(9)
|
|
Form
of Supervision and Administration Agreement. 3/
|
|
|
|
|
|
(10)
|
|
Amended
and Restated Schedule A dated December 5, 2008 to the Supervision and
Administration Agreement. 5/
|
|
|
|
|
|
(11)
|
|
Amended
and Restated Schedule A dated September 18, 2009 to the Supervision and
Administration Agreement.6/
|
|
|
|
|
|
(12)
|
|
Amended
and Restated Schedule A dated February 26, 2010 to the Supervision and
Administration Agreement.7/
|
|
|
|
|
|
(13)
|
|
Amended
and Restated Schedule A dated April 6, 2010 to the Supervision and
Administration Agreement.8/
|
|
|
|
|
|
(14)
|
|
Amended
and Restated Schedule A dated June 9, 2010 to the Supervision and
Administration Agreement.9/
|
|
|
|
|
|
(15)
|
|
Amended
and Restated Schedule A dated August 27, 2010 to the Supervision and
Administration Agreement.11/
|
|
|
|
|
|
(16)
|
|
Amended
and Restated Schedule A dated November 17, 2010 to the Supervision and
Administration Agreement.13/
|
|
|
|
|
|
(17)
|
|
Amended
and Restated Schedule A dated [ ] to the
Supervision and Administration Agreement.*
|
|
|
|
|
|
(18)
|
|
Form
of Amendment to the Sub-Administration Agreement.6/
|
|
|
|
|
|
(19)
|
|
Amendment
to the Sub-Administration Agreement.8/
|
|
|
|
|
|
(20)
|
|
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. 13/
|
|
|
|
|
|
(10)
|
|
Opinion
and Consent of Fund Counsel. 14/
|
|
|
|
|
|
(11)
|
|
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. 12/
|
|
|
|
|
|
(10)
|
|
Consent
of Independent Registered Public Accounting Firm. 13/
|
|
|
|
|
(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.
13/
|
|
|
|
|
|
(6)
|
|
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
12/
Incorporated by reference from the Registrant’s Post-effective Amendment #19,
SEC File No. 333-151713, filed December 30, 2010
13/
Incorporated by reference from the Registrant’s Post-effective Amendment #20,
SEC File No. 333-151713, filed January 10, 2011
14/
Incorporated by reference from the Registrant’s Post-effective Amendment #21,
SEC File No. 333-151713, filed January 26, 2011
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)
|
|
|
|
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
|
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
|
RiverPark
Funds
|
September
8,
2010
|
(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
J. 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.
Item30. Undertakings
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. 24 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 17th day of February, 2011.
|
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
|
|
February
17, 2011
|
Bruno
del Ama
|
|
|
|
|
|
|
|
|
|
/s/
Jose C. Gonzalez
|
|
Chief
Operating Officer, Treasurer (Principal Financial Officer) and
Principal Accounting Officer
|
|
February
17, 2011
|
Jose
C. Gonzalez
|
|
|
|
|
|
|
|
|
|
*
|
|
|
|
|
Sanjay
Ram Bharani
|
|
Trustee
|
|
February
17, 2011
|
|
|
|
|
|
*
|
|
|
|
|
Scott
R. Chichester
|
|
Trustee
|
|
February
17, 2011
|
|
|
|
|
|
*
|
|
|
|
|
Kartik
Kiran Shah
|
|
Trustee
|
|
February
17, 2011
|
|
|
|
|
|
*/s/
Bruno del Ama
|
|
|
|
|
Attorney-In-Fact,
pursuant to power of
attorney
|
|
|
|