MANAGEMENT OF THE
FUND
The Investment Adviser and
Sub-Adviser
The Adviser acts as the
Fund’s investment adviser pursuant to an advisory agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). The
Adviser is a Colorado corporation with its principal offices located at 1290 Broadway, Suite 1100, Denver, Colorado 80203. As of June 30, 2011, ALPS
entities serviced over $4.3 billion in client assets providing mutual fund administration, hedge fund administration, distribution and advisory
solutions for the investment management industry. Pursuant to the Advisory Agreement, the Adviser has overall supervisory responsibility for the
general management and investment of the Fund’s securities portfolio, and has ultimate responsibility (subject to oversight by the Trust’s
Board of Trustees) for oversight of the Trust’s sub-advisers.
As described in the formula
below, the annual management fee paid by the Trust to the Adviser under the Advisory Agreement is based on total assets of the Trust. For the first
twelve series of the Trust to offer shares to the public (the “Original Funds”), the annual management fee paid by the Trust to the Adviser
is subject to both a minimum amount and a cap. For each additional series of the Trust offered to the public (the “Additional Funds”),
including the Fund in this Prospectus, the minimum amount and the cap rise proportionately. The annual management fee paid by the Additional
Funds is credited for the annual management fees paid by the Original Funds.
For its services, the Trust pays
the Adviser an annual management fee, accrued daily at the rate of 1/365th of the applicable advisory fee rate and payable monthly as soon as
practicable after the last day of each month, in an amount calculated as follows: (a) For the Original Funds, the greater of (i) $400,000.00 or (ii) 10
basis points of each Original Fund’s daily net assets during the month, but in either event not to exceed $1,000,000 per year; and (b) for the
Additional Funds, the greater of (i) $400,000.00 plus (x) $33,333.33 for each operating Additional Fund, minus (y) any management fees paid to the
Adviser by the Original Funds, or (ii) 10 basis points of each Additional Fund’s daily net assets during the month, but in either event not to
exceed annually $1,000,000 plus (x) $83,333.33 for each operating Additional Fund, minus (y) any management fees paid to the Adviser by the Original
Funds.
On July 19, 2011, ALPS Holdings, Inc., parent company to the Adviser, announced
that it signed a definitive agreement to be acquired by DST Systems, Inc. (the
“Transaction”). If completed, the Transaction will cause a change of
control of the Adviser, which will terminate the current investment advisory
agreement between the Adviser and the Funds. At a meeting held on July 28, 2011,
the Board considered and approved: (1) a new investment advisory agreement
between the Adviser and the Funds; and (2) the submission of a proposal to the
Funds’ shareholders to approve the new investment advisory agreement. The new
investment advisory agreement for the Fund was approved by sole shareholder
consent on July 29, 2011, and it will become effective upon the closing of the
Transaction.
EGA serves as the sub-adviser to
the Fund and provides investment advice and management services to the Fund, including portfolio trading and index tracking services. EGA is a
Delaware limited liability company with its principal offices located at 171 East Ridgewood Ave., Ridgewood, NJ 07450. EGA manages the day-today
investment and reinvestment of the assets in the Fund and is responsible for designating the Deposit Securities and monitoring the Fund’s
adherence to its investment mandate. For the investment advisory services provided to the Fund, EGA is entitled to receive fees equal to 0.85% of the average daily net assets of the Fund. The advisory fee for the
Adviser is paid directly by the Trust separately from the sub-advisory fee for EGA.
EGA has agreed to reduce fees
and/or reimburse expenses to the extent necessary to prevent the annual operating expenses of the Fund (excluding any taxes, interest, brokerage fees
and non-routine expenses, such as expenses attributable to mergers or liquidation) from exceeding 0.85% of average daily net assets of the Fund. Under this agreement, EGA retains the right to seek reimbursement from the Fund of fees previously waived or
expenses previously assumed to the extent such fees were waived or expenses were assumed within three years of such reimbursement, provided such
reimbursement does not cause the Fund to exceed any applicable fee waiver or expense limitation agreement that was in place at the time the fees were
waived or expenses were assumed. EGA, from its own resources, including profits from sub-advisory fees received from the Fund, also may make payments
to broker-dealers and other financial institutions in connection with the distribution of the Fund’s Shares.
Subject to the fee waiver and
expense assumption agreement, the Fund is responsible for all of its expenses, including: the investment advisory fees and sub-advisory fees; costs of
transfer agency, custody, fund administration, legal, audit and other services; interest, taxes, brokerage commissions and other expenses connected
with executions of portfolio transactions; distribution fees or expenses; and non-routine expenses (including litigation or merger-related expenses, if
any).
11
The basis for the Board’s
approval of the Advisory Agreement and Sub-Advisory Agreement will be available in the Trust’s next report to shareholders.
Portfolio Management
Richard C. Kang serves as the
portfolio manager for the Fund and is responsible for the day-to-day management of the Fund. Mr. Kang is the Chief Investment Officer and Director of
Research of EGA and has managed portfolios of the Trust since the Trust’s commencement of operations in 2009. Mr. Kang joined EGA in October 2008.
Prior to that Mr. Kang was a contract consultant for ETFx Indexes from October 2007 to September 2008. From January 2007 to September 2008, Mr. Kang
was an independent consultant and blogger of The Beta Brief. Prior to that, Mr. Kang was Chief Investment Officer of Quadrexx Asset Management from
July 2003 to May 2005, and President and Chief Investment Officer of Meridian Global Investors from November 2002 to December 2007.
The Trust’s SAI provides
additional information about the Portfolio Manager’s compensation, other accounts managed by the Portfolio Manager, and the Portfolio
Manager’s ownership of Shares in the Fund.
HOW TO BUY AND SELL
SHARES
Most investors will buy and sell
Shares of the Fund at market prices in secondary market transactions through brokers. Shares of the Fund are listed for trading on the secondary
market on the Exchange. Shares can be bought and sold throughout the trading day like other publicly traded shares. There is no minimum investment.
Although Shares are generally purchased and sold in “round lots” of 100 Shares, brokerage firms typically permit investors to purchase or
sell Shares in smaller “odd lots,” at no per-Share price differential. When buying or selling Shares through a broker, investors should
expect to incur customary brokerage commissions, investors may receive less than the NAV of the Shares, and investors may pay some or all of the spread
between the bid and the offer price in the secondary market on each leg of a round trip (purchase and sale) transaction. Share prices are reported in
dollars and cents per Share.
Share Trading Prices
The trading prices of Shares of
the Fund on the Exchange may differ from the Fund’s daily NAV and can be affected by market forces of supply and demand, economic conditions and
other factors.
The Exchange intends to
disseminate the approximate value of Shares of the Fund every 15 seconds (the “Intraday Indicative Value” or “IIV”). This IIV
should not be viewed as a “real-time” update of the NAV per Share of the Fund because the approximate value may not be calculated in the same
manner as the NAV, which is computed once a day, generally at the end of the business day. The Fund is not involved in, or responsible for, the
calculation or dissemination of the IIV of Shares of the Fund and the Fund does not make any warranty as to the accuracy of these
calculations.
CME Group Index Services LLC
(“Dow Jones Indexes”), its affiliates, sources and distribution agents (together, the “IIV Calculation Agent”) shall not be liable
to any customer or any third party for any loss or damage, direct, indirect or consequential, arising from (i) any inaccuracy or incompleteness in, or
delays, interruptions, errors or omissions in the delivery of the IIV with respect to the Fund or any data related thereto (collectively, the
“Data”) or (ii) any decision made or action take by any customer or third party in reliance upon the Data. The IIV Calculation Agent does not
make any warranties, express or implied to any investor in the Fund, or any one else regarding the Data, including, without limitation, any warranties
with respect to the timeliness, sequence, accuracy, completeness, currentness, merchantability, quality or fitness for a particular purpose or any
warranties as to the results to be obtained by any investors in the Fund or other person in connection with the use of the Data. The IIV Calculation
Agent shall not be liable to any investors in the Fund or third parties for any damages, including, without limitation, loss of business revenues,
lost profits or any indirect, consequential, special or similar damages whatsoever, whether in contract, tort or otherwise, even if advise of the
possibility of such damages.
Frequent Purchases and Redemptions of the Fund’s
Shares
The Fund imposes no restrictions
on the frequency of purchases and redemptions (“market timing”). In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by the Fund’s shareholders. The Board considered that, unlike traditional mutual funds, the Fund
issues and redeems its Shares at NAV per Share generally for a basket of securities intended to mirror the Fund’s portfolio,
12
plus a small amount
of cash, and the Shares may be purchased and sold on the Exchange at prevailing market prices. The Board noted that the Fund’s Shares can only be
purchased and redeemed directly from the Fund in Creation Units by broker-dealers and large institutional investors that have entered into
participation agreements (“APs”) and that the vast majority of trading in Shares occurs on the secondary market. Because the secondary market
trades do not involve the Fund directly, it is unlikely those trades would cause many of the harmful effects of market timing, including: dilution,
disruption of portfolio management, increases in the Fund’s trading costs and the realization of capital gains. With respect to trades directly
with the Fund, to the extent effected in-kind (i.e., for securities), those trades do not cause any of the harmful effects (as noted above) that may
result from frequent cash trades. To the extent trades are effected in whole or in part in cash, the Board noted that those trades could result in
dilution to the Fund and increased transaction costs, which could negatively impact the Fund’s ability to achieve its investment objective. However,
the Board noted that direct trading by APs is critical to ensuring that the Shares trade at or close to NAV. The Fund also employs fair valuation
pricing to minimize potential dilution from market timing. The Fund imposes transaction fees on in-kind purchases and redemptions of Shares to cover
the custodial
and other costs incurred by
the Fund in executing in-kind trades, and with respect to the redemption fees, these fees increase if an investor substitutes cash in part or in whole
for securities, reflecting the fact that the Fund’s trading costs increase in those circumstances. Given this structure, the Board determined that
(a) it is unlikely that market timing would be attempted by the Fund’s shareholders and (b) any attempts to market time the Fund by shareholders would
not be expected to negatively impact the Fund or its shareholders.
DIVIDENDS, DISTRIBUTIONS AND
TAXES
As with any investment, you
should consider how your investment in Shares will be taxed. The tax information in this Prospectus is provided as general information. You should
consult your own tax professional about the tax consequences of an investment in Shares.
Unless your investment in Shares
is made through a tax-exempt entity or tax-deferred retirement account, such as an IRA plan, you need to be aware of the possible tax consequences
when:
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Your Fund makes distributions,
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You sell your Shares listed on the Exchange, and
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You purchase or redeem Creation Units.
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Dividends & Distributions
Dividends and
Distributions
. The Fund intends to qualify each year as a regulated investment company under the Internal Revenue Code. As a regulated investment
company, the Fund generally will not pay federal income tax on the income and gains it distributes to you. The Fund expects to declare and pay all of its net investment income, if any, to shareholders as dividends quarterly. However, the officers of the Trust are
authorized in their discretion not to pay a dividend for the Fund if such officers determine that the cost of paying the dividend (including costs borne
by the Fund for printing and mailing dividend checks) exceeds the amount of income or excise tax that is payable by the Fund as a result of not paying
the dividend. The Fund will also declare and pay net realized capital gains, if any, at least annually. The Fund may distribute such income dividends
and capital gains more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund. The amount of any
distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gains distribution. Distributions in cash may
be reinvested automatically in additional whole Shares only if the broker through whom you purchased Shares makes such option
available.
Annual Statements
. Each
year, the Fund will send you an annual statement (Form 1099) of your account activity to assist you in completing your federal, state, and local tax
returns. Distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
Prior to issuing your statement, the Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to
shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Avoid “Buying a
Dividend.”
At the time you purchase your Fund shares, the Fund’s net asset value may reflect undistributed income, undistributed capital
gains, or net unrealized appreciation in value of portfolio
13
securities held by the Fund. For taxable investors, a subsequent distribution to you of
such amounts, although constituting a return of your investment, would be taxable. Buying shares in the Fund just before it declares an income dividend
or capital gains distribution is sometimes known as “buying a dividend.”
Taxes
Tax Considerations
. If you
are a taxable investor, Fund distributions are generally taxable to you as ordinary income, capital gains, or some combination of both. This is true
whether you reinvest your distributions in additional Fund Shares or receive them in cash. For federal income tax purposes, Fund distributions of
short-term capital gains are taxable to you as ordinary income. Fund distributions of long-term capital gains in excess of net short-term capital
losses are taxable to you as long-term capital gains no matter how long you have owned your
Shares. With respect to
taxable years of a Fund beginning before January 1, 2013, unless such provision is extended or made permanent, a portion of income dividends paid to
individual shareholders and designated by a Fund may be qualified dividend income eligible for taxation at long-term capital gain rates provided
certain holding period requirements are met.
Foreign Tax.
The Fund
intends to elect to “pass-through” to the Fund’s shareholders as a deduction or credit the amount of foreign taxes paid by the Fund. The
taxes passed through to shareholders are included in each shareholder’s income. Certain shareholders, including some non-U.S. shareholders, are
not entitled to the benefit of a deduction or credit with respect to foreign taxes paid by the Fund. Other foreign taxes, such as transfer taxes, may be
imposed on the Fund, but would not give rise to a credit, or be eligible to be passed through to shareholders.
Taxes on Exchange-Listed Share
Sales
. A sale or exchange of Fund Shares is a taxable event and, accordingly, a capital gain or loss may be recognized. Currently, any capital gain
or loss realized upon a sale of Fund Shares is generally treated as long-term capital gain or loss if the Shares have been held for more than one year
and as short-term capital gain or loss if the Shares have been held for one year or less. The ability to deduct capital losses may be
limited.
Backup Withholding
. By
law, if you do not provide the Fund with your proper taxpayer identification number and certain required certifications, you may be subject to backup
withholding on any distributions of income, capital gains or proceeds from the sale of your Shares. The Fund also must withhold if the IRS instructs it
to do so. When withholding is required, the amount will be 28% of any distributions or proceeds paid.
State and Local Taxes
.
Fund distributions and gains from the sale or exchange of your Fund Shares generally are subject to state and local taxes.
Taxes on Purchase and
Redemption of Creation Units
. An Authorized Participant who exchanges equity securities for Creation Units generally will recognize a gain or a
loss. The gain or loss will be equal to the difference between the market value of the Creation Units at the time of purchase and the exchanger’s
aggregate basis in the securities surrendered and any cash paid. A person who exchanges Creation Units for equity securities will generally recognize a
gain or loss equal to the difference between the exchanger’s basis in the Creation Units and the aggregate market value of the securities received
and any cash received. The Internal Revenue Service, however, may assert that a loss realized upon an exchange of securities for Creation Units cannot
be deducted currently under the rules governing “wash sales,” or on the basis that there has been no significant change in economic position.
Persons exchanging securities should consult their own tax advisor with respect to whether wash sale rules apply and when a loss might be
deductible.
Under current federal tax laws,
any capital gain or loss realized upon redemption of Creation Units is generally treated as long-term capital gain or loss if the Shares have been held
for more than one year and as a short-term capital gain or loss if the Shares have been held for one year or less.
Non-U.S. Investors
.
Non-U.S. investors may be subject to U.S. withholding tax at a 30% or lower treaty rate and U.S. estate tax and are subject to special U.S. tax
certification requirements to avoid backup withholding and claim any treaty benefits. Exemptions from U.S. withholding tax are provided for capital
gain dividends paid by a Fund from long-term capital gains and, with respect to taxable years of a Fund that begin before January 1, 2012 (unless such
sunset date is extended or made permanent), interest-related dividends paid by a Fund from its qualified net interest income from U.S. sources and
short-term capital gain dividends. However, notwithstanding
14
such exemptions from U.S. withholding at the source, any such dividends and distributions
of income and capital gains will be subject to backup withholding at a rate of 28% if you fail to properly certify that you are not a U.S.
person.
MAURITIUS TAX
STATUS
The Fund conducts its investment
activities in India through a Subsidiary, which is a wholly owned subsidiary of the Fund. The Subsidiary has elected to be treated
as a disregarded entity for United States federal income tax purposes. A disregarded entity is a separate legal entity that is treated as part of its
owner for such tax purposes. As a tax resident of Mauritius, each Subsidiary expects to obtain benefits under the tax treaty between Mauritius and
India (the “Treaty”). In light of Circular 789 of April 13, 2000 issued by the Central Board of Direct Taxes in India, a Subsidiary will be
eligible for the benefits under the Treaty if it holds a valid tax
residence certificate issued
by the Mauritius income tax authorities. The validity of the Circular was subsequently upheld by the Supreme Court of India in a judgment delivered on
October 7, 2003. The Subsidiary has been issued a Category 1 Global Business License by the Financial Services Commission of Mauritius. The has
applied for and obtained a tax residence certificate (“TRC”) from the Mauritius Revenue Authority for the purpose of the Mauritius-India
Double Taxation Avoidance Agreement. The TRC is issued for a period of one year and thereafter renewable annually. The Subsidiary is subject to tax in
Mauritius at the rate of 15% on its net income.
However, the Subsidiary will be
entitled to a tax credit for foreign tax on its income which is not derived from Mauritius against the Mauritian tax computed by reference to that same
income. If no written evidence is presented to the Mauritius Revenue Authority showing the amount of foreign tax charged on income derived by the Fund
outside of Mauritius, the amount of the foreign tax will be conclusively presumed to be equal to eighty percent (80%) of the Mauritian tax chargeable
with respect to that income, which could reduce the rate of tax effectively to three percent (3%). Further, the Subsidiary is not subject to capital
gains tax in Mauritius nor is it liable for income tax on any gains from sale of units or securities. Any dividends and redemption proceeds paid by the
Subsidiary to a Fund are exempt from Mauritius tax. Provided that the Subsidiary does not have a permanent establishment in India, the tax treatment in
India of income derived by the Subsidiary is as follows:
(i) long-term
capital gains arising from the sale on a recognized stock exchange in India of, among other things, equity shares and units of “equity
oriented” funds, provided that the applicable securities transaction tax has been paid, are not subject to tax in India;
(ii)
short-term capital gains are not subject to tax in India by virtue of certain provisions of the Treaty;
(iii)
dividends from Indian companies are paid to the Subsidiary free of Indian tax; and
(iv) any
interest income earned on Indian securities is subject to withholding tax in India at a rate of 20% (plus surcharges), depending on the nature of the
underlying debt security.
The Subsidiary continues to: (i)
comply with the requirements of the Treaty; (ii) be a tax resident of Mauritius; and (iii) maintain its central management and control in Mauritius.
Accordingly, management believes that the Subsidiary will be able to obtain the benefits of the Treaty, which ultimately benefits the Fund. However,
there can be no assurance that the Subsidiary will be granted a certificate of tax residency in the future. While the validity of the Treaty and its
applicability to entities such as the Subsidiary was upheld by the Supreme Court of India, no assurance can be given that the terms of the Treaty
will not be subject to reinterpretation and renegotiation in the future. Any change in the Treaty’s application could have a material adverse
affect on the returns of the Fund. Further, it is possible that the Indian tax authorities may seek to take the position that the Subsidiary is not
entitled to the benefits of the Treaty. It is currently not clear whether income from entities such as the Subsidiary will be classified as “capital
gains” income or as “business income” under Indian law. However, this distinction should not affect the ultimate tax consequences to the
Subsidiary or the Fund. Under the Treaty, capital gains from investment in Indian securities, GDRs or ADRs issued with respect to Indian companies are
exempt from tax, provided that the Subsidiary does not have a permanent establishment in India. Similarly, “business income” is not chargeable
to tax in India under the Treaty so long as the Subsidiary does not have a permanent establishment in India. The Subsidiary expects that it will be
deemed a tax resident of Mauritius and does not expect to be deemed to have a permanent establishment in India because it will not maintain an office
or place of management in India and the Adviser will make investment decisions regarding securities orders
15
outside of India. If the Subsidiary were
deemed to have such a permanent establishment, income attributable to that permanent establishment could be taxable in India at a rate of up to 40%
(plus surcharges).
Regardless of the application of
the Treaty, all transactions entered on a recognized stock exchange in India are subject to the Securities Transaction Tax (“STT”), which is
levied on the value of a transaction at rates not exceeding 0.125%. The STT can be set off against business income tax calculated under the Indian
Income Tax Act, provided that the gains on the transactions subject to the STT are taxed as business income and not as capital gains. It is currently
not entirely clear whether the Indian Minimum Alternate Tax (“MAT”) applies to the Subsidiary as a beneficiary of the Treaty. Although the
Treaty should override the provisions of the Indian Income Tax Act and thus the application of the MAT, this is not certain. If the MAT does apply, and
the Indian income tax payable by the Subsidiary is less than 18% of its book profits, then the Subsidiary would be deemed to owe taxes of 18% (plus
surcharges) of book profits. Such a fee would not be included in the fee charged by the Adviser. Please note that the above description is based on
current provisions of Mauritius and Indian law, and any change or modification made by subsequent
legislation, regulation, or administrative or judicial decision could increase the Indian tax liability of the Subsidiary and thus reduce the return to
Fund shareholders.
This discussion of
“Dividends, Distributions and Taxes” is not intended or written to be used as tax advice. Because everyone’s tax situation is unique,
you should consult your tax professional about federal, state, local or foreign tax consequences before making an investment in the
Fund.
PRICING FUND
SHARES
The trading price of the
Fund’s Shares on the Exchange may differ from the Fund’s daily NAV and can be affected by market forces of supply and demand, economic
conditions and other factors.
The Exchange intends to
disseminate the approximate value of Shares of the Fund every fifteen seconds. The approximate value calculations are based on local market prices and
may not reflect events that occur subsequent to the local market’s close. As a result, premiums and discounts between the approximate value and
the market price could be affected. This approximate value should not be viewed as a “real time” update of the NAV per Share of the Fund
because the approximate value may not be calculated in the same manner as the NAV, which is computed once a day, generally at the end of the Business
Day (as defined below), and may be subject to fair valuation. The Trust is not involved in, or responsible for, the calculation or dissemination of the
approximate value of the Shares and does not make any warranty as to its accuracy.
The NAV for the Fund is determined
once daily as of the close of the New York Stock Exchange (the “NYSE”), usually 4:00 p.m. Eastern time, each day the NYSE is open for regular
trading (“Business Day”). NAV is determined by dividing the value of the Fund’s portfolio securities, cash and other assets (including
accrued interest), less all liabilities (including accrued expenses), by the total number of shares outstanding.
Equity securities (including ADRs
and GDRs) are valued at the last reported sale price on the principal exchange on which such securities are traded, as of the close of regular trading
on the NYSE on the day the securities are being valued or, if there are no sales, at the mean of the most recent bid and asked prices. Equity
securities that are traded in over-the-counter markets are valued at the NASDAQ Official Closing Price as of the close of regular trading on the NYSE
on the day the securities are valued or, if there are no sales, at the mean of the most recent bid and asked prices. Debt securities are valued at the
mean between the last available bid and asked prices for such securities or, if such prices are not available, at prices for securities of comparable
maturity, quality, and type.
Securities for which market
quotations are not readily available, including restricted securities, are valued by a method that the Board believes accurately reflects fair value.
Securities will be valued at fair value when market quotations are not readily available or are deemed unreliable, such as when a security’s value
or meaningful portion of a Fund’s portfolio is believed to have been materially affected by a significant event. Such events may include a natural
disaster, an economic event like a bankruptcy filing, a trading halt in a security, an unscheduled early market close or a substantial fluctuation in
domestic and foreign markets that has occurred between the close of the principal exchange and the NYSE. In such a case, the value for a security is
likely to be different from the last quoted market price. In addition, due to the subjective and variable nature of fair market value pricing, it is
possible that the value determined for a particular asset may be materially different from the value realized upon such asset’s
sale.
16
The Fund may employ fair value
pricing in situations where trading in securities on foreign securities exchanges and over-the-counter markets is completed before the close of
business on a Business Day. In addition, fair valuation may be necessary where there is no securities trading in a particular country or countries on a
Business Day. Moreover, the Fund’s NAV may not reflect changes in valuations on certain securities that occur at times or on days on which the
Fund’s NAV is not calculated and on which a Fund does not effect sales, redemptions and exchanges of its Shares, such as when trading takes place
in countries on days that are not a Business Day.
Valuing the 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 NAV and the prices
used by the Fund’s corresponding underlying index, which, in turn, could result in a difference between the Fund’s performance and the
performance of the Fund’s Underlying Index.
The value of assets denominated
in foreign currencies is converted into U.S. dollars using exchange rates deemed appropriate by the Fund. Use of a rate different from the rate used
by INDXX, LLC (“INDXX”) may adversely affect the Fund’s ability to track its Underlying Index.
OTHER SERVICE
PROVIDERS
ALPS Distributors, Inc., located
at 1290 Broadway, Suite 1100, Denver, Colorado 80203, serves as the Fund’s distributor.
The Bank of New York Mellon,
located at 101 Barclay Street, New York, NY 10286, serves as the Fund’s administrator, accountant, custodian and transfer agent.
ALPS Fund Services, Inc.
(“AFS”), an affiliate of the Adviser and the Distributor, provides the Trust with an Anti-Money Laundering Officer, Principal Financial
Officer and Chief Compliance Officer, as well as certain additional compliance support functions.
Counsel and Independent Registered Public Accounting
Firm
Stradley Ronon Stevens &
Young, LLP, 2600 One Commerce Square, Philadelphia, Pennsylvania, serves as legal counsel to the Trust.
BBD, LLP, 1835 Market Street,
26th Floor, Philadelphia, PA 19103, serves as independent registered public accounting firm of the Trust. BBD, LLP audits the Fund’s financial
statements and performs other related audit services.
INDEX PROVIDER
The Underlying Index is compiled
by INDXX. INDXX is not affiliated with the Fund, ALPS or EGA. The Fund is entitled to use its corresponding Underlying Index pursuant to a
sublicensing arrangement with EGA, which in turn has a licensing agreement with INDXX. INDXX or its agent also serves as calculation agent for the
Underlying Index (the “Index Calculation Agent”). The Index Calculation Agent is responsible for the management of the day-to-day operations
of the Underlying Index, including calculating the value of the Underlying Index every 15 seconds, widely disseminating the Underlying Index values
every 15 seconds and tracking corporate actions resulting in Underlying Index adjustments. The value of the Underlying Index will be disseminated
under the following ticker:
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Ticker
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INDXX
Emerging Market High Income Low Beta Index
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IHILO
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“INDXX” is a service
mark of INDXX and has been licensed for use for certain purposes by EGA. The Fund is not sponsored, endorsed, sold or promoted by INDXX. INDXX makes
no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly. INDXX’s only relationship to EGA is the licensing of certain trademarks, trade names and
service marks of INDXX and of the Underlying Index, which are determined, composed and calculated by INDXX without regard to EGA or the Fund. INDXX
has no obligation to take the needs of EGA or the shareholders of the Fund into consideration in determining, composing or calculating the
17
Underlying
Index. INDXX is not responsible for and has not participated in the determination of the timing, amount or pricing of the Fund Shares to be issued or
in the determination or calculation of the equation by which the Fund Shares are to be converted into cash. INDXX has no obligation or liability in
connection with the administration, marketing or trading of the Fund.
DISCLAIMERS
The Adviser and EGA do not
guarantee the accuracy and/or the completeness of the Underlying Index or any data included therein, and neither the Adviser nor EGA shall have any
liability for any errors, omissions or interruptions therein. Neither the Adviser nor EGA make any warranty, express or implied, as to results to be
obtained by the Fund, owners of the Shares of the Fund or any other person or entity from the use of the Underlying Index or any data included therein. The
Adviser and EGA make no express or implied warranties, and expressly disclaim all warranties of merchantability or fitness for a particular purpose or
use with respect to the Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall the Adviser or EGA
have any liability for any special, punitive, direct, indirect or consequential damages (including lost profits) arising out of matters relating to the
use of the Underlying Index, even if notified of the possibility of such damages.
THE INDXX INDICES
Eligibility Criteria for Index
Components
The index universe (“Index
Universe”) for the Underlying Index is defined as all publicly traded stocks domiciled in Emerging
Markets countries, such as Argentina, Chile, Columbia, Czech Republic, Egypt, Hungary, Indonesia, Jordan, Kuwait, Malaysia, Mexico, Morocco, Peru,
Philippines, Poland, Russia, Slovenia, South Africa, Ukraine, Brazil, China, India, Thailand and Turkey. Emerging Markets countries are categorized as
emerging markets countries for purposes of stock selection based on the classifications of international organizations, such as the World Bank and the
International Monetary Fund. Specific criteria related to individual indices are applied to the Index Universe.
Criteria For Inclusion
In addition to the eligibility
criteria described above for the Index Universe, on the Determination Date (as defined below) index components must be consistent with the following
criteria for inclusion in the Underlying Index:
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2.
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Minimum market cap of $250 Million
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3.
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Minimum average daily turnover of $2.50 million during the six
months prior to the Review Date
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4.
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Minimum 10% free float
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5.
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Maximum 4.9% weight of single component
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6.
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Maximum 25% weight for each country and sector and maximum 5
components per country
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7.
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Beta of each component should be less than 1 with respect to
their respective benchmark
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8.
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Dividend yield of each component should be between 1% and
10%
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9.
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Each component will have paid dividends consistently over the
last three years
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INDXX may at any
time, and from time to time, change the issues comprising the Underlying Index by adding or deleting one or more components or sectors, or replacing one
or more issues contained in the Underlying Index with one or more substitute stocks of its choice, if, in the discretion of INDXX, such addition,
deletion or substitution is necessary or appropriate to maintain the quality and/or character of the Underlying Index.
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Calculation Methodology
A master list of the securities
is initially prepared from the Index Universe by applying the criteria of market capitalization and beta. From the master list, a selection
list satisfying the predetermined turnover criteria is shortlisted and dividend yield for the shortlisted companies is calculated. All companies with
(i) dividend yields below 1% or above 10% or (ii) a beta of more than 1 are then removed from selection list to obtain a “Final Selection
List.”
The Index Component Securities
for the Underlying Index are then established by a process that screens companies by dividend yield and correlation, ranks and weighs companies in the
Final Selection List by dividend yield and then applies the Index’s eligibility criteria formula. The Underlying Index limits the total number of constituents from one particular country to no more than five.
For any Index component that
exceeds the maximum weight for a single member, as determined by the Index’s criteria for inclusion, the excess weight is redistributed among the
remaining components. For any grouping of Index components classified as the same sector that exceeds the maximum weight for a particular sector, as
determined by the Index’s criteria for inclusion, the excess weight is redistributed among the components of the other classified sectors. For the
Underlying Index, any Index components that exceeds the maximum weight for a particular country, as determined by the
Index’s criteria for inclusion, the excess weight is redistributed among the components of other countries.
Updates to the Index
The components
of the Underlying Index are reviewed (the “Review Date”) on June 15th and rebalanced (the “Rebalance Date”) on the last Friday of June. The Review Date of the weight of each component of the Underlying Index occurs quarterly on the
15th of March, June, September and December with the Rebalance Date the last Friday of the quarter.
For the Underlying Index, if
the Rebalance Date falls on the last business day of the month, the new Rebalance Date will be the Friday immediately before the last business day of
the month. If the Rebalance Date falls on a holiday, the new Rebalance Date will be the Thursday immediately before the last Friday of the
month.
The Underlying Index is also
reviewed on an ongoing basis to account for corporate actions such as mergers, delistings or bankruptcies. The Underlying Index’s components will
be determined and announced at least one week prior to its Rebalance Date (the “Determination Date”).
Maintenance of the Index
Certain corporate actions will
have an impact on the maintenance of the Underlying Index by INDXX. In the event a company is delisted (including in the case of a temporary delisting
or prolonged trading suspension), acquired, or merged, it will be removed from the Underlying Index. INDXX will decide whether to liquidate the stock
in the Underlying Index or to replace it with the next best constituent according to the Underlying Index methodology. Other corporate actions,
including dividend payments, stock splits, bonus issues, rights issues, and spin offs that affect a component of the Underlying Index will result in an
appropriate adjustment in the methodology utilized by the Underlying Index.
Dissemination of Index Information
INDXX will pre-announce to
clients the addition of new index constituents one week prior to the Rebalance Date via email.
PREMIUM/DISCOUNT
INFORMATION
The term “premium” is
sometimes used to describe a market price in excess of NAV and the term “discount” is sometimes used to describe a market price below NAV. As
with other exchange traded funds, the market price of the Fund’s shares is typically slightly higher or lower than the Fund’s per share NAV.
Factors that contribute to the differences between market price and NAV include the supply and demand for Fund shares and investors’ assessments
of the underlying value of the Fund’s portfolio securities.
19
Differences between the closing
times of U.S. and non-U.S. markets may contribute to differences between the NAV and market price of Fund shares. Many non-U.S. markets close prior to
the close of the U.S. securities exchanges. Developments after the close of such markets as a result of ongoing price discovery may be reflected in the
Fund’s market price but not in its NAV (or vice versa).
Information showing the difference between the per share NAV of the Fund and the market trading price of shares of the Fund during
various time periods is available by visiting the Fund’s website at
www.egshares.com
.
DISTRIBUTION PLAN
The Distributor serves as the distributor of Creation Units for each Fund on an
agency basis. The Distributor does not maintain a secondary market in Fund
Shares.
The Board of Trustees of the
Trust has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule 12b-l under the 1940 Act. In accordance with its Rule 12b-l
plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to finance any activity primarily intended to
result in the sale of Creation Units of the Fund or the provision of investor services, including but not limited to: (i) marketing and promotional
services, including advertising; (ii) facilitating communications with beneficial owners of shares of the Fund; (iii) wholesaling services; and (iv)
such other services and obligations as may be set forth in the Distribution Agreement with the Distributor.
No 12b-l fees are currently paid
by the Fund, and there are no plans to impose these fees. However, in the event 12b-l fees are charged in the future, because these fees are paid out
of the Fund’s assets, over time these fees will increase the cost of your investment and may cost you more than certain other types of sales
charges.
FINANCIAL
HIGHLIGHTS
No financial information is
presented for the Funds because they had not commenced operations prior to the date of this Prospectus.
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If you want more information
about the Fund, the following documents are available free upon request:
Annual/Semi-Annual Reports
Additional information about the
Fund’s investments will be available in the Fund’s annual and semi-annual reports to shareholders. In the Fund’s annual report, you will
find a discussion of market conditions and investment strategies that significantly affected the Fund’s performance during its fiscal
year.
Statement of Additional Information
(SAI)
The SAI provides more detailed
information about the Fund and is incorporated by reference into this prospectus (i.e., it is legally considered a part of this
prospectus).
You will be able to request other
information about the Fund or obtain free copies of the Fund’s annual and semi-annual reports and the SAI by contacting the Fund directly at
1-888-800-4347. The SAI and shareholder reports will also be available on the Fund’s website,
www.egshares.com
.
You may review and copy
information about the Fund, including shareholder reports and the SAI, at the Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. You may obtain information about the operations of the SEC’s Public Reference Room by calling the SEC at 1-202-551-8090. You may
get copies of reports and other information about the Fund:
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•
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For a fee, by electronic request at publicinfo@sec.gov or by
writing the SEC’s Public Reference Section, Washington, D.C. 20549-0102; or
|
|
•
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Free from the EDGAR Database on the SEC’s Internet website
at:
http://www.sec.gov
.
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EGA Emerging Global
Shares Trust
EGShares Emerging Markets
High Income Low Beta
ETF
PROSPECTUS
June 10, 2011
as revised August 4,
2011
EGA Emerging Global Shares Trust
Investment Company Act
File No. 811-22255
Egshares Dow Jones Emerging Markets Titans Composite Index Fund (NYSE:EEG)
Graphique Historique de l'Action
De Jan 2025 à Fév 2025
Egshares Dow Jones Emerging Markets Titans Composite Index Fund (NYSE:EEG)
Graphique Historique de l'Action
De Fév 2024 à Fév 2025
