1933 Act Registration No. 333-215607
1940 Act Registration No. 811-23227
Washington, D.C. 20549
Kathleen H. Moriarty
Principal U.S. Listing Exchange: NYSE Arca, Inc.
Beginning on January 1, 2021, as permitted
by regulations adopted by the U.S. Securities and Exchange Commission (“SEC”), Syntax Stratified LargeCap ETF (the
“Fund”) intends to no longer mail paper copies of the Fund’s shareholder reports, unless you specifically request
paper copies of the reports from the Fund or your financial intermediary (such as a broker-dealer or bank). Instead, the reports
will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website
link to access the report. If you already have elected to receive shareholder reports electronically (“e-delivery”),
you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other
communications from the Fund electronically anytime by contacting your financial intermediary.
You may elect to receive all future
reports in paper free of charge. Please contact your financial intermediary to request that you continue to receive paper copies
of your shareholder reports. That election will apply to all Syntax funds held directly in your account.
The SEC has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal
offense. Shares in the Fund are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other agency of
the U.S. Government, nor are Shares deposits or obligations of any bank. It is possible to lose money by investing in the Fund.
Table of Contents
FUND SUMMARY
Syntax Stratified
LargeCap ETF
OBJECTIVE
The Syntax Stratified LargeCap ETF (the
“Fund”) seeks to provide investment results that, before expenses, correspond generally to the total return performance
of publicly traded equity securities of companies comprising the Syntax Stratified LargeCap Index (the “Index”).
FEES AND EXPENSES OF THE FUND
The table below describes the fees and
expenses that you may pay if you buy and hold shares of the Fund (“Fund Shares”). This table and the Example below
reflect the expenses of the Fund and do not reflect brokerage commissions you may pay on purchases and sales of Fund Shares.
Annual Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value
of your investment):
|
Management fees
|
|
|
0.45
|
%
|
|
Distribution and service (12b-1)
fees
|
|
|
None
|
|
|
Other expenses
|
|
|
0.00
|
%
|
|
Total annual Fund operating
expenses
|
|
|
0.45
|
%
|
|
Fee
Waiver/Expense Reimbursement1
|
|
|
0.15
|
%
|
|
Total
annual Fund operating expenses after Fee Waiver/Expense Reimbursement1
|
|
|
0.30
|
%
|
(1)
Syntax Advisors, LLC (the “Advisor”) has agreed to waive its fees and/or absorb expenses of the Fund to ensure that
Total Annual Operating Expenses (except any (i) interest expense, (ii) taxes, (iii) acquired fund fees and expenses, (iv) brokerage
expenses and other expenses (such as stamp taxes) connected with the execution of portfolio transactions or in connection with
creation and redemption transactions, (v) expenses associated with shareholder meetings, (vi) compensation and expenses of the
Independent Trustees, (vii) compensation and expenses of the Trust’s chief compliance officer and his or her staff, (viii)
distribution fees and expenses paid by the Trust under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act,
(ix) legal fees or expenses in connection with any arbitration, litigation or pending or threatened arbitration or litigation,
including any settlements in connection therewith, and (x) extraordinary expenses of the Fund) do not exceed 0.30%. Subject to
approval by the Fund’s Board of Trustees, any waiver under the Expense Limitation Agreement is subject to repayment by the
Fund within 36 months following the day on which fees are waived or reimbursed, if such repayment does not cause the Fund’s
expense ratio (after the repayment is taken into account) to exceed both: (i) the expense cap in place at the time such amounts
were waived; and (ii) the Fund’s current expense cap. These arrangements cannot be terminated prior to one year from the
effective date of this prospectus without the approval of the Board of Trustees.
Example:
This Example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated, and then sell all of your Fund 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. Investors
may pay brokerage commissions on their purchases and sales of Fund shares, which are not reflected in the example. Only the 1-year
dollar amount shown below reflects the Adviser’s agreement to waive fees and/or reimburse fund expenses. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
|
Year 1
|
Year 3
|
Year 5
|
Year 10
|
|
$ 31
|
$129
|
$237
|
$552
|
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 generate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable account. These costs,
which are not reflected in Total Annual Fund Operating Expenses or in the Example, affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was 34% of the average value of its portfolio.
PRINCIPAL STRATEGY
In seeking to track the performance of
the Index, the Fund employs a replication strategy, which means that the Fund typically invests in substantially all of the securities
represented in the Index in approximately the same proportions as the Index. Under normal market conditions, the Fund generally
invests substantially all, and at least 95% of its total assets in the securities comprising the Index. The Fund will provide shareholders
with at least 60 days’ notice prior to any material change in this 95% investment
policy. In addition, the Fund may invest in cash and cash equivalents or money market instruments, such as repurchase agreements
and money market funds.
The Index, which was created by Syntax,
LLC, an affiliate of the Fund’s investment adviser, is the Stratified WeightTM version of the widely used S&P
500® Index and holds the same constituents as the S&P 500 Index. The S&P 500 Index may include some constituent
stocks of companies that may be considered small, medium and large capitalization companies. “Stratified Weight” refers
to the weighting methodology of the Index and is the method by which Syntax diversifies its indices by hierarchically grouping
and distributing the weight of the Index constituent companies that share “Related Business Risks”. Related Business
Risk occurs when two or more companies’ earnings are affected by the same fundamental drivers (e.g. the product/services
the company makes/provides, the customers or end users the company sells to, or the inputs that it utilizes to make its product
or service). The process of identifying, grouping, and diversifying across related business risk is called stratification. Under
normal market conditions, the Index rebalances quarterly, on the third Friday of each quarter-ending month, and will typically
include 500 components allocated across eight industry sectors: consumer, energy, financials, food, healthcare, industrials, information,
and information tools. The market capitalization of companies in the S&P 500® Index as of December 31, 2019
was between $4.58 billion and $1.29 trillion.
Please see the Additional Strategies Information
section of the Fund’s prospectus for more information on the methodology of the Syntax Indices.
PRINCIPAL RISKS OF INVESTING IN THE
FUND
As with all investments, there are certain
risks of investing in the Fund. Fund Shares will change in value, and you could lose money by investing in the Fund.
MARKET RISK: Overall securities
market risks will affect the value of individual instruments in which the Fund invests. Factors such as economic growth and market
conditions, interest rate levels, epidemics and pandemics, and political events affect the US securities markets. When the value
of the Fund’s investments goes down, your investment in the Fund decreases in value and you could lose money.
Additionally, the onset of an infectious
respiratory disease called COVID-19, caused by a novel coronavirus known as SARS-CoV-2, was first identified in China in December
2019 and now has been detected globally. Among other things, COVID-19 has led to travel restrictions, closed international borders,
disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions,
shuttering of offices, universities, schools, cultural institutions and sporting events, and lower consumer demand, as well as
general anxiety and uncertainty. The impact of COVID-19, and other infectious disease outbreaks that may arise in the future,
could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways
that cannot necessarily be foreseen. In addition, the impact of infectious diseases in emerging market countries may be greater
due to generally less established healthcare systems. Public health crises caused by the COVID-19 spread may aggravate other pre-existing
political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot
be determined with certainty.
EQUITY SECURITIES RISK: The value of
equity securities may increase or decrease as a result of market fluctuations, changes in interest rates and perceived trends in
stock prices.
LARGE-CAPITALIZATION SECURITIES RISK:
Returns on investments in securities of large companies could trail the returns on investments in securities of smaller and mid-sized
companies. Larger companies may be unable to respond as quickly as smaller and mid-sized companies to competitive challenges or
to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high
rates that may be achieved by well-managed smaller and mid-sized companies. Under certain market conditions the capitalization
of a large-size company could decline to the extent that it exhibits the characteristics of a mid-capitalization company.
SMALL- AND MID-CAPITALIZATION SECURITIES
RISK: Investing in securities of small and mid-sized companies may involve greater volatility than investing in larger
and more established companies because small and mid-sized companies can be subject to more abrupt or erratic share price changes
than larger, more established companies, are more vulnerable to adverse business and economic developments,
and are more thinly traded relative to those of larger companies.
PASSIVE STRATEGY/INDEX RISK: The
Fund is managed with a passive investment strategy, attempting to track the performance of an unmanaged index of securities. This
differs from an actively-managed fund, which typically seeks to outperform a benchmark index. As a result, the Fund may hold constituent
securities of the Index regardless of the current or projected performance of a specific security or a particular industry or
market sector. Maintaining investments in securities regardless of market conditions or the performance of individual securities
could cause the Fund’s return to be lower than if the Fund employed an active strategy.
CYBER SECURITY RISK: The Fund and
its service providers may be susceptible to operational and information security risks resulting from a breach in cyber security,
including cyber-attacks. A breach in cyber security, intentional or unintentional, may adversely impact the Fund and in many ways, including, but not limited to, disruption of the Fund’s operational capacity, loss of proprietary information, theft or corruption of data, denial-of-service attacks on websites or network
resources, and the unauthorized release of confidential information. Cyber-attacks affecting the Fund’s third-party service providers, market makers, Authorized Participants, or the issuers of securities in which the
Fund invest may subject the Fund to many of the same risks associated
with direct cyber security breaches.
MARKET TRADING RISK: The Fund faces
numerous market trading risks, including the potential lack of an active market for Fund Shares, losses from trading in secondary
markets, periods of high volatility and disruption in the creation/redemption process of the Fund. Any of these factors, among
others, may lead to the Fund’s Shares trading at a premium or discount to NAV.
TRACKING ERROR RISK: The Fund may
be subject to tracking error, which is the divergence of the Fund’s performance from that of the Index. Tracking error may
occur because of differences between the securities and other instruments held in the Fund’s portfolio and those included
in the Index, pricing differences, transaction costs incurred by the Fund, the Fund’s holding of uninvested cash, differences
in timing of the accrual of or the valuation of dividends or interest, the requirements to maintain pass-through tax treatment,
portfolio transactions carried out to minimize the distribution of capital gains to shareholders, changes to the Index or the
costs to the Fund of complying with various new or existing regulatory requirements. This risk may be heightened during times
of increased market volatility or other unusual market conditions. Tracking error also may result because the Fund incurs fees
and expenses, while the Index does not.
FUND PERFORMANCE
The following bar chart and table provide
an indication of the risks of investing in the Fund by showing changes in the performance of the Fund from year to year and by
showing how its average annual returns for certain time periods compare with the average annual returns of a broad measure of
market performance. The Fund’s performance information, from January 1, 2015 to the Fund’s commencement of operations
on January 2, 2019, is that of the 500 Series of the Syntax Index Series LP, a privately offered account, which was the predecessor
of the Fund.
The returns were calculated using the methodology
the SEC requires of registered funds. However, since the 500 Series did not calculate its returns on a per share basis, its returns
have been calculated on its total net asset value. Neither the 500 Series’ nor the Fund’s past performance (before
and after taxes) is necessarily an indication of how the Fund will perform in the future. Updated performance information is available
by calling (866) 972-4492 or visiting our website at www.SyntaxAdvisors.com.
The 500 Series had investment objectives,
policies and strategies that were, in all material respects, the same as those of the Fund, and was managed in a manner that,
in all material respects, complied with the investment guidelines and restrictions of the Fund, which means that it also complied
with the investment guidelines and restrictions of the Index. The investment advisor for the Fund was the investment advisor for
the 500 Series for the entire period from January 1, 2015 until the Fund’s commencement of operations for which performance
information is shown below. The 500 Series was reorganized into the Fund as of the date of the Fund’s commencement of operations
as a tax-free conversion.
As a registered investment company, the
Fund is subject to certain restrictions under the Investment Company Act of 1940 (the “1940 Act”) and the Internal
Revenue Code of 1986 (the “Internal Revenue Code”) which did not apply to the 500 Series. If the 500 Series had been
subject to the provisions of the 1940 Act and the Internal Revenue Code, its performance could have been adversely affected. However,
these restrictions are not expected to have a material effect on the Fund’s investment performance.
The performance information of the 500
Series is net of all fees and expenses. The Fund may be subject to higher fees and expenses, which would negatively impact performance.
Consistent with the rules of the Index,
the 500 Series held, and the Fund holds, underlying securities that coincide with the securities chosen by the Index in appropriate
pre-set weights. Trading in securities undertaken for the 500 Series by the Fund’s portfolio manager during the prior privately
offered investment period, was the addition or deletion of portfolio securities made in order to track the constituents’
securities under the same criteria as those of the Index during the quarterly constituent selection process. Rebalancing and tracking,
quarterly, of the underlying securities into the pre-set weights during the privately offered period were also executed as determined
by the Fund’s Index as contemplated by both the Fund’s investment strategies and the Index that the Fund is designed
to track.
* Performance from January 1, 2015 to the Fund’s commencement
of operations on January 2, 2019 is that of the 500 Series of Syntax Index Series LP.
|
Highest
Quarterly Return
|
First
Quarter 2019
|
14.69%
|
|
Lowest
Quarterly Return
|
Fourth
Quarter 2018
|
-13.19%
|
Average Annual Total Returns (for periods
ending 12/31/19)*
|
|
|
One
Year
|
|
|
Five
Years
|
|
|
Since
Inception (1/1/15)
|
|
|
Return Before Taxes
|
|
|
28.93
|
%
|
|
|
10.16
|
%
|
|
|
10.16
|
%
|
|
Return After Taxes on Distributions**
|
|
|
28.46
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
|
Return After Taxes on Distributions and Sale of
Fund Shares**
|
|
|
17.46
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
|
S&P
500® Index
|
|
|
31.49
|
%
|
|
|
11.70
|
%
|
|
|
11.70
|
%
|
(Index
returns reflect no deduction for fees, expenses or taxes)
* Performance from
January 1, 2015 to the Fund’s commencement of operations on January 2, 2019 is that of the 500 Series of Syntax Index Series
LP.
**The
500 Series was an unregistered limited partnership that did not qualify as a registered investment company for federal income
tax purposes and did not pay dividends or distributions. Due to this different tax treatment, the 5-Years and Since Inception
after tax performance information has not been provided.
The after-tax returns presented in the
table above are calculated using highest historical individual federal marginal income tax rates and do not reflect the impact
of state and local taxes. Your actual after-tax returns will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Fund Shares through tax-advantaged arrangements, such as 401(k)
plans or individual retirement accounts. The returns after taxes can exceed the returns before taxes due to an assumed tax benefit
for a shareholder from realizing a capital loss on a sale of Fund Shares.
PORTFOLIO MANAGEMENT
Investment Adviser
Syntax Advisors, LLC serves as the investment advisor to
the Fund.
Sub-Adviser
Vantage Consulting Group Inc. serves as the investment sub-advisor
to the Fund.
Portfolio Manager
The professional primarily responsible
for the day-to-day management of the Fund is:
|
Name
|
Start Date
|
|
James Thomas Wolfe
|
Since the Fund’s Inception.
|
PURCHASE AND SALE OF FUND SHARES
Individual Fund Shares may only be purchased
and sold on a national securities exchange through a broker-dealer. The price of Fund Shares is based on market price, and because
ETF 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). The Fund will only issue or redeem Shares that have been aggregated into blocks of 25,000 Shares or multiples thereof
(“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The
Fund generally will issue or redeem Creation Units in return for a designated portfolio of securities (and an amount of cash) that
the Fund specifies each day.
TAX INFORMATION
The Fund’s distributions are expected
to be taxed as ordinary income, qualified dividend income and/or capital gains, unless you are investing through a tax-deferred
arrangement, such as a 401(k) plan or individual retirement account. However, subsequent withdrawals from such a tax-advantaged
account may be subject to U.S. federal income tax. You should consult your tax advisor about your specific situation.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase Fund Shares through a broker-dealer
or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund
Shares and related services. These payments may create conflicts of interest by influencing the broker-dealer or other intermediary
and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s
website for more information.
ADDITIONAL STRATEGIES INFORMATION
Please see the Fund’s “Principal
Strategy” section under “Fund Summary” above for a complete discussion of the Fund’s principal investment
strategies.
The Index was developed and is maintained
in accordance with the following criteria: (1) each of the component securities in the Index is a constituent company of the S&P
500® Index; and (2) the Index is calculated by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC)
based on methodology proprietary to Syntax, LLC (the “Index Provider”), an affiliate of the investment advisor, using
its Stratified Weight methodology. The Index Provider publishes information regarding the market value of the Index. For more
information, please visit the Fund’s website at www.SyntaxAdvisors.com.
Syntax Indices utilize a proprietary
functional information system (“FIS”) developed by Syntax, LLC, an affiliate of Syntax Advisors, LLC, the Fund’s
investment adviser, to categorize, group, and stratify constituent securities to create Stratified Weight indices. FIS is a
patented technology for mapping economic relationships between the constituent securities of the Index and for managing concentrations
of related business risks. Related business risks are not based on companies’ capitalization or past performance, but rather,
are based on each company’s current business functions and the functional economic relationships between them. By identifying
these underlying business relationships – common suppliers, customers, competitors, products, etc. – FIS identifies
shared business risks in a securities portfolio. Financial indices not using FIS technology to identify such risks can become
highly exposed to groups of companies that share related business risks.
FIS makes it possible to control for
risks shared by groups of related companies by: 1) organizing companies that share related business risks into well-defined functional
groups; and 2) weighting these groups to spread exposure across these underlying risks. Other commonly used industry and sector
classifications like Global Industry Classification Standard (“GICS”) and Standard Industrial Classification (“SIC”)
lack codified definitions and instead simply group together companies that “seem similar”. FIS-based industries are
engineered to minimize performance distortions caused by the uncontrolled risk exposures that are present in cap-weighted financial
indices. FIS-based sectors effectively group and limit weighting in companies that have shared business functions that can make
them perform similarly when events happen to change expectations in a given part of the economy.
The investment objective of every Syntax
Index is to deliver returns consistent with the performance of the underlying companies that make up the index. By using FIS and
stratification to control for related business risks, Syntax Indices are designed to improve the tracking of the actual medium-to
long-term performance of groups of companies and provide results that are the product of effective diversification, rather than
the overweighting of one or more outperforming group. Because FIS defines the functional parts of the economy, Syntax Indices
are built as a more stable composite of those functional parts. While the major cap-weighted indices are designed to be a proxy
for the total market, Syntax, LLC believes that the Syntax Indices serve as a better basis for medium-to-long-term investments
in index-tracking funds.
The Advisor manages the Fund seeking
to track the performance of its corresponding Syntax Index as closely as possible (i.e., obtain a high degree of correlation with
the Index). A number of factors may affect the Fund’s ability to achieve a high degree of correlation with its Index, and
there can be no guarantee that the Fund will achieve a high degree of correlation.
In the event that a bankruptcy or other
event occurs making a portfolio security illiquid, the Advisor intends to allocate to other similar holdings in the portfolio.
These situations should be uncommon in U.S. large and mid-cap companies and less rare in small-cap companies with fewer resources.
The Board of Trustees (the “Board”)
of Syntax ETF Trust may change the Fund’s investment strategy and other policies without shareholder approval, except as
otherwise indicated in this Prospectus or in the Statement of Additional Information (“SAI”). The Board may not change
the Fund’s investment objective without shareholder approval.
ADDITIONAL RISK INFORMATION
The following section provides additional
information regarding the principal risks identified under “Principal Risks of Investing in the Fund” in the Fund
Summary along with additional risk information.
Market
Risk: Overall securities market risks will affect the value of individual instruments in which the Fund invests. Factors
such as economic growth and market conditions, interest rate levels, epidemics and pandemics, and political events affect the
US securities markets. When the value of the Fund’s investments goes down, your investment in the Fund decreases in value
and you could lose money.
Additionally, the onset of an infectious
respiratory disease called COVID-19, caused by a novel coronavirus known as SARS-CoV-2, was first identified in China in December
2019 and now has been detected globally. Among other things, COVID-19 has led to travel restrictions, closed international borders,
disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions,
shuttering of offices, universities, schools, cultural institutions and sporting events, and lower consumer demand, contributing
to extremely high equity market drawdowns and volatility, as well as general anxiety and uncertainty. The impact of COVID-19,
and other infectious disease outbreaks that may arise in the future, could adversely affect the economies and financial markets
of many nations or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen.
In addition, the impact of infectious diseases in emerging market countries may be greater due to generally less established healthcare
systems. Public health crises caused by the COVID-19 spread may aggravate other pre-existing political, social, financial, and
economic risks in certain countries or globally. The Fund and associated strategies may be affected as adversely, or more adversely,
than indices. Neither the duration of the COVID-19 outbreak and its effects, nor the prospective health, economic,
and financial risks from future pandemics, can be determined with certainty.
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.
Large-Capitalization Securities Risk:
Returns on investments in securities of large companies could trail the returns on investments in securities of smaller and mid-sized
companies. Larger companies may be unable to respond as quickly as smaller and mid-sized companies to competitive challenges or
to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high
rates that may be achieved by well-managed smaller and mid-sized companies. Under certain market conditions the capitalization
of a large-size company could decline to the extent that it exhibits the characteristics of a mid-capitalization company.
Small- And Mid-Capitalization
Securities Risk: Investing in securities of small and mid-sized companies may involve greater volatility than investing
in larger and more established companies because small and mid-sized companies can be subject to more abrupt or erratic share price
changes than larger, more established companies, are more vulnerable to adverse business and economic
developments, and are more thinly traded relative to those of larger companies.
Tracking Error Risk: The Fund
may be subject to tracking error, which is the divergence of the Fund’s performance from that of the Index. Tracking error
may occur because of differences between the securities and other instruments held in the Fund’s portfolio and those included
in the Index, pricing differences, transaction costs incurred by the Fund, the Fund’s holding of uninvested cash, differences
in timing of the accrual of or the valuation of dividends or interest, the requirements to maintain pass-through tax treatment,
portfolio transactions carried out to minimize the distribution of capital gains to shareholders, changes to the Index or the
costs to the Fund of complying with various new or existing regulatory requirements. This risk may be heightened during times
of increased market volatility or other unusual market conditions. Tracking error also may result because the Fund incurs fees
and expenses, while the Index does not.
Passive Strategy/Index Risk:
The Fund is managed with a passive investment strategy, attempting to track the performance of an unmanaged index of securities.
This differs from an actively-managed fund, which typically seeks to outperform a benchmark index. As a result, the Fund may hold
constituent securities of its underlying Index regardless of the current or projected performance of a specific security or a
particular industry or market sector. Maintaining investments in securities regardless of market conditions or the performance
of individual securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
Cyber Security Risk: The Fund and its service providers may be susceptible to operational and information security risks resulting
from a breach in cyber security, including cyber-attacks. A breach in cyber security, intentional or unintentional, may adversely
impact the Fund in many ways, including, but not limited to, disruption of the Fund’s operational capacity, loss of proprietary information, theft or corruption of data, denial-of-service
attacks on websites or network resources, and the unauthorized release of confidential information. Cyber-attacks affecting the
Fund’s third-party service providers, market makers, Authorized Participants, or the
issuers of securities in which the Fund invest may subject the Fund to many of the same risks associated with direct cyber security breaches.
Market Trading Risk:
Absence of Active Market. Although Shares of the Fund are listed for trading on one or more stock exchanges, there can be
no assurance that an active trading market for such Shares will develop or be maintained by market makers or Authorized Participants.
Risk of Secondary Listings.
The Fund’s 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 Fund’s Shares will continue to trade
on any such stock exchange or in any market or that the Fund’s Shares will continue to meet the requirements for listing
or trading on any exchange or in any market. The Fund’s Shares may be less actively traded in certain markets than in 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 Fund 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.
Shares are not Individually Redeemable
Shares may be redeemed at NAV
by the Fund only in large lot sizes known as “Creation Units”, which are expected to be worth in excess of one million
dollars each. The Trust may not redeem Shares in fractional Creation Units. Only certain large institutions that enter into agreements
with the Distributor are authorized to transact in Creation Units with the Fund. These entities are referred to as “Authorized
Participants.” All other persons or entities transacting in Fund Shares must do so in the secondary market.
Additional Non-Principal Risks
Secondary Market Trading Risk. Shares of the Fund may trade in the secondary market at times when the Fund does not accept
orders to purchase or redeem Shares. At such times, Fund Shares may trade in the secondary market with more significant premiums
or discounts than might be experienced at times 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 for 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 Fund, similar to shares of
other issuers listed on a stock exchange, may be sold short and are therefore subject to the risk of increased volatility associated
with short selling.
Shares of the Fund may trade at
prices other than NAV. Shares of the Fund trade on stock exchanges at prices at, above or below the Fund’s most recent
NAV. The NAV of the Fund is calculated at the end of each business day and fluctuates with changes in the market value of the
Fund’s holdings. The trading price of the Fund’s Shares fluctuates continuously throughout trading hours based on
both market supply of and demand for Fund Shares and the underlying value of the Fund’s portfolio holdings or NAV. Also,
in times of market stress, market makers or Authorized Participants may step away from their respective roles in making
a market for Shares of the Fund and in executing purchase or redemption orders. As a result, the trading prices of the Fund’s
Shares may deviate significantly from NAV during periods of market volatility. ANY OF THESE FACTORS, AMONG OTHERS, MAY LEAD TO
THE FUND’S SHARES TRADING AT A PREMIUM OR DISCOUNT TO NAV. However, because Shares can be created and redeemed in Creation
Units at NAV (unlike shares of many closed-end funds, which frequently trade at appreciable discounts from, and sometimes at premiums
to, their NAVs), Syntax believes that large discounts or premiums to the NAV of the Fund are not likely to be sustained over the
long term. While the creation/redemption feature is designed to make it more likely that the Fund’s Shares normally will
trade on stock exchanges at prices close to the Fund’s next calculated NAV, exchange prices are not expected to correlate
exactly with the Fund’s NAV due to timing reasons, supply and demand imbalances and other factors. In addition, disruptions
to creations and redemptions, including disruptions at market makers or Authorized Participants, or to market participants or
during periods of significant market volatility, may result in trading prices for Shares of the Fund that differ significantly
from its NAV.
Costs of Buying or Selling Fund Shares.
Buying or selling Fund Shares on an exchange involves two types of costs that apply to all securities transactions. When buying
or selling Shares of the 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 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.
Continuous Offering. The method
by which Creation Units are purchased and traded may raise certain issues under applicable securities laws. Because new Creation
Units are issued and sold by the Fund on an ongoing basis, at any point a “distribution,” as such term is used in the
Securities Act, may occur. Broker-dealers and other persons are cautioned that some activities on their part may, depending on
the circumstances, result in their being deemed participants in a distribution in a manner which could render them statutory underwriters
and subject them to the prospectus delivery 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 Units after placing an order with the Transfer Agent, breaks
them down into individual 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 categorization as an underwriter.
U.S. Tax Risks: To qualify for the
favorable U.S. federal income tax treatment accorded to regulated investment companies, the Fund must satisfy certain income, asset
diversification and distribution requirements. If, for any taxable year, the Fund does not qualify as a regulated investment company,
all of its taxable income (including its net capital gain) for that year would be subject to tax at regular corporate rates without
any deduction for distributions to its shareholders, and such distributions would be taxable to its shareholders as dividend income
to the extent of the Fund’s current and accumulated earnings and profits. The tax treatment of certain derivatives is unclear
for purpose of determining the Fund’s tax status.
MANAGEMENT
BOARD OF TRUSTEES. The
Board of Trustees is responsible for overseeing the management and business affairs of the Fund. The Board oversees the operations
of the Fund by its officers. The Board also reviews management of the Fund’s assets by the investment advisor and sub-advisor.
Information about the Board of Trustees and executive officers of the Fund is contained in the SAI.
ADVISOR. Syntax Advisors,
LLC (“Syntax” or the “Advisor”) serves as the investment advisor to the Fund and, subject to the supervision
of the Board, is responsible for the investment management of the Fund, executed through the selection of the Sub-Advisor for
portfolio management and other agreed upon activities. Syntax has been a registered investment advisor since April 21, 2017. Syntax
is owned by Syntax, LLC and is controlled by Rory Riggs. As the Fund’s investment adviser, Syntax provides an investment
management program for the Fund and manages the investment of the Fund’s assets through sub-advisory relationships. The
Adviser’s principal business address is One Liberty Plaza, 46th Floor, New York, NY 10006.
For the services provided to the Fund
under the Investment Advisory Agreement, the Fund expects to pay the Advisor the annual fee set forth below, which is based on
a percentage of the Fund’s average daily net assets.
|
Fund
|
Advisory Fee
|
|
Syntax Stratified LargeCap ETF
|
0.45%
|
Under the Investment Advisory
Agreement, the Advisor agrees to pay all expenses of the Fund, except (i) interest expense, (ii) taxes, (iii) acquired fund fees
and expenses, (iv) brokerage expenses and other expenses (such as stamp taxes) connected with the execution of portfolio transactions
or in connection with creation and redemption transactions, (v) expenses associated with shareholder meetings, (vi) compensation
and expenses of the Independent Trustees, (vii) compensation and expenses of the Trust’s chief compliance officer and his
or her staff, (viii) distribution fees and expenses paid by the Trust under any distribution plan adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the “1940 Act”), (ix) legal fees or expenses in connection with
any arbitration, litigation or pending or threatened arbitration or litigation, including any settlements in connection therewith,
(x) extraordinary expenses of the Fund and (xi) fees payable to the Adviser. The payment or assumption by the Advisor of any expense
of the Fund that the Advisor is not required by the Investment Advisory Agreement to pay or assume shall not obligate the Advisor
to pay or assume the same or any similar expense of the Fund on any subsequent occasion.
Contractual arrangements have been made
with Syntax, through one year from the effective date of this prospectus, to waive fees and/or reimburse fund expenses to the extent
that the Fund’s total operating expenses exceed the rates below, excluding, as applicable, (i) interest expense, (ii) taxes,
(iii) acquired fund fees and expenses, (iv) brokerage expenses and other expenses (such as stamp taxes) connected with the execution
of portfolio transactions or in connection with creation and redemption transactions, (v) expenses associated with shareholder
meetings, (vi) compensation and expenses of the Independent Trustees, (vii) compensation and expenses of the Trust’s chief
compliance officer and his or her staff, (viii) distribution fees and expenses paid by the Trust under any distribution plan adopted
pursuant to Rule 12b-1 under the 1940 Act, (ix) legal fees or expenses in connection with any arbitration, litigation or pending
or threatened arbitration or litigation, including any settlements in connection therewith, and (x) extraordinary expenses of the
Fund. These arrangements cannot be terminated prior to one year from the effective date of this prospectus, without the approval
of the Fund’s Board of Trustees. Syntax is entitled to reimbursement by the Fund of fees waived or expenses reduced during
any of the previous 36 months if on any day or month the estimated annualized fund operating expenses are less than the cap. The
Fund may only make repayments to the Syntax if such repayment does not cause the Fund’s expense ratio (after the repayment
is taken into account) to exceed both: (1) the Fund’s net expense ratio in place at the time such amounts were waived; and
(2) the Fund’s current net expense ratio (before recoupment).
|
Fund
|
Total Operating Expenses after Waiver/Reimbursement
|
|
Syntax Stratified LargeCap ETF
|
0.30%
|
SUB-ADVISER. Pursuant
to an investment sub-advisory agreement with Syntax, Vantage Consulting Group Inc. (“Vantage” or the “Sub-Advisor”)
serves as the sub-advisor to the Fund and performs the day to day management of the Fund and places orders for the purchase and
sale of securities for the Fund. For its services to the Fund, the Sub-Advisor is compensated by Syntax. The Sub-Advisor has been
a registered investment advisor since June 2, 1986 and is owned by Mark T. Finn. As of December 31, 2019, the Sub-Advisor managed
approximately $2.3 billion in assets. The Sub-Adviser’s principal business address is 3500 Pacific Ave. Virginia Beach,
VA 23451.
A discussion regarding the Board’s
consideration of the investment advisory and sub-advisory agreements will be found in the Trust’s next Annual or Semi-Annual
Report to Shareholders, as applicable.
PORTFOLIO MANAGER. The Fund is managed by
the portfolio manager listed below.
|
Portfolio
Manager
|
Business
Experience over Past 5 Years
|
|
James
Thomas Wolfe
|
Mr.
Wolfe currently serves as portfolio manager. He has held a variety of positions since joining Vantage in 1988 including
trader, operations manager, and systems developer specializing in quantitative modeling, and he is currently head trader.
Mr. Wolfe is an investment professional with over 30 years of experience. Mr. Wolfe received his BA from Virginia
Wesleyan College in 1983 and an MBA from the College of William and Mary in 1989.
|
Additional information about the portfolio
manager’s compensation, other accounts managed by the portfolio manager, and the portfolio manager’s ownership of securities
in the Fund is available in the SAI.
Administrator, Custodian and Transfer
Agent
State Street Bank and Trust Company
is the Administrator for the Fund, the Transfer Agent to the Fund and the Custodian for the Fund’s assets.
Distributor
Foreside Fund Services, LLC (the “Distributor”)
is the distributor of the Fund Shares. The Distributor will not distribute Fund Shares in less than Creation Units, and it does
not maintain a secondary market in the Fund Shares. The Distributor may enter into selected dealer agreements with other broker-dealers
or other qualified financial institutions for the sale of Creation Units of Fund Shares.
Independent Registered Public Accounting
Firm
Ernst & Young LLP serves as the independent
registered public accounting firm for the Trust.
Independent auditors
Ernst &
Young, Dublin, Ireland, serves as the independent auditors for the Syntax 500 Series of Syntax Index Series, LP.
Legal Counsel
Chapman and Cutler LLP serves as legal
counsel to the Trust and the Fund.
INDEX/TRADEMARK LICENSES AND DISCLAIMER
Syntax, LLC, the Index Provider, is
affiliated with the Trust and the Advisor. The Advisor (“Licensee”) has entered into license agreements with the Index
Provider pursuant to which the Advisor pays a fee to use the Index. The Advisor is sub-licensing rights to the Index to the Fund
at no charge.
The Syntax Stratified LargeCap Index
(the “Index”) is the property of Syntax, LLC, which has contracted with S&P Opco, LLC (a subsidiary of S&P
Dow Jones Indices LLC) to calculate and maintain the Index. The Index is not sponsored by S&P Dow Jones Indices LLC or its
affiliates or its third-party licensors, including Standard & Poor’s Financial Services LLC and Dow Jones Trademark
Holdings LLC (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices will not be liable for any errors
or omissions in calculating the Index. “Calculated by S&P Dow Jones Indices” and the related stylized mark(s)
are service marks of S&P Dow Jones Indices and have been licensed for use by Syntax, LLC. S&P® is a registered
trademark of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow
Jones Trademark Holdings LLC.
The Fund is not sponsored, endorsed, sold
or promoted by S&P Dow Jones Indices. S&P Dow Jones Indices does not make any 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 or the ability of the Index to track general market performance. S&P Dow Jones Indices’ only relationship
to Syntax, LLC with respect to the Index is the licensing of the S&P 500® Index and its constituents, certain
trademarks, service marks and trade names of S&P Dow Jones Indices, and the provision of the calculation services related
to the Index. S&P Dow Jones Indices is not responsible for and has not participated in the determination of the prices and
amount of the Fund or the timing of the issuance or sale of the Fund or in the determination or calculation of the equation by
which the Fund may be converted into cash or other redemption mechanics. S&P Dow Jones Indices has no obligation or liability
in connection with the administration, marketing or trading of the Fund. S&P Dow Jones Indices LLC is not an investment advisor.
Inclusion of a security within the Index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security,
nor is it investment advice.
S&P DOW JONES INDICES DOES NOT GUARANTEE
THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION WITH RESPECT
THERETO, INCLUDING, ORAL, WRITTEN, OR ELECTRONIC COMMUNICATIONS. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES
OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN EXCEPT THOSE ARISING FROM FRAUD OR GROSS NEGLIGENCE ON THE PART OF S&P.
S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY SYNTAX, LLC, OWNERS OF THE FUND, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES,
INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME, OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.
ADDITIONAL PURCHASE AND SALE INFORMATION
The Shares are listed for secondary trading
on NYSE Arca, Inc. (the “Exchange”) and individual Fund Shares may only be purchased and sold in the secondary market
through a broker-dealer. The secondary markets are closed on weekends and also are generally closed on the following holidays:
New Year’s Day, Dr. Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day (observed), Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. The Exchange may close early on the business day before certain holidays and
on the day after Thanksgiving Day. Exchange holiday schedules are subject to change without notice. If you buy or sell Shares in
the secondary market, you will pay the secondary market price for Shares. In addition, you may incur customary brokerage commissions
and charges and may pay some or all of the spread between the bid and the offered price in the secondary market on each leg of
a round trip (purchase and sale) transaction.
The trading prices of the Fund’s
Shares will fluctuate continuously throughout trading hours based on market supply and demand rather than the Fund’s net
asset value, which is calculated at the end of each business day. The Shares will trade on the Exchange at prices that may be
above (i.e., at a premium) or below (i.e., at a discount), to varying degrees, the daily net asset value of the Shares. The trading
prices of the Fund’s Shares may deviate significantly from its net asset value during periods of market volatility. Given,
however, that Shares can be issued and redeemed daily in Creation Units, the Advisor believes that large discounts and premiums
to net asset value should not be sustained over long periods. Information showing the number of days the market price of the Fund’s
Shares was greater than the Fund’s net asset value and the number of days it was less than the Fund’s net asset value
(i.e., premium or discount) for various time periods is available by visiting the Fund’s website at www.SyntaxAdvisors.com.
The Exchange will disseminate, every
fifteen seconds during the regular trading day, an indicative optimized portfolio value (“IOPV”) relating to the Fund.
The IOPV calculations are estimates of the value of the Fund’s net asset value per Share using market data converted into
U.S. dollars at the current currency rates. The IOPV price is based on quotes and closing prices from the securities’ local
market and may not reflect events that occur subsequent to the local market’s close. Premiums and discounts between the
IOPV and the market price may occur. This should not be viewed as a “real-time” update of the net asset value per
Share of the Fund, which is calculated only once a day. Neither the Fund, nor the Advisor or any of their affiliates are involved
in, or responsible for, the calculation or dissemination of such IOPVs and make no warranty as to their accuracy.
The Fund does not impose any restrictions
on the frequency of purchases and redemptions; however, the Fund reserves the right to reject or limit purchases at any time as
described in the SAI. When considering that no restriction or policy was necessary, the Board evaluated the risks posed by market
timing activities, such as whether frequent purchases and redemptions would occur, for example from an investor’s efforts
to take advantage of a potential arbitrage opportunity, and would interfere with the efficient implementation of the Fund’s
investment strategy, or whether they would cause the Fund to experience increased transaction costs. The Board considered that,
unlike traditional mutual funds, Fund Shares are issued and redeemed only in the large quantities of Creation Units available
only from the Fund directly, and that most trading in the Fund occurs on the Exchange at prevailing market prices and does not
involve the Fund directly. Given this structure, the Board determined that it is unlikely that (a) market timing would be attempted
by the Fund’s shareholders or (b) any attempts to market time the Fund by shareholders would result in negative impact to
the Fund or its shareholders.
BOOK ENTRY. Shares of the Fund are held
in book-entry form and no stock certificates are issued. The Depository Trust Company (“DTC”), through its nominee
Cede & Co., is the record owner of all outstanding Shares.
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
in DTC include 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 right 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 for any publicly-traded company. Specifically,
in the case of a shareholder meeting of the Fund, DTC assigns applicable Cede & Co. voting rights to its participants that
have Shares credited to their accounts on the record date, issues an omnibus proxy and forwards the omnibus proxy to the Fund.
The omnibus proxy transfers the voting authority from Cede & Co. to the DTC participant. This gives the DTC participant through
whom you own Shares (namely, your broker, dealer, bank, trust company or other nominee) authority to vote the Shares, and, in
turn, the DTC participant is obligated to follow the voting instructions you provide.
DISTRIBUTIONS
DIVIDENDS AND CAPITAL GAINS. As
a shareholder, you are entitled to your share of the Fund’s income and net realized gains on its investments. The Fund pays
out substantially all of its net earnings to its shareholders as “distributions.”
The Fund typically earns income dividends
from stocks. These amounts, net of expenses and taxes (if applicable), are passed along to Fund shareholders as “income dividend
distributions.” The Fund realizes capital gains or losses whenever it sells securities. Net long-term capital gains are distributed
to shareholders as “capital gain distributions.”
Income dividend distributions, if any,
for the Fund are generally distributed to shareholders annually, but may vary significantly from period to period. Net capital
gains for the Fund are distributed at least annually. Dividends may be declared and paid more frequently or at any other times
to improve Index tracking or to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the
“Internal Revenue Code”).
Distributions in cash may be reinvested
automatically in additional whole Fund Shares only if the broker through whom you purchased Shares makes such option available.
Distributions which are reinvested will nevertheless be taxable to the same extent as if such distributions had not been reinvested.
PORTFOLIO HOLDINGS DISCLOSURE
A description of the Fund’s policies
and procedures with respect to the disclosure of the Fund’s portfolio securities is available in the Fund’s SAI.
U.S. FEDERAL INCOME TAXATION
The following is a summary of certain U.S.
federal income tax considerations applicable to an investment in Shares of the Fund. The summary is based on the U.S. Internal
Revenue Code of 1986, as amended (the “Internal Revenue Code”), U.S. Treasury Department regulations promulgated thereunder,
and judicial and administrative interpretations thereof, all as in effect on the date of this Prospectus and all of which are subject
to change, possibly with retroactive effect. In addition, this summary assumes that a shareholder holds Shares as capital assets
within the meaning of the Internal Revenue Code and does not hold Shares in connection with a trade or business. This summary does
not address all potential U.S. federal income tax considerations possibly applicable to an investment in Shares of the Fund, and
does not address the consequences to Fund shareholders subject to special tax rules, including, but not limited to, partnerships
and the partners therein, tax-exempt shareholders, those who hold Fund Shares through an IRA, 401(k) plan or other tax-advantaged
account, and, except to the extent discussed below, “non-U.S. shareholders” (as defined below). This discussion does
not discuss any aspect of U.S. state, local, estate, and gift, or non-U.S., tax law. Furthermore, this discussion is not intended
or written to be legal or tax advice to any shareholder in the Fund or other person and is not intended or written to be used or
relied on, and cannot be used or relied on, by any such person for the purpose of avoiding any U.S. federal tax penalties that
may be imposed on such person. Prospective Fund shareholders are urged to consult their own tax advisors with respect to the specific
U.S. federal, state and local, and non-U.S., tax consequences of investing in Shares, based on their particular circumstances.
The Fund has not requested and will not
request an advance ruling from the U.S. Internal Revenue Service (the “IRS”) as to the U.S. federal income tax matters
described below. The IRS could adopt positions contrary to those discussed below and such positions could be sustained. Prospective
investors should consult their own tax advisors with regard to the U.S. federal tax consequences of the purchase, ownership or
disposition of Shares, as well as the tax consequences arising under the laws of any state, locality, non-U.S. country or other
taxing jurisdiction. The following information supplements, and should be read in conjunction with, the section in the SAI entitled
“U.S. Federal Income Taxation.”
Tax Treatment of the Fund
The Fund intends to qualify and elect to
be treated as a separate “regulated investment company” (a “RIC”) under the Internal Revenue Code. To qualify
and remain eligible for the special tax treatment accorded to RICs, the Fund must meet certain annual income and quarterly asset
diversification requirements and must distribute annually at least 90% of the sum of (i) its “investment company taxable
income” (which includes dividends, interest and net short-term capital gains) and (ii) certain net tax-exempt income, if
any.
As a RIC, the Fund generally will not be
required to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes to its shareholders.
If the Fund fails to qualify as a RIC for any year (subject to certain curative measures allowed by the Internal Revenue Code),
the Fund will be subject to regular corporate-level U.S. federal income tax in that year on all of its taxable income, regardless
of whether the Fund makes any distributions to its shareholders. In addition, in such case, distributions will be taxable to the
Fund’s shareholders generally as ordinary dividends to the extent of the Fund’s current and accumulated earnings and
profits. The remainder of this discussion assumes that the Fund will qualify for the special tax treatment accorded to RICs.
The Fund will be subject to a 4% excise
tax on certain undistributed income if the Fund does not distribute to its shareholders in each calendar year at least 98% of its
ordinary income for the calendar year, 98.2% of its capital gain net income for the twelve months ended October 31 of such year,
plus 100% of any undistributed amounts from prior years. For these purposes, the Fund will be treated as having distributed any
amount on which it has been subject to U.S. corporate income tax for the taxable year ending within the calendar year. The Fund
intends to make distributions necessary to avoid this 4% excise tax, although there can be no assurance that it will be able to
do so.
The Fund may be required to recognize taxable
income in advance of receiving the related cash payment. For example, if the Fund invests in original issue discount obligations
(such as zero coupon debt instruments or debt instruments with payment-in-kind interest), the Fund will be required to include
in income each year a portion of the original issue discount that accrues over the term of the obligation, even if the related
cash payment is not received by the Fund until a later year. Under the “wash sale” rules, the Fund may not be able
to deduct currently a loss on a disposition of a portfolio security. As a result, the Fund may be required to make an annual income
distribution greater than the total cash actually received during the year. Such distribution may be made from the existing cash
assets of the Fund or cash generated from selling portfolio securities. The Fund may realize gains or losses from such sales, in
which event its shareholders may receive a larger capital gain distribution than they would in the absence of such transactions.
Tax Treatment of Fund Shareholders
Taxation of U.S. Shareholders
The
following is a summary of certain U.S. federal income tax consequences of the purchase, ownership and disposition of Fund Shares
applicable to “U.S. shareholders.” For purposes of this discussion, a “U.S. shareholder” is a beneficial
owner of Fund Shares who, for U.S. federal income tax purposes, is (i) an individual who is a citizen or resident of the United
States; (ii) a corporation (or an entity treated as a corporation for U.S. federal income tax purposes) created or organized in
the United States or under the laws of the United States, or of any state thereof, or the District of Columbia; (iii) an estate,
the income of which is includable in gross income for U.S. federal income tax purposes regardless of its source; or (iv) a trust,
if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons
have the authority to control all substantial decisions of the trust, or (2) the trust has a valid election in place to be treated
as a U.S. person.
Fund Distributions. In general,
Fund distributions are subject to U.S. federal income tax when paid, regardless of whether they consist of cash or property, and
regardless of whether they are re-invested in Shares. However, any Fund distribution declared in October, November or December
of any calendar year and payable to shareholders of record on a specified date during such month will be deemed to have been received
by the Fund shareholder on December 31 of such calendar year, provided such dividend is actually paid during January of the following
calendar year.
Distributions of the Fund’s net
investment income (except, as discussed below, qualified dividend income) and net short-term capital gains are taxable as ordinary
income to the extent of the Fund’s current and accumulated earnings and profits. To the extent designated as capital gain
dividends by the Fund, distributions of the Fund’s net long-term capital gains in excess of net short-term capital losses
(“net capital gain”) are taxable at long-term capital gain tax rates to the extent of the Fund’s current and
accumulated earnings and profits, regardless of the Fund shareholder’s holding period in the Fund’s Shares. Distributions
of qualified dividend income are, to the extent of the Fund’s current and accumulated earnings and profits, taxed to certain
non-corporate Fund shareholders at the rates generally applicable to long-term capital gain, provided that the Fund shareholder
meets certain holding period and other requirements with respect to the distributing Fund’s Shares and the distributing
Fund meets certain holding period and other requirements with respect to its dividend-paying stocks. Substitute payments received
on Fund Shares that are lent out will be ineligible for being reported as qualified dividend income.
The Fund intends to distribute its net
capital gain at least annually. However, by providing written notice to its shareholders no later than 60 days after its year-end,
the Fund may elect to retain some or all of its net capital gain and designate the retained amount as a “deemed distribution.”
In that event, the Fund pays U.S. federal income tax on the retained net capital gain, and the Fund shareholder recognizes a proportionate
share of the Fund’s undistributed net capital gain. In addition, the Fund shareholder can claim a tax credit or refund for
the shareholder’s proportionate share of the Fund’s U.S. federal income taxes paid on the undistributed net capital
gain and increase the shareholder’s tax basis in the Shares by an amount equal to the shareholder’s proportionate share
of the Fund’s undistributed net capital gain, reduced by the amount of the shareholder’s tax credit or refund.
Distributions in excess of the 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 the shareholder’s tax basis in its Shares of the Fund, and generally as capital gain thereafter.
In addition, high-income individuals (and
certain trusts and estates) generally will be subject to a 3.8% Medicare tax on “net investment income” in addition
to otherwise applicable U.S. federal income tax. “Net investment income” generally will include dividends (including
capital gain dividends) received from the Fund and net gains from the redemption or other disposition of Shares. Please consult
your tax advisor regarding this tax.
Investors considering buying Shares just
prior to a distribution should be aware that, although the price of the Shares purchased at such time may reflect the forthcoming
distribution, such distribution nevertheless may be taxable (as opposed to a non-taxable return of capital).
Sales of Shares. Any capital gain
or loss realized upon a sale or exchange of Shares generally is treated as a long-term gain or loss if the Shares have been held
for more than one year. Any capital gain or loss realized upon a sale or exchange of Shares held for one year or less generally
is treated as a short-term gain or loss, except that any capital loss on the sale or exchange of Shares held for six months or
less is treated as long-term capital loss to the extent that capital gain dividends were paid (or deemed to be paid) with respect
to the Shares.
Creation Unit Issues and Redemptions.
On an issue of Shares of the Fund as part of a Creation Unit where the creation is conducted in-kind, an Authorized Participant
recognizes capital gain or loss equal to the difference between (i) the fair market value (at issue) of the issued Shares (plus
any cash received by the Authorized Participant as part of the issue) and (ii) the Authorized Participant’s aggregate basis
in the exchanged securities (plus any cash paid by the Authorized Participant as part of the issue). On a redemption of Shares
as part of a Creation Unit where the redemption is conducted in-kind, an Authorized Participant recognizes capital gain or loss
equal to the difference between (i) the fair market value (at redemption) of the securities received (plus any cash received by
the Authorized Participant as part of the redemption) and (ii) the Authorized Participant’s basis in the redeemed Shares
(plus any cash paid by the Authorized Participant as part of the redemption). However, the IRS may assert, under the “wash
sale” rules or on the basis that there has been no significant change in the Authorized Participant’s economic position,
that any loss on creation or redemption of Creation Units cannot be deducted currently.
In general, any capital gain or loss recognized
upon the issue or redemption of Shares (as components of a Creation Unit) is treated either as long-term capital gain or loss,
if the deposited securities (in the case of an issue) or the Shares (in the case of a redemption) have been held for more than
one year, or otherwise as short-term capital gain or loss. However, any capital loss on a redemption of Shares held for six months
or less is treated as long-term capital loss to the extent that capital gain dividends were paid (or deemed to be paid) with respect
to such Shares.
Taxation of Non-U.S. Shareholders
The following is a summary of certain U.S.
federal income tax consequences of the purchase, ownership and disposition of Fund Shares applicable to “non-U.S. shareholders.”
For purposes of this discussion, a “non-U.S. shareholder” is a beneficial
owner of Fund Shares that is not a U.S. shareholder (as defined above) and is not an entity or arrangement treated as a partnership
for U.S. federal income tax purposes. The following discussion is based on current law and is for general information only. It
addresses only selected, and not all, aspects of U.S. federal income taxation.
With respect to non-U.S. shareholders of
the Fund, the Fund’s ordinary income dividends generally will be subject to U.S. federal withholding tax at a rate of 30%
(or at a lower rate established under an applicable tax treaty), subject to certain exceptions for “interest-related dividends”
and “short-term capital gain dividends” discussed below. U.S. federal withholding tax generally will not apply to any
gain realized by a non-U.S. shareholder in respect of the Fund’s net capital gain. Special rules apply with respect to dividends
of the Fund that are attributable to gain from the sale or exchange of “U.S. real property interests.”
In general, all “interest-related
dividends” and “short-term capital gain dividends” (each defined below) will not be subject to U.S. federal withholding
tax, provided that the non-U.S. shareholder furnished the Fund with a completed IRS Form W-8BEN or W-8BEN-E, as applicable, (or
acceptable substitute documentation) establishing the non-U.S. shareholder’s non-U.S. status and the Fund does not have actual
knowledge or reason to know that the non-U.S. shareholder would be subject to such withholding tax if the non-U.S. shareholder
were to receive the related amounts directly rather than as dividends from the Fund. “Interest-related
dividends” generally means dividends designated by the Fund as attributable to such Fund’s U.S.-source interest income,
other than certain contingent interest and interest from obligations of a corporation or partnership in which such Fund is at least
a 10% shareholder, reduced by expenses that are allocable to such income. “Short-term capital gain dividends” generally
means dividends designated by the Fund as attributable to the excess of such Fund’s net short-term capital gain over its
net long-term capital loss. Depending on its circumstances, the Fund may treat such dividends, in whole or in part, as ineligible
for these exemptions from withholding.
In
general, subject to certain exceptions, non-U.S. shareholders will not be subject to U.S. federal income or withholding tax in
respect of a sale or other disposition of Shares of the Fund.
To claim a credit or refund for any Fund-level
taxes on any undistributed net capital gain (as discussed above) or any taxes collected through back-up withholding (discussed
below), a non-U.S. shareholder must obtain a U.S. taxpayer identification number and file a U.S. federal income tax return even
if the non-U.S. shareholder would not otherwise be required to do so.
Back-Up Withholding.
The Fund (or a financial intermediary such
as a broker through which a shareholder holds Shares in the Fund) may be required to report certain information on the Fund shareholder
to the IRS and withhold U.S. federal income tax (“backup withholding”) at a current rate of 28% from taxable distributions
and redemption or sale proceeds payable to the Fund shareholder if (i) the Fund shareholder fails to provide the Fund with a correct
taxpayer identification number or make required certifications, or if the IRS notifies the Fund that the Fund shareholder is otherwise
subject to backup withholding, and (ii) the Fund shareholder is not otherwise exempt from backup withholding. Non-U.S. shareholders
can qualify for exemption from backup withholding by submitting a properly completed IRS Form W-8BEN or W-8BEN-E. Backup withholding
is not an additional tax and any amount withheld may be credited against the Fund shareholder’s U.S. federal income tax liability.
Foreign Account Tax Compliance Act
The U.S. Foreign Account Tax Compliance
Act (“FATCA”) generally imposes a 30% withholding tax on “withholdable payments” (defined below) made to
(i) a “foreign financial institution” (“FFI”), unless the FFI enters into an agreement with the IRS to
provide information regarding certain of its direct and indirect U.S. account holders and satisfy certain due diligence and other
specified requirements, and (ii) a “non-financial foreign entity” (“NFFE”) unless such NFFE provides certain
information about its direct and indirect “substantial U.S. owners” to the withholding agent or certifies that it has
no such U.S. owners. The beneficial owner of a withholdable payment may be eligible for a refund or credit of the withheld tax.
The U.S. government also has entered into several intergovernmental agreements with other jurisdictions to provide an alternative,
and generally easier, approach for FFIs to comply with FATCA.
Withholdable payments generally include,
among other items, (i) U.S.-source interest and dividends, and (ii) gross proceeds from the sale or disposition, occurring on or
after January 1, 2019, of property of a type that can produce U.S.-source interest or dividends.
The Fund may be required to impose a 30%
withholding tax on withholdable payments to a shareholder if the shareholder fails to provide the Fund with the information, certifications
or documentation required under FATCA, including information, certification or documentation necessary for the Fund to determine
if the shareholder is a non-U.S. shareholder or a U.S. shareholder and, if it is a non-U.S. shareholder, if the non-U.S. shareholder
has “substantial U.S. owners” and/or is in compliance with (or meets an exception from) FATCA requirements. The Fund
will not pay any additional amounts to shareholders in respect of any amounts withheld. The Fund may disclose any shareholder information,
certifications or documentation to the IRS or other parties as necessary to comply with FATCA.
The requirements of, and exceptions from,
FATCA are complex. All prospective shareholders are urged to consult their own tax advisors regarding the potential application
of FATCA with respect to their own situation.
For a more detailed tax discussion regarding
an investment in the Fund, please see the section of the SAI entitled “U.S. Federal Income Taxation.”
GENERAL INFORMATION
Syntax ETF Trust was organized as a Delaware
statutory trust on June 27, 2013. If shareholders of the Fund are required to vote on any matters, shareholders are entitled to
one vote for each Share they own. Annual meetings of shareholders will not be held except as required by the 1940 Act and other
applicable law. See the SAI for more information concerning the Trust’s form of organization.
For purposes of the 1940 Act, Shares of
the Trust are issued by the respective series of the Trust and the acquisition of Shares by investment companies is subject to
the restrictions of section 12(d)(1) of the 1940 Act. The Trust has received exemptive relief from Section 12(d)(1) to
allow registered investment companies to invest in the Fund beyond the limits set forth in Section 12(d)(1), subject to certain
terms and conditions as set forth in an SEC exemptive order issued to the Trust, including that such investment companies enter
into an agreement with the Trust.
From time to time, the Fund may advertise
yield and total return figures. Yield is a historical measure of dividend income, and total return is a measure of past dividend
income (assuming that it has been reinvested) plus capital appreciation. Neither yield nor total return should be used to predict
the future performance of the Fund.
PREMIUM/DISCOUNT INFORMATION
Information showing the number of days
the market price of the Fund’s Shares was greater than the Fund’s NAV per Share (i.e. at a premium) and the number
of days it was less than the Fund’s NAV per Share (i.e. at a discount) for various time periods is available by visiting
the Fund’s website at www.SyntaxAdvisors.com.
CODE OF ETHICS
The Trust, the Adviser, the Sub-Advisor
and Foreside Financial Group, LLC (on behalf of Foreside Fund Officer Services, LLC) have each adopted a code of ethics under
Rule 17j-1 of the 1940 Act. These codes of ethics permit, subject to certain conditions, personnel of each of those
entities to invest in securities that may be purchased or held by the Fund. The Distributor relies on the principal underwriters
exception under Rule 17j-1(c)(3), specifically where the Distributor is not affiliated with the Trust or the Adviser, and no officer,
director or general partner of the Distributor serves as an officer, director or general partner of the Trust or the Adviser.
Each code of ethics is on public file with, and is available from, the SEC.
DISTRIBUTION PLAN
The Fund has adopted a Rule 12b-1 Distribution
and Service Plan in accordance with Rule 12b-1 under the 1940 Act pursuant to which payments of up to 0.25% of the Fund’s
average daily net assets may be made for the sale and distribution of its Shares. However, the Board of Trustees has determined
not to authorize payment of a 12b-1 Plan fee at this time. The 12b-1 Plan fee may only be imposed or increased when the Board of
Trustees determines that it is in the best interests of shareholders to do so. Because Rule 12b-1 fees are paid out of the Fund’s
assets, and over time, these fees increase the cost of your investment and they may cost you more than certain other types of sales
charges.
OTHER INFORMATION
The Fund is not sponsored, endorsed, sold
or promoted by NYSE Arca, Inc. NYSE Arca makes no representation or warranty, express or implied, to the owners of Shares or any
member of the public regarding the advisability of investing in securities generally or in the Fund particularly or the ability
of the Fund to achieve its objectives. NYSE Arca has no obligation or liability in connection with the administration, marketing
or trading of the Fund.
For purposes of the 1940 Act, the Fund
is a registered investment company, and the acquisition of Shares by other registered investment companies and companies relying
on exemption from registration as investment companies under Section 3(c)(1) or 3(c)(7) of the 1940 Act is subject to the restrictions
of Section 12(d)(1) of the 1940 Act, except as permitted by an exemptive order that permits registered investment companies to
invest in the Fund beyond those limitations.
FINANCIAL HIGHLIGHTS
The Financial Highlights table is intended
to help you understand the Fund’s performance for the past five years or since its inception if less than five years. The
total returns in the table represent the rate an investor would have earned (or lost) on an investment in the Fund for the period
shown, assuming reinvestment of all dividends and distributions. Information has been derived from financial statements audited
by Ernst & Young LLP, an Independent Registered Public Accounting firm, whose reports, along with the Fund’s financial
statements, are included in the December 31, 2019 Annual Report to Shareholders, which is available to you upon request.
Syntax
Stratified LargeCap ETF
Selected data for a share outstanding throughout this period
|
|
|
For
the Period
1/2/19(a)
to
12/31/19
|
|
|
Net asset value, beginning of period
|
|
$
|
40.00
|
|
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income (loss)(b)
|
|
|
0.84
|
|
|
Net realized and unrealized
gain (loss)
|
|
|
10.68
|
|
|
Total from investment operations
|
|
|
11.52
|
|
|
Less Distributions from:
|
|
|
|
|
|
Net investment income
|
|
|
(0.79
|
)
|
|
Net asset value, end of period
|
|
$
|
50.73
|
|
|
Total return(c)
|
|
|
28.81
|
%(d)
|
|
Ratios and Supplemental Data:
|
|
|
|
|
|
Net assets, end of period (000s)
|
|
$
|
62,149
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
Total expenses
|
|
|
0.80
|
%(e)
|
|
Net expenses(f)
|
|
|
0.30
|
%(e)
|
|
Net investment income (loss)(f)
|
|
|
1.80
|
%(e)
|
|
Portfolio turnover rate(g)
|
|
|
34
|
%(d)
|
|
|
(a)
|
Fund
commenced operations on January 2, 2019.
|
|
|
(b)
|
Per
Share numbers have been calculated using the average shares method.
|
|
|
(c)
|
Total
return is calculated assuming a purchase of Shares at net asset value per Share on the
first day and a sale at net asset value per Share on the last day of each period reported.
Distributions are assumed, for the purposes of this calculation, to be reinvested at
the net asset value per Share on the respective payment dates of the Fund. Total return
for a period of less than one year is not annualized. Broker commission charges are not
included in this calculation. Past performance is no guarantee of future results. Performance
results do not reflect the deduction of taxes that a shareholder would pay on fund distributions
or on the redemption or sale of fund shares.
|
|
|
(f)
|
Net
of expenses waived/reimbursed by the Advisor.
|
|
|
(g)
|
Portfolio
turnover rate excludes securities received or delivered from in-kind processing of creations
or redemptions of Shares.
|
WHERE TO LEARN MORE ABOUT THE FUND
This Prospectus does not contain all
the information included in the Registration Statement filed with the SEC with respect to the Fund’s Shares. The Fund’s
SAI and, when available, the annual and semi-annual reports to shareholders, each of which will be filed with the SEC, provide
more information about the Fund. The SAI contains the financial statements of the Fund for the year ended December 31, 2019, which
should be read in conjunction with this Prospectus. In the annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund’s performance during the Fund’s last fiscal year, as
applicable. The SAI and the financial statements included in the Trust’s annual report to shareholders are incorporated
herein by reference (i.e., they are legally part of this Prospectus). These materials may be obtained without charge, upon request,
by writing to the Distributor, Three Canal Plaza, Suite 100, Portland, Maine, 04101, by visiting the Fund’s website at www.SyntaxAdvisors.com
or by calling the following number: (866) 972-4492.
Investor Information:
The Registration Statement, including
this Prospectus, the SAI, and the exhibits as well as any shareholder reports may be reviewed on the EDGAR Database on the SEC’s
website (http://www.sec.gov. You may get copies of this and other information after paying a duplicating fee, by electronic request
at the following e-mail address: publicinfo@sec.gov, or by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-1520.
Shareholder inquiries may be directed
to the Fund in writing to Syntax Advisors, LLC at One Liberty Plaza, 46th Floor, New York, NY 10006 or by calling the Investor
Information number listed above.
No person has been authorized to give
any information or to make any representations other than those contained in this Prospectus in connection with the offer of the
Fund’s Shares, and, if given or made, the information or representations must not be relied upon as having been authorized
by the Trust or the Fund. Neither the delivery of this Prospectus nor any sale of Shares shall under any circumstance imply that
the information contained herein is correct as of any date after the date of this Prospectus.
Dealers effecting transactions in the Fund’s
Shares, whether or not participating in this distribution, are generally required to deliver a Prospectus. This is in addition
to any obligation of dealers to deliver a Prospectus when acting as underwriters.
Investment Company Act File No.:
811-23227
PROSPECTUS DATED MAY 1, 2020
Syntax ETF Trust (the “Trust”)
|
Syntax
Stratified MidCap ETF (SMDY)
|
|
Syntax
Stratified SmallCap ETF (SSLY)
|
May 1, 2020
Principal U.S. Listing Exchange: NYSE Arca, Inc.
Beginning on January 1, 2021, as permitted
by regulations adopted by the U.S. Securities and Exchange Commission (“SEC”), Syntax Stratified MidCap ETF and Syntax
Stratified SmallCap ETF (each a “Fund” and collectively the “Funds”) intend to no longer mail paper copies
of the Funds’ shareholder reports, unless you specifically request paper copies of the reports from the Funds or your financial
intermediary (such as a broker-dealer or bank). Instead, the reports will be made available on a website, and you will be notified
by mail each time a report is posted and provided with a website link to access the report. If you already have elected to receive
shareholder reports electronically (“e-delivery”), you will not be affected by this change and you need not take any
action. You may elect to receive shareholder reports and other communications from a Fund electronically anytime by contacting
your financial intermediary.
You may elect to receive all future
reports in paper free of charge. Please contact your financial intermediary to request that you continue to receive paper copies
of your shareholder reports. That election will apply to all Syntax funds held directly in your account.
The SEC has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
Shares in the Funds are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other agency of the U.S.
Government, nor are Shares deposits or obligations of any bank. It is possible to lose money by investing in the Funds.
Table of Contents
FUND SUMMARIES
Syntax Stratified
MIDCap ETF
OBJECTIVE
The Syntax Stratified MidCap ETF (the “Fund”)
seeks to provide investment results that, before expenses, correspond generally to the total return performance of publicly traded
equity securities of companies comprising the Syntax Stratified MidCap Index (the “Index”).
FEES AND EXPENSES OF THE FUND
The table below describes the fees and
expenses that you may pay if you buy and hold shares of the Fund (“Fund Shares”). This table and the Example below
reflect the expenses of the Fund and do not reflect brokerage commissions you may pay on purchases and sales of Fund Shares.
Annual Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value
of your investment):
|
Management fees
|
|
|
0.45
|
%
|
|
Distribution and service (12b-1) fees
|
|
|
None
|
|
|
Other expenses1
|
|
|
0.00
|
%
|
|
Total annual Fund operating expenses
|
|
|
0.45
|
%
|
|
Fee Waiver/Expense Reimbursement2
|
|
|
0.15
|
%
|
|
Total annual Fund operating expenses after Fee Waiver/Expense
Reimbursement2
|
|
|
0.30
|
%
|
(1)
Other expenses have been estimated for the current fiscal year. Actual expenses may be different.
(2)
Syntax Advisors, LLC (the “Advisor”) has agreed to waive its fees and/or absorb expenses of the Fund to ensure that
Total Annual Operating Expenses (except any (i) interest expense, (ii) taxes, (iii) acquired fund fees and expenses, (iv) brokerage
expenses and other expenses (such as stamp taxes) connected with the execution of portfolio transactions or in connection with
creation and redemption transactions, (v) expenses associated with shareholder meetings, (vi) compensation and expenses of the
Independent Trustees, (vii) compensation and expenses of the Trust’s chief compliance officer and his or her staff, (viii)
distribution fees and expenses paid by the Trust under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act,
(ix) legal fees or expenses in connection with any arbitration, litigation or pending or threatened arbitration or litigation,
including any settlements in connection therewith, and (x) extraordinary expenses of the Fund) do not exceed 0.30%. Subject to
approval by the Fund’s Board of Trustees, any waiver under the Expense Limitation Agreement is subject to repayment by the
Fund within 36 months following the day on which fees are waived or reimbursed, if such repayment does not cause the Fund’s
expense ratio (after the repayment is taken into account) to exceed both: (i) the expense cap in place at the time such amounts
were waived; and (ii) the Fund’s current expense cap. These arrangements cannot be terminated prior to one year from the
effective date of this prospectus without the approval of the Board of Trustees.
Example:
This Example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated, and then sell all of your Fund 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. Investors
may pay brokerage commissions on their purchases and sales of Fund shares, which are not reflected in the example. Only the 1-year
dollar amount shown below reflects the Advisor’s agreement to waive fees and/or reimburse fund expenses. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
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 generate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable account. These costs,
which are not reflected in Total Annual Fund Operating Expenses or in the Example, affect the Fund’s performance. Because
the Fund did not commence operations prior to December 31, 2019, portfolio turnover information is not included.
PRINCIPAL STRATEGY
In seeking to track the performance
of the Index, the Fund employs a replication strategy, which means that the Fund typically invests in substantially all of the
securities represented in the Index in approximately the same proportions as the Index. Under normal market conditions, the Fund
generally invests substantially all, and at least 95%, of its total assets in the securities comprising the Index. The Fund will
provide shareholders with at least 60 days’ notice prior to any material change in this 95% investment policy. In addition,
the Fund may invest in cash and cash equivalents or money market instruments, such as repurchase agreements and money market funds.
The Index, which was created by
Syntax LLC, an affiliate of the Fund’s investment advisor, is the stratified-weight version of the widely used S&P
MidCap 400® Index and holds the same constituents as the S&P MidCap 400 Index. The S&P MidCap 400
Index may include some constituent stocks of companies that may be considered small, medium and large capitalization
companies. “Stratified Weight” refers to the weighting methodology of the Index and is the method by which Syntax
diversifies its indices by hierarchically grouping and distributing the weight of the Index constituent companies that share
“Related Business Risks.” Related Business Risk occurs when two or more companies’ earnings are affected by
the same fundamental drivers (e.g. the product/services the company makes/provides, the customers or end users the company
sells to, or the inputs that it utilizes to make its product or service). The process of identifying, grouping, and
diversifying across related business risk is called “stratification”. Under normal market conditions, the Index
rebalances quarterly on the third Friday of each quarter-ending month and will typically include 400 components allocated
across eight industry sectors: consumer, energy, financials, food, healthcare, industrials, information, and information
tools. The market capitalization of companies in the S&P MidCap 400® Index as of December 31, 2019 was
between $1.10 billion and $12.67 billion.
Please see the Additional Strategies Information
section of the Fund’s prospectus for more information on the methodology of the Syntax Indices.
PRINCIPAL RISKS OF INVESTING IN THE
FUND
As with all investments, there are certain
risks of investing in the Fund. Fund Shares will change in value, and you could lose money by investing in the Fund.
MARKET RISK: Overall securities
market risks will affect the value of individual instruments in which the Fund invests. Factors such as economic growth and market
conditions, interest rate levels, epidemics and pandemics, and political events affect the US securities markets. When the value
of the Fund’s investments goes down, your investment in the Fund decreases in value and you could lose money.
Additionally, the onset of
an infectious respiratory disease called COVID-19, caused by a novel coronavirus known as SARS-CoV-2, was first identified in
China in December 2019 and now has been detected globally. Among other things, COVID-19 has led to travel restrictions, closed
international borders, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations,
supply chain disruptions, shuttering of offices, universities, schools, cultural institutions and sporting events, and lower consumer
demand, as well as general anxiety and uncertainty. The impact of COVID-19, and other infectious disease outbreaks that may arise
in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital
markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious diseases in emerging market countries
may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 spread may aggravate
other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak
and its effects cannot be determined with certainty.
EQUITY SECURITIES RISK: The value
of equity securities may increase or decrease as a result of market fluctuations, changes in interest rates and perceived trends
in stock prices.
SMALL- AND MID-CAPITALIZATION
SECURITIES RISK: Investing in securities of small and mid-sized companies may involve greater volatility than investing
in larger and more established companies because small and mid-sized companies can be subject to more abrupt or erratic share price
changes than larger, more established companies, are more vulnerable to adverse business and economic
developments, and are more thinly traded relative to those of larger companies.
PASSIVE STRATEGY/INDEX RISK:
The Fund is managed with a passive investment strategy, attempting to track the performance of an unmanaged index of securities.
This differs from an actively-managed fund, which typically seeks to outperform a benchmark index. As a result, the Fund may hold
constituent securities of the Index regardless of the current or projected performance of a specific security or a particular
industry or market sector. Maintaining investments in securities regardless of market conditions or the performance of individual
securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
LIQUIDITY RISK: Liquidity
risk exists when particular investments are difficult to purchase or sell. Certain investments may be subject to restrictions
on resale, trade over-the-counter or in limited volume, or lack an active trading market. Accordingly, the Fund may not be able
to sell or close out of such investments at favorable times or prices (or at all), or at the prices approximating those at which
the Fund currently values them; the Fund itself may also lack sufficient liquidity. There can be no guarantee that an investor
will be able to enter or exit a desired position efficiently or promptly. While the Advisor has engaged with Authorized Participants
to seek to make a liquid, efficient market in the Fund, investors in the Fund may incur fees and losses, including, but not limited
to, upon taking an exit in a position, in the event that the Fund or its underlying constituents are not highly liquid. Illiquid
securities may trade at a discount from comparable, more liquid investments and may be subject to wide fluctuations in market
value.
CYBER SECURITY RISK: The
Fund and its service providers may be susceptible to operational and information security risks resulting from a breach in cyber
security, including cyber-attacks. A breach in cyber security, intentional or unintentional, may adversely impact the Fund in
many ways, including, but not limited to, disruption of the Fund’s operational capacity, loss of proprietary information,
theft or corruption of data, denial-of-service attacks on websites or network resources, and the unauthorized release of confidential
information. Cyber-attacks affecting the Fund’s third-party service providers, market makers, Authorized Participants, or
the issuers of securities in which the Fund invest may subject the Fund to many of the same risks associated with direct cyber
security breaches.
TRACKING ERROR RISK: The
Fund may be subject to tracking error, which is the divergence of the Fund’s performance from that of the Index. Tracking
error may occur because of differences between the securities and other instruments held in the Fund’s portfolio and those
included in the Index, pricing differences, transaction costs incurred by the Fund, the Fund’s holding of uninvested cash,
differences in timing of the accrual of or the valuation of dividends or interest, the requirements to maintain pass-through tax
treatment, portfolio transactions carried out to minimize the distribution of capital gains to shareholders, changes to the Index
or the costs to the Fund of complying with various new or existing regulatory requirements. This risk may be heightened during
times of increased market volatility or other unusual market conditions. Tracking error also may result because the Fund incurs
fees and expenses, while the Index does not.
LARGE-CAPITALIZATION SECURITIES
RISK: Returns on investments in securities of large companies could trail the returns on investments in securities of smaller
and mid-sized companies. Larger companies may be unable to respond as quickly as smaller and mid-sized companies to competitive
challenges or to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth
at the high rates that may be achieved by well-managed smaller and mid-sized companies. Under certain market conditions, the capitalization
of a large-size company could decline to the extent that it exhibits the characteristics of a mid-capitalization company.
MARKET TRADING RISK: The
Fund is a new Fund and faces numerous market trading risks, including the potential lack of an active market for Fund Shares,
losses from trading in secondary markets, periods of high volatility and disruption in the creation/redemption process of the
Fund. Any of these factors, among others, may lead to the Fund’s Shares trading at a premium or discount to NAV.
NEW FUND RISK: The Fund is
a new Fund. As a new Fund, there can be no assurance that it will grow to or maintain an economically viable size, which may cause
it to experience greater tracking error to the Index than it otherwise would at a higher asset level; it may also cause the Fund
to liquidate.
FUND PERFORMANCE
The following bar chart and table provide
an indication of the risks of investing in the Fund by showing changes in the performance of the Fund from year to year and by
showing how its average annual returns for certain time periods compare with the average annual returns of a broad measure of
market performance. The Fund’s performance information, from January 1, 2015 to the Fund’s commencement of operations
on January 16, 2020, is that of the “400 Series” of the Syntax Index Series LP, a privately offered account, which
was the predecessor of the Fund.
The returns were calculated using the methodology
the SEC requires of registered funds. However, since the 400 Series did not calculate its returns on a per share basis, its returns
have been calculated on its total net asset value. Neither the 400 Series’ nor the Fund’s past performance (before
and after taxes) is necessarily an indication of how the Fund will perform in the future. Updated performance information is available
by calling (866) 972-4492 or visiting our website at www.SyntaxAdvisors.com.
The 400 Series had investment objectives,
policies and strategies that were, in all material respects, the same as those of the Fund, and was managed in a manner that,
in all material respects, complied with the investment guidelines and restrictions of the Fund, which means that it also complied
with the investment guidelines and restrictions of the Index. The investment advisor for the Fund was the investment advisor for
the 400 Series for the entire period from January 1, 2015 until the Fund’s commencement of operations for which performance
information is shown below. The 400 Series was reorganized into the Fund as of the date of the Fund’s commencement of operations
as a tax-free conversion.
As a registered investment company, the
Fund is subject to certain restrictions under the Investment Company Act of 1940 (the “1940 Act”) and the Internal
Revenue Code of 1986 (the “Internal Revenue Code”) which did not apply to the 400 Series. If the 400 Series had been
subject to the provisions of the 1940 Act and the Internal Revenue Code, its performance could have been adversely affected. However,
these restrictions are not expected to have a material effect on the Fund’s investment performance.
The performance information of the 400
Series is net of all fees and expenses. The Fund may be subject to higher fees and expenses, which would negatively impact performance.
Consistent with the rules of the Index,
the 400 Series held, and the Fund holds, underlying securities that coincide with the securities chosen by the Index in appropriate
pre-set weights. Trading in securities undertaken for the 400 Series by the Fund’s portfolio manager during the prior privately
offered investment period, was the addition or deletion of portfolio securities made in order to track the constituents’
securities under the same criteria as those of the Index during the quarterly constituent selection process. Rebalancing and tracking,
quarterly, of the underlying securities into the pre-set weights during the privately offered period were also executed as determined
by the Fund’s Index as contemplated by both the Fund’s investment strategies and the Index that the Fund is designed
to track.
6
* Performance from January 1, 2015 to the Fund’s commencement
of operations on January 16, 2020 is that of the 400 Series of Syntax Index Series LP.
|
Highest
Quarterly Return
|
First
Quarter 2019
|
14.29%
|
|
Lowest
Quarterly Return
|
Fourth
Quarter 2018
|
-16.51%
|
Average Annual Total Returns (for periods
ending 12/31/19)*
|
|
|
|
One Year
|
|
|
|
Five
Years
|
|
|
Since
Inception
(1/1/2015)
|
|
Return Before Taxes
|
|
|
23.35
|
%
|
|
|
8.40
|
%
|
|
|
8.40
|
%
|
|
Return After Taxes on Distributions**
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
Return After Taxes on Distributions and Sale of Fund Shares**
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
S&P MidCap 400® Index
|
|
|
26.20
|
%
|
|
|
9.03
|
%
|
|
|
9.03
|
%
|
(Index
returns reflect no deduction for fees, expenses or taxes)
*
Performance from January 1, 2015 to the Fund’s commencement of operations on January 16, 2020 is that of the 400 Series
of Syntax Index Series LP.
**The
400 Series was an unregistered limited partnership that did not qualify as a registered investment company for federal income
tax purposes and did not pay dividends or distributions. Due to this different tax treatment, after tax returns of the 400 Series
are not available.
The after-tax returns presented in the
table above are calculated using highest historical individual federal marginal income tax rates and do not reflect the impact
of state and local taxes. Your actual after-tax returns will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Fund Shares through tax-advantaged arrangements, such as 401(k)
plans or individual retirement accounts. The returns after taxes can exceed the returns before taxes due to an assumed tax benefit
for a shareholder from realizing a capital loss on a sale of Fund Shares.
PORTFOLIO MANAGEMENT
Investment Advisor
Syntax Advisors, LLC serves as the investment advisor to
the Fund.
Sub-Advisor
Vantage Consulting Group Inc. serves as the investment sub-advisor
to the Fund.
Portfolio Manager
The professional primarily responsible
for the day-to-day management of the Fund is:
|
Name
|
Start Date
|
|
James Thomas Wolfe
|
Since the Fund’s Inception.
|
PURCHASE AND SALE OF FUND SHARES
Individual Fund Shares may only be purchased
and sold on a national securities exchange through a broker-dealer. The price of Fund Shares is based on market price, and because
ETF 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). The Fund will only issue or redeem Shares that have been aggregated into blocks of 25,000 Shares or multiples thereof
(“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The
Fund generally will issue or redeem Creation Units in return for a designated portfolio of securities (and an amount of cash) that
the Fund specifies each day.
TAX INFORMATION
The Fund's distributions are expected to
be taxed as ordinary income, qualified dividend income and/or capital gains, unless you are investing through a tax-deferred arrangement,
such as a 401(k) plan or individual retirement account. However, subsequent withdrawals from such a tax-advantaged account may
be subject to U.S. federal income tax. You should consult your tax advisor about your specific situation.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase Fund Shares through a broker-dealer
or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund
Shares and related services. These payments may create conflicts of interest by influencing the broker-dealer or other intermediary
and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s
website for more information.
Syntax Stratified
SMALLCAP ETF
OBJECTIVE
The Syntax Stratified SmallCap ETF (the
“Fund”) seeks to provide investment results that, before expenses, correspond generally to the total return performance
of publicly traded equity securities of companies in the Syntax Stratified SmallCap Index (the “Index”).
FEES AND EXPENSES OF THE FUND
The table below describes the fees and
expenses that you may pay if you buy and hold shares of the Fund (“Fund Shares”). This table and the Example below
reflect the expenses of the Fund and do not reflect brokerage commissions you may pay on purchases and sales of Fund Shares.
Annual Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value
of your investment):
|
Management fees
|
|
|
0.45
|
%
|
|
Distribution and service (12b-1) fees
|
|
|
None
|
|
|
Other expenses1
|
|
|
0.00
|
%
|
|
Total annual Fund operating expenses
|
|
|
0.45
|
%
|
|
Fee Waiver/Expense Reimbursement2
|
|
|
0.15
|
%
|
|
Total annual Fund operating expenses after Fee Waiver/Expense
Reimbursement2
|
|
|
0.30
|
%
|
(1)
Other expenses have been estimated for the current fiscal year. Actual expenses may be different.
(2)
Syntax Advisors, LLC (the “Advisor”) has agreed to waive its fees and/or absorb expenses of the Fund to ensure that
Total Annual Operating Expenses (except any (i) interest expense, (ii) taxes, (iii) acquired fund fees and expenses, (iv) brokerage
expenses and other expenses (such as stamp taxes) connected with the execution of portfolio transactions or in connection with
creation and redemption transactions, (v) expenses associated with shareholder meetings, (vi) compensation and expenses of the
Independent Trustees, (vii) compensation and expenses of the Trust’s chief compliance officer and his or her staff, (viii)
distribution fees and expenses paid by the Trust under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act,
(ix) legal fees or expenses in connection with any arbitration, litigation or pending or threatened arbitration or litigation,
including any settlements in connection therewith, and (x) extraordinary expenses of the Fund) do not exceed 0.30%. Subject to
approval by the Fund’s Board of Trustees, any waiver under the Expense Limitation Agreement is subject to repayment by the
Fund within 36 months following the day on which fees are waived or reimbursed, if such repayment does not cause the Fund’s
expense ratio (after the repayment is taken into account) to exceed both: (i) the expense cap in place at the time such amounts
were waived; and (ii) the Fund’s current expense cap. These arrangements cannot be terminated prior to one year from the
effective date of this prospectus without the approval of the Board of Trustees.
Example:
This Example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated, and then sell all of your Fund 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. Investors
may pay brokerage commissions on their purchases and sales of Fund Shares, which are not reflected in the example. Only the 1-year
dollar amount shown below reflects the Advisor’s agreement to waive fees and/or reimburse fund expenses. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
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 generate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable account. These costs,
which are not reflected in Total Annual Fund Operating Expenses or in the Example, affect the Fund’s performance. Because
the Fund has not yet commenced operations, portfolio turnover information is not yet available.
PRINCIPAL STRATEGY
In seeking to track the performance
of the Index, the Fund employs a replication strategy, which means that the Fund typically invests in substantially all of the
securities represented in the Index in approximately the same proportions as the Index. Under normal market conditions, the Fund
generally invests substantially all, and at least 95% of its total assets in the securities comprising the Index. The Fund will
provide shareholders with at least 60 days’ notice prior to any material change in this 95% investment policy. In addition,
the Fund may invest in cash and cash equivalents or money market instruments, such as repurchase agreements and money market funds.
The Index, which was created by Syntax
LLC, an affiliate of the Fund’s investment Advisor, is the Stratified WeightTM version of the widely used S&P
SmallCap 600® Index and holds the same constituents as the S&P SmallCap 600® Index. Although
the S&P SmallCap 600® Index seeks to measure the small cap segment of the US equity market, it may include
some constituent stocks of companies that may be considered small, medium and large capitalization companies. “Stratified
Weight” refers to the weighting methodology of the Index and is the method by which Syntax diversifies its indices by hierarchically
grouping and distributing the weight of constituent companies that share “Related Business Risks.” Related Business
Risk occurs when two or more companies’ earnings are affected by the same fundamental drivers (e.g. the product/ services
the company makes/provides, the customers or end users the company sells to, or the inputs that it utilizes to make its product
or service). The process of identifying, grouping, and diversifying across related business risk is called stratification. Under
normal market conditions, the Index rebalances quarterly, on the third Friday of each quarter-ending month, and will typically
include 600 components allocated across eight industry sectors: consumer, energy, financials, food, healthcare, industrials, information,
and information tools. The market capitalization of companies in the S&P SmallCap 600® Index as of December
31, 2019 was between $6.76 billion and $97 million.
Please see the Additional Strategies Information
section of the Fund’s prospectus for more information on the methodology of the Syntax Indices.
PRINCIPAL RISKS OF INVESTING IN THE
FUND
As with all investments, there are certain
risks of investing in the Fund. Fund Shares will change in value, and you could lose money by investing in the Fund.
MARKET RISK: Overall securities
market risks will affect the value of individual instruments in which the Fund invests. Factors such as economic growth and market
conditions, interest rate levels, epidemics and pandemics, and political events affect the US securities markets. When the value
of the Fund’s investments goes down, your investment in the Fund decreases in value and you could lose money.
Additionally, the onset of
an infectious respiratory disease called COVID-19, caused by a novel coronavirus known as SARS-CoV-2, was first identified in
China in December 2019 and now has been detected globally. Among other things, COVID-19 has led to travel restrictions, closed
international borders, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations,
supply chain disruptions, shuttering of offices, universities, schools, cultural institutions and sporting events, and lower consumer
demand, as well as general anxiety and uncertainty. The impact of COVID-19, and other infectious disease outbreaks that may arise
in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital
markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious diseases in emerging market countries
may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 spread may aggravate
other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak
and its effects cannot be determined with certainty.
EQUITY SECURITIES RISK: The value
of equity securities may increase or decrease as a result of market fluctuations, changes in interest rates and perceived trends
in stock prices.
SMALL- AND MID-CAPITALIZATION
SECURITIES RISK: Investing in securities of small and mid-sized companies may involve greater volatility than investing
in larger and more established companies because small and mid-sized companies can be subject to more abrupt or erratic share
price changes than larger, more established companies, are more vulnerable to adverse business and economic developments, and
are more thinly traded relative to those of larger companies.
PASSIVE STRATEGY/INDEX RISK:
The Fund is managed with a passive investment strategy, attempting to track the performance of an unmanaged index of securities.
This differs from an actively-managed fund, which typically seeks to outperform a benchmark index. As a result, the Fund may hold
constituent securities of the Index regardless of the current or projected performance of a specific security or a particular
industry or market sector. Maintaining investments in securities regardless of market conditions or the performance of individual
securities could cause the Fund’s return to be lower than if the Fund employed an active strategy.
LIQUIDITY RISK: Liquidity risk
exists when particular investments are difficult to purchase or sell. Certain investments may be subject to restrictions on resale,
trade over-the-counter or in limited volume, or lack an active trading market. Accordingly, the Fund may not be able to sell or
close out of such investments at favorable times or prices (or at all), or at the prices approximating those at which the Fund
currently values them. Illiquid securities may trade at a discount from comparable, more liquid investments and may be subject
to wide fluctuations in market value.
CYBER SECURITY RISK: The
Fund and its service providers may be susceptible to operational and information security risks resulting from a breach in cyber
security, including cyber-attacks. A breach in cyber security, intentional or unintentional, may adversely impact the Fund in
many ways, including, but not limited to, disruption of the Fund’s operational capacity, loss of proprietary information,
theft or corruption of data, denial-of-service attacks on websites or network resources, and the unauthorized release of confidential
information. Cyber-attacks affecting the Fund’s third-party service providers, market makers, Authorized Participants, or
the issuers of securities in which the Fund invest may subject the Fund to many of the same risks associated with direct cyber
security breaches.
MARKET TRADING RISK: The Fund
is a new Fund and faces numerous market trading risks, including the potential lack of an active market for Fund Shares, losses
from trading in secondary markets, periods of high volatility and disruption in the creation/redemption process of the Fund. Any
of these factors, among others, may lead to the Fund’s Shares trading at a premium or discount to NAV.
TRACKING ERROR RISK: The
Fund may be subject to tracking error, which is the divergence of the Fund’s performance from that of the Index. Tracking
error may occur because of differences between the securities and other instruments held in the Fund’s portfolio and those
included in the Index, pricing differences, transaction costs incurred by the Fund, the Fund’s holding of uninvested cash,
differences in timing of the accrual of or the valuation of dividends or interest, the requirements to maintain pass-through tax
treatment, portfolio transactions carried out to minimize the distribution of capital gains to shareholders, changes to the Index
or the costs to the Fund of complying with various new or existing regulatory requirements. This risk may be heightened during
times of increased market volatility or other unusual market conditions. Tracking error also may result because the Fund incurs
fees and expenses, while the Index does not.
LARGE-CAPITALIZATION SECURITIES
RISK: Returns on investments in securities of large companies could trail the returns on investments in securities of smaller
and mid-sized companies. Larger companies may be unable to respond as quickly as smaller and mid-sized companies to competitive
challenges or to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth
at the high rates that may be achieved by well-managed smaller and mid-sized companies. Under certain market conditions, the capitalization
of a large-size company could decline to the extent that it exhibits the characteristics of a mid-capitalization company.
NEW FUND RISK: The Fund is a new
Fund. As a new Fund, there can be no assurance that it will grow to or maintain an economically viable size, which may cause it
to experience greater tracking error to the Index than it otherwise would at a higher asset level; it may also cause the Fund
to liquidate.
FUND PERFORMANCE
The Fund is new and does not yet have
a full calendar year of performance. After the Fund has been in operation for a full calendar year, total return information will
be presented. Updated performance information, which will be available by calling (866) 972-4492 or visiting our website at www.SyntaxAdvisors.com,
will provide some indication of the risks of investing in the Fund.
PORTFOLIO MANAGEMENT
Investment Advisor
Syntax Advisors, LLC serves as the investment advisor to
the Fund.
Sub-Advisor
Vantage Consulting Group Inc. serves as the investment sub-advisor
to the Fund.
Portfolio Manager
The professional primarily responsible
for the day-to-day management of the Fund is:
|
Name
|
Start Date
|
|
James Thomas Wolfe
|
Since the Fund’s Inception.
|
PURCHASE AND SALE OF FUND SHARES
Individual Fund Shares may only be purchased
and sold on a national securities exchange through a broker-dealer. The price of Fund Shares is based on market price, and because
ETF 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). The Fund will only issue or redeem Shares that have been aggregated into blocks of 25,000 Shares or multiples thereof
(“Creation Units”) to authorized participants who have entered into agreements with the Fund’s distributor. The
Fund generally will issue or redeem Creation Units in return for a designated portfolio of securities (and an amount of cash) that
the Fund specifies each day.
TAX INFORMATION
The Fund’s distributions are expected
to be taxed as ordinary income, qualified dividend income and/or capital gains, unless you are investing through a tax-deferred
arrangement, such as a 401(k) plan or individual retirement account. However, subsequent withdrawals from such a tax-advantaged
account may be subject to U.S. federal income tax. You should consult your tax advisor about your specific situation.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase Fund Shares through a broker-dealer
or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund
Shares and related services. These payments may create conflicts of interest by influencing the broker-dealer or other intermediary
and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s
website for more information.
ADDITIONAL STRATEGIES INFORMATION
Please see each Fund’s “Principal
Strategy” section under “Fund Summary” above for a complete discussion of the Fund’s principal investment
strategies.
Each of the Syntax Stratified MidCap
Index and the Syntax Stratified SmallCap Index (each a “Syntax Index”, collectively the “Syntax Indices”)
was developed and is maintained in accordance with the following criteria: (1) each of the component securities in the Syntax
Indices is a constituent company of the S&P MidCap 400® Index or the S&P SmallCap 600® Index,
respectively; and (2) the Syntax Indices are calculated by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) based
on methodology proprietary to Syntax LLC (the “Index Provider”), an affiliate of the investment Advisor, using its
Stratified Weight methodology. The Index Provider publishes information regarding the market value of each Index. For more information,
please visit the Funds’ website at www.SyntaxAdvisors.com.
Syntax, LLC takes widely used benchmark
constituents and reweights them to diversify business risks. For example, the Syntax Stratified MidCap Index re-weights the constituents
of widely-used S&P MidCap 400® Index while the Syntax Stratified SmallCap Index re-weights the constituents widely-used
S&P SmallCap 600® Index.
Syntax Indices utilize a proprietary
functional information system (“FIS”) developed by Syntax LLC, an affiliate of Syntax Advisors, LLC, the Funds’
investment adviser (the “Advisor”), to categorize, group, and stratify constituent securities to create stratified-weighted
indices. FIS is a patented technology for mapping economic relationships between the constituent securities of each Syntax Index
and for managing concentrations of related business risks. Related business risks are not based on companies’ capitalization
or past performance, but rather, are based on each company’s current business functions and the functional economic relationships
between them. By identifying these underlying business relationships – common suppliers, customers, competitors, products,
etc. – FIS identifies shared business risks in a securities portfolio. Financial indices not using FIS technology to identify
such risks can become highly exposed to groups of companies that share related business risks.
FIS makes it possible to control for
risks shared by groups of related companies by: 1) organizing companies that share related business risks into well-defined functional
groups; and 2) weighting these groups to spread exposure across these underlying risks. Other commonly used industry and sector
classifications like Global Industry Classification Standard (“GICS”) and Standard Industrial Classification (“SIC”)
lack codified definitions and instead simply group together companies that “seem similar.” FIS-based industries are
engineered to minimize performance distortions caused by the uncontrolled risk exposures that are present in cap-weighted financial
indices. FIS-based sectors effectively group and limit weighting in companies that have shared business functions that can make
them perform similarly when events happen to change expectations in a given part of the economy.
The investment objective of every Syntax
Index is to deliver returns consistent with the performance of the underlying companies that make up the index. By using FIS and
stratification to control for related business risks, Syntax Indices are designed to improve the tracking of the actual medium-to-long-term
performance of groups of companies and provide results that are the product of effective diversification, rather than the overweighting
of one or more outperforming group. Because FIS defines the functional parts of the economy, Syntax Indices are built as a more
stable composite of those functional parts. While the major cap-weighted indices are designed to be a proxy for the total market,
Syntax LLC believes that the Syntax Indices serve as a better basis for medium-to-long-term investments in index-tracking funds.
The Advisor manages each Fund seeking
to track the performance of its corresponding Syntax Index as closely as possible (i.e., obtain a high degree of correlation with
its respective Syntax Index). A number of factors may affect the Fund’s ability to achieve a high degree of correlation
with its Syntax Index, and there can be no guarantee that the Fund will achieve a high degree of correlation.
In the event that a bankruptcy or other
event occurs making a portfolio security illiquid, the Advisor intends to allocate to other similar holdings in the portfolio.
These situations should be rare in U.S. large and mid-cap companies and less rare in small-cap companies with fewer resources.
The Board of Trustees (the “Board”)
of Syntax ETF Trust may change a Fund’s investment strategy and other policies without shareholder approval, except as otherwise
indicated in this Prospectus or in the Statement of Additional Information (“SAI”). The Board may not change a Fund’s
investment objective without shareholder approval.
ADDITIONAL RISK INFORMATION
The following section provides additional
information regarding the principal risks identified under “Principal Risks of Investing in the Fund” in each Fund’s
Summary, along with additional risk information.
Market Risk: Overall securities market risks will
affect the value of individual instruments in which s Fund invests. Factors such as economic growth and market conditions, interest
rate levels, epidemics and pandemics, and political events affect the US securities markets. When the value of a Fund’s
investments goes down, your investment in the Fund decreases in value and you could lose money.
Additionally, the onset of an infectious respiratory disease
called COVID-19, caused by a novel coronavirus known as SARS-CoV-2, was first identified in China in December 2019 and now has
been detected globally. Among other things, COVID-19 has led to travel restrictions, closed international borders, disruption
of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions,
shuttering of offices, universities, schools, cultural institutions and sporting events, and lower consumer demand, as well as
general anxiety and uncertainty. The impact of COVID-19, and other infectious disease outbreaks that may arise in the future,
could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways
that cannot necessarily be foreseen. In addition, the impact of infectious diseases in emerging market countries may be greater
due to generally less established healthcare systems. Public health crises caused by the COVID-19 spread may aggravate other pre-existing
political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot
be determined with certainty.
Equity Securities Risk: Each 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.
Small- And Mid-Capitalization
Securities Risk: Investing in securities of small and mid-sized companies may involve greater volatility than investing
in larger and more established companies because small and mid-sized companies can be subject to more abrupt or erratic share price
changes than larger, more established companies, are more vulnerable to adverse business and economic
developments, and are more thinly traded relative to those of larger companies.
Passive Strategy/Index Risk: Each
Fund is managed with a passive investment strategy, attempting to track the performance of an unmanaged index of securities. This
differs from an actively-managed fund, which typically seeks to outperform a benchmark index. As a result, a Fund may hold constituent
securities of its underlying Index regardless of the current or projected performance of a specific security or a particular industry
or market sector. Maintaining investments in securities regardless of market conditions or the performance of individual securities
could cause a Fund’s return to be lower than if the Fund employed an active strategy.
Liquidity
Risk: Liquidity risk exists when particular investments are difficult to purchase
or sell. Certain investments may be subject to restrictions on resale, trade over-the-counter
or in limited volume, or lack an active trading market. Accordingly, the Fund may not
be able to sell or close out of such investments at favorable times or prices (or at
all), or at the prices approximating those at which the Fund currently values them; the
Fund itself may also lack sufficient liquidity. There can be no guarantee that an investor
will be able to enter or exit a desired position efficiently or promptly. While the Advisor
has engaged with Authorized Participants to seek to make a liquid, efficient market in
the Fund, investors in the fund may incur fees and losses, including, but not limited
to, upon taking an exit in a position, in the event that the Fund or its underlying constituents
are not highly liquid. Illiquid securities may trade at a discount from comparable, more
liquid investments and may be subject to wide fluctuations in market value.
Cyber Security Risk: Each Fund
and its service providers may be susceptible to operational and information security risks resulting from a breach in cyber security,
including cyber-attacks. A breach in cyber security, intentional or unintentional, may adversely impact a Fund in many ways, including,
but not limited to, disruption of the Fund’s operational capacity, loss of proprietary information, theft or corruption
of data, denial-of-service attacks on websites or network resources, and the unauthorized release of confidential information.
Cyber-attacks affecting a Fund’s third-party service providers, market makers, Authorized Participants, or the issuers of
securities in which the Fund invest may subject the Fund to many of the same risks associated with direct cyber security breaches.
Tracking Error Risk: The Fund
may be subject to tracking error, which is the divergence of the Fund’s performance from that of the Index. Tracking error
may occur because of differences between the securities and other instruments held in the Fund’s portfolio and those included
in the Index, pricing differences, transaction costs incurred by the Fund, the Fund’s holding of uninvested cash, differences
in timing of the accrual of or the valuation of dividends or interest, the requirements to maintain pass-through tax treatment,
portfolio transactions carried out to minimize the distribution of capital gains to shareholders, changes to the Index or the
costs to the Fund of complying with various new or existing regulatory requirements. This risk may be heightened during times
of increased market volatility or other unusual market conditions. Tracking error also may result because the Fund incurs fees
and expenses, while the Index does not.
New Fund Risk: Each Fund is
a new Fund. As a new Fund, there can be no assurance that it will grow to or maintain an economically viable size, which may cause
it to experience greater tracking error to the Index than it otherwise would at a higher asset level; it may also cause the Fund
to liquidate.
Large-Capitalization Securities
Risk: Returns on investments in securities of large companies could trail the returns on investments in securities of smaller
and mid-sized companies. Larger companies may be unable to respond as quickly as smaller and mid-sized companies to competitive
challenges or to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth
at the high rates that may be achieved by well-managed smaller and mid-sized companies. Under certain market conditions, the capitalization
of a large-size company could decline to the extent that it exhibits the characteristics of a mid-capitalization company.
Market Trading Risk:
Absence of Active Market. Although Shares of the Funds are listed for trading on one or more stock exchanges, each Fund is
a new fund and there can be no assurance that an active trading market for such Shares will develop or be maintained by market
makers or Authorized Participants.
Risk of Secondary Listings.
Each Fund’s 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 Fund’s Shares will continue to trade
on any such stock exchange or in any market or that the Fund's Shares will continue to meet the requirements for listing or trading
on any exchange or in any market. The Fund’s Shares may be less actively traded in certain markets than in 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 Fund 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.
Shares are not Individually Redeemable
Shares may be redeemed at NAV
by each Fund only in large lot sizes known as “Creation Units”, which are expected to be worth in excess of one million
dollars each. The Trust may not redeem Shares in fractional Creation Units. Only certain large institutions that enter into agreements
with the Distributor are authorized to transact in Creation Units with the Funds. These entities are referred to as “Authorized
Participants.” All other persons or entities transacting in Fund Shares must do so in the secondary market.
Additional Non-Principal Risks
Secondary Market Trading Risk. Shares of each Fund may trade in the secondary market at times when the Fund does not accept
orders to purchase or redeem Shares. At such times, Fund Shares may trade in the secondary market with more significant premiums
or discounts than might be experienced at times 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 for 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 each Fund, similar to shares
of other issuers listed on a stock exchange, may be sold short and are therefore subject to the risk of increased volatility associated
with short selling.
Shares of the Funds may trade at
prices other than NAV. Shares of each Fund trade on stock exchanges at prices at, above or below the Fund’s most recent
NAV. The NAV of a Fund is calculated at the end of each business day and fluctuates with changes in the market value of the Fund’s
holdings. The trading price of a Fund’s Shares fluctuates continuously throughout trading hours based on both market supply
of and demand for Fund Shares and the underlying value of the Fund’s portfolio holdings or NAV. Also, in times of market
stress, market makers or Authorized Participants may step away from their respective roles in making a market for Shares
of a Fund and in executing purchase or redemption orders. As a result, the trading prices of a Fund’s Shares may deviate
significantly from NAV during periods of market volatility. ANY OF THESE FACTORS, AMONG OTHERS, MAY LEAD TO THE FUNDS’ SHARES
TRADING AT A PREMIUM OR DISCOUNT TO NAV. However, because Shares can be created and redeemed in Creation Units at NAV (unlike
shares of many closed-end funds, which frequently trade at appreciable discounts from, and sometimes at premiums to, their NAVs),
Syntax believes that large discounts or premiums to the NAV of each Fund are not likely to be sustained over the long term. While
the creation/redemption feature is designed to make it more likely that a Fund’s Shares normally will trade on stock exchanges
at prices close to the Fund’s next calculated NAV, exchange prices are not expected to correlate exactly with the Fund's
NAV due to timing reasons, supply and demand imbalances and other factors. In addition, disruptions to creations and redemptions,
including disruptions at market makers or Authorized Participants, or to market participants or during periods of significant
market volatility, may result in trading prices for Shares of the Fund that differ significantly from its NAV.
Costs of Buying or Selling Fund Shares.
Buying or selling Fund Shares on an exchange involves two types of costs that apply to all securities transactions. When buying
or selling Shares of the Funds 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 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.
Continuous Offering. The method
by which Creation Units are purchased and traded may raise certain issues under applicable securities laws. Because new Creation
Units 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 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 Units after placing an order with the Transfer Agent,
breaks them down into individual 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 categorization as an underwriter.
U.S. Tax Risks: To qualify for the
favorable U.S. federal income tax treatment accorded to regulated investment companies, the Fund must satisfy certain income, asset
diversification and distribution requirements. If, for any taxable year, the Fund does not qualify as a regulated investment company,
all of its taxable income (including its net capital gain) for that year would be subject to tax at regular corporate rates without
any deduction for distributions to its shareholders, and such distributions would be taxable to its shareholders as dividend income
to the extent of the Fund’s current and accumulated earnings and profits. The tax treatment of certain derivatives is unclear
for purpose of determining the Fund’s tax status.
MANAGEMENT
BOARD OF TRUSTEES. The
Board of Trustees is responsible for overseeing the management and business affairs of the Funds. The Board oversees the operations
of each Fund by its officers. The Board also reviews management of each Fund’s assets by the investment advisor and sub-advisor.
Information about the Board of Trustees and executive officers of the Funds is contained in the SAI.
ADVISOR. Syntax Advisors,
LLC (“Syntax” or the “Advisor”) serves as the investment advisor to the Funds and, subject to the supervision
of the Board, is responsible for the investment management of the Funds, executed through the selection of the sub-advisor for
portfolio management and other agreed upon activities. Syntax has been a registered investment adviser since April 21, 2017. Syntax
is owned by Syntax LLC and is controlled by Rory Riggs. As the Funds’ investment adviser, Syntax provides an investment
management program for the Funds and manages the investment of the Funds’ assets through sub-advisory relationships. The
Advisor’s principal business address is One Liberty Plaza, 46th Floor, New York, NY 10006.
For the services provided to each Fund
under the Investment Advisory Agreement, the Fund expects to pay the Advisor the annual fee set forth below, which is based on
a percentage of the Fund’s average daily net assets.
|
Fund
|
|
Advisory Fee
|
|
|
Syntax Stratified MidCap ETF
|
|
|
0.45
|
%
|
|
Syntax Stratified SmallCap ETF
|
|
|
0.45
|
%
|
Under the Investment Advisory
Agreement, the Advisor agrees to pay all expenses of the Funds, except (i) interest expense, (ii) taxes, (iii) acquired fund fees
and expenses, (iv) brokerage expenses and other expenses (such as stamp taxes) connected with the execution of portfolio transactions
or in connection with creation and redemption transactions, (v) expenses associated with shareholder meetings, (vi) compensation
and expenses of the Independent Trustees, (vii) compensation and expenses of the Trust’s chief compliance officer and his
or her staff, (viii) distribution fees and expenses paid by the Trust under any distribution plan adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the “1940 Act”), (ix) legal fees or expenses in connection with
any arbitration, litigation or pending or threatened arbitration or litigation, including any settlements in connection therewith,
(x) extraordinary expenses of the Funds and (xi) fees payable to the Advisor. The payment or assumption by the Advisor of any
expense of the Funds that the Advisor is not required by the Investment Advisory Agreement to pay or assume shall not obligate
the Advisor to pay or assume the same or any similar expense of the Funds on any subsequent occasion.
Contractual arrangements have been
made with Syntax, through one year from the effective date of this prospectus, to waive fees and/or reimburse Fund expenses to
the extent that a Fund’s total operating expenses exceed the rates below, excluding, as applicable, (i) interest expense,
(ii) taxes, (iii) acquired fund fees and expenses, (iv) brokerage expenses and other expenses (such as stamp taxes) connected
with the execution of portfolio transactions or in connection with creation and redemption transactions, (v) expenses associated
with shareholder meetings, (vi) compensation and expenses of the Independent Trustees, (vii) compensation and expenses of the
Trust’s chief compliance officer and his or her staff, (viii) distribution fees and expenses paid by the Trust under any
distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act, (ix) legal fees or expenses in connection with any arbitration,
litigation or pending or threatened arbitration or litigation, including any settlements in connection therewith, and (x) extraordinary
expenses of the Fund. These arrangements cannot be terminated prior to one year from the effective date of this prospectus, without
the approval of the Fund’s Board of Trustees. Syntax is entitled to reimbursement by a Fund of fees waived or expenses reduced
during any of the previous 36 months if on any day the estimated annualized fund operating expenses are less than the cap. A Fund
may only make repayments to Syntax if such repayment does not cause the Fund’s expense ratio (after the repayment is taken
into account) to exceed both: (1) the Fund’s net expense ratio in place at the time such amounts were waived; and (2) the
Fund’s current net expense ratio (before recoupment).
|
Fund
|
|
Total
Operating
Expenses after
Waiver/Reimbursement
|
|
|
Syntax Stratified MidCap
ETF
|
|
|
0.30
|
%
|
|
Syntax Stratified SmallCap ETF
|
|
|
0.30
|
%
|
SUB-ADVISOR. Pursuant
to an investment sub-advisory agreement with Syntax, Vantage Consulting Group (“Vantage” or the “Sub-Advisor”)
serves as the sub-advisor to the Funds and performs the day to day management of the Funds and places orders for the purchase
and sale of securities for the Funds. For its services to the Funds, the Sub-Advisor is compensated by Syntax. The Sub-Advisor
has been a registered investment advisor since June 2, 1986 and is owned by Mark T. Finn. As of December 31, 2019, the Sub-Advisor
managed approximately $2.3 billion in assets. The Sub-Advisor’s principal business address is 3500 Pacific Ave., Virginia
Beach, VA 23451.
A discussion regarding the Board’s
consideration of the investment advisory and sub-advisory agreements will be found in the Trust’s next Annual or Semi-Annual
Report to Shareholders, as applicable.
PORTFOLIO MANAGER. The Funds are managed by
the portfolio manager listed below.
|
Portfolio
Manager
|
Business
Experience over Past 5 Years
|
|
James
Thomas Wolfe
|
Mr.
Wolfe currently serves as portfolio manager. He has held a variety of positions since joining Vantage in 1988 including
trader, operations manager, and systems developer specializing in quantitative modeling, and he is currently head trader.
Mr. Wolfe is an investment professional with over 30 years of experience. Mr. Wolfe received his BA from Virginia
Wesleyan College in 1983 and an MBA from the College of William and Mary in 1989.
|
Additional information about the portfolio
manager’s compensation, other accounts managed by the portfolio manager, and the portfolio manager’s ownership of securities
in the Funds is available in the SAI.
Administrator, Custodian and Transfer
Agent
State Street Bank and Trust Company is
the Administrator for the Funds, the Transfer Agent to the Funds and the Custodian for the Funds’ assets.
Distributor
Foreside Fund Services, LLC (the “Distributor”)
is the distributor of the Fund Shares of each Fund. The Distributor will not distribute Fund Shares in less than Creation Units,
and it does not maintain a secondary market in the Fund Shares. The Distributor may enter into selected dealer agreements with
other broker-dealers or other qualified financial institutions for the sale of Creation Units of Fund Shares.
Independent Registered Public Accounting
Firm
Ernst & Young LLP serves as the
independent registered public accounting firm for the Trust.
Independent Auditors
Ernst & Young,
Dublin, Ireland, serves as the independent auditors for the Syntax 400 Series of Syntax Index Series, LP.
Legal Counsel
Chapman and Cutler LLP serves as legal
counsel to the Trust and the Funds.
INDEX/TRADEMARK LICENSES AND DISCLAIMER
Syntax LLC, the Index Provider, is
affiliated with the Trust and the Advisor. The Advisor (“Licensee”) has entered into license agreements with the Index
Provider pursuant to which the Advisor pays a fee to use the Indices. The Advisor is sub-licensing rights to the Indices to the
Funds at no charge.
The Syntax Stratified SmallCap Index and
Syntax Stratified MidCap Index (each an “Index” and collectively the “Indices”) are the property of Syntax
LLC, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the
Indices. The Indices are not sponsored by S&P Dow Jones Indices LLC or its affiliates or its third-party licensors, including
Standard & Poor's Financial Services LLC and Dow Jones Trademark Holdings LLC (collectively, “S&P Dow Jones Indices”).
S&P Dow Jones Indices will not be liable for any errors or omissions in calculating the Indices. “Calculated by S&P
Dow Jones Indices” and the related stylized mark(s) are service marks of S&P Dow Jones Indices and have been licensed
for use by Syntax LLC. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC,
and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC.
The Funds are not sponsored, endorsed,
sold or promoted by S&P Dow Jones Indices. S&P Dow Jones Indices does not make any representation or warranty, express
or implied, to the owners of the Funds 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’ Indices to track general market performance. S&P Dow Jones
Indices’ only relationship to Syntax LLC with respect to the Indices is the licensing of the S&P MidCap 400®
Index and the S&P SmallCap 600® Index and their constituents, certain trademarks, service marks and trade
names of S&P Dow Jones Indices, and the provision of the calculation services related to the Indices. S&P Dow Jones Indices
is not responsible for and has not participated in the determination of the prices and amount of the Funds or the timing of the
issuance or sale of the Funds or in the determination or calculation of the equation by which the Funds may be converted into
cash or other redemption mechanics. S&P Dow Jones Indices has no obligation or liability in connection with the administration,
marketing or trading of the Fund. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an
Index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it investment advice.
S&P DOW JONES INDICES DOES NOT GUARANTEE
THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION WITH RESPECT
THERETO, INCLUDING, ORAL, WRITTEN, OR ELECTRONIC COMMUNICATIONS. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES
OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN EXCEPT THOSE ARISING FROM FRAUD OR GROSS NEGLIGENCE ON THE PART OF S&P.
S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY SYNTAX LLC, OWNERS OF THE FUNDS, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES,
INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME, OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.
ADDITIONAL PURCHASE AND SALE INFORMATION
Fund Shares are listed for secondary
trading on NYSE Arca, Inc. (the “Exchange”) and individual Fund Shares may only be purchased and sold in the secondary
market through a broker-dealer. The secondary markets are closed on weekends and also are generally closed on the following holidays:
New Year’s Day, Dr. Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day (observed), Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. The Exchange may close early on the business day before certain holidays and
on the day after Thanksgiving Day. Exchange holiday schedules are subject to change without notice. If you buy or sell Shares
in the secondary market, you will pay the secondary market price for Shares. In addition, you may incur customary brokerage commissions
and charges and may pay some or all of the spread between the bid and the offered price in the secondary market on each leg of
a round trip (purchase and sale) transaction.
The trading prices of each Fund’s
Shares will fluctuate continuously throughout trading hours based on market supply and demand rather than the Fund’s net
asset value, which is calculated at the end of each business day. The Shares will trade on the Exchange at prices that may be
above (i.e., at a premium) or below (i.e., at a discount), to varying degrees, the daily net asset value of the Shares. The trading
prices of each Fund’s Shares may deviate significantly from its net asset value during periods of market volatility. Given,
however, that Shares can be issued and redeemed daily in Creation Units, the Advisor believes that large discounts and premiums
to net asset value should not be sustained over long periods. Information showing the number of days the market price of a Fund’s
Shares was greater than the Fund’s net asset value and the number of days it was less than the Fund’s net asset value
(i.e., premium or discount) for various time periods is available by visiting the Funds’ website at www.SyntaxAdvisors.com.
The Exchange will disseminate, every fifteen
seconds during the regular trading day, an indicative optimized portfolio value (“IOPV”) relating to each Fund. The
IOPV calculations are estimates of the value of the Fund’s net asset value per Share using market data converted into U.S.
dollars at the current currency rates. The IOPV price is based on quotes and closing prices from the securities’ local market
and may not reflect events that occur subsequent to the local market’s close. Premiums and discounts between the IOPV and
the market price may occur. This should not be viewed as a “real-time” update of the net asset value per Share of a
Fund, which is calculated only once a day. Neither the Funds, nor the Advisor or any of their affiliates are involved in, or responsible
for, the calculation or dissemination of such IOPVs and make no warranty as to their accuracy.
The Funds do not impose any restrictions
on the frequency of purchases and redemptions; however, the Funds reserve the right to reject or limit purchases at any time as
described in the SAI. When considering that no restriction or policy was necessary, the Board evaluated the risks posed by market
timing activities, such as whether frequent purchases and redemptions would occur, for example from an investor’s efforts
to take advantage of a potential arbitrage opportunity, and would interfere with the efficient implementation of each Fund’s
investment strategy, or whether they would cause the Fund to experience increased transaction costs. The Board considered that,
unlike traditional mutual funds, Fund Shares are issued and redeemed only in the large quantities of Creation Units available only
from the Fund directly, and that most trading in the Fund occurs on the Exchange at prevailing market prices and does not involve
the Fund directly. Given this structure, the Board determined that it is unlikely that (a) market timing would be attempted by
a Fund’s shareholders or (b) any attempts to market time a Fund by shareholders would result in negative impact to the Fund
or its shareholders.
BOOK ENTRY. Shares of the Funds are held
in book-entry form and no stock certificates are issued. The Depository Trust Company (“DTC”), through its nominee
Cede & Co., is the record owner of all outstanding Shares.
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
in DTC include 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 right 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 for any publicly-traded company. Specifically,
in the case of a shareholder meeting of a Fund, DTC assigns applicable Cede & Co. voting rights to its participants that have
Shares credited to their accounts on the record date, issues an omnibus proxy and forwards the omnibus proxy to the Fund. The omnibus
proxy transfers the voting authority from Cede & Co. to the DTC participant. This gives the DTC participant through whom you
own Shares (namely, your broker, dealer, bank, trust company or other nominee) authority to vote the shares, and, in turn, the
DTC participant is obligated to follow the voting instructions you provide.
DISTRIBUTIONS
DIVIDENDS AND CAPITAL GAINS. As
a shareholder, you are entitled to your share of a Fund’s income and net realized gains on its investments. Each Fund pays
out substantially all of its net earnings to its shareholders as “distributions.”
A Fund typically earns income dividends
from stocks. These amounts, net of expenses and taxes (if applicable), are passed along to Fund shareholders as “income dividend
distributions.” The Fund realizes capital gains or losses whenever it sells securities. Net long-term capital gains are distributed
to shareholders as “capital gain distributions.”
Income dividend distributions, if any,
for the Funds are generally distributed to shareholders annually, but may vary significantly from period to period. Net capital
gains for the Funds are distributed at least annually. Dividends may be declared and paid more frequently or at any other times
to improve Index tracking or to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the
“Internal Revenue Code”).
Distributions in cash may be reinvested
automatically in additional whole Fund Shares only if the broker through whom you purchased Shares makes such option available.
Distributions which are reinvested will nevertheless be taxable to the same extent as if such distributions had not been reinvested.
PORTFOLIO HOLDINGS DISCLOSURE
A description of the Funds’ policies
and procedures with respect to the disclosure of the Funds’ portfolio securities is available in the Funds’ SAI.
U.S. FEDERAL INCOME TAXATION
The following is a summary of certain U.S.
federal income tax considerations applicable to an investment in Shares of a Fund. The summary is based on the U.S. Internal Revenue
Code of 1986, as amended (the “Internal Revenue Code”), U.S. Treasury Department regulations promulgated thereunder,
and judicial and administrative interpretations thereof, all as in effect on the date of this Prospectus and all of which are subject
to change, possibly with retroactive effect. In addition, this summary assumes that a shareholder holds Shares as capital assets
within the meaning of the Internal Revenue Code and does not hold Shares in connection with a trade or business. This summary does
not address all potential U.S. federal income tax considerations possibly applicable to an investment in Shares of a Fund, and
does not address the consequences to Fund shareholders subject to special tax rules, including, but not limited to, partnerships
and the partners therein, tax-exempt shareholders, those who hold Fund Shares through an IRA, 401(k) plan or other tax-advantaged
account, and, except to the extent discussed below, “non-U.S. shareholders” (as defined below). This discussion does
not discuss any aspect of U.S. state, local, estate, and gift, or non-U.S., tax law. Furthermore, this discussion is not intended
or written to be legal or tax advice to any shareholder in a Fund or other person and is not intended or written to be used or
relied on, and cannot be used or relied on, by any such person for the purpose of avoiding any U.S. federal tax penalties that
may be imposed on such person. Prospective Fund shareholders are urged to consult their own tax advisors with respect to the specific
U.S. federal, state and local, and non-U.S., tax consequences of investing in Shares, based on their particular circumstances.
The Funds have not requested and will not
request an advance ruling from the U.S. Internal Revenue Service (the “IRS”) as to the U.S. federal income tax matters
described below. The IRS could adopt positions contrary to those discussed below and such positions could be sustained. Prospective
investors should consult their own tax advisors with regard to the U.S. federal tax consequences of the purchase, ownership or
disposition of Shares, as well as the tax consequences arising under the laws of any state, locality, non-U.S. country or other
taxing jurisdiction. The following information supplements, and should be read in conjunction with, the section in the SAI entitled
“U.S. Federal Income Taxation.”
Tax Treatment of the Funds
Each Fund intends to qualify and elect
to be treated as a separate “regulated investment company” (a “RIC”) under the Internal Revenue Code. To
qualify and remain eligible for the special tax treatment accorded to RICs, a Fund must meet certain annual income and quarterly
asset diversification requirements and must distribute annually at least 90% of the sum of (i) its “investment company taxable
income” (which includes dividends, interest and net short-term capital gains) and (ii) certain net tax-exempt income, if
any.
As a RIC, a Fund generally will not be
required to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes to its shareholders.
If a Fund fails to qualify as a RIC for any year (subject to certain curative measures allowed by the Internal Revenue Code), the
Fund will be subject to regular corporate-level U.S. federal income tax in that year on all of its taxable income, regardless of
whether the Fund makes any distributions to its shareholders. In addition, in such case, distributions will be taxable to the Fund’s
shareholders generally as ordinary dividends to the extent of the Fund’s current and accumulated earnings and profits. The
remainder of this discussion assumes that each Fund will qualify for the special tax treatment accorded to RICs.
Each Fund will be subject to a 4% excise
tax on certain undistributed income if the Fund does not distribute to its shareholders in each calendar year at least 98% of its
ordinary income for the calendar year, 98.2% of its capital gain net income for the twelve months ended October 31 of such year,
plus 100% of any undistributed amounts from prior years. For these purposes, the Fund will be treated as having distributed any
amount on which it has been subject to U.S. corporate income tax for the taxable year ending within the calendar year. Each Fund
intends to make distributions necessary to avoid this 4% excise tax, although there can be no assurance that it will be able to
do so.
A Fund may be required to recognize taxable
income in advance of receiving the related cash payment. For example, if a Fund invests in original issue discount obligations
(such as zero coupon debt instruments or debt instruments with payment-in-kind interest), the Fund will be required to include
in income each year a portion of the original issue discount that accrues over the term of the obligation, even if the related
cash payment is not received by the Fund until a later year. Under the “wash sale” rules, a Fund may not be able to
deduct currently a loss on a disposition of a portfolio security. As a result, the Fund may be required to make an annual income
distribution greater than the total cash actually received during the year. Such distribution may be made from the existing cash
assets of the Fund or cash generated from selling portfolio securities. The Fund may realize gains or losses from such sales, in
which event its shareholders may receive a larger capital gain distribution than they would in the absence of such transactions.
Tax Treatment of Fund Shareholders
Taxation of U.S. Shareholders
The following is a summary of certain U.S.
federal income tax consequences of the purchase, ownership and disposition of Fund Shares applicable to “U.S. shareholders.”
For purposes of this discussion, a “U.S. shareholder” is a beneficial owner of Fund Shares who, for U.S. federal income
tax purposes, is (i) an individual who is a citizen or resident of the United States; (ii) a corporation (or an entity treated
as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United
States, or of any state thereof, or the District of Columbia; (iii) an estate, the income of which is includable in gross income
for U.S. federal income tax purposes regardless of its source; or (iv) a trust, if (1) a U.S. court is able to exercise primary
supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions
of the trust, or (2) the trust has a valid election in place to be treated as a U.S. person.
Fund Distributions. In general,
Fund distributions are subject to U.S. federal income tax when paid, regardless of whether they consist of cash or property, and
regardless of whether they are re-invested in Shares. However, any Fund distribution declared in October, November or December
of any calendar year and payable to shareholders of record on a specified date during such month will be deemed to have been received
by the Fund shareholder on December 31 of such calendar year, provided such dividend is actually paid during January of the following
calendar year.
Distributions of a Fund’s net investment
income (except, as discussed below, qualified dividend income) and net short-term capital gains are taxable as ordinary income
to the extent of the Fund’s current and accumulated earnings and profits. To the extent designated as capital gain dividends
by the Fund, distributions of the Fund’s net long-term capital gains in excess of net short-term capital losses (“net
capital gain”) are taxable at long-term capital gain tax rates to the extent of the Fund’s current and accumulated
earnings and profits, regardless of the Fund shareholder’s holding period in the Fund’s Shares. Distributions of qualified
dividend income are, to the extent of the Fund’s current and accumulated earnings and profits, taxed to certain non-corporate
Fund shareholders at the rates generally applicable to long-term capital gain, provided that the Fund shareholder meets certain
holding period and other requirements with respect to the distributing Fund’s Shares and the distributing Fund meets certain
holding period and other requirements with respect to its dividend-paying stocks. Substitute payments received on Fund Shares that
are lent out will be ineligible for being reported as qualified dividend income.
Each Fund intends to distribute its net
capital gain at least annually. However, by providing written notice to its shareholders no later than 60 days after its year-end,
the Fund may elect to retain some or all of its net capital gain and designate the retained amount as a “deemed distribution.”
In that event, the Fund pays U.S. federal income tax on the retained net capital gain, and the Fund shareholder recognizes a proportionate
share of the Fund’s undistributed net capital gain. In addition, the Fund shareholder can claim a tax credit or refund for
the shareholder’s proportionate share of the Fund’s U.S. federal income taxes paid on the undistributed net capital
gain and increase the shareholder’s tax basis in the Shares by an amount equal to the shareholder’s proportionate share
of the Fund’s undistributed net capital gain, reduced by the amount of the shareholder’s tax credit or refund.
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 the shareholder’s tax basis in its Shares of the Fund, and generally as capital gain thereafter.
In addition, high-income individuals (and
certain trusts and estates) generally will be subject to a 3.8% Medicare tax on “net investment income” in addition
to otherwise applicable U.S. federal income tax. “Net investment income” generally will include dividends (including
capital gain dividends) received from a Fund and net gains from the redemption or other disposition of Shares. Please consult your
tax advisor regarding this tax.
Investors considering buying Shares just
prior to a distribution should be aware that, although the price of the Shares purchased at such time may reflect the forthcoming
distribution, such distribution nevertheless may be taxable (as opposed to a non-taxable return of capital).
Sales of Shares. Any capital gain
or loss realized upon a sale or exchange of Shares generally is treated as a long-term gain or loss if the Shares have been held
for more than one year. Any capital gain or loss realized upon a sale or exchange of Shares held for one year or less generally
is treated as a short-term gain or loss, except that any capital loss on the sale or exchange of Shares held for six months or
less is treated as long-term capital loss to the extent that capital gain dividends were paid (or deemed to be paid) with respect
to the Shares.
Creation Unit Issues and Redemptions.
On an issue of Shares of a Fund as part of a Creation Unit where the creation is conducted in-kind, an Authorized Participant recognizes
capital gain or loss equal to the difference between (i) the fair market value (at issue) of the issued Shares (plus any cash received
by the Authorized Participant as part of the issue) and (ii) the Authorized Participant’s aggregate basis in the exchanged
securities (plus any cash paid by the Authorized Participant as part of the issue). On a redemption of Shares as part of a Creation
Unit where the redemption is conducted in-kind, an Authorized Participant recognizes capital gain or loss equal to the difference
between (i) the fair market value (at redemption) of the securities received (plus any cash received by the Authorized Participant
as part of the redemption) and (ii) the Authorized Participant’s basis in the redeemed Shares (plus any cash paid by the
Authorized Participant as part of the redemption). However, the IRS may assert, under the “wash sale” rules or on the
basis that there has been no significant change in the Authorized Participant’s economic position, that any loss on creation
or redemption of Creation Units cannot be deducted currently.
In general, any capital gain or loss recognized
upon the issue or redemption of Shares (as components of a Creation Unit) is treated either as long-term capital gain or loss,
if the deposited securities (in the case of an issue) or the Shares (in the case of a redemption) have been held for more than
one year, or otherwise as short-term capital gain or loss. However, any capital loss on a redemption of Shares held for six months
or less is treated as long-term capital loss to the extent that capital gain dividends were paid (or deemed to be paid) with respect
to such Shares.
Taxation of Non-U.S. Shareholders
The following is a summary of certain U.S.
federal income tax consequences of the purchase, ownership and disposition of Fund Shares applicable to “non-U.S. shareholders.”
For purposes of this discussion, a “non-U.S. shareholder” is a beneficial owner of Fund Shares that is not a U.S. shareholder
(as defined above) and is not an entity or arrangement treated as a partnership for U.S. federal income tax purposes. The following
discussion is based on current law and is for general information only. It addresses only selected, and not all, aspects of U.S.
federal income taxation.
With respect to non-U.S. shareholders of
a Fund, the Fund’s ordinary income dividends generally will be subject to U.S. federal withholding tax at a rate of 30% (or
at a lower rate established under an applicable tax treaty), subject to certain exceptions for “interest-related dividends”
and “short-term capital gain dividends” discussed below. U.S. federal withholding tax generally will not apply to any
gain realized by a non-U.S. shareholder in respect of a Fund’s net capital gain. Special rules apply with respect to dividends
of the Fund that are attributable to gain from the sale or exchange of “U.S. real property interests.”
In general, all “interest-related
dividends” and “short-term capital gain dividends” (each defined below) will not be subject to U.S. federal withholding
tax, provided that the non-U.S. shareholder furnished the Fund with a completed IRS Form W-8BEN or W-8BEN-E, as applicable, (or
acceptable substitute documentation) establishing the non-U.S. shareholder’s non-U.S. status and the Fund does not have actual
knowledge or reason to know that the non-U.S. shareholder would be subject to such withholding tax if the non-U.S. shareholder
were to receive the related amounts directly rather than as dividends from the Fund. “Interest-related dividends” generally
means dividends designated by the Fund as attributable to such Fund’s U.S.-source interest income, other than certain contingent
interest and interest from obligations of a corporation or partnership in which such Fund is at least a 10% shareholder, reduced
by expenses that are allocable to such income. “Short-term capital gain dividends” generally means dividends designated
by the Fund as attributable to the excess of such Fund’s net short-term capital gain over its net long-term capital loss.
Depending on its circumstances, the Fund may treat such dividends, in whole or in part, as ineligible for these exemptions from
withholding.
In general, subject to certain exceptions,
non-U.S. shareholders will not be subject to U.S. federal income or withholding tax in respect of a sale or other disposition of
Shares of a Fund.
To claim a credit or refund for any Fund-level
taxes on any undistributed net capital gain (as discussed above) or any taxes collected through back-up withholding (discussed
below), a non-U.S. shareholder must obtain a U.S. taxpayer identification number and file a U.S. federal income tax return even
if the non-U.S. shareholder would not otherwise be required to do so.
Back-Up Withholding.
A Fund (or a financial intermediary such as a broker through
which a shareholder holds Shares in the Fund) may be required to report certain information on the Fund shareholder to the IRS
and withhold U.S. federal income tax (“backup withholding”) at a current rate of 28% from taxable distributions and
redemption or sale proceeds payable to the Fund shareholder if (i) the Fund shareholder fails to provide the Fund with a correct
taxpayer identification number or make required certifications, or if the IRS notifies the Fund that the Fund shareholder is otherwise
subject to backup withholding, and (ii) the Fund shareholder is not otherwise exempt from backup withholding. Non-U.S. shareholders
can qualify for exemption from backup withholding by submitting a properly completed IRS Form W-8BEN or W-8BEN-E. Backup withholding
is not an additional tax and any amount withheld may be credited against the Fund shareholder’s U.S. federal income tax liability.
Foreign Account Tax Compliance Act
The U.S. Foreign Account Tax Compliance
Act (“FATCA”) generally imposes a 30% withholding tax on “withholdable payments” (defined below) made
to (i) a “foreign financial institution” (“FFI”), unless the FFI enters into an agreement with the IRS
to provide information regarding certain of its direct and indirect U.S. account holders and satisfy certain due diligence and
other specified requirements, and (ii) a “non-financial foreign entity” (“NFFE”) unless such NFFE provides
certain information about its direct and indirect “substantial U.S. owners” to the withholding agent or certifies
that it has no such U.S. owners. The beneficial owner of a withholdable payment may be eligible for a refund or credit of the
withheld tax. The U.S. government also has entered into several intergovernmental agreements with other jurisdictions to provide
an alternative, and generally easier, approach for FFIs to comply with FATCA. Withholdable payments generally include, among other
items, (i) U.S.-source interest and dividends, and (ii) gross proceeds from the sale or disposition, occurring on or after January
1, 2019, of property of a type that can produce U.S.-source interest or dividends.
A Fund may be required to impose a 30%
withholding tax on withholdable payments to a shareholder if the shareholder fails to provide the Fund with the information, certifications
or documentation required under FATCA, including information, certification or documentation necessary for the Fund to determine
if the shareholder is a non-U.S. shareholder or a U.S. shareholder and, if it is a non-U.S. shareholder, if the non-U.S. shareholder
has “substantial U.S. owners” and/or is in compliance with (or meets an exception from) FATCA requirements. The Fund
will not pay any additional amounts to shareholders in respect of any amounts withheld. The Fund may disclose any shareholder information,
certifications or documentation to the IRS or other parties as necessary to comply with FATCA.
The requirements of, and exceptions from,
FATCA are complex. All prospective shareholders are urged to consult their own tax advisors regarding the potential application
of FATCA with respect to their own situation.
For a more detailed tax discussion regarding
an investment in the Funds, please see the section of the SAI entitled “U.S. Federal Income Taxation.”
GENERAL INFORMATION
Syntax ETF Trust was organized as a Delaware
statutory trust on June 27, 2013. If shareholders of a Fund are required to vote on any matters, shareholders are entitled to one
vote for each Share they own. Annual meetings of shareholders will not be held except as required by the 1940 Act and other applicable
law. See the SAI for more information concerning the Trust’s form of organization.
For purposes of the 1940 Act, Shares of
the Trust are issued by the respective series of the Trust and the acquisition of Shares by investment companies is subject to
the restrictions of section 12(d)(1) of the 1940 Act. The Trust has received exemptive relief from Section 12(d)(1) to
allow registered investment companies to invest in the Funds beyond the limits set forth in Section 12(d)(1), subject to certain
terms and conditions as set forth in an SEC exemptive order issued to the Trust, including that such investment companies enter
into an agreement with the Trust.
From time to time, a Fund may advertise
yield and total return figures. Yield is a historical measure of dividend income, and total return is a measure of past dividend
income (assuming that it has been reinvested) plus capital appreciation. Neither yield nor total return should be used to predict
the future performance of the Fund.
PREMIUM/DISCOUNT INFORMATION
Information showing the number of days
the market price of each Fund’s Shares was greater than the Fund’s NAV per Share (i.e. at a premium) and the number
of days it was less than the Fund’s NAV per Share (i.e. at a discount) for various time periods is available by visiting
the Funds’ website at www.SyntaxAdvisors.com.
CODE OF ETHICS
The Trust, the Advisor, the Sub-Advisor
and Foreside Financial Group, LLC (on behalf of Foreside Fund Officer Services, LLC) have each adopted a code of ethics under
Rule 17j-1 of the 1940 Act. These codes of ethics permit, subject to certain conditions, personnel of each of those
entities to invest in securities that may be purchased or held by the Funds. The Distributor relies on the principal underwriters
exception under Rule 17j-1(c)(3), specifically where the Distributor is not affiliated with the Trust or the Advisor, and no officer,
director or general partner of the Distributor serves as an officer, director or general partner of the Trust or the Advisor.
Each code of ethics is on public file with, and is available from, the SEC.
DISTRIBUTION PLAN
The Funds have adopted a Rule 12b-1 Distribution
and Service Plan in accordance with Rule 12b-1 under the 1940 Act pursuant to which payments of up to 0.25% of a Fund’s average
daily net assets may be made for the sale and distribution of its Shares. However, the Board of Trustees has determined not to
authorize payment of a 12b-1 Plan fee at this time. The 12b-1 Plan fee may only be imposed or increased when the Board of Trustees
determines that it is in the best interests of shareholders to do so. Because Rule 12b-1 fees are paid out of a Fund’s assets,
over time, these fees increase the cost of your investment and they may cost you more than certain other types of sales charges.
OTHER INFORMATION
The Funds are not sponsored, endorsed,
sold or promoted by NYSE Arca, Inc. NYSE Arca 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 a Fund particularly or the ability
of a Fund to achieve its objectives. NYSE Arca has no obligation or liability in connection with the administration, marketing
or trading of the Funds.
For purposes of the 1940 Act, the Funds
are a registered investment company, and the acquisition of Shares by other registered investment companies and companies relying
on exemption from registration as investment companies under Section 3(c)(1) or 3(c)(7) of the 1940 Act is subject to the restrictions
of Section 12(d)(1) of the 1940 Act, except as permitted by an exemptive order that permits registered investment companies to
invest in a Fund beyond those limitations.
FINANCIAL HIGHLIGHTS
Financial Highlights for the Funds
are not included in this Prospectus because the Funds had not commenced operations prior to December 31, 2019.
WHERE TO LEARN MORE ABOUT THE FUNDS
This Prospectus does not contain all
the information included in the Registration Statement filed with the SEC with respect to the Funds’ Shares. The Funds’
SAI and, when available, the annual and semi-annual reports to shareholders, each of which will be filed with the SEC, provide
more information about each Fund. The SAI contains the financial statements of the 400 Series for the year ended December 31,
2019, which should be read in conjunction with this Prospectus. In the annual report, you will find a discussion of the market
conditions and investment strategies that significantly affected a Fund’s performance during the Fund’s last fiscal
year, as applicable. The SAI and the financial statements included in the Trust’s annual report to shareholders are incorporated
herein by reference (i.e., they are legally part of this Prospectus). These materials may be obtained without charge, upon request,
by writing to the Distributor, Three Canal Plaza, Suite 100, Portland, Maine, 04101, by visiting the Fund’s website at www.SyntaxAdvisors.com
or by calling the following number: (866) 972-4492.
Investor Information:
The Registration Statement, including
this Prospectus, the SAI, and the exhibits as well as any shareholder reports may be reviewed on the EDGAR Database on the SEC’s
website (http://www.sec.gov). You may get copies of this and other information after paying a duplicating fee, by electronic request
at the following e-mail address: publicinfo@sec.gov, or by writing the Public Reference Section of the SEC, Washington, D.C. 20549-1520.
Shareholder inquiries may be directed to
the Funds in writing to Syntax Advisors, LLC at One Liberty Plaza, 46th Floor, New York, NY 10006 or by calling the Investor Information
number listed above.
No person has been authorized to give any
information or to make any representations other than those contained in this Prospectus in connection with the offer of the Funds’
Shares, and, if given or made, the information or representations must not be relied upon as having been authorized by the Trust
or the Funds. Neither the delivery of this Prospectus nor any sale of Shares shall under any circumstance imply that the information
contained herein is correct as of any date after the date of this Prospectus.
Dealers effecting transactions in the Funds’
Shares, whether or not participating in this distribution, are generally required to deliver a Prospectus. This is in addition
to any obligation of dealers to deliver a Prospectus when acting as underwriters.
Investment Company Act File No.:
811-23227
SYNTAX ETF TRUST (THE “TRUST”)
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2020
This Statement of Additional Information
(“SAI”) is not a prospectus. It should be read in conjunction with the prospectus for the Trust dated May 1, 2020,
as it may be revised from time to time (the “Prospectus”).
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Fund
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Ticker
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SYNTAX
STRATIFIED LARGECAP ETF
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SSPY
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SYNTAX
STRATIFIED MIDCAP ETF
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SMDY
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SYNTAX
STRATIFIED SMALLCAP ETF
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SSLY
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Principal U.S. Listing Exchange:
NYSE Arca, Inc.
Capitalized terms used herein that are
not defined have the same meaning as in the Prospectus, unless otherwise noted. A copy of the Prospectus may be obtained without
charge by writing to the Trust’s Distributor, Foreside Fund Services, LLC, at Three Canal Plaza, Suite 100, Portland, Maine,
04101, by visiting the Funds’ website at www.SyntaxAdvisors.com or calling (866) 972-4492.
Table of Contents
GENERAL DESCRIPTION OF THE TRUST
The Trust is an open-end management
investment company, registered under the Investment Company Act of 1940, as amended (the “1940 Act”), currently consisting
of six investment series (the “Funds”). The Trust was organized as a Delaware statutory trust on June 27, 2013.
The offering of the Funds’ shares (“Shares”) is registered under the Securities Act of 1933, as amended (“Securities
Act”). The investment objective of each Fund is to provide investment results that, before fees and expenses, correspond
to the total return, of a specified market index (the “Index”). Syntax Advisors, LLC (“Syntax” or the
“Advisor”) serves as the investment adviser for the Funds. Vantage Consulting Group (“Vantage” or the
“Sub-Advisor,” and together with the Advisor, “Advisors”) serves as the investment sub-adviser for the
Funds.
The Funds offer and issue Shares at their
net asset value (sometimes referred to herein as “NAV”) only in aggregations of a specified number of Shares (each,
a “Creation Unit”). The Funds generally offer and issue Shares in exchange for a basket of securities included in their
Index (“Deposit Securities”) together with the deposit of a specified cash payment (“Cash Component”).
The Trust reserves the right to permit or require the substitution of a “cash in lieu” amount (“Deposit Cash”)
to be added to the Cash Component to replace any Deposit Security. The Shares have been approved for listing and secondary trading
on a national securities exchange (“Exchange”). The Shares will trade on the Exchange at market prices. These prices
may differ from the Shares’ net asset values. The Shares are also redeemable only in Creation Unit aggregations, and generally
in exchange for portfolio securities and a specified cash payment. A Creation Unit of the Fund consists of 25,000 Shares, as set
forth in the Prospectus.
Shares may be issued in advance of receipt
of all Deposit Securities subject to various conditions including a requirement to maintain on deposit with the Trust cash at least
equal to a specified percentage of the market value of the missing Deposit Securities as set forth in the Participant Agreement
(as defined below). See “Purchase and Redemption of Creation Units.” The Trust may impose a transaction fee for each
creation or redemption. In all cases, such fees will be limited in accordance with the requirements of the U.S. Securities and
Exchange Commission (“SEC”) applicable to management investment companies offering redeemable securities. In addition
to the fixed creation or redemption transaction fee, an additional transaction fee of up to three times the fixed creation or redemption
transaction fee and/or an additional variable charge may apply.
ADDITIONAL INDEX INFORMATION
The Syntax Stratified LargeCap Index,
the Syntax Stratified MidCap Index, and the Syntax Stratified SmallCap Index (each an “Index”, collectively the “Indices”)
are the Stratified Weight versions of the widely used S&P500® Index, S&P MidCap 400® Index,
and S&P SmallCap 600® Index, respectively. Each Index holds the same constituents as its corresponding index,
S&P 500, S&P MidCap 400 or S&P SmallCap 600, but the weight of each company in the Index is based on Syntax’s
patented methodology to control exposure to related business risks (RBRs).
The Indices were developed and are
maintained in accordance with the following criteria: (1) each of the component securities in each Index is a constituent company
of the S&P 500® Index, the S&P MidCap 400® Index or S&P SmallCap 600®
Index, as applicable; and (2) the Indices are calculated by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC)
based on methodology proprietary to Syntax, LLC an affiliate of the investment adviser (the “Index Provider”), using
a stratification methodology. The Index Provider publishes information regarding the market value of each Index. For more information,
please visit the Funds’ website at www.SyntaxAdvisors.com.
Syntax Stratified Weight Indices represent
a major breakthrough in passive index weighting methodology in that they are designed (e.g. the product/services the company makes/provides,
the customers or end users the company sells to, or the inputs that it utilizes to make its product or service) to control for
the negative impacts of related business risks. When two or more companies’ earnings are affected by the same fundamental
drivers, we say that they share a related business risk. Syntax Indices utilize a proprietary functional information system (“FIS”)
developed by Syntax, LLC, to identify related business risks and implement a patented stratified weighting methodology that controls
for the inadvertent overweighting of related business risk that regularly occurs in capitalization-weighted and equal-weighted
indices. To learn more about FIS, please visit www.SyntaxAdvisors.com.
Stratified Weight Indices are a new
class of passive indexing that mitigates the negative impacts of overweighting related business risks without sacrificing upside
performance in normal markets. Stratified Weight Indices, together with capitalization-weight and equal-weight indices, form a
complementary suite of index weighting methods that each provide a different measure of market performance. Capitalization-weight
indices measure aggregate market performance, equal-weight indices measure average company performance, and Stratified Weight
indices measure diversified business performance. Each is an important market benchmark that offers different perspectives.
The investment objective of every Syntax
Index is to deliver returns consistent with the performance objectives of the underlying companies that make up the index. By
using FIS and stratification to control for exposure to related business risks, Syntax Indices are designed to improve the tracking
of the actual medium-to long-term performance of groups of companies and provide results that are the product of effective diversification,
rather than the overweighting of one or more outperforming groups. Because FIS defines the related business risks, Syntax Indices
are built as a more stable composite of those functional parts. While the major cap-weighted indices are designed to be a proxy
for the total market, Syntax, LLC believes that the Syntax Indices serve as a better basis for medium-to-long-term investments
in index-tracking funds.
Disclaimer
Syntax, LLC, the Index Provider, is
affiliated with the Trust and the Advisor. The Advisor (“Licensee”) has entered into license agreements with the Index
Provider pursuant to which the Advisor pays a fee to use the Index. The Advisor is sub-licensing rights to the Indices to the
Funds at no charge.
Each Index is the property of Syntax,
LLC, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the
Indices. The Indices are not sponsored by S&P Dow Jones Indices LLC or its affiliates or its third-party licensors, including
Standard & Poor's Financial Services LLC and Dow Jones Trademark Holdings LLC (collectively, “S&P Dow Jones Indices”).
S&P Dow Jones Indices will not be liable for any errors or omissions in calculating the Indices. “Calculated by S&P
Dow Jones Indices” and the related stylized mark(s) are service marks of S&P Dow Jones Indices and have been licensed
for use by Syntax, LLC. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC,
and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC.
The Funds are not sponsored, endorsed,
sold or promoted by S&P Dow Jones Indices. S&P Dow Jones Indices does not make any representation or warranty, express
or implied, to the owners of the Funds or any member of the public regarding the advisability of investing in securities generally
or in the Funds particularly or the ability of the Indices to track general market performance. S&P Dow Jones Indices’
only relationship to Syntax, LLC with respect to the Indices is the licensing of the S&P 500 Index, the S&P MidCap 400
Index, and S&P SmallCap 600 Index and their constituents, certain trademarks, service marks and trade names of S&P Dow
Jones Indices, and the provision of the calculation services related to each Index. S&P Dow Jones Indices is not responsible
for and has not participated in the determination of the prices and amount of the Funds or the timing of the issuance or sale
of the Funds or in the determination or calculation of the equation by which the Funds may be converted into cash or other redemption
mechanics. S&P Dow Jones Indices has no obligation or liability in connection with the administration, marketing or trading
of the Funds. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within each Index is not a recommendation
by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it investment advice.
S&P DOW JONES INDICES DOES NOT GUARANTEE
THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION WITH RESPECT
THERETO, INCLUDING, ORAL, WRITTEN, OR ELECTRONIC COMMUNICATIONS. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES
OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN EXCEPT THOSE ARISING FROM FRAUD OR GROSS NEGLIGENCE ON THE PART OF S&P.
S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY SYNTAX, LLC, OWNERS OF THE FUNDS, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES,
INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME, OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.
INVESTMENT POLICIES
INVESTMENT STRATEGIES
DIVERSIFICATION STATUS
Each Fund is classified as a
“diversified” investment company under the 1940 Act.
REPURCHASE AGREEMENTS
Each Fund may invest in repurchase
agreements with commercial banks, brokers or dealers to generate income from its excess cash balances and to invest securities
lending cash collateral. A repurchase agreement is an agreement under which a Fund acquires a financial instrument (e.g., a security
issued by the U.S. government or an agency thereof, a banker’s acceptance or a certificate of deposit) from a seller, subject
to resale to the seller at an agreed upon price and date (normally, the next Business Day – as defined below). A repurchase
agreement may be considered a loan collateralized by securities. The resale price reflects an agreed upon interest rate effective
for the period the instrument is held by the Fund and is unrelated to the interest rate on the underlying instrument.
In these repurchase agreement
transactions, the securities acquired by the Fund (including accrued interest earned thereon) must have a total value in excess
of the value of the repurchase agreement and be held by the Custodian until repurchased. No more than an aggregate of 15 percent
of a Fund’s net assets will be invested in illiquid securities, including repurchase agreements having maturities longer
than seven days and securities subject to legal or contractual restrictions on resale, or for which there are no readily available
market quotations.
The use of repurchase agreements
involves certain risks. For example, if the other party to the agreement defaults on its obligation to repurchase the underlying
security at a time when the value of the security has declined, the Fund may incur a loss upon disposition of the security. If
the other party to the agreement becomes insolvent and subject to liquidation or reorganization under the U.S. Bankruptcy Code
or other laws, a court may determine that the underlying security is collateral for a loan by the Fund not within the control of
the Fund and, therefore, the Fund may not be able to substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement.
OTHER SHORT-TERM INSTRUMENTS
In addition to repurchase
agreements, each Fund may invest in short-term instruments, including money market instruments, cash and cash equivalents, 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 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
(“Moody’s”) or “A-1” by Standard & Poor’s (“S&P”), or if unrated, of comparable
quality as determined by the Advisor; (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; and (vi) short-term U.S. dollar-denominated obligations of foreign banks (including U.S. branches) that, in the
opinion of the Advisor, 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. Money market instruments also include shares of money market
funds. 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.
SPECIAL CONSIDERATIONS AND RISKS
A discussion of the risks associated with
an investment in each Fund is contained in the Prospectus. The discussion below supplements, and should be read in conjunction
with, the Prospectus.
GENERAL
Investment in a Fund should be
made with an understanding that the value of the Fund’s portfolio securities may fluctuate in accordance with changes in
the financial condition of the issuers of the portfolio securities, the value of securities generally and other factors.
An investment in a Fund should
also be made with an understanding of the risks inherent in an investment in securities, including the risk that the financial
condition of issuers may become impaired or that the general condition of the securities markets may deteriorate (either of which
may cause a decrease in the value of the portfolio securities and thus in the value of Shares). Securities are susceptible to general
market fluctuations and to volatile increases and decreases in value as market confidence in and perceptions of their issuers change.
These investor perceptions are based on various and unpredictable factors including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic expansion or contraction, and global or regional political,
economic and banking crises.
Holders of common stocks incur
more risk than holders of preferred stocks and debt obligations because common stockholders, as owners of the issuer, have generally
inferior rights to receive payments from the issuer in comparison with the rights of creditors of, or holders of debt obligations
or preferred stocks issued by, the issuer. Further, unlike debt securities which typically have a stated principal amount payable
at maturity (whose value, however, will be subject to market fluctuations prior thereto), or preferred stocks which typically have
a liquidation preference and which may have stated optional or mandatory redemption provisions, common stocks have neither a fixed
principal amount nor a maturity. Common stock values are subject to market fluctuations as long as the common stock remains outstanding.
The principal trading market
for some of the securities in the Index may be in the over-the-counter market. The existence of a liquid trading market for certain
securities may depend on whether dealers will make a market in such securities. There can be no assurance that a market will be
made or maintained or that any such market will be or remain liquid. The price at which securities may be sold and the value of
a Fund’s Shares will be adversely affected if trading markets for the Fund’s portfolio securities are limited or absent
or if bid/ask spreads are wide.
TAX RISKS
As with any investment, you should
consider how your investment in Shares of a Fund will be taxed. The tax information in the Prospectus and this SAI is provided
as general information. You should consult your own tax professional about the tax consequences of an investment in Shares of a
Fund.
CONTINUOUS OFFERING
The method by which Creation
Units of Shares are created and traded may raise certain issues under applicable securities laws. Because new Creation Units of
Shares are issued and sold by the Trust 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 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 Units after placing an order with the Transfer Agent,
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, are generally 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 a Fund are reminded that under Securities Act
Rule 153, 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 Fund’s 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.
INVESTMENT RESTRICTIONS
The Trust has adopted the following investment
restrictions as fundamental policies with respect to the Funds. These restrictions cannot be changed without the approval of the
holders of a majority of a Fund’s outstanding voting securities. For purposes of the 1940 Act, a majority of the outstanding
voting securities of a Fund means the vote, at an annual or a special meeting of the security holders of the Trust, of the lesser
of (1) 67 percent or more of the voting securities of the Fund present at such meeting, if the holders of more than 50 percent
of the outstanding voting securities of the Fund are present or represented by proxy, or (2) more than 50 percent of the outstanding
voting securities of the Fund. Except with the approval of a majority of the outstanding voting securities, a Fund may not:
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1.
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Change its investment objective;
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2.
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Lend any funds or other assets except through the purchase
of all or a portion of an issue of securities or obligations of the type in which it is permitted to invest (including participation
interests in such securities or obligations) and except that the Fund may lend its portfolio securities in an amount not to
exceed 33 1/3% of the value of its total assets;
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3.
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Issue senior securities or borrow money, except borrowings
from banks for temporary or emergency purposes in an amount up to 10% of the value of the Fund’s total assets (including
the amount borrowed), valued at market, less liabilities (not including the amount borrowed) valued at the time the borrowing
is made, and the Fund will not purchase securities while borrowings in excess of 5% of the Fund’s total assets are outstanding,
provided, that for purposes of this restriction, short-term credits necessary for the clearance of transactions are not considered
borrowings (this limitation on purchases does not apply to acceptance by the Fund of a deposit principally of securities included
in the relevant Index for creation of Creation Units);
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4.
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Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure permitted borrowings. (The deposit of underlying securities and other assets in escrow and collateral arrangements
with respect to initial or variation margin for futures contracts or options contracts will not be deemed to be pledges of
the Fund’s assets);
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5.
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Purchase, hold or deal in real estate, or oil, gas or mineral
interests or leases, but the Fund may purchase and sell securities that are issued by companies that invest or deal in such
assets;
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6.
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Act as an underwriter of securities of other issuers, except
to the extent the Fund may be deemed an underwriter in connection with the sale of securities in its portfolio;
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7.
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Purchase securities on margin, except for such short-term
credits as are necessary for the clearance of transactions, except that the Fund may make margin deposits in connection with
transactions in options, futures and options on futures;
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8.
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Sell securities short;
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9.
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Invest in commodities or commodity contracts, except that
the Fund may transact in exchange traded futures contracts on securities, stock indices and options on such futures contracts
and make margin deposits in connection with such contracts; or
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10.
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Concentrate its investments in securities of issuers in the
same industry, except the Fund will concentrate, as necessary to approximate the composition of the Fund’s underlying
Index (the SEC Staff considers concentration to involve more than 25 percent of the Fund’s assets to be invested in
an industry or group of industries).
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In addition to the investment restrictions
adopted as fundamental policies as set forth above, each Fund observes the following restrictions, which may be changed by the
Board without a shareholder vote. A Fund:
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1.
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Will not invest in the securities of a company for the purpose
of exercising management or control, provided that the Trust may vote the investment securities owned by the Fund in accordance
with its views.
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2.
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Will not hold illiquid assets in excess of 15% of its net
assets. An illiquid asset is any asset which may not be sold or disposed of in the ordinary course of business within seven
days at approximately the value at which the Fund has valued the investment.
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3.
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Will, under normal circumstances, invest at least 95% of
its total assets in common stocks that compose its relevant Index. Prior to any change in the Fund’s 95% investment
policy, the Fund will provide shareholders with 60 days written notice.
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4.
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Will not invest in securities issued by other investment
companies so that, as determined immediately after a purchase of such securities is made: (i) not more than 5% of the value
of the Fund’s total assets 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 in 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.
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If a percentage limitation is
adhered to at the time of investment or contract, a later increase or decrease in percentage resulting from any change in value
or total or net assets will not result in a violation of such restriction, except that the percentage limitations with respect
to the borrowing of money and illiquid securities will be observed continuously. With respect to the limitation on illiquid securities,
in the event that a subsequent change in net assets or other circumstances cause the Fund to exceed its limitation, the Fund will
take steps to bring the aggregate amount of illiquid instruments back within the limitations as soon as reasonably practicable.
EXCHANGE LISTING AND TRADING
A discussion of exchange listing and trading
matters associated with an investment in a Fund is contained in the Prospectus under “ADDITIONAL PURCHASE AND SALE INFORMATION.”
The discussion below supplements, and should be read in conjunction with, such sections of the Prospectus.
The Shares of each Fund are approved for
listing and trading on the Exchange, subject to notice of issuance. The Shares trade on the Exchange at prices that may differ
to some degree from their net asset value. There can be no assurance that the requirements of the Exchange necessary to maintain
the listing of Shares of the Fund will continue to be met.
The Exchange may, but is not required to,
remove the Shares of a Fund from listing if: (1) following the initial twelve-month period beginning upon the commencement of trading
of the Fund, there are fewer than 50 beneficial holders of the Shares for 30 or more consecutive trading days; (2) the value of
its underlying Index or portfolio of securities on which the Fund is based is no longer calculated or available; (3) the “indicative
optimized portfolio value” (“IOPV”) of the Fund is no longer calculated or available; or (4) such other event
shall occur or condition exists that, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. In addition,
the Exchange will remove the Shares from listing and trading upon termination of the Trust or the Fund.
The Trust reserves the right to adjust
the Share price of a Fund in the future to maintain convenient trading ranges for investors. Any adjustments would be accomplished
through stock splits or reverse stock splits, which would have no effect on the net assets of the Fund.
As in the case of other publicly-traded
securities, brokers’ commissions on transactions will be based on negotiated commission rates at customary levels.
The base and trading currencies of the
Funds is the U.S. dollar. The base currency is the currency in which a Fund’s net asset value per Share is calculated and
the trading currency is the currency in which Shares of the Fund are listed and traded on the Exchange.
MANAGEMENT OF THE TRUST
The following information supplements and
should be read in conjunction with the section in the Prospectus entitled “MANAGEMENT.”
The Board has responsibility for the overall
management, operations and business affairs of the Trust, including general supervision and review of its investment activities.
The Trustees elect the officers of the Trust who are responsible for administering the day-to-day operations of the Trust and the
Funds.
The Trustees and executive officers
of the Trust, along with their year of birth, principal occupations over the past five years, length of time served, total number
of portfolios overseen in the fund complex, public and fund directorships held and other positions and their affiliations, if
any, with the Advisor, are listed below:
TRUSTEES AND OFFICERS OF THE TRUST
TRUSTEES
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NAME, ADDRESS
AND YEAR OF
BIRTH
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POSITION(S)
WITH
TRUST
|
TERM OF
OFFICE
AND LENGTH
OF TIME
SERVED
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PRINCIPAL
OCCUPATION(S)
DURING PAST
5 YEARS
|
NUMBER
OF
PORTFOLIOS
IN FUND
COMPLEX
OVERSEEN
BY
TRUSTEE
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OTHER
DIRECTORSHIPS
HELD BY
TRUSTEE DURING THE LAST 5
YEARS
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Independent
Trustees
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Deborah Fuhr
(1959)
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Independent
Trustee
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Term: Unlimited
Trustee since 2018
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Co-Founder
and Managing Partner, ETFGI LLP (research and consulting) (2012 to present);
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2
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Co-Founder
and Board Member, Women in ETFs (Not for Profit) (2014 to present); Co-founder and Board Member, Women in ETFs Europe Limited
(Educational Association) (2015 to present); Director and Board Member, 2 Culford Gardens RTM (Property) (2011
to present); Director and Board Member (2 Culford Gardens Freehold (Property) (2011 to present)
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George Hornig
(1954)
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Independent
Trustee and Chairman of the Audit Committee
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Term: Unlimited
Trustee since 2018
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Managing
Member, George Hornig, LLC (2017 to present) (investments); Senior Managing Director and Chief Operating Officer, Pinebridge
Investments (investment adviser) (2010 to 2016).
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2
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Director, Forrester Research, Inc.
(technology research company) (1996 to 2018); Director, Daniel J. Edelman Holding (2016 to present) (communications marketing
firm); Director, Xometry (advanced manufacturing platform business) (2014 to present); Director, KBL Merger Corp IV (2017
to present) (healthcare).
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NAME, ADDRESS
AND YEAR OF
BIRTH
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POSITION(S)
WITH
TRUST
|
TERM OF
OFFICE
AND LENGTH
OF TIME
SERVED
|
PRINCIPAL
OCCUPATION(S)
DURING PAST
5 YEARS
|
NUMBER
OF
PORTFOLIOS
IN FUND
COMPLEX
OVERSEEN
BY
TRUSTEE
|
OTHER
DIRECTORSHIPS
HELD BY
TRUSTEE DURING THE LAST 5
YEARS
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Richard Lyons
(1961)
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Lead Independent Trustee and Chairman of the Nominating
and Governance Committee
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Term: Unlimited
Trustee since 2018
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Chief Innovation and Entrepreneurship Officer, UC
Berkeley (since 2020); Professor and William & Janet Cronk Chair in Innovative Leadership (2019), Dean (2008-19),
Haas School of Business, UC Berkeley; Haas School of Business, UC Berkeley; Chief Learning
Officer (2006 to 2008), Goldman Sachs (investment
banking and investment
management); Executive Associate Dean (2005 to 2006),
Acting Dean (2004 to 2005),
Professor (2000 to 2004), Associate Professor (1996
to 2000), Assistant Professor
(1993 to 1996), Haas School of Business, UC Berkeley.
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2
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Director
(2013 to 2016), Matthews A Share Selections Fund, LLC (mutual funds).
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Stewart Myers
(1940)
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Independent
Trustee
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Term: Unlimited
Trustee since 2018
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Professor,
MIT Sloan School of Management (since 2015); Principal, The Brattle Group, Inc. (since 1991).
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2
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Director,
Entergy Corp. (2009 to 2015).
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Interested
Trustees
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Rory Riggs
(1953)
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Trustee
and Chief Executive Officer
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Term: Unlimited
Trustee since 2017
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Founder
and Chief Executive Officer, Locus Analytics, LLC (since 2010); Founder and Chief Executive Officer, Syntax Advisors, LLC
(Since 2013); Chief Executive Officer and Founder of Syntax LLC (Since 2009).
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2
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Managing
Member of Balfour, LLC (since 2001); Board Member, Nuredis, Inc. (2016 to present);
Co-Founder and Chairman, RP Management, LLC Chairman and Co-Founder, Royalty Pharma (1996 to present) (biopharmaceuticals);
Chairman and Co-Founder, Cibus Global, Ltd. (2012 to present) (gene editing agriculture); Director StageZero Life Sciences, fka GeneNews Limited
(2000 to present); Director, Intra-Cellular Therapies, Inc. (since 2014); Director, FibroGen, Inc. (1993 to present).
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Kathy Cuocolo
(1952)
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Trustee
and President
|
Term: Unlimited
Trustee since 2018
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President
and Senior Vice President, Syntax Advisors, LLC and predecessor companies (2014 to present); Managing Director, Head of Global
ETF Services, BNY Mellon (2008 to 2013); Executive Vice President, State Street (1982 to 2003).
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2
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Greenbacker Renewable
Energy LLC, Audit Chair (2013 to present); Guardian Life Family of Funds (2005 – 2007); Select Sector Trust, Chairman
(2000 to 2007); The China Fund (1999 to 2003).
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OFFICERS
|
NAME, ADDRESS
AND YEAR OF BIRTH
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POSITION(S)
WITH TRUST
|
TERM OF
OFFICE
AND LENGTH
OF TIME SERVED
|
PRINCIPAL OCCUPATION(S)
DURING PAST 5 YEARS
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|
OFFICERS
|
|
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|
Rory Riggs
(1953)
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Chief
Executive
|
Since
2018
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See
Trustee table above
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Kathy Cuocolo
(1952)
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President
|
Since
2018
|
See
Trustee table above
|
|
David Jaffin
(1954)
|
Treasurer
|
Since
2019
|
Partner,
B2B CFO® (January 2019 to present); Chief Financial Officer, Poliwogg Holdings, Inc. (October 2012 to August
2018).
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|
Carly Arison
(1990)
|
Secretary
|
Since
2018
|
Senior
Vice President, Vice President, and Manager, Syntax Advisors, LLC and predecessor companies (2012 to present)
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Brandon Kipp
(1983)
|
Chief
Compliance Officer
|
Since
2019
|
Director, Foreside Financial Group,
LLC (since May 2019); Senior Fund Compliance Officer, Ultimus Fund Solutions, LLC (from July 2017 to May 2019); Assistant
Vice President and Compliance Manager, UMB Fund Services, Inc. (March 2014 to July 2017).
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Leadership Structure
and Board of Trustees
Board Responsibilities. The management
and affairs of the Trust and its series, including the Funds described in this SAI, are overseen by the Trustees. The Board has
approved contracts, as described in this SAI, under which certain companies provide essential management services to the Trust.
Like most mutual funds, the day-to-day
business of the Trust, including the management of risk, is performed by third party service providers, such as the Advisor, Sub-Advisor,
Distributor and Administrator. The Trustees are responsible for overseeing the Trust’s service providers and, thus, have
oversight responsibility with respect to risk management performed by those service providers. Risk management seeks to identify
and address risks, i.e., events or circumstances that could have material adverse effects on the business, operations, shareholder
services, investment performance or reputation of the Funds. The Funds and their service providers employ a variety of processes,
procedures and controls to identify various of those possible events or circumstances, to lessen the probability of their occurrence
and/or to mitigate the effects of such events or circumstances if they do occur. Each service provider is responsible for one
or more discrete aspects of the Trust’s business (e.g., a Sub-Advisor is responsible for the day-to-day management of a
Fund’s portfolio investments) and, consequently, for managing the risks associated with that business. The Board has emphasized
to the Funds’ service providers the importance of maintaining vigorous risk management.
The Trustees’ role in risk oversight
begins before the inception of a Fund, at which time the Fund’s Advisor presents the Board with information concerning the
investment objectives, strategies and risks of the Fund, as well as proposed investment limitations for the Fund. Additionally,
the Fund’s Advisor provides the Board with an overview of, among other things, their investment philosophies, brokerage
practices and compliance infrastructures. Thereafter, the Board continues its oversight function as various personnel, including
the Trust’s Chief Compliance Officer, as well as personnel of the Advisor and other service providers, such as the Fund’s
independent accountants, make periodic reports to the Audit Committee or to the Board with respect to various aspects of risk
management. The Board and the Audit Committee oversee efforts by management and service providers to manage risks to which each
Fund may be exposed.
The Board is responsible for overseeing
the nature, extent and quality of the services provided to the Funds by the Advisor and Sub-Advisor and receives information about
those services at its regular meetings. In addition, on an annual basis, in connection with its consideration of whether to renew
the Advisory Agreement with the Advisor, Sub-Advisory Agreement with the Sub-Advisor, the Board meets with the Advisor and Sub-Advisor
to review such services. Among other things, the Board regularly considers the Advisors’ adherence to each Fund’s
investment restrictions and compliance with various Fund policies and procedures and with applicable securities regulations. The
Board also reviews information about each Fund’s investments.
The Trust’s Chief Compliance
Officer reports regularly to the Board to review and discuss compliance issues. At least annually, the Trust’s Chief Compliance
Officer provides the Board with a report reviewing the adequacy and effectiveness of the Trust’s policies and procedures
and those of its service providers, including the Advisor and Sub-Advisor. The report addresses the operation of the policies
and procedures of the Trust and each service provider since the date of the last report; any material changes to the policies
and procedures since the date of the last report; any recommendations for material changes to the policies and procedures; and
any material compliance matters since the date of the last report.
The Board receives reports from Fund service
providers regarding operational risks and risks related to the valuation and liquidity of portfolio securities. Regular reports
are made to the Board concerning investments for which market quotations are not readily available. Annually, the independent registered
public accounting firm reviews with the Audit Committee its audit of each Fund’s financial statements, focusing on major
areas of risk encountered by the Fund and noting any significant deficiencies or material weaknesses in the Fund’s internal
controls. Additionally, in connection with its oversight function, the Board oversees Fund management’s implementation of
disclosure controls and procedures, which are designed to ensure that information required to be disclosed by the Trust in its
periodic reports with the SEC are recorded, processed, summarized, and reported within the required time periods. The Board also
oversees the Trust’s internal controls over financial reporting, which comprise policies and procedures designed to provide
reasonable assurance regarding the reliability of the Trust’s financial reporting and the preparation of the Trust’s
financial statements.
From their review of these reports
and discussions with the Advisor, Sub-Advisor, the Chief Compliance Officer, the independent registered public accounting firm
and other service providers, the Board and the Audit Committee learn in detail about the material risks of a Fund, thereby facilitating
a dialogue about how management and service providers identify and mitigate those risks.
The Board recognizes that not all risks
that may affect a Fund can be identified and/or quantified, that it may not be practical or cost-effective to eliminate or mitigate
certain risks, that it may be necessary to bear certain risks (such as investment-related risks) to achieve the Fund’s goals,
and that the processes, procedures and controls employed to address certain risks may be limited in their effectiveness. Moreover,
reports received by the Trustees as to risk management matters are typically summaries of the relevant information. Most of the
Funds’ investment management and business affairs are carried out by or through the Funds’ Advisor, Sub-Advisor and
other service providers, each of which has an independent interest in risk management but whose policies and the methods by which
one or more risk management functions are carried out may differ from the Funds’ and each other’s in the setting of
priorities, the resources available or the effectiveness of relevant controls. As a result of the foregoing and other factors,
the Board’s ability to monitor and manage risk, as a practical matter, is subject to limitations.
Trustees and Officers. There
are 6 members of the Board of Trustees, 4 of whom are not interested persons of the Trust, as that term is defined in the 1940
Act (“Independent Trustees”). Mr. Riggs, an Interested Trustee, serves as Chairman of the Board to act as liaison
with the investment Advisor, other service providers, counsel and other Trustees generally between meetings. Mr. Lyons serves
as Lead Independent Trustee and is a spokesperson for and leader of the Independent Trustees. The Board has determined its leadership
structure is appropriate given the specific characteristics and circumstances of the Trust. The Board made this determination
in consideration of, among other things, the fact that the Independent Trustees constitute a majority of the Board, the fact that
the chairperson of each Committee of the Board is an Independent Trustee, the amount of assets under management in the Trust,
and the number of funds (and classes of shares) overseen by the Board. The Board also believes that its leadership structure facilitates
the orderly and efficient flow of information to the Independent Trustees from fund management.
The Board of Trustees has two standing
committees: the Audit Committee and the Nominating and Governance Committee. The Audit Committee and the Nominating and Governance
Committee are each chaired by an Independent Trustee and composed of all of the Independent Trustees.
Individual Trustee Qualifications
The Board has concluded that each of the
Trustees should serve on the Board because of his or her ability to review and understand information about the Funds provided
to him or her by management, to identify and request other information he or she may deem relevant to the performance of his or
her duties, to question management and other service providers regarding material factors bearing on the management and administration
of the Funds, and to exercise his or her business judgment in a manner that serves the best interests of each Fund’s shareholders.
The Board has concluded that each of the Trustees should serve as a Trustee based on his or her own experience, qualifications,
attributes and skills as described below.
Rory Riggs: Rory Riggs
is the CEO and Founder of Syntax LLC.
Rory’s idea for Syntax Stratified
Indices came from his career in healthcare and the industry’s statistical use of population sampling and stratification
across sub-populations to control for inadvertent biases in clinical trial results. To address the potential of similar biases
in index results, he and his team identified a new risk category called related business risks; developed a new classification
system with which to identify and group related business risk; and implemented a stratified weighting methodology to control for
the inadvertent over-weighting of related business risks that regularly occur capitalization-weight and equal-weight methodologies.
Using this Stratified Weight methodology, Syntax operates a family of Syntax Stratified Indices that includes a Stratified Syntax
LargeCap and MidCap Index that provide Stratified Weight versions of the widely-followed S&P 500 and the S&P MidCap 400.
Prior to founding Syntax and its parent,
Locus LP, Rory has been involved in the creation and development of many successful companies in healthcare and bio-technology.
These companies include: Royalty Pharma; Fibrogen, Inc.; Cibus, LLC; GeneNews Ltd., Sugen, Inc. and eReceivables Inc. He is currently
the chairman and co-founder of Royalty Pharma, the largest investor in revenue-producing intellectual property, principally royalty
interests in marketed and late-stage development biopharmaceutical products. In addition, Rory is Chairman and Co-founder of Cibus,
the leader in non-transgenic (non-GMO) gene editing in agriculture. He also served as the president and director of Biomatrix
Corporation (NYSE: BXM) where he launched Synvisc, an important product in the treatment of osteoarthritis.
Rory received a BA from Middlebury College
and an MBA from Columbia University.
Kathy Cuocolo: Kathy
Cuocolo is president of Syntax ETF Trust and has served as President and Senior Vice President of Syntax Advisors, bringing over
30 years of experience in the asset management and ETF industry to Syntax.
Prior to Syntax, Kathy was Managing Director,
Head of Global ETF Services at BNY Mellon. Before BNY, Kathy spent 22 years at State Street Corporation, where she rose to Executive
Vice President. While at State Street, Kathy brought the first ETF to market, the S&P 500 SPDR, as well as several of the other
early ETF products such as the Select Sector SPDR, the Dow Diamond, and CountryBaskets. She began her career at PricewaterhouseCoopers
as an audit and consulting manager. She is a Board Member and Audit Chair of Greenbacker Renewable Energy LLC and has been on the
Boards of Select Sector SPDRs, The China Fund and Guardian Family of Funds.
Kathy received her B.A. in Accounting Summa
Cum Laude from Boston College and is a Certified Public Accountant in Massachusetts.
George Hornig: George Hornig
has had a career as a senior operating officer in the financial services industry (asset management, investment banking, insurance
and fin-tech).
From 2010 - 2016, George was a Senior Managing
Director of PineBridge Investments. George led the restructuring of the operations of this former division of AIG Insurance to
make it an independent company after its divestiture. Prior to joining PineBridge, George spent 11 years at Credit Suisse Asset
Management as Global Chief Operating Officer. Prior to that, he was Executive Vice President and Chief Operating Officer, Americas,
at Deutsche Bank. In 1988, he was a co-founder and Chief Operating Officer of Wasserstein Perella and Company, following his tenure
at The First Boston Corp. George also practiced law for two years at Skadden Arps at the start of his career. In addition, George’s
career has spanned investments, management and advisor in industries as diverse as health care, manufacturing and the outsourcing
of business services, social media, cybersecurity, augmented reality, and e-waste management. Presently he is managing a portfolio
of acquisition transactions and venture capital investments. Also he is the Chairman of KBL Merger Corp IV (healthcare industry
SPAC), a Director of Edelman (communications marketing firm), and a Director of Xometry (advanced manufacturing platform business).
From 1992 to 2012, he was a Director of Unity Mutual Life and from 1996 to 2018, he was a Director of Forrester Research and Chairman
of the Audit Committee.
George received his AB in Economics from Harvard College, his
MBA from Harvard Business School and his JD from Harvard Law School.
Deborah Fuhr: Deborah Fuhr
is the managing partner and co-founder of ETFGI. Previously she served as global head of ETF research and implementation strategy
and as a managing director at BlackRock/Barclays Global Investors from 2008-2011. Fuhr also worked as a managing director and head
of the investment strategy team at Morgan Stanley in London from 1997-2008, and as an associate at Greenwich Associates.
Deborah Fuhr is the recipient of the 2014
William F. Sharpe Lifetime Achievement Award for outstanding and lasting contributions to the field of index investing, the Nate
Most Greatest Contributor to the ETF industry award, and the ETF.com Lifetime achievement award. She has been named as one of the
“100 Most Influential Women in Finance” by Financial News in 2014, 2013, 2012, 2009, 2008 and 2007. Ms. Fuhr won the
award for the Greatest Overall Contribution to the development of the Global ETF industry in the ExchangeTradedFunds.com survey
in 2011 and 2008, Ms. Fuhr is one of the founders and on the board of Women in ETFs and is on the board of Cancer Research UK’s
‘Women of Influence’ initiative to support female scientists. Ms. Fuhr is on the editorial board of the Journal of
Indexes, and Money Management Executive; the advisory board for the Journal of Index Investing; and the investment panel of experts
for Portfolio Adviser, the FTSE ICB Advisory Committee, the NASDAQ listing and hearing review council, the International Advisory
Committee for the Egyptian Exchange, and the University of Connecticut School of Business International Advisory Board.
She holds a BS degree from the University of Connecticut and
an MBA from the Kellogg School of Management at Northwestern University.
Richard Lyons: Richard
Lyons is Chief Innovation and Entrepreneurship Officer at UC Berkeley, and previously served as the dean of the Haas School of
Business, UC Berkeley, where he held the Bank of America Dean’s Chair.
Prior to becoming dean in July 2008, he
served as the chief learning officer at Goldman Sachs in New York, a position he held since 2006. As chief learning officer, Rich
was responsible for leadership development among the firm’s managing directors. Prior to Goldman Sachs, Rich served as acting
dean of the Haas School from 2004 to 2005 and as executive associate dean and Sylvan Coleman Professor of Finance from 2005 to
2006.
He received his BS with highest honors from UC Berkeley (finance)
and his Ph.D. from MIT (economics). Before coming to Haas, Professor Lyons spent six years on the faculty at Columbia Business
School. His teaching expertise is in international finance.
Stewart Myers: Stewart C.
Myers is the Robert C. Merton (1970) Professor of Finance, Emeritus at the MIT Sloan School of Management.
Mr. Myers is past President of the American
Finance Association, a Research Associate at the National Bureau of Economic Research and a principal of the Brattle Group, Inc.
His textbook Principles of Corporate Finance (12th ed., with Richard Brealey and Franklin Allen) is known as the “bible”
of financial management. His research focuses on the valuation of real and financial assets, corporate finance and financial
aspects of government regulation of business. He introduced both the tradeoff and pecking order theories of capital structure and
was the first to recognize the importance of real options in corporate finance. Myers is the author of influential research
papers on many topics, including adjusted present value (APV), rate of return regulation, capital allocation and risk management
in banking and insurance, real options, payout policy, and moral hazard and information issues in financing decisions. He has served
as a director of Entergy Corporation and CAT Ltd. and as a manager of the Cambridge Endowment for Research in Finance.
He holds an AB from Williams College and an MBA and a PhD from
Stanford University.
References to the experience, attributes
and skills of Trustees above are pursuant to requirements of the SEC and do not constitute holding out of the Board or any Trustee
as having any special expertise or experience, and shall not impose any greater responsibility or liability on any such person
or on the Board by reason thereof.
In its periodic assessment of the effectiveness
of the Board, the Board considers the complementary individual skills and experience of the individual Trustees primarily in the
broader context of the Board’s overall composition so that the Board, as a body, possesses the appropriate (and appropriately
diverse) skills and experience to oversee the business of the Funds.
REMUNERATION OF THE TRUSTEES AND OFFICERS
No officer, director or employee of
the Advisor, its parent or subsidiaries receives any compensation from the Trust for serving as an officer or Trustee of the Trust.
The Trust pays, in the aggregate, each Independent Trustee an annual fee of $25,000. Trustee fees are allocated between the Funds
in such a manner as deemed equitable, taking into consideration the relative net assets of the series.
STANDING COMMITTEES
Audit Committee. The Board has
an Audit Committee consisting of all Independent Trustees. George Hornig serves as Chair. The Audit Committee meets with the Trust’s
independent auditors to review and approve the scope and results of their professional services; to review the procedures for
evaluating the adequacy of the Trust’s accounting controls; to consider the range of audit fees; and to make recommendations
to the Board regarding the engagement of the Trust’s independent auditors. The Audit Committee was established on March
28, 2018. During the fiscal year ended December 31, 2019, the Audit Committee met three times.
Nominating and Governance Committee. The Board has established a Nominating and Governance Committee consisting of all
Independent Trustees. Richard Lyons serves as Chairperson. The responsibilities of the Nominating and Governance Committee are
to: (1) nominate Independent Trustees; (2) review on a periodic basis the governance structures and procedures of the Funds; (3)
periodically review Trustee compensation, (4) annually review committee and committee chair assignments, (5) annually review the
responsibilities and charter of each committee, (6) to plan and administer the Board’s annual self-evaluation, (7) annually
consider the structure, operations and effectiveness of the Nominating and Governance Committee, and (8) at least annually evaluate
the independence of counsel to the Independent Trustees. The Nominating and Governance Committee was established on March 28,
2018. During the fiscal year ended December 31, 2019, the Nominating and Governance Committee did not meet.
The Trustees adopted the following procedures
with respect to the consideration of nominees recommended by security holders.
|
|
1.
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The shareholder must submit any such recommendation (a “Shareholder
Recommendation”) in writing to the Trust, to the attention of the Trust’s Secretary, at the address of the principal
executive offices of the Trust.
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|
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2.
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The Shareholder Recommendation must be delivered to, or mailed
and received at, the principal executive offices of the Trust not less than sixty (60) calendar days nor more than ninety
(90) calendar days prior to the date of the Board or shareholder meeting at which the nominee candidate would be considered
for election. Shareholder Recommendations will be kept on file for two years after receipt of the Shareholder Recommendation.
A Shareholder Recommendation considered by the Committee in connection with the Committee’s nomination of any candidate(s)
for appointment or election as an independent Trustee need not be considered again by the Committee in connection with any
subsequent nomination(s).
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3.
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The Shareholder Recommendation must include: (i) a statement
in writing setting forth (A) the name, age, date of birth, business address, residence address and nationality of the person
recommended by the shareholder (the “candidate”), and the names and addresses of at least three professional references;
(B) the number of all shares of the Trust (including the series and class, if applicable) owned of record or beneficially
by the candidate, the date such shares were acquired and the investment intent of such acquisition(s), as reported to such
shareholder by the candidate; (C) any other information regarding the candidate called for with respect to director nominees
by paragraphs (a), (d), (e) and (f) of Item 401 of Regulation S-K or paragraph (b) of Item 22 of Rule 14a-101 (Schedule 14A)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), adopted by the SEC (or the corresponding
provisions of any applicable regulation or rule subsequently adopted by the SEC or any successor agency with jurisdiction
related to the Trust); (D) any other information regarding the candidate that would be required to be disclosed if the candidate
were a nominee in a proxy statement or other filing required to be made in connection with solicitation of proxies for election
of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder or any other
applicable law or regulation; and (E) whether the recommending shareholder believes that the candidate is or will be an “interested
person” of the Trust (as defined in the 1940 Act) and, if not an “interested person,” information regarding
the candidate that will be sufficient, in the discretion of the Board or the Committee, for the Trust to make such determination;
(ii) the written and signed consent of the candidate to be named as a nominee and to serve as a Trustee if elected; (iii)
the recommending shareholder’s name as it appears on the Trust’s books; (iv) the number of all shares of the Trust
(including the series and class, if applicable) owned beneficially and of record by the recommending shareholder; (v) a complete
description of all arrangements or understandings between the recommending shareholder and the candidate and any other person
or persons (including their names) pursuant to which the recommendation is being made by the recommending shareholder including,
without limitation, all direct and indirect compensation and other material monetary agreements, arrangements and understandings
between the candidate and recommending shareholder during the past three years, and (vi) a brief description of the candidate’s
relevant background and experience for membership on the Board, such as qualification as an audit committee financial expert.
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4.
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The Committee may require the recommending shareholder to
furnish such other information as it may reasonably require or deem necessary to verify any information furnished pursuant
to paragraph 3 above or to determine the eligibility of the candidate to serve as a Trustee of the Trust or to satisfy applicable
law. If the recommending shareholder fails to provide such other information in writing within seven days of receipt of a
written request from the Committee, the recommendation of such candidate as a nominee will be deemed not properly submitted
for consideration, and the Committee will not be required to consider such candidate.
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OWNERSHIP OF FUND SHARES
As of December 31, 2019, neither the
Independent Trustees nor their immediate family members owned beneficially or of record any securities in the Advisor, Sub-Advisor,
Principal Underwriter or any person controlling, controlled by, or under common control with the Advisor, Sub-Advisor or Principal
Underwriter.
The following table sets forth information describing the
dollar range of equity securities beneficially owned by each Trustee in the Trust as of December 31, 2019.
|
Name of
Trustee
|
Dollar Range of
Equity Securities
in the
Syntax Stratified
LargeCap ETF
|
Aggregate Dollar
Range of Equity
Securities in All Funds
Overseen by Trustee in
Family of Investment
Companies
|
|
Independent Trustees:
|
|
|
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Deborah Fuhr
|
None
|
None
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George Hornig
|
$0-$10,000
|
$0-$10,000
|
|
Richard Lyons
|
$10,000-$50,000
|
$10,000-$50,000
|
|
Stewart Myers
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$10,000-$50,000
|
$10,000-$50,000
|
|
|
|
|
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Interested Trustees:
|
|
|
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Rory Riggs
|
Over $100,000
|
Over $100,000
|
|
Kathy Cuocolo
|
Over $100,000
|
Over $100,000
|
CODE OF ETHICS. The Trust, the
Advisor, the Sub-Advisor and Foreside Financial Group, LLC (on behalf of Foreside Fund Officer Services, LLC) have each adopted
a code of ethics under Rule 17j-1 of the 1940 Act. These codes of ethics permit, subject to certain conditions, personnel
of each of those entities to invest in securities that may be purchased or held by the Funds. The Distributor relies on the principal
underwriters exception under Rule 17j-1(c)(3), specifically where the Distributor is not affiliated with the Trust or the Advisor,
and no officer, director or general partner of the Distributor serves as an officer, director or general partner of the Trust
or the Advisor. Each code of ethics, filed as an exhibit to the Trust’s registration statement, may be examined at the office
of the SEC in Washington, D.C. or on the Internet at the SEC’s website at http://www.sec.gov.
PROXY VOTING POLICY. The Board
believes that the voting of proxies on securities held by the Funds is an important element of the overall investment process.
As such, the Board has delegated the responsibility to vote such proxies to the Sub-Advisor. The Sub-Advisor’s proxy voting
policy is attached at the end of this SAI as Appendix A. Information regarding how the a Fund voted proxies relating to its portfolio
securities during the most recent twelve-month period ended June 30 is available: (1) without charge by calling (866) 972-4492;
(2) on the Funds’ website at www.SyntaxAdvisors.com; and (3) on the SEC’s website at http://www.sec.gov.
DISCLOSURE OF PORTFOLIO HOLDINGS
POLICY. The Trust has adopted a policy regarding the disclosure of information about the Trust’s portfolio holdings.
The Board must approve all material amendments to this policy. Each Fund’s portfolio holdings are publicly disseminated
each day the Fund is open for business through financial reporting and news services including publicly accessible Internet web
sites. In addition, a basket composition file, which includes the security names and share quantities to deliver in exchange for
each Fund’s shares, together with estimates and actual cash components, is publicly disseminated daily prior to the opening
of the Exchange via the National Securities Clearing Corporation (the “NSCC”). The basket represents one Creation
Unit of the Fund. The Trust, the Advisor or State Street will not disseminate non-public information concerning the Trust, except:
(i) to a party for a legitimate business purpose related to the day-to-day operations of the Fund or (ii) to any other party for
a legitimate business or regulatory purpose, upon waiver or exception.
THE INVESTMENT
ADVISOR
Syntax Advisors, LLC (“Syntax”
or “Advisor”) acts as investment Advisor to the Trust and, subject to the supervision of the Board, is responsible
for the investment management of the Funds. The Advisor’s principal address is One Liberty Plaza, 46th Fl. New York, NY
10006.
The Advisor serves as investment adviser
to the Funds pursuant to an investment advisory agreement (“Investment Advisory Agreement”) between the Trust and
the Advisor. The Investment Advisory Agreement, with respect to each Fund, continues in effect for two years from its effective
date, and thereafter is subject to annual approval by (1) the Board or (2) vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, provided that in either event such continuance also is approved by a majority
of the Board who are not interested persons (as defined in the 1940 Act) of the Trust by a vote cast in person at a meeting called
for the purpose of voting on such approval. The Investment Advisory Agreement with respect to each Fund is terminable without
penalty, on 60 days’ notice, by the Board or by a vote of the holders of a majority (as defined in the 1940 Act) of the
Fund’s outstanding voting securities. The Investment Advisory Agreement is also terminable upon 60 days’ notice by
the Advisor and will terminate automatically in the event of its assignment (as defined in the 1940 Act).
Under the Investment Advisory Agreement,
the Advisor, subject to the supervision of the Board and in conformity with the stated investment policies of each Fund, manages
the investment of the Fund’s assets. The Advisor is responsible for placing purchase and sale orders and providing continuous
supervision of the investment portfolio of the Fund. Pursuant to the Investment Advisory Agreement, the Trust has agreed to indemnify
the Advisor for certain liabilities, including certain liabilities arising under the federal securities laws, unless such loss
or liability results from willful misfeasance, bad faith or gross negligence in the performance of its duties or the reckless
disregard of its obligations and duties.
For the services provided to the Funds
under the Investment Advisory Agreement, each Fund pays the Advisor monthly fees based on a percentage of the Fund’s average
daily net assets as set forth in the Fund’s Prospectus. From time to time, the Advisor may waive all or a portion of its
fee. Under the Investment Advisory Agreement, the Advisor agrees to pay all expenses of the Trust, except (i) interest expense,
(ii) taxes, (iii) acquired fund fees and expenses, (iv) brokerage expenses and other expenses (such as stamp taxes) connected
with the execution of portfolio transactions or in connection with creation and redemption transactions, (v) expenses associated
with shareholder meetings, (vi) compensation and expenses of the Independent Trustees, (vii) compensation and expenses of the
Trust’s chief compliance officer and his or her staff, (viii) distribution fees and expenses paid by the Trust under any
distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act, (ix) legal fees or expenses in connection with any arbitration,
litigation or pending or threatened arbitration or litigation, including any settlements in connection therewith, and (x) extraordinary
expenses of the Fund.
The net advisory fees paid to the Advisor
for the Syntax Stratified LargeCap ETF for the period from the commencement of operations on January 2, 2019 to fiscal year ended
December 31, 2019, were $156,763. Total advisory fees were $235,145, of which $78,382 were waived. The advisor compensation information
for the last three fiscal years for the Syntax Stratified SmallCap ETF and the Stratified MidCap ETF have been omitted because
those Funds had not commenced investment operations as of December 31, 2019.
Syntax has agreed to waive its fees
and/or absorb expenses of the Funds to ensure that Total Annual Operating Expenses (excluding, as applicable, (i) interest expense,
(ii) taxes, (iii) acquired fund fees and expenses, (iv) brokerage expenses and other expenses (such as stamp taxes) connected
with the execution of portfolio transactions or in connection with creation and redemption transactions, (v) expenses associated
with shareholder meetings, (vi) compensation and expenses of the Independent Trustees, (vii) compensation and expenses of the
Trust’s chief compliance officer and his or her staff, (viii) distribution fees and expenses paid by the Trust under any
distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act, (ix) legal fees or expenses in connection with any arbitration,
litigation or pending or threatened arbitration or litigation, including any settlements in connection therewith, and (x) extraordinary
expenses of the Funds) do not exceed the rates below. Subject to approval by the Fund’s Board of Trustees, any waiver under
the Expense Limitation Agreement is subject to repayment by the Fund within 36 months following the month in which fees are waived
or reimbursed, if the Fund is able to make the payment without exceeding the applicable expense limitation. These arrangements
cannot be terminated prior to one year from the effective date of this prospectus without the approval of the Board of Trustees.
|
Fund
|
Total
Operating Expenses after
Waiver/Reimbursement
|
|
Syntax
Stratified LargeCap ETF
|
0.30%
|
|
Syntax
Stratified MidCap ETF
|
0.30%
|
|
Syntax
Stratified SmallCap ETF
|
0.30%
|
A discussion regarding the Board’s
consideration of the Trust’s Investment Advisory and Sub-Advisory Agreements will be found in the Trust’s next Annual
or Semi-Annual Report to Shareholders, as applicable.
SUB-ADVISOR
Vantage Consulting Group (“Vantage”
or the “Sub-Advisor”), 3500 Pacific Ave. Virginia Beach, VA 23451, serves as the investment sub-adviser for the Funds
pursuant to an Investment Sub-Advisory Agreement between the Advisor and Vantage, dated March 2, 2018 (referred to as a “Sub-Advisory
Agreement). The Sub-Advisor is responsible for placing purchase and sale orders and shall make investment decisions for each Fund,
subject to the supervision by the Advisor. For its services, the Sub-Advisor is compensated by the Advisor.
PORTFOLIO MANAGER
The Sub-Advisor manages each Fund using
a team of investment professionals. The professional primarily responsible for the day-to-day portfolio management of the Funds
is James Thomas Wolfe.
The following table lists the number and
types of accounts, other than the Funds, managed by Mr. Wolfe and the assets under management in those accounts.
Other Accounts
Managed as of December 31, 2019
|
Portfolio Manager
|
Registered
Investment
Company
Accounts
|
Assets
Managed
(millions)
|
Pooled
Investment
Vehicle
Accounts
|
Assets
Managed
(millions)
|
Other
Accounts
|
Assets
Managed
(millions)
|
|
James
Thomas Wolfe
|
1
|
$62,148,931
|
2
|
$26,083,283
|
0
|
$0
|
* Mr. Wolfe serves as the portfolio
manager for the Syntax Stratified LargeCap ETF’s and Syntax Stratified MidCap ETF’s predecessor private fund.
OWNERSHIP OF SECURITIES
The portfolio manager listed above does not beneficially
own any Shares of the Funds as of December 31, 2019.
CONFLICTS OF INTEREST
Description of Material Conflicts
of Interest. Because the portfolio manager may manage multiple portfolios for multiple clients, the potential for conflicts
of interest exists. The portfolio manager generally manages portfolios having substantially the same investment style as the Funds.
However, the portfolios managed by the portfolio manager may not have portfolio compositions identical to those of the Funds due,
for example, to specific investment limitations or guidelines present in some portfolios or accounts but not others. The portfolio
manager may purchase securities for one portfolio and not another portfolio, and the performance of securities purchased for one
portfolio may vary from the performance of securities purchased for other portfolios. The portfolio manager may place transactions
on behalf of other accounts that are directly or indirectly contrary to investment decisions made on behalf of a Fund, or make
investment decisions that are similar to those made for a Fund, both of which have the potential to adversely impact the Fund depending
on market conditions. For example, the portfolio manager may purchase a security in one portfolio while appropriately selling that
same security in another portfolio. In addition, some of these portfolios have fee structures that are or have the potential to
be higher than the advisory fees paid by the Funds, which can cause potential conflicts in the allocation of investment opportunities
between the Funds and the other accounts. However, the compensation structure for portfolio manager does not generally provide
incentive to favor one account over another because that part of a manager’s bonus based on performance is not based on the
performance of one account to the exclusion of others. There are many other factors considered in determining the portfolio manager’s
bonus and there is no formula that is applied to weight the factors listed.
COMPENSATION
The Sub-Advisor’s compensation
and incentive program varies by professional and discipline. A portfolio manager’s compensation is comprised of a fixed
based salary and a bonus. The base salary is not based on the value of the assets managed but rather on the individual portfolio
manager’s experience and responsibilities. The bonus also varies by individual and is based upon criteria that incorporate
the Sub-Advisor’s assessment of each Fund’s performance as well as a portfolio manager’s corporate citizenship
and overall contribution to the Firm.
THE ADMINISTRATOR, CUSTODIAN AND TRANSFER
AGENT
State Street Bank and Trust Company (“State
Street”), located at State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111, serves as Administrator
for the Trust pursuant to an administration agreement (“Administration Agreement”). Under the Administration Agreement,
State Street is responsible for certain administrative services associated with day-to-day operations of the Funds.
Pursuant to the Administration Agreement,
the Trust has agreed to a limitation on damages and to indemnify the Administrator for certain liabilities, including certain liabilities
arising under the federal securities laws; provided, however, such indemnity of the Administrator shall not apply in the case of
the Administrator’s gross negligence or willful misconduct in the performance of its duties. Under the Custodian Agreement
and Transfer Agency Agreement, as described below, the Trust has also provided indemnities to State Street for certain liabilities.
State Street also serves as Custodian for
the Funds pursuant to a custodian agreement (“Custodian Agreement”). As Custodian, State Street holds each Fund’s
assets, calculates the net asset value of the Shares and calculates net income and realized capital gains or losses. State Street
and the Trust will comply with the self-custodian provisions of Rule 17f-2 under the 1940 Act.
State Street also serves as Transfer Agent
of the Funds pursuant to a transfer agency agreement (“Transfer Agency Agreement”).
As compensation for the foregoing services,
State Street receives certain out-of-pocket costs, transaction fees, asset-based fees, and fixed fees which are paid by the Advisor.
These payments made by the Advisor to State Street do not represent an additional expense to the Trust or its shareholders.
THE DISTRIBUTOR
Foreside Fund Services, LLC (“Foreside”
or the “Distributor”) is the principal underwriter and Distributor of the Funds’ Creation Units. Its principal
address is Three Canal Plaza, Suite 100, Portland, Maine, 04101. Investor information can be obtained by calling (866) 972-4492.
The Distributor has entered into a distribution agreement (“Distribution Agreement”) with the Trust pursuant to which
it distributes Creation Units of the Funds. The Distribution Agreement will continue for two years from its effective date and
is renewable annually thereafter. Shares will be continuously offered for sale by the Trust through the Distributor only in Creation
Units, as described in the Prospectus and below under “PURCHASE AND REDEMPTION OF CREATION UNITS.” Shares in numbers
less than Creation Units are not distributed by the Distributor. The Distributor will deliver the Prospectus to Authorized Participants
(as defined below) purchasing Creation Units and will maintain records of both orders placed with it and confirmations of acceptance
furnished by it. The Distributor is a broker-dealer registered under the Exchange Act and a member of the Financial Industry Regulatory
Authority (“FINRA”). The Distributor has no role in determining the investment policies of the Trust or which securities
are to be purchased or sold by the Trust.
The Advisor, or an affiliate of the
Advisor, may directly or indirectly make cash payments to certain broker-dealers for participating in activities that are designed
to make registered representatives and other professionals more knowledgeable about exchange traded products, including the Funds,
or for other activities, such as participation in marketing activities and presentations, educational training programs, conferences,
the development of technology platforms and reporting systems.
The Funds have adopted a Rule 12b-1 Distribution and Service
Plan in accordance with Rule 12b-1 under the 1940 Act pursuant to which payments of up to 0.25% of a Fund’s average daily
net assets may be made for the sale and distribution of its Shares. However, the Board of Trustees has determined not to authorize
payment of a 12b-1 Plan fee at this time. The 12b-1 Plan fee may only be imposed or increased when the Board of Trustees determines
that it is in the best interests of shareholders to do so. Rule 12b-1 fees are paid out of a Fund’s assets, and over time,
these fees increase the cost of your investment and they may cost you more than certain other types of sales charges.
The Distribution Agreement provides that
it may be terminated at any time, without the payment of any penalty, as to each Fund: (i) by vote of a majority of the Independent
Trustees or (ii) by vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund, on at least
60 days written notice to the Distributor. The Distribution Agreement is also terminable upon 60 days’ notice by the Distributor
and will terminate automatically in the event of its assignment (as defined in the 1940 Act).
The continuation of the Distribution Agreement,
any Investor Services Agreements and any other related agreements is subject to annual approval of the Board, including by a majority
of the Independent Trustees, as described above.
Each of the Investor Services Agreements
will provide that it may be terminated at any time, without the payment of any penalty, (i) by vote of a majority of the Independent
Trustees or (ii) by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the relevant Fund,
on at least 60 days’ written notice to the other party. The Distribution Agreement is also terminable upon 60 days’
notice by the Distributor and will terminate automatically in the event of its assignment (as defined in the 1940 Act). Each Investor
Services Agreement is also terminable by the applicable Investor Service Organization upon 60 days’ notice to the other party
thereto.
The Distributor may also enter into agreements
with securities dealers (“Soliciting Dealers”) who will solicit purchases of Creation Unit aggregations of Fund Shares.
Such Soliciting Dealers may also be Participating Parties (as defined in the “Book Entry Only System” section below),
DTC Participants (as defined below) and/or Investor Services Organizations.
Pursuant to the Distribution Agreement,
the Trust has agreed to indemnify the Distributor, and may indemnify Soliciting Dealers and Authorized Participants (as described
below) entering into agreements with the Distributor, for certain liabilities, including certain liabilities arising under the
federal securities laws, unless such loss or liability results from willful misfeasance, bad faith or gross negligence in the performance
of its duties or the reckless disregard of its obligations and duties under the Distribution Agreement or other agreement, as applicable.
BROKERAGE TRANSACTIONS
The policy of the Trust regarding purchases
and sales of securities for the Funds 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 which are considered fair and reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Trust believes that a requirement always to seek the lowest possible commission
cost could impede effective portfolio management and preclude a Fund and the Advisor from obtaining a high quality of brokerage
and research services. In seeking to determine the reasonableness of brokerage commissions paid in any transaction, the Advisor
relies upon its experience and knowledge regarding commissions generally charged by various brokers and on its judgment in evaluating
the brokerage and research services received from the broker effecting the transaction. Such determinations are necessarily subjective
and imprecise, as in most cases an exact dollar value for those services is not ascertainable. The Trust has adopted policies
and procedures that prohibit the consideration of sales of a Fund’s Shares as a factor in the selection of a broker or dealer
to execute its portfolio transactions.
In selecting a broker/dealer for each
specific transaction, the Sub-Advisor chooses the broker/dealer deemed most capable of providing the services necessary to obtain
the most favorable execution and does not take the sale of Fund Shares into account. The Sub-Advisor considers the full range
of brokerage services applicable to a particular transaction that may be considered when making this judgment, which may include,
but is not limited to: liquidity, price, commission, timing, aggregated trades, capable floor brokers or traders, competent block
trading coverage, ability to position, capital strength and stability, reliable and accurate communications and settlement processing,
use of automation, knowledge of other buyers or sellers, arbitrage skills, administrative ability, underwriting and provision
of information on a particular security or market in which the transaction is to occur. The specific criteria will vary depending
upon the nature of the transaction, the market in which it is executed, and the extent to which it is possible to select from
among multiple broker/dealers. The Sub-Advisor will also use electronic crossing networks when appropriate.
The Sub-Advisor does not currently
use the Funds’ assets for, or participate in, third party soft dollar arrangements, although the Sub-Advisor may receive
proprietary research from various full service brokers, the cost of which is bundled with the cost of the broker’s execution
services. The Sub-Advisor does not “pay up” for the value of any such proprietary research.
The Sub-Advisor assumes general supervision
over placing orders on behalf of the Trust for the purchase or sale of portfolio securities. If purchases or sales of portfolio
securities of the Trust and one or more other investment companies or clients supervised by the Sub-Advisor are considered at
or about the same time, transactions in such securities are allocated among the several investment companies and clients in a
manner deemed equitable and consistent with its fiduciary obligations to all by the Advisor. In some cases, this procedure could
have a detrimental effect on the price or volume of the security so far as the Trust is concerned. However, in other cases, it
is possible that the ability to participate in volume transactions and to negotiate lower brokerage commissions will be beneficial
to the Trust. The primary consideration is prompt execution of orders at the most favorable net price.
The Funds will not deal with affiliates
in principal transactions unless permitted by exemptive order or applicable rule or regulation. The aggregate dollar amount of
brokerage commissions paid by the Syntax Stratifed LargeCap ETF for the period from the commencement of operations on January
2, 2019 to the fiscal year ended December 31, 2019, was $14,329. As the Syntax Stratified MidCap ETF commenced operation after
December 31, 2019, and the Syntax Stratified SmallCap ETF has not yet commenced operation, these Funds have omitted this information.
Each Fund is required to identify any
securities of its “regular brokers and dealers” (as such term is defined in the 1940 Act) which it may hold at the
close of its most recent fiscal year. “Regular brokers or dealers” of the Trust are the ten brokers or dealers that,
during the most recent fiscal year: (i) received the greatest dollar amounts of brokerage commissions from the Trust’s portfolio
transactions; (ii) engaged as principal in the largest dollar amounts of portfolio transactions of the Trust; or (iii) sold the
largest dollar amounts of the Trust’s Shares.
Each Fund is required to identify any securities of its
“regular brokers and dealers” (as such term is defined in the 1940 Act) which it may hold at the close of its most
recent fiscal year. “Regular brokers or dealers” of the Trust are the ten brokers or dealers that, during the most
recent fiscal year: (i) received the greatest dollar amounts of brokerage commissions from the Trust’s portfolio transactions;
(ii) engaged as principal in the largest dollar amounts of portfolio transactions of the Trust; or (iii) sold the largest dollar
amounts of the Trust’s Shares. As of December 31, 2019 there were no securities held “regular brokers and dealers”
by the Syntax Stratified LargeCap ETF. As the Syntax Stratified MidCap ETF commenced operation after December 31, 2019, and the
Syntax Stratified SmallCap ETF has not yet commenced operation, these Funds have omitted this information.
PORTFOLIO TURNOVER RATE
Portfolio turnover may vary from year
to year, as well as within a year. High turnover rates are likely to result in comparatively greater brokerage expenses or transaction
costs. The overall reasonableness of brokerage commissions and transaction costs is evaluated by the Advisor based upon its knowledge
of available information as to the general level of commissions and transaction costs paid by other institutional investors for
comparable services.
BOOK ENTRY ONLY SYSTEM
The following information supplements and
should be read in conjunction with the section in the Prospectus entitled “ADDITIONAL PURCHASE AND SALE INFORMATION.”
DTC acts as securities depositary for the
Shares. Shares of the Funds are represented by securities registered in the name of DTC or its nominee, Cede & Co. and deposited
with, or on behalf of, DTC. Except in the limited circumstance provided below, certificates will not be issued for Shares.
DTC, a limited-purpose trust company, was
created to hold securities of its participants (the “DTC Participants”) and to facilitate the clearance and settlement
of securities transactions among the DTC Participants in such securities through electronic book-entry changes in accounts of the
DTC Participants, thereby eliminating the need for physical movement of securities certificates. DTC Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their
representatives) own DTC. More specifically, DTC is owned by a number of its DTC Participants and by the New York Stock Exchange
(“NYSE”) and the FINRA. Access to the DTC system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (the “Indirect
Participants”).
Beneficial ownership of Shares is limited
to DTC Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Ownership
of beneficial interests in Shares (owners of such beneficial interests are referred to herein as “Beneficial Owners”)
is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with respect to DTC Participants)
and on the records of DTC 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.
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 Shares of
the Funds held by each DTC Participant. The Trust, either directly or through a third party service, shall inquire of each such
DTC Participant as to the number of Beneficial Owners holding Shares, directly or indirectly, through such DTC Participant. The
Trust, either directly or through a third party service, 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 and/or third party service 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. 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 of the Funds 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 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.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Although the Syntax Stratified LargeCap ETF and the Syntax
Stratified MidCap ETF did not have information concerning their beneficial ownership held in the names of DTC Participants, as
of April 3, 2020 the names, addresses and percentage ownership of each DTC Participant that owned of record 5% or more of the
outstanding Shares of the Fund were as follows:
|
FUND NAME
|
NAME & ADDRESS
|
% OWNERSHIP (RECORD OR BENEFICIAL)
|
|
Syntax Stratified LargeCap
ETF
|
Charles Schwab & Co., Inc.
211 MAIN STREET
SAN FRANCISCO CA 94105
|
39.0%
|
|
National Financial Services LLC
82 DEVONSHIRE STREET
BOSTON MA 02109
|
36.0%
|
|
Citibank, N.A.
399 PARK AVE
NEW YORK NY 10043
|
9.6%
|
|
JP Morgan Chase Bank, National Association
1111 POLARIS PARKWAY
COLUMBUS OH 43240
|
6.7%
|
|
Syntax Stratified MidCap ETF
|
Citibank, N.A.
399 PARK AVE
NEW YORK NY 10043
|
93.1%
|
The Syntax Stratified SmallCap ETF had not commenced operations
prior to the date of this SAI and therefore did not have any beneficial owners that owned greater than 5% of the outstanding voting
securities as of the date of this SAI.
An Authorized Participant (as defined
below) may hold of record more than 25% of the outstanding Shares of a Fund. From time to time, Authorized Participants may be
a beneficial and/or legal owner of a Fund, may be deemed to have control of the Fund and may be able to affect the outcome of
matters presented for a vote of the shareholders of the Fund(s). Authorized Participants may execute an irrevocable proxy granting
the Distributor, State Street or an affiliate (the “Agent”) power to vote or abstain from voting such Authorized Participant’s
beneficially or legally owned Shares of the applicable Fund. In such cases, the Agent shall mirror vote (or abstain from voting)
such Shares in the same proportion as all other beneficial owners of the applicable Fund.
As of April 3, 2020, the Trustees and officers of the Trust,
as a group, owned 1.6% of the Syntax Stratified LargeCap ETF's outstanding Shares and 2.2% of the Syntax Stratified MidCap ETF's
outstanding Shares.
PURCHASE AND REDEMPTION OF CREATION UNITS
A Fund issues and redeems its Shares on
a continuous basis, at net asset value, only in a large specified number of Shares called a “Creation Unit,” either
principally in-kind for securities included in the relevant Index or in cash for the value of such securities. The value of a Fund
is determined once each business day, as described under “Determination of Net Asset Value.” Creation Unit sizes are
set forth in the table below:
|
FUND
|
Creation
Unit Size
|
|
|
Syntax Stratified LargeCap ETF
|
25,000
|
|
|
Syntax Stratified MidCap ETF
|
25,000
|
|
|
Syntax Stratified SmallCap ETF
|
25,000
|
|
PURCHASE (CREATION). The Trust issues and sells Shares
of a Fund only: in Creation Units on a continuous basis through the Principal Underwriter, without a sales load (but subject to
transaction fees), at their NAV per Share next determined after receipt of an order, on any Business Day (as defined below), in
proper form pursuant to the terms of the Authorized Participant Agreement (“Participant Agreement”). A “Business
Day” with respect to the Funds is, generally, any day on which the NYSE Arca is open for business.
FUND DEPOSIT. The consideration
for purchase of a Creation Unit of a Fund generally consists of either (i) the in-kind deposit of a designated portfolio of securities
instruments (“Deposit Instruments”) per each Creation Unit, constituting a substantial replication, or (ii) the Deposit
Cash constituting the cash value of the Deposit Instruments and “Cash Amount,” computed as described below. When accepting
purchases of Creation Units for cash, a Fund may incur additional costs associated with the acquisition of Deposit Instruments
that would otherwise be provided by an in-kind purchaser.
Together, the Deposit Instruments or Deposit
Cash, as applicable, and the Cash Amount constitute the “Fund Deposit,” which represents the minimum initial and subsequent
investment amount for a Creation Unit of any Fund. The “Cash Amount” is an amount equal to the difference between the
net asset value of the Shares (per Creation Unit) and the aggregate market value of the Deposit Instruments or Deposit Cash, as
applicable. If the Cash Amount is a positive number (i.e., the net asset value per Creation Unit exceeds the market value of the
Deposit Instruments or Deposit Cash, as applicable), the Cash Amount shall be such positive amount. If the Cash Amount is a negative
number (i.e., the net asset value per Creation Unit is less than the market value of the Deposit Instruments or Deposit Cash, as
applicable), the Cash Amount shall be such negative amount and the creator will be entitled to receive cash in an amount equal
to the Cash Amount. The Cash Amount serves the function of compensating for any differences between the net asset value per Creation
Unit and the market value of the Deposit Instruments or Deposit Cash, as applicable. Computation of the Cash Amount excludes any
stamp duty or other similar fees and expenses payable upon transfer of beneficial ownership of the Deposit Instruments, if applicable,
which shall be the sole responsibility of the Authorized Participant (as defined below).
The Custodian, through NSCC, makes available
on each Business Day, immediately prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern time), the list
of the names and the required amount of the instruments comprising the Deposit Instruments or the required amount of Deposit Cash,
as applicable, as well as the estimated amount of the Cash Amount to be included in the current Fund Deposit (based on information
at the end of the previous Business Day) for each Fund. Such Fund Deposit is subject to any applicable adjustments as described
below, in order to effect purchases of Creation Units of the Funds until such time as the next-announced composition of the Deposit
Instruments or the required amount of Deposit Cash, as applicable, is made available.
The identity and required amount of
each instrument comprising the Deposit Instruments or the amount of Deposit Cash, as applicable, required for the Fund Deposit
for a Fund changes as rebalancing adjustments and corporate action events are reflected from time to time by the Advisor with
a view to the investment objective of the Fund. The composition of the Deposit Instruments may also change in response to adjustments
to the weighting or composition of the component securities of the Fund’s Index.
As noted above, the Trust reserves
the right to permit or require the substitution of Deposit Cash to replace any Deposit Instrument which shall be added to the
Deposit Instruments, including, without limitation, in situations where such Deposit Instrument: (i) may not be eligible for transfer
through the systems of DTC for corporate securities and municipal securities; (ii) in the case of foreign funds holding non-US
Deposit Instruments, where such instruments are not eligible for trading due to local trading restrictions, local restrictions
on securities transfers, or other similar circumstances; (iii) may not be available in sufficient quantity for delivery; (iv)
may not be eligible for trading by an Authorized Participant (as defined below) or the investor for which it is acting; or (v)
a holder of Shares of a foreign fund holding non-US instruments would be subject to unfavorable income tax treatment if the holder
receives redemption proceed “in-kind” (collectively, “non-standard orders”). The Trust also reserves the
right to include or remove Deposit Instruments from the basket in anticipation of index rebalancing changes. The adjustments described
above will reflect changes, known to the Advisor on the date of announcement to be in effect by the time of delivery of the Fund
Deposit, in the composition of the subject Index being tracked by the relevant Fund or resulting from certain corporate actions.
PROCEDURES FOR PURCHASE OF CREATION
UNITS. To be eligible to place orders with the Principal Underwriter, as facilitated via the Transfer Agent, to purchase a
Creation Unit of a Fund, an entity must be (i) a “Participating Party,” i.e., a broker-dealer or other participant
in the clearing process through the Continuous Net Settlement System of the NSCC (the “Clearing Process”), a clearing
agency that is registered with the SEC; or (ii) a DTC Participant (see “BOOK ENTRY ONLY SYSTEM”). In addition, each
Participating Party or DTC Participant (each, an “Authorized Participant”) must execute a Participant Agreement that
has been agreed to by the Principal Underwriter and the Transfer Agent, and that has been accepted by the Trust, with respect
to purchases and redemptions of Creation Units. Each Authorized Participant will agree, pursuant to the terms of a Participant
Agreement, on behalf of itself or any investor on whose behalf it will act, to certain conditions, including that it will pay
to the Trust, an amount of cash sufficient to pay the Deposit Instruments together with the creation transaction fee (described
below) and any other applicable fees, taxes and additional variable charge.
All orders to purchase Shares directly
from a Fund, including non-standard orders, must be placed for one or more whole Creation Units and in the manner and by the time
set forth in the Participant Agreement and/or applicable order form. The date on which an order to purchase Creation Units (or
an order to redeem Creation Units, as set forth below) is received and accepted is referred to as the “Order Placement Date.”
An Authorized Participant may require an
investor to make certain representations or enter into agreements with respect to the order, (e.g., to provide for payments of
cash, when required). Investors should be aware that their particular broker may not have executed a Participant Agreement and
that, therefore, orders to purchase Shares directly from a Fund in Creation Units have to be placed by the investor’s broker
through an Authorized Participant that has executed a Participant Agreement. In such cases there may be additional charges to such
investor. At any given time, there may be only a limited number of broker-dealers that have executed a Participant Agreement and
only a small number of such Authorized Participants may have international capabilities.
On days when the Exchange closes earlier
than normal, a Fund may require orders to create Creation Units to be placed earlier in the day. In addition, if a market or markets
on which the Fund’s investments are primarily traded is closed, the Fund will also generally not accept orders on such day(s).
Orders must be transmitted by an Authorized Participant by telephone or other transmission method acceptable to the Distributor
pursuant to procedures set forth in the Participant Agreement and in accordance with the applicable order form. Those placing orders
through an Authorized Participant should allow sufficient time to permit proper submission of the purchase order by the cut-off
time on such Business Day. Economic or market disruptions or changes, or telephone or other communication failure may impede the
ability to reach the Distributor or an Authorized Participant.
Fund Deposits must be delivered by an Authorized
Participant through the Federal Reserve System (for cash) or through DTC (for corporate securities), through a subcustody agent
for (for foreign securities) and/or through such other arrangements allowed by the Trust or its agents. With respect to foreign
Deposit Instruments, the Custodian shall cause the subcustodian of such 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, such Deposit Instruments. Foreign Deposit Instruments
must be delivered to an account maintained at the applicable local subcustodian. The Fund Deposit transfer must be ordered by the
Authorized Participant in a timely fashion so as to ensure the delivery of the requisite number of Deposit Instruments or Deposit
Cash, as applicable, to the account of the Fund or its agents by no later than the Settlement Date. The “Settlement Date”
for the Funds is generally the third Business Day after the Order Placement Date. All questions as to the number of Deposit Instruments
or Deposit Cash to be delivered, as applicable, and the validity, form and eligibility (including time of receipt) for the deposit
of any tendered securities or cash, as applicable, will be determined by the Trust, whose determination shall be final and binding.
The amount of cash represented by the Deposit Instruments must be transferred directly to the Custodian through the Federal Reserve
Bank wire transfer system in a timely manner so as to be received by the Custodian no later than the Settlement Date. If the Cash
Amount and the Deposit Instruments or Deposit Cash, as applicable, are not received in a timely manner by the Settlement Date,
the creation order may be cancelled. Upon written notice to the Transfer Agent, such canceled order may be resubmitted the following
Business Day using the Fund Deposit as newly constituted to reflect the then current NAV of the Fund. The delivery of Creation
Units so created generally will occur no later than the third Business Day following the day on which the purchase order is deemed
received by the Transfer Agent.
The order shall be deemed to be received
on the Business Day on which the order is placed provided that the order is placed in proper form prior to the applicable cut-off
time and the federal funds in the appropriate amount are deposited by 2:00 p.m. or 3:00 p.m. Eastern time (per applicable instructions),
with the Custodian on the Settlement Date. If the order is not placed in proper form as required, or federal funds in the appropriate
amount are not received by 2:00 p.m. or 3:00 p.m. Eastern time (per applicable instructions) on the Settlement Date, then the order
may be deemed to be rejected and the Authorized Participant shall be liable to the Fund for losses, if any, resulting therefrom.
A creation request is considered to be in “proper form” if all procedures set forth in the Participant Agreement, order
form and this SAI are properly followed.
ISSUANCE OF A CREATION UNIT.
Except as provided herein, Creation Units will not be issued until the transfer of good title to the Trust of the Deposit Instruments
or payment of Deposit Cash, as applicable, and the payment of the Deposit Instruments has been completed. When the sub-custodian
has confirmed to the Custodian that the required Deposit Instruments (or the cash value thereof) have been delivered to the account
of the relevant sub-custodian or sub-custodians, the Principal Underwriter and the Advisor shall be notified of such delivery,
and the Trust will issue and cause the delivery of the Creation Units.
In instances where the Trust accepts Deposit
Instruments for the purchase of a Creation Unit, the Creation Unit may be purchased in advance of receipt by the Trust of all or
a portion of the applicable Deposit Instruments as described below. In these circumstances, the initial deposit will have a value
greater than the net asset value of the Shares on the date the order is placed in proper form since in addition to available Deposit
Instruments, cash must be deposited in an amount equal to the sum of (i) the Deposit Instruments, plus (ii) an additional amount
of cash equal to a percentage of the market value as set forth in the Participant Agreement, of the undelivered Deposit Instruments
(the “Additional Cash Deposit”), which shall be maintained in a general non-interest bearing collateral account. An
additional amount of cash shall be required to be deposited with the Trust, pending delivery of the missing Deposit Instruments
to the extent necessary to maintain the Additional Cash Deposit with the Trust in an amount at least equal to the applicable percentage,
as set forth in the Participant Agreement, of the daily marked to market value of the missing Deposit Instruments. The Trust may
use such Additional Cash Deposit to buy the missing Deposit Instruments at any time. Authorized Participants will be liable to
the Trust for all costs, expenses, dividends, income and taxes associated with missing Deposit Instruments, including the costs
incurred by the Trust in connection with any such purchases. These costs will be deemed to include the amount by which the actual
purchase price of the Deposit Instruments exceeds the market value of such Deposit Instruments on the day the purchase order was
deemed received by the Principal Underwriter plus the brokerage and related transaction costs associated with such purchases. The
Trust will return any unused portion of the Additional Cash Deposit once all of the missing Deposit Instruments have been properly
received by the Custodian or purchased by the Trust and deposited into the Trust. In addition, a transaction fee as set forth below
under “Creation Transaction Fees” will be charged and an additional variable charge may also be applied. The delivery
of Creation Units so created generally will occur no later than the Settlement Date.
ACCEPTANCE OF ORDERS OF CREATION
UNITS. The Trust reserves the absolute right to reject an order for Creation Units transmitted in respect of a Fund at its
discretion, including, without limitation, if (a) the order is not in proper form; (b) the Deposit Instruments or Deposit Cash,
as applicable, delivered by the Participant are not as disseminated through the facilities of the NSCC for that date by the Custodian;
(c) the investor(s), upon obtaining the Shares ordered, would own 80 percent or more of the currently outstanding Shares of the
Fund; (d) acceptance of the Deposit Instruments would have certain adverse tax consequences to the Fund; (e) the acceptance of
the Fund Deposit would, in the opinion of counsel, be unlawful; (f) the acceptance of the Fund Deposit would otherwise, in the
discretion of the Trust or the Advisor, have an adverse effect on the Trust or the rights of beneficial owners; (g) the acceptance
or receipt of the order for a Creation Unit would, in the opinion of counsel to the Trust, be unlawful; or (h) in the event that
circumstances outside the control of the Trust, the Custodian, the Transfer Agent and/or the Advisor make it for all practical
purposes not feasible to process orders for Creation Units. Examples of such circumstances include acts of God or public service
or utility problems such as fires, floods, extreme weather conditions and power outages resulting in telephone, telecopy and computer
failures; market conditions or activities causing trading halts; systems failures involving computer or other information systems
affecting the Trust, the Principal Underwriter, the Custodian, the Transfer Agent, DTC, NSCC, Federal Reserve System, or any other
participant in the creation process, and other extraordinary events. The Trust or its agents shall communicate to the Authorized
Participant its rejection of an order. The Trust, the Transfer Agent, the Custodian and the Principal Underwriter are under no
duty, however, to give notification of any defects or irregularities in the delivery of Fund Deposits nor shall either of them
incur any liability for the failure to give any such notification. The Trust, the Transfer Agent, the Custodian and the Principal
Underwriter shall not be liable for the rejection of any purchase order for Creation Units.
All questions as to the number of shares
of each security in the Deposit Instruments 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.
REDEMPTION. Shares may be redeemed
only in Creation Units at their net asset value next determined after receipt of a redemption request in proper form by a Fund
through the Transfer Agent and only on a Business Day. EXCEPT UPON LIQUIDATION OF A FUND, THE TRUST WILL NOT REDEEM SHARES IN AMOUNTS
LESS THAN WHOLE CREATION UNITS. Investors must accumulate enough Shares in the secondary market to constitute a Creation Unit in
order to have such Shares redeemed by the Trust. There can be no assurance, however, that there will be sufficient liquidity in
the public trading market at any time to permit assembly of a Creation Unit. Investors should expect to incur brokerage and other
costs in connection with assembling a sufficient number of Shares to constitute a redeemable Creation Unit.
With respect to the Funds, the Custodian,
through the NSCC, makes available immediately prior to the opening of business on the Exchange (currently 9:30 a.m. Eastern time)
on each Business Day, the list of the names and share quantities of each Fund’s portfolio instruments that will be applicable
(subject to possible amendment or correction) to redemption requests received in proper form (as defined below) on that day (“Redemption
Instruments”). In certain circumstances, Redemption Instruments received on redemption may not be identical to Deposit Instruments.
Redemption proceeds for a Creation Unit
are paid either in-kind or in cash, or a combination thereof, as determined by the Trust. With respect to in-kind redemptions of
a Fund, redemption proceeds for a Creation Unit will consist of Redemption Securities – as announced by the Custodian on
the Business Day of the request for redemption received in proper form plus cash in an amount equal to the difference between the
net asset value of the Shares being redeemed, as next determined after a receipt of a request in proper form, and the value of
the Redemption Instruments (the “Cash Redemption Amount”), less a fixed redemption transaction fee and any applicable
additional variable charge as set forth below. In the event that the Redemption Instruments have a value greater than the net asset
value of the Shares, a compensating cash payment equal to the differential is required to be made by or through an Authorized Participant
by the redeeming shareholder. Notwithstanding the foregoing, at the Trust’s discretion, an Authorized Participant may receive
the corresponding cash value of the securities in lieu of the in-kind securities value representing one or more redemption Instruments.
PROCEDURES FOR REDEMPTION OF CREATION
UNITS. After the Trust has deemed an order for redemption received, the Trust will initiate procedures to transfer the requisite
Redemption Instruments and the Cash Redemption Amount to the Authorized Participant by the Settlement Date. With respect to in-kind
redemptions of a Fund, the calculation of the value of the Redemption Instruments and the Cash Redemption Amount to be delivered
upon redemption will be made by the Custodian according to the procedures set forth under “Determination of Net Asset Value,”
computed on the Business Day on which a redemption order is deemed received by the Trust. Therefore, if a redemption order in proper
form is submitted to the Principal Underwriter by a DTC Participant by the specified time on the Order Placement Date, and the
requisite number of Shares of the Fund are delivered to the Custodian prior to 2:00 p.m. or 3:00 p.m. Eastern time (per applicable
instructions) on the Settlement Date, then the value of the Redemption Instruments and the Cash Redemption Amount to be delivered
will be determined by the Custodian on such Order Placement Date. If the requisite number of Shares of the Fund are not delivered
by 2:00 p.m. or 3:00 p.m. Eastern time (per applicable instructions) on the Settlement Date, the Fund will not release the underlying
securities for delivery unless collateral is posted in such percentage amount of missing Shares as set forth in the Participant
Agreement (marked to market daily).
With respect to in kind redemptions of
the Fund, in connection with taking delivery of shares of Redemption Instruments upon redemption of Creation Units, an Authorized
Participant must maintain appropriate custody arrangements with a qualified broker-dealer, bank or other custody providers in
each jurisdiction in which any of the Redemption Instruments are customarily traded (or such other arrangements as allowed by
the Trust or its agents), to which account such Redemption Instruments will be delivered. Deliveries of redemption proceeds generally
will be made within three Business Days of the trade date. Due to the schedule of holidays in certain countries, however, the
delivery of in-kind redemption proceeds may take longer than three business days after the day on which the redemption request
is received in proper form. The section below entitled “Local Market Holidays Schedules” 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
Funds, the Trust will make delivery of in-kind redemption proceeds within the number of days stated in the Local Market Holidays
section to be the maximum number of days necessary to deliver redemption proceeds. If the Authorized Participant has not made
appropriate arrangements to take delivery of the Redemption Instruments in the applicable foreign jurisdiction and it is not possible
to make other such arrangements, or if it is not possible to effect deliveries of the Redemption Instruments in such jurisdiction,
the Trust may, in its discretion, exercise its option to redeem such Shares in cash, and the Authorized Participant will be required
to receive its redemption proceeds in cash.
If it is not possible to make other such
arrangements, or if it is not possible to effect deliveries of the Redemption Instruments, the Trust may in its discretion exercise
its option to redeem such Shares in cash, and the redeeming investor will be required to receive its redemption proceeds in cash.
In addition, an investor may request a redemption in cash that a Fund may, in its sole discretion, permit. In either case, the
investor will receive a cash payment equal to the NAV 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 charge for requested
cash redemptions specified above, to offset the Trust’s brokerage and other transaction costs associated with the disposition
of Redemption Instruments). Each Fund may also, in its sole discretion, upon request of a shareholder, provide such redeemer a
portfolio of securities that differs from the exact composition of the Redemption Instruments but does not differ in net asset
value.
An Authorized Participant submitting a
redemption request is deemed to represent to the Trust that it (or its client) (i) owns outright or has full legal authority and
legal beneficial right to tender for redemption the requisite number of Shares to be redeemed and can receive the entire proceeds
of the redemption, and (ii) the Shares to be redeemed have not been loaned or pledged to another party nor are they the subject
of a repurchase agreement, securities lending agreement or such other arrangement which would preclude the delivery of such Shares
to the Trust. The Trust reserves the right to verify these representations at its discretion, but will typically require verification
with respect to a redemption request from a Fund in connection with higher levels of redemption activity and/or short interest
in the Fund. If the Authorized Participant, upon receipt of a verification request, does not provide sufficient verification of
its representations as determined by the Trust, the redemption request will not be considered to have been received in proper form
and may be rejected by the Trust.
Redemptions of Shares for Redemption Instruments
will be subject to compliance with applicable federal and state securities laws and a Fund (whether or not it otherwise permits
cash redemptions) reserves the right to redeem Creation Units for cash to the extent that the Trust could not lawfully deliver
specific Redemption Instruments upon redemptions or could not do so without first registering the Redemption Instruments under
such laws. An Authorized Participant or an investor for which it is acting subject to a legal restriction with respect to a particular
security included in the Redemption Instruments applicable to the redemption of Creation Units may be paid an equivalent amount
of cash. The Authorized Participant may request the redeeming investor of the Shares to complete an order form or to enter into
agreements with respect to such matters as compensating cash payment. Further, an Authorized Participant that is not a “qualified
institutional buyer,” (“QIB”), as such term is defined under Rule 144A of the Securities Act, will not be able
to receive Redemption Instruments that are restricted securities eligible for resale under Rule 144A. An Authorized Participant
may be required by the Trust to provide a written confirmation with respect to QIB status in order to receive Redemption Instruments.
The right of redemption may be suspended
or the date of payment postponed with respect to a Fund (1) for any period during which the Exchange is closed (other than customary
weekend and holiday closings); (2) for any period during which trading on the 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 or determination of the NAV of
the Shares is not reasonably practicable; or (4) in such other circumstance as is permitted by the SEC.
CREATION AND REDEMPTION TRANSACTION
FEES. A transaction fee, as set forth in the table below, is imposed for the transfer and other transaction costs associated
with the purchase or redemption of Creation Units, as applicable. Authorized Participants will be required to pay a fixed creation
transaction fee and/or a fixed redemption transaction fee, as applicable, on a given day regardless of the number of Creation
Units created or redeemed on that day. A Fund may adjust the transaction fee from time to time. The Creation/Redemption Transaction
Fee may be waived for the Fund when the Advisor believes that waiver of such fee is in the best interest of the Fund. When determining
whether to waive the Creation/Redemption Transaction Fee, the Advisor considers a number of factors including whether waiving
such fee will facilitate the initial launch of the Fund; facilitate portfolio rebalancings in a less costly manner; improve the
quality of the secondary trading market for the Fund’s shares; and not result in the Fund bearing additional costs or expenses
as a result of such waiver.
An additional charge or a variable charge
(discussed below) will be applied to certain creation and redemption transactions, including non-standard orders and whole or partial
cash purchases or redemptions. With respect to creation orders, Authorized Participants are responsible for the costs of transferring
the securities constituting the Deposit Instruments to the account of the Trust and with respect to redemption orders, Authorized
Participants are responsible for the costs of transferring the Redemption Instruments from the Trust to their account or on their
order. Investors who use the services of a broker or other such intermediary may also be charged a fee for such services.
|
|
|
|
|
|
|
|
|
FUND
|
|
TRANSACTION
FEE
|
|
|
MAXIMUM
TRANSACTION
FEE
|
|
|
Syntax Stratified LargeCap ETF
|
|
$
|
1,250
|
|
|
|
2,000
|
|
|
Syntax Stratified MidCap ETF
|
|
$
|
1,000
|
|
|
|
2,000
|
|
|
Syntax Stratified SmallCap ETF
|
|
$
|
1,500
|
|
|
|
2,000
|
|
DETERMINATION OF NET ASSET VALUE
The following information supplements and
should be read in conjunction with the sections in the Prospectus entitled “PURCHASE AND SALE OF FUND SHARES” and “ADDITIONAL
PURCHASE AND SALE INFORMATION.”
Net asset value per Share for each
Fund of the Trust is computed 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 Shares outstanding. Expenses and fees, including the management, administration and distribution
fees, are accrued daily and taken into account for purposes of determining net asset value. The net asset value of the Fund is
calculated by the Custodian and determined as of the close of the regular trading session on the NYSE (ordinarily 4:00p.m. Eastern
time) on each day that such exchange is open.
In computing a Fund’s net asset value
per Share, the Fund’s securities holdings are based on the market price of the securities, which generally means a valuation
obtained from an exchange or other market (or based on a price quotation or other equivalent indication of value supplied by an
exchange or other market) or a valuation obtained from an independent pricing service. In the case of shares of funds that are
not traded on an exchange (e.g., mutual funds), last sale price means such fund’s published net asset value per share. Other
portfolio securities and assets for which market quotations are not readily available are valued based on fair value as determined
in good faith by the Oversight Committee in accordance with procedures adopted by the Board. In these cases, the Fund’s net
asset value may reflect certain portfolio securities’ fair values rather than their market prices. Fair value pricing involves
subjective judgments and it is possible that the fair value determination for a security is materially different than the value
that could be realized upon the sale of the security. In addition, fair value pricing could result in a difference between the
prices used to calculate a Fund’s net asset value and the prices used by the Index. This may result in a difference between
the Fund’s performance and the performance of the Index.
DIVIDENDS AND DISTRIBUTIONS
The following information supplements and
should be read in conjunction with the section in the Prospectus entitled “DISTRIBUTIONS.”
GENERAL POLICIES. Dividends from
net investment income, if any, are declared and paid annually for each Fund. Distributions of net realized securities gains, if
any, generally are declared and paid once a year, but the Trust may make distributions on a more frequent basis for a Fund to improve
index tracking or to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent
with the provisions of the 1940 Act. In addition, the Trust intends to distribute at least annually amounts representing the full
dividend yield on the underlying portfolio securities of each Fund, net of expenses of such Fund, as if such Fund owned such underlying
portfolio securities for the entire dividend period. As a result, some portion of each distribution may result in a return of capital
for tax purposes for shareholders.
Dividends and other distributions on Shares
are distributed, as described below, 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 Trust.
The Trust may make additional distributions
to the extent necessary (i) to distribute the entire annual taxable income of the Trust, plus any net capital gains and (ii) to
avoid imposition of the excise tax imposed by Section 4982 of the Internal Revenue Code. Management of the Trust reserves the right
to declare special dividends if, in its reasonable discretion, such action is necessary or advisable to preserve the status of
a Fund as a “regulated investment company” under the Internal Revenue Code or to avoid imposition of income or excise
taxes on undistributed income.
DIVIDEND REINVESTMENT. Broker dealers,
at their own discretion, may also offer a dividend reinvestment service under which Shares are purchased in the secondary market
at current market prices. Investors should consult their broker dealer for further information regarding any dividend reinvestment
service offered by such broker dealer.
U.S. FEDERAL INCOME TAXATION
Set forth below is a discussion of certain
U.S. federal income tax considerations affecting the Funds and the purchase, ownership and disposition of Shares. It is based upon
the U.S. Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), U.S. Treasury Department regulations
promulgated thereunder, judicial authorities, and administrative rulings and practices, all as in effect as of the date of this
SAI and all of which are subject to change, possibly with retroactive effect. The following information supplements and should
be read in conjunction with the section in the Prospectus entitled “U.S. Federal Income Taxation.”
Except to the extent discussed below, this
summary assumes that a Fund’s shareholder holds Shares as capital assets within the meaning of the Internal Revenue Code,
and does not hold Shares in connection with a trade or business. This summary does not address all potential U.S. federal income
tax considerations possibly applicable to an investment in Shares, and does not address the tax consequences to Fund shareholders
subject to special tax rules, including, but not limited to, partnerships and the partners therein, those who hold Shares through
an IRA, 401(k) plan or other tax-advantaged account, and, except to the extent discussed below, tax-exempt shareholders. This discussion
does not discuss any aspect of U.S. state, local, estate, and gift, or non-U.S., tax law. This discussion is not intended or written
to be legal or tax advice to any shareholder in the Fund or other person and is not intended or written to be used or relied on,
and cannot be used or relied on, by any such person for the purpose of avoiding any U.S. federal tax penalties that may be imposed
on such person. Prospective Fund shareholders are urged to consult their own tax advisers with respect to the specific U.S. federal,
state, and local, and non-U.S., tax consequences of investing in Shares based on their particular circumstances.
The Funds have not requested and will not
request an advance ruling from the U.S. Internal Revenue Service (“IRS”) as to the U.S. federal income tax matters
described below. The IRS could adopt positions contrary to those discussed below and such positions could be sustained. Prospective
investors should consult their own tax advisors with regard to the U.S. federal tax consequences of the purchase, ownership or
disposition of Shares, as well as the tax consequences arising under the laws of any state, non-U.S. country or other taxing jurisdiction.
Tax Treatment of the Funds
In General. Each Fund intends to
qualify and elect to be treated as a separate regulated investment company (“RIC”) under the Internal Revenue Code.
As a RIC, a Fund generally will not be required to pay corporate-level U.S. federal income taxes on any ordinary income or capital
gains that it distributes to its shareholders.
To qualify and remain eligible for the
special tax treatment accorded to RICs, a Fund must meet certain income, asset and distribution requirements, described in more
detail below. Specifically, the Fund must (i) derive at least 90% of its gross income in each taxable year from dividends, interest,
payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies,
other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to its business
of investing in such stock, securities or currencies and net income derived from interests in qualified publicly traded partnerships
(“QPTPs”) (i.e., partnership that are traded on an established securities market or readily tradable on a secondary
market, other than partnerships that derive at least 90% of their income from interest, dividends, and other qualifying RIC income
described above), and (ii) diversify its holdings so that, at the end of each quarter of the Fund’s taxable year, (a) at
least 50% of the value of the Fund’s assets is represented by cash, securities of other RICs, U.S. government securities
and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater in value than
5% of the Fund’s total assets and not greater than 10% of the outstanding voting securities of such issuer, and (b) not
more than 25% of the value of its assets is invested in the securities (other than U.S. government securities or securities of
other RICs) of any one issuer, any two or more issuers of which 20% or more of the voting stock of each such issuer is held by
the Fund and that are determined to be engaged in the same or similar trades or businesses or related trades or business or in
the securities of one or more QPTPs. Furthermore, a Fund must distribute annually at least 90% of the sum of (i) its “investment
company taxable income” (which includes dividends, interest and net short-term capital gains) and (ii) certain net tax-exempt
income, if any.
Failure to Maintain RIC Status.
If a Fund fails to qualify as a RIC for any year (subject to certain curative measures allowed by the Internal Revenue Code), the
Fund will be subject to regular corporate-level U.S. federal income tax in that year on all of its taxable income, regardless of
whether the Fund makes any distributions to its shareholders. In addition, in such case, distributions will be taxable to the Fund’s
shareholders generally as ordinary dividends to the extent of the Fund’s current and accumulated earnings and profits, possibly
eligible for (i) in the case of an individual Fund shareholder, treatment as a qualified dividend (as discussed below) subject
to tax at preferential long-term capital gains rates or (ii) in the case of a corporate Fund shareholder, a dividends-received
deduction. The remainder of this discussion assumes that the Fund will qualify for the special tax treatment accorded to RICs.
Excise Tax. A Fund will be subject
to a 4% excise tax on certain undistributed income generally if the Fund does not distribute to its shareholders in each calendar
year at least 98% of its ordinary income for the calendar year, 98.2% of its capital gain net income for the twelve months ended
October 31 of such year, plus 100% of any undistributed amounts from prior years. For these purposes, the Fund will be treated
as having distributed any amount on which it has been subject to U.S. corporate income tax for the taxable year ending within such
calendar year. The Funds intend to make distributions necessary to avoid this 4% excise tax, although there can be no assurance
that it will be able to do so.
Phantom Income. With respect to
some or all of its investments, a Fund may be required to recognize taxable income in advance of receiving the related cash payment.
For example, under the “wash sale” rules, the Fund may not be able to deduct currently a loss on a disposition of a
portfolio security. As a result, the Fund may be required to make an annual income distribution greater than the total cash actually
received during the year. Such distribution may be made from the existing cash assets of the Fund or cash generated from selling
Portfolio Securities. The Fund may realize gains or losses from such sales, in which event the Fund’s shareholders may receive
a larger capital gain distribution than they would in the absence of such transactions. (See also “Certain Debt Instruments”
below.)
Certain Debt Instruments. Some of
the debt securities (with a fixed maturity date of more than one year from the date of issuance) that may be acquired by a Fund
(such as zero coupon debt instruments or debt instruments with payment in-kind interest) may be treated as debt securities that
are issued originally at a discount. Generally, the amount of original issue discount is treated as interest income and is included
in income over the term of the debt security, even though payment of that amount is not received until a later time, usually when
the debt security matures.
If a Fund acquires debt securities
(with a fixed maturity date of more than one year from the date of issuance) in the secondary market, such debt securities may
be treated as having market discount. Generally, any gain recognized on the disposition of, and any partial payment of principal
on, a debt security having market discount is treated as ordinary income to the extent the gain, or principal payment, does not
exceed the “accrued market discount” on such debt security. Market discount generally accrues in equal daily installments.
A Fund may make one or more of the elections applicable to debt securities having market discount, which could affect the character
and timing of recognition of income.
Some debt securities (with a fixed maturity
date of one year or less from the date of issuance) that may be acquired by a Fund may be treated as having acquisition discount,
or original issue discount in the case of certain types of debt securities. Generally, the Fund will be required to include the
acquisition discount, or original issue discount, in income over the term of the debt security, even though payment of that amount
is not received until a later time, usually when the debt security matures. The Fund may make one or more of the elections applicable
to debt securities having acquisition discount, or original issue discount, which could affect the character and timing of recognition
of income.
Non-U.S. Investments. Dividends,
interest and proceeds from the direct or indirect sale of non-U.S. securities may be subject to non-U.S. withholding tax and other
taxes, including financial transaction taxes. Even if a Fund is entitled to seek a refund in respect of such taxes, it may not
have sufficient information to do so or may choose not to do so. Tax treaties between certain countries and the United States may
reduce or eliminate such taxes in some cases. Non-U.S. taxes paid by a Fund will reduce the return from the Fund’s investments.
Special or Uncertain Tax Consequences.
A Fund’s investment or other activities could be subject to special and complex tax rules that may produce differing tax
consequences, such as disallowing or limiting the use of losses or deductions, causing the recognition of income or gain without
a corresponding receipt of cash, affecting the time as to when a purchase or sale of stock or securities is deemed to occur or
altering the characterization of certain complex financial transactions.
A Fund may engage in investment or other
activities the treatment of which may not be clear or may be subject to recharacterization by the IRS. In particular, the tax treatment
of swaps and certain other derivatives and income from foreign currency transactions is unclear for purposes of determining the
Fund’s status as a RIC. If a final determination on the tax treatment of a Fund’s investment or other activities differs
from the Fund’s original expectations, the final determination could adversely affect the Fund’s status as a RIC or
the timing or character of income recognized by the Fund, requiring the Fund to purchase or sell assets, alter its portfolio or
take other action in order to comply with the final determination.
Tax Treatment of Fund Shareholders
Taxation of U.S. Shareholders
The following is a summary of certain U.S.
federal income tax consequences of the purchase, ownership and disposition of Fund Shares applicable to “U.S. shareholders.”
For purposes of this discussion, a “U.S. shareholder” is a beneficial owner of Fund Shares who, for U.S. federal income
tax purposes, is (i) an individual who is a citizen or resident of the United States; (ii) a corporation (or an entity treated
as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United
States, or of any state thereof, or the District of Columbia; (iii) an estate, the income of which is includable in gross income
for U.S. federal income tax purposes regardless of its source; or (iv) a trust, if (a) a U.S. court is able to exercise primary
supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions
of the trust, or (b) the trust has a valid election in place to be treated as a U.S. person.
Fund Distributions. In general,
Fund distributions are subject to U.S. federal income tax when paid, regardless of whether they consist of cash or property and
regardless of whether they are re-invested in Shares. However, any Fund distribution declared in October, November or December
of any calendar year and payable to shareholders of record on a specified date during such month will be deemed to have been received
by the Fund shareholder on December 31 of such calendar year, provided such dividend is actually paid during January of the following
calendar year.
Distributions of a Fund’s net investment
income and the Fund’s net short-term capital gains in excess of net long-term capital losses (collectively referred to as
“ordinary income dividends”) are taxable as ordinary income to the extent of the Fund’s current and accumulated
earnings and profits (subject to an exception for “qualified dividend income, as discussed below). Corporate shareholders
of the Fund may be eligible to take a dividends-received deduction with respect to such distributions, provided the distributions
are attributable to dividends received by the Fund on stock of U.S. corporations with respect to which the Fund meets certain holding
period and other requirements. To the extent designated as “capital gain dividends” by the Fund, distributions of the
Fund’s net long-term capital gains in excess of net short-term capital losses (“net capital gain”) are taxable
at long-term capital gain tax rates to the extent of the Fund’s current and accumulated earnings and profits, regardless
of the Fund shareholder’s holding period in the Fund’s Shares. Such dividends will not be eligible for a dividends-received
deduction by corporate shareholders.
A Fund’s net capital gain is computed
by taking into account the Fund’s capital loss carryforwards, if any. Under the Regulated Investment Company Modernization
Act of 2010, capital losses incurred in tax years beginning after December 22, 2010 can be carried forward indefinitely and retain
the character of the original loss. To the extent that these carryforwards are available to offset future capital gains, it is
probable that the amount offset will not be distributed to shareholders. In the event that a Fund were to experience an ownership
change as defined under the Code, the Fund’s loss carryforwards, if any, may be subject to limitation.
Distributions of “qualified dividend
income” (defined below) are taxed to certain non-corporate shareholders at the reduced rates applicable to long-term capital
gain to the extent of a Fund’s current and accumulated earnings and profits, provided that the Fund shareholder meets certain
holding period and other requirements with respect to the distributing Fund’s Shares and the distributing Fund meets certain
holding period and other requirements with respect to the dividend-paying stocks. Dividends subject to these special rules, however,
are not actually treated as capital gains and, thus, are not included in the computation of a non-corporate shareholder’s
net capital gain and generally cannot be used to offset capital losses. The portion of distributions that a Fund may report as
qualified dividend income generally is limited to the amount of qualified dividend income received by the Fund, but if for any
Fund taxable year 95% or more of the Fund’s gross income (exclusive of net capital gain from sales of stock and securities)
consist of qualified dividend income, all distributions of such income for that taxable year may be reported as qualified dividend
income. For this purpose, “qualified dividend income” generally means income from dividends received by a Fund from
U.S. corporations and qualified non-U.S. corporations. Income from dividends received by the Fund from a real estate investment
trust (“REIT”) or another RIC generally is qualified dividend income only to the extent that the dividend distributions
are made out of qualified dividend income received by such REIT or other RIC.
To the extent that a Fund makes a distribution
of income received by such Fund in lieu of dividends with respect to securities on loan pursuant to a securities lending transaction,
such income will not constitute qualified dividend income to individual shareholders and will not be eligible for the dividends-received
deduction for corporate shareholders.
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 the shareholder’s tax basis in its Shares of the Fund, and as a capital gain thereafter (assuming the shareholder holds
its Shares of the Fund as capital assets).
Each Fund intends to distribute its net
capital gain at least annually. However, by providing written notice to its shareholders no later than 60 days after its year-end,
a Fund may elect to retain some or all of its net capital gain and designate the retained amount as a “deemed distribution.”
In that event, the Fund pays U.S. federal income tax on the retained net capital gain, and the Fund shareholder recognizes a proportionate
share of the Fund’s undistributed net capital gain. In addition, a shareholder can claim a tax credit or refund for the shareholder’s
proportionate share of the Fund’s U.S. federal income taxes paid on the undistributed net capital gain and increase the shareholder’s
tax basis in the Fund Shares by an amount equal to the shareholder’s proportionate share of the Fund’s undistributed
net capital gain, reduced by the amount of the shareholder’s tax credit or refund. Organizations or persons not subject to
U.S. federal income tax on such net capital gain may be entitled to a refund of their pro rata share of such taxes paid by the
Fund upon timely filing appropriate returns or claims for refund with the IRS.
With respect to non-corporate Fund shareholders
(i.e., individuals, trusts and estates), ordinary income and short-term capital gain are taxed at a current maximum rate
of 39.6% and long-term capital gain is taxed at a current maximum rate of 20%. Corporate shareholders are taxed at a current maximum
rate of 35% on their income and gain.
In addition, high-income individuals (and
certain trusts and estates) generally will be subject to a 3.8% Medicare tax on “net investment income,” in addition
to otherwise applicable U.S. federal income tax. “Net investment income” generally will include dividends (including
capital gain dividends) received from a Fund and net gains from the redemption or other disposition of Shares. Please consult your
tax advisor regarding this tax.
Investors considering buying Shares just
prior to a distribution should be aware that, although the price of the Shares purchased at such time may reflect the forthcoming
distribution, such distribution nevertheless may be taxable (as opposed to a non-taxable return of capital).
Sales of Shares. Any capital gain
or loss realized upon a sale or exchange of Shares generally is treated as a long-term gain or loss if the Shares have been held
for more than one year. Any capital gain or loss realized upon a sale or exchange of Shares held for one year or less generally
is treated as a short-term gain or loss, except that any capital loss on the sale of Shares held for six months or less is treated
as long-term capital loss to the extent that capital gain dividends were paid (or deemed to be paid) with respect to such Shares.
All or a portion of any loss realized upon a sale or exchange of Fund Shares will be disallowed under the “wash sale”
rules if substantially identical shares are purchased (through reinvestment of dividends or otherwise) within a 61-day period beginning
30 days before and ending 30 days after the disposition of the Fund Shares. In such a case, the basis of the newly purchased shares
will be adjusted to reflect the disallowed loss.
Legislation passed by Congress requires
reporting to the IRS and to taxpayers of adjusted cost basis information for “covered securities,” which generally
include shares of a RIC acquired on or after January 1, 2012. Shareholders should contact their brokers to obtain information with
respect to the available cost basis reporting methods and available elections for their accounts.
Creation Unit Issues and Redemptions.
On an issue of Shares as part of a Creation Unit, made by means of an in-kind deposit, an Authorized Participant recognizes capital
gain or loss equal to the difference between (i) the fair market value (at issue) of the issued Shares (plus any cash received
by the Authorized Participant as part of the issue) and (ii) the Authorized Participant’s aggregate basis in the exchanged
securities (plus any cash paid by the Authorized Participant as part of the issue). On a redemption of Shares as part of a Creation
Unit where the redemption is conducted in-kind by a payment of Fund Securities, an Authorized Participant recognizes capital gain
or loss equal to the difference between (i) the fair market value (at redemption) of the securities received (plus any cash received
by the Authorized Participant as part of the redemption) and (ii) the Authorized Participant’s basis in the redeemed Shares
(plus any cash paid by the Authorized Participant as part of the redemption). However, the IRS may assert, under the “wash
sale” rules or on the basis that there has been no significant change in the Authorized Participant’s economic position,
that any loss on an issue or redemption of Creation Units cannot be deducted currently.
In general, any capital gain or loss recognized
upon the issue or redemption of Shares (as components of a Creation Unit) is treated either as long-term capital gain or loss,
if the deposited securities (in the case of an issue) or the Shares (in the case of a redemption) have been held for more than
one year, or otherwise as short-term capital gain or loss. However, any capital loss on a redemption of Shares held for six months
or less is treated as long-term capital loss to the extent that capital gain dividends were paid (or deemed to be paid) with respect
to such Shares.
Reportable Transactions. If a shareholder
recognizes a loss with respect to Shares of $2 million or more (for an individual Fund shareholder) or $10 million or more (for
a corporate shareholder) in any single taxable year (or a greater loss over a combination of years), the Fund shareholder may be
required to file a disclosure statement with the IRS. Significant penalties may be imposed upon the failure to comply with these
reporting rules. Shareholders should consult their tax advisors to determine the applicability of these rules in light of their
individual circumstances.
Taxation of Non-U.S. Shareholders
The following is a summary of certain U.S.
federal income tax consequences of the purchase, ownership and disposition of Fund Shares applicable to “non-U.S. shareholders.”
For purposes of this discussion, a “non-U.S. shareholder” is a beneficial owner of Fund Shares that is not a U.S. shareholder
(as defined above) and is not an entity or arrangement treated as a partnership for U.S. federal income tax purposes. The following
discussion is based on current law, and is for general information only. It addresses only selected, and not all, aspects of U.S.
federal income taxation.
Dividends. With respect to non-U.S.
shareholders of a Fund, the Fund’s ordinary income dividends generally will be subject to U.S. federal withholding tax at
a rate of 30% (or at a lower rate established under an applicable tax treaty). However, ordinary income dividends that are “interest-related
dividends” or “short-term capital gain dividends” (each as defined below) and capital gain dividends generally
will not be subject to U.S. federal withholding (or income tax), provided that the non-U.S. shareholder furnishes the Fund with
a completed IRS Form W-8BEN or W-8BEN-E, as applicable, (or acceptable substitute documentation) establishing the non-U.S. shareholder’s
non-U.S. status and the Fund does not have actual knowledge or reason to know that the non-U.S. shareholder would be subject to
such withholding tax if the non-U.S. shareholder were to receive the related amounts directly rather than as dividends from the
Fund. “Interest-related dividends” generally means dividends designated by the Fund as attributable to such Fund’s
U.S.-source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership
in which such Fund is at least a 10% shareholder, reduced by expenses that are allocable to such income. “Short-term capital
gain dividends” generally means dividends designated by the Fund as attributable to the excess of such Fund’s net short-term
capital gain over its net long-term capital loss. Depending on its circumstances, the Fund may treat such dividends, in whole or
in part, as ineligible for these exemptions from withholding.
Notwithstanding the foregoing, special
rules apply in certain cases, including as described below. For example, in cases where dividend income from a non-U.S. shareholder’s
investment in the Fund is effectively connected with a trade or business of the non-U.S. shareholder conducted in the United States,
the non-U.S. shareholder generally will be exempt from withholding tax, but will be subject to U.S. federal income tax at the graduated
rates applicable to U.S. shareholders. Such income generally must be reported on a U.S. federal income tax return. Furthermore,
such income also may be subject to the 30% branch profits tax in the case of a non-U.S. shareholder that is a corporation. In addition,
if a non-U.S. shareholder is an individual who is present in the United States for 183 days or more during the taxable year and
has a “tax home” in the United States, any gain incurred by such shareholder with respect to his or her capital gain
dividends and short-term capital gain dividends would be subject to a 30% U.S. federal income tax (which, in the case of short-term
capital gain dividends, may, in certain instances, be withheld at source by the Fund). Lastly, special rules apply with respect
to dividends that are subject to the Foreign Investment in Real Property Act (“FIRPTA”), discussed below (see “Investments
in U.S. Real Property”).
Sales of Fund Shares. Under current
law, gain on a sale or exchange of Shares generally will be exempt from U.S. federal income tax (including withholding at the
source) unless (i) the non-U.S. shareholder is an individual who was physically present in the United States for 183 days or more
during the taxable year and has a “tax home” in the United States, in which case the non-U.S. shareholder would incur
a 30% U.S. federal income tax on his capital gain, (ii) the gain is effectively connected with a U.S. trade or business conducted
by the non-U.S. shareholder (in which case the non-U.S. shareholder generally would be taxable on such gain at the same graduated
rates applicable to U.S. shareholders, would be required to file a U.S. federal income tax return and, in the case of a corporate
non-U.S. shareholder, may also be subject to the 30% branch profits tax), or (iii) the gain is subject to FIRPTA, as discussed
below (see —“Investments in U.S. Real Property”).
Credits or Refunds. To claim a credit
or refund for any Fund-level taxes on any undistributed long-term capital gains (as discussed above) or any taxes collected through
withholding, a non-U.S. Fund shareholder must obtain a U.S. taxpayer identification number and file a U.S. federal income tax return
even if the non-U.S. Fund shareholder would not otherwise be required to do so.
Investments in U.S. Real Property.
Subject to the exemptions described below, a non-U.S. shareholder generally will be subject to U.S. federal income tax under FIRPTA
on any gain from the sale or exchange of Shares if the Fund is a “U.S. real property holding corporation” (as defined
below) at any time during the shorter of the period during which the non-U.S. shareholder held such Shares and the five-year period
ending on the date of the disposition of those Shares. Any such gain will be taxed in the same manner as for a U.S. Fund shareholder
and in certain cases will be collected through withholding at the source in an amount equal to 15% of the sales proceeds. A Fund
will be a “U.S. real property holding corporation” if the fair market value of its “U.S. real property interests”
(“USRPIs”) (which includes shares of U.S. real property holding corporations and certain participating debt securities)
equals or exceeds 50% of the fair market value of such interests plus its interests in real property located outside the United
States plus any other assets used or held for use in a business.
An exemption from FIRPTA applies if either
(i) the class of Shares disposed of by the non-U.S. shareholder is regularly traded on an established securities market (as determined
for U.S. federal income tax purposes) and the non-U.S. shareholder did not actually or constructively hold more than 5% of such
class of Shares at any time during the five-year period prior to the disposition, or (ii) the Fund is a “domestically-controlled
RIC.” A “domestically-controlled RIC” is any RIC in which at all times during the relevant testing period 50%
or more in value of the RIC’s stock is owned by U.S. persons.
Furthermore, special rules apply under
FIRPTA in respect of distributions attributable to gains from USRPIs. In general, if a Fund is a U.S. real property holding corporation
(taking certain special rules into account), distributions by such Fund attributable to gains from USRPIs will be treated as income
effectively connected with a trade or business within the United States, subject generally to tax at the same graduated rates applicable
to U.S. shareholders and, in the case of a corporation that is a non-U.S. shareholder, a “branch profits” tax at a
rate of 30% (or other applicable lower treaty rate). Such distributions will be subject to U.S. federal withholding tax and generally
will give rise to an obligation on the part of the non-U.S. shareholder to file a U.S. federal income tax return.
Even if a Fund is treated as a U.S. real
property holding corporation, distributions on the Fund’s Shares will not be treated, under the rule described above, as
income effectively connected with a U.S. trade or business in the case of a non-U.S. shareholder that owns (for the applicable
period) 5% or less (by class) of Shares and such class is regularly traded on an established securities market for U.S. federal
income tax purposes (but such distribution will be treated as ordinary dividends subject to a 30% withholding tax or lower applicable
treaty rate).
Non-U.S. shareholders that engage in certain
“wash sale” and/or substitute dividend payment transactions the effect of which is to avoid the receipt of distributions
from the Fund that would be treated as gain effectively connected with a U.S. trade or business will be treated as having received
such distributions.
All shareholders of the Funds should consult
their tax advisers regarding the application of the rules described above.
Back-Up Withholding
A Fund (or a financial intermediary such
as a broker through which a shareholder holds Shares in the Fund) may be required to report certain information on the Fund shareholder
to the IRS and withhold U.S. federal income tax (“backup withholding”) at a 28% rate from taxable distributions and
redemption or sale proceeds payable to the Fund shareholder if (i) the Fund shareholder fails to provide the Fund with a correct
taxpayer identification number or make required certifications, or if the IRS notifies the Fund that the Fund shareholder is otherwise
subject to backup withholding, and (ii) the Fund shareholder is not otherwise exempt from backup withholding. Non-U.S. shareholders
can qualify for exemption from backup withholding by submitting a properly completed IRS Form W-8BEN or W-8BEN-E. Backup withholding
is not an additional tax and any amount withheld may be credited against the Fund shareholder’s U.S. federal income tax
liability.
Foreign Account Tax Compliance Act
The U.S. Foreign Account Tax Compliance
Act (“FATCA”) generally imposes a 30% withholding tax on “withholdable payments” (defined below) made to
(i) a “foreign financial institution” (“FFI”), unless the FFI enters into an agreement with the IRS to
provide information regarding certain of its direct and indirect U.S. account holders and satisfy certain due diligence and other
specified requirements, and (ii) a “non-financial foreign entity” (“NFFE”) unless such NFFE provides certain
information to the withholding agent about certain of its direct and indirect “substantial U.S. owners” or certifies
that it has no such U.S. owners. The beneficial owner of a "withholdable payment" may be eligible for a refund or credit
of the withheld tax. The U.S. government also has entered into several intergovernmental agreements with other jurisdictions to
provide an alternative, and generally easier, approach for FFIs to comply with FATCA.
“Withholdable payments” generally
include, among other items, (i) U.S.-source interest and dividends, and (ii) gross proceeds from the sale or disposition, occurring
on or after January 1, 2019, of property of a type that can produce U.S.-source interest or dividends.
A Fund may be required to impose a 30%
withholding tax on withholdable payments to a shareholder if the shareholder fails to provide the Fund with the information, certifications
or documentation required under FATCA, including information, certification or documentation necessary for the Fund to determine
if the shareholder is a non-U.S. shareholder or a U.S. shareholder and, if it is a non-U.S. shareholder, if the non-U.S. shareholder
has “substantial U.S. owners” and/or is in compliance with (or meets an exception from) FATCA requirements. The Fund
will not pay any additional amounts to shareholders in respect of any amounts withheld. The Fund may disclose any shareholder information,
certifications or documentation to the IRS or other parties as necessary to comply with FATCA.
The requirements of, and exceptions from,
FATCA are complex. All prospective shareholders are urged to consult their own tax advisors regarding the potential application
of FATCA with respect to their own situation.
Section 351
The Trust, on behalf of the Funds,
have the right to reject an order for a purchase of shares of the Funds if the purchase (including any purchases of shares in
the same Fund by a related group of purchasers) would not qualify as a tax-free transaction described in Section 351 of the Internal
Revenue Code. The Trust also has the right to require information from a purchaser of shares in a Fund for purposes of determining
if an order for a purchase of shares of the Fund qualifies as a tax-free transaction described in Section 351 of the Internal
Revenue Code.
CAPITAL STOCK AND SHAREHOLDER REPORTS
Each Fund issues Shares of beneficial
interest, with no par value. The Board may designate additional funds.
Each Share issued by the Trust has a pro
rata interest in the assets of the corresponding series of the Trust. Shares have no preemptive, exchange, subscription or conversion
rights and are freely transferable. Each Share is entitled to participate equally in dividends and distributions declared by the
Board with respect to the Fund, and in the net distributable assets of the Fund on liquidation.
Each Share has one vote with respect to
matters upon which a shareholder vote is required consistent with the requirements of the 1940 Act and the rules promulgated thereunder.
Shares of all series of the Trust (i.e., Shares of the Funds) vote together as a single class, except that if the matter being
voted on affects only a particular Fund it will be voted on only by that Fund and if a matter affects a particular Fund differently
from other Funds, that Fund will vote separately on such matter. Under Delaware law, the Trust is not required to hold an annual
meeting of shareholders unless required to do so under the 1940 Act. The policy of the Trust is not to hold an annual meeting
of shareholders unless required to do so under the 1940 Act. All Shares of the Trust (regardless of the Fund) have noncumulative
voting rights for the election of Trustees. Under Delaware law, Trustees of the Trust may be removed by vote of the shareholders.
The Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust, requires that Trust obligations include such disclaimer,
and provides for indemnification and reimbursement of expenses out of the Trust’s property for any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the Trust itself would be unable to meet its obligations. Given the above limitations on shareholder
personal liability, and the nature of a Fund’s assets and operations, the risk to shareholders of personal liability is believed
to be remote.
Shareholder inquiries may be made by writing
to the Trust, c/o Syntax Advisors, LLC, One Liberty Plaza, 46th Fl. New York, NY 10006.
COUNSEL AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Chapman and Cutler LLP serves as counsel
to the Trust and the Funds. Ernst & Young LLP serves as the independent registered public accounting firm to the Trust.
INDEPENDENT AUDITORS
Ernst
& Young, Dublin, Ireland, are the independent auditors of Syntax 500 Series and Syntax 400 Series of Syntax Index Series,
LP
FINANCIAL STATEMENTS
The audited
financial statements and financial highlights for Syntax 400 Series of Syntax Index Series, LP, a privately offered account which
was the predecessor of the Syntax Stratified MidCap ETF, for the years ended December 31, 2017, December 31, 2018 and December
31, 2019, have been audited by Ernst & Young, Dublin, Ireland, independent auditors.
The audited
financial statements and financial highlights for Syntax 500 Series of Syntax Index Series,
LP, privately offered account which was the predecessor of the Syntax Stratified LargeCap ETF, for the years ended December 31,
2017, December 31, 2018; have been audited by Ernst & Young, Dublin, Ireland, independent auditors. The audited financial
statements and financial highlights for Syntax Stratified LargeCap ETF for the fiscal year ended December 31, 2019, have been
audited by Ernst & Young LLP, independent auditors for the Trust.
The audited
financial statements for the fiscal year ended December 31, 2019 for the Syntax Stratified LargeCap ETF, including the financial highlights,
appearing in the annual report to shareholders, is incorporated by reference in this SAI.
Financial
statements are not included for the Syntax Stratified SmallCap ETF, which had not commenced operations prior to the date of this
SAI.
|
Syntax Index Series LP
Syntax 400 Series
Financial statements for the year ended December
31, 2019
|
SYNTAX INDEX SERIES LP
Syntax 400 Series
FINANCIAL STATEMENTS
for the year ended December 31, 2019
|
TABLE OF CONTENTS
|
PAGE
|
|
|
|
|
|
|
|
INDEPENDENT AUDITORS’ REPORT
|
2
|
|
|
|
|
STATEMENT OF ASSETS AND LIABILITIES
|
4
|
|
|
|
|
SCHEDULE OF INVESTMENTS
|
5
|
|
|
|
|
STATEMENT OF OPERATIONS
|
9
|
|
|
|
|
STATEMENT OF CHANGES IN PARTNERS’ CAPITAL
|
10
|
|
|
|
|
STATEMENT OF CASH FLOWS
|
11
|
|
|
|
|
NOTES TO THE FINANCIAL STATEMENTS
|
12
|
Report of Independent Auditors
To the General Partner, Syntax Index Series,
L.P.
We have audited the accompanying financial
statements of Syntax 400 Series (the ‘’Series’’) of Syntax Index Series, L.P. (the ‘’Partnership’’),
which comprise the statement of assets and liabilities, including the schedule of investments, as of December 31, 2019, and the
related statements of operations, changes in partners' capital and cash flows for the year then ended, and the related notes to
the financial statements.
Management’s Responsibility for
the Financial Statements
Management is responsible for the preparation
and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes
the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements
that are free of material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion
on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.
An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of the Syntax 400 Series of Syntax Index Series,
L.P. at December 31, 2019, and the results of its operations, changes in its partners’ capital and its cash flows,
for the year then ended in conformity with U.S. generally accepted accounting principles.
Ernst & Young
Dublin, Ireland
April 29, 2020
SYNTAX INDEX SERIES LP
Syntax 400 Series
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2019
|
|
|
Syntax 400
|
|
|
Assets
|
|
Series
|
|
|
Cash and cash equivalents
|
2(c)
|
$
|
17,137
|
|
|
Investments (cost: $2,336,433)
|
2(d)
|
|
2,734,304
|
|
|
Dividends receivable
|
|
|
1,935
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,753,376
|
|
|
Liabilities and Partners' Capital
|
|
|
|
|
|
|
$
|
4,703
|
|
|
Accrued expenses
|
|
|
|
Amounts due to broker
|
|
|
7,637
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
12,340
|
|
|
General Partner capital
|
|
|
15,159
|
|
|
Limited Partners' capital
|
|
|
2,725,877
|
|
|
Total Partners' capital
|
|
|
2,741,036
|
|
|
Total Liabilities and Partners' Capital
|
|
|
|
|
|
|
$
|
2,753,376
|
|
|
|
|
|
|
|
See accompanying Notes, which are an integral
part of the Financial Statements.
SYNTAX INDEX SERIES LP
Syntax 400 Series
SCHEDULE OF INVESTMENTS
December 31, 2019
Syntax 400 Series
|
Common Stocks
|
|
Shares
|
|
Fair Value (US$)
|
|
Common Stocks
|
|
Shares
|
|
Fair Value (US$)
|
|
ACI Worldwide Inc
|
|
388
|
|
14,699
|
|
Cathay General Bancorp
|
|
38
|
|
1,446
|
|
AECOM
|
|
112
|
|
4,831
|
|
Ceridian HCM Holding Inc
|
|
85
|
|
5,770
|
|
AGCO Corporation
|
|
78
|
|
6,025
|
|
Charles River Laboratories International I
|
|
58
|
|
8,860
|
|
ALLETE Inc
|
|
101
|
|
8,198
|
|
Cheesecake Factory Incorporated
|
|
241
|
|
9,365
|
|
AMC Networks Inc Class A
|
|
285
|
|
11,257
|
|
Chemed Corporation
|
|
18
|
|
7,907
|
|
ASGN Inc
|
|
114
|
|
8,091
|
|
Chemours Co.
|
|
188
|
|
3,401
|
|
Aaron's Inc
|
|
135
|
|
7,710
|
|
Chesapeake Energy Corporation
|
|
5,055
|
|
4,175
|
|
Acadia Healthcare Company Inc
|
|
332
|
|
11,029
|
|
Choice Hotels Intl Inc
|
|
16
|
|
1,655
|
|
Acuity Brands Inc
|
|
46
|
|
6,348
|
|
Churchill Downs Incorporated
|
|
12
|
|
1,646
|
|
Adient plc
|
|
116
|
|
2,465
|
|
Ciena Corporation
|
|
770
|
|
32,871
|
|
Adtalem Global Education Inc
|
|
153
|
|
5,350
|
|
Cinemark Holdings Inc
|
|
310
|
|
10,493
|
|
Affiliated Managers Group Inc
|
|
63
|
|
5,339
|
|
Cirrus Logic Inc
|
|
139
|
|
11,455
|
|
Alexander & Baldwin Inc
|
|
46
|
|
964
|
|
Clean Harbors Inc
|
|
57
|
|
4,888
|
|
Alleghany Corporation
|
|
13
|
|
10,394
|
|
Cognex Corporation
|
|
110
|
|
6,164
|
|
Allegheny Technologies Incorporated
|
|
179
|
|
3,698
|
|
Coherent Inc
|
|
68
|
|
11,312
|
|
Allscripts Healthcare Solutions Inc
|
|
1,485
|
|
14,575
|
|
Colfax Corporation
|
|
152
|
|
5,530
|
|
Amedisys Inc
|
|
66
|
|
11,017
|
|
Columbia Sportswear Company
|
|
29
|
|
2,906
|
|
American Campus Communities Inc
|
|
231
|
|
10,864
|
|
CommVault Systems Inc
|
|
117
|
|
5,223
|
|
American Eagle Outfitters Inc
|
|
945
|
|
13,891
|
|
Commerce Bancshares Inc
|
|
54
|
|
3,669
|
|
American Financial Group Inc
|
|
48
|
|
5,263
|
|
Commercial Metals Company
|
|
180
|
|
4,009
|
|
Antero Midstream Corp
|
|
815
|
|
6,186
|
|
Compass Minerals International Inc
|
|
69
|
|
4,206
|
|
Apergy Corp
|
|
184
|
|
6,216
|
|
Core Laboratories NV
|
|
119
|
|
4,483
|
|
Aptargroup Inc
|
|
23
|
|
2,659
|
|
CoreCivic Inc
|
|
251
|
|
4,362
|
|
Aqua America Inc
|
|
106
|
|
4,976
|
|
CoreLogic Inc
|
|
110
|
|
4,808
|
|
Arrow Electronics Inc
|
|
24
|
|
2,034
|
|
CoreSite Realty Corporation
|
|
24
|
|
2,691
|
|
Arrowhead Pharmaceuticals Inc.
|
|
239
|
|
15,160
|
|
Corporate Office Properties Trust
|
|
42
|
|
1,234
|
|
Ashland Global Holdings Inc
|
|
35
|
|
2,679
|
|
Cousins Properties Incorporated
|
|
30
|
|
1,236
|
|
Associated Banc-Corp
|
|
65
|
|
1,433
|
|
Cracker Barrel Old Country Store Inc
|
|
62
|
|
9,532
|
|
AutoNation Inc
|
|
240
|
|
11,671
|
|
Crane Co.
|
|
140
|
|
12,093
|
|
Avanos Medical Inc
|
|
55
|
|
1,853
|
|
Cree Inc
|
|
88
|
|
4,061
|
|
Avis Budget Group Inc
|
|
382
|
|
12,316
|
|
Cullen/Frost Bankers Inc
|
|
37
|
|
3,618
|
|
Avnet Inc
|
|
47
|
|
1,995
|
|
Curtiss-Wright Corporation
|
|
28
|
|
3,945
|
|
Axon Enterprise Inc
|
|
83
|
|
6,082
|
|
Cypress Semiconductor Corporation
|
|
455
|
|
10,615
|
|
BJ's Wholesale Club Holdings Inc
|
|
338
|
|
7,686
|
|
CyrusOne Inc
|
|
262
|
|
17,143
|
|
BancorpSouth Bank
|
|
45
|
|
1,413
|
|
Dana Incorporated
|
|
216
|
|
3,931
|
|
Bank OZK
|
|
46
|
|
1,403
|
|
Deckers Outdoor Corporation
|
|
84
|
|
14,184
|
|
Bank of Hawaii Corporation
|
|
87
|
|
8,279
|
|
Delphi Technologies Plc
|
|
297
|
|
3,811
|
|
Bed Bath & Beyond Inc
|
|
208
|
|
3,598
|
|
Deluxe Corporation
|
|
94
|
|
4,692
|
|
Belden Inc
|
|
73
|
|
4,015
|
|
Dick's Sporting Goods Inc
|
|
167
|
|
8,265
|
|
Bio-Rad Laboratories Inc Class A
|
|
30
|
|
11,101
|
|
Dillard's Inc Class A
|
|
199
|
|
14,623
|
|
Bio-Techne Corporation
|
|
40
|
|
8,780
|
|
Domino's Pizza Inc
|
|
27
|
|
7,932
|
|
Black Hills Corporation
|
|
62
|
|
4,869
|
|
Domtar Corporation
|
|
69
|
|
2,639
|
|
Blackbaud Inc
|
|
68
|
|
5,413
|
|
Donaldson Company Inc
|
|
94
|
|
5,416
|
|
Boston Beer Company Inc Class A
|
|
32
|
|
12,091
|
|
Douglas Emmett Inc
|
|
28
|
|
1,229
|
|
Boyd Gaming Corporation
|
|
54
|
|
1,617
|
|
Dunkin' Brands Group Inc
|
|
107
|
|
8,083
|
|
Brighthouse Financial Inc
|
|
253
|
|
9,925
|
|
Dycom Industries Inc
|
|
101
|
|
4,762
|
|
Brink's Company
|
|
52
|
|
4,715
|
|
EMCOR Group Inc
|
|
55
|
|
4,746
|
|
Brinker International Inc
|
|
227
|
|
9,534
|
|
EPR Properties
|
|
14
|
|
989
|
|
Brixmor Property Group Inc
|
|
46
|
|
994
|
|
EQT Corporation
|
|
429
|
|
4,676
|
|
Brown & Brown Inc
|
|
274
|
|
10,818
|
|
Eagle Materials Inc
|
|
59
|
|
5,349
|
|
Brunswick Corporation
|
|
134
|
|
8,037
|
|
East West Bancorp Inc
|
|
30
|
|
1,461
|
|
CACI International Inc Class A
|
|
33
|
|
8,250
|
|
EastGroup Properties Inc
|
|
20
|
|
2,653
|
|
CDK Global Inc
|
|
145
|
|
7,929
|
|
Eaton Vance Corp
|
|
113
|
|
5,276
|
|
CNO Financial Group Inc
|
|
565
|
|
10,243
|
|
Edgewell Personal Care Co.
|
|
608
|
|
18,824
|
|
CNX Resources Corporation
|
|
536
|
|
4,744
|
|
Eldorado Resorts Inc
|
|
29
|
|
1,730
|
|
Cable One Inc
|
|
11
|
|
16,373
|
|
Encompass Health Corporation
|
|
151
|
|
10,460
|
|
Cabot Corporation
|
|
67
|
|
3,184
|
|
EnerSys
|
|
65
|
|
4,864
|
|
Cabot Microelectronics Corp.
|
|
78
|
|
11,257
|
|
Energizer Holdings Inc
|
|
382
|
|
19,184
|
|
Caesars Entertainment Corporation
|
|
121
|
|
1,646
|
|
Equitrans Midstream Corp
|
|
440
|
|
5,878
|
|
Camden Property Trust
|
|
101
|
|
10,716
|
|
Etsy Inc
|
|
151
|
|
6,689
|
|
Cantel Medical Corp
|
|
48
|
|
3,403
|
|
Evercore Inc Class A
|
|
106
|
|
7,925
|
|
Carlisle Companies Incorporated
|
|
17
|
|
2,751
|
|
Exelixis Inc
|
|
896
|
|
15,788
|
|
Carpenter Technology Corporation
|
|
75
|
|
3,733
|
|
F.N.B. Corporation
|
|
116
|
|
1,473
|
|
Carter's Inc
|
|
134
|
|
14,652
|
|
FTI Consulting Inc
|
|
72
|
|
7,968
|
|
Casey's General Stores Inc
|
|
52
|
|
8,267
|
|
FactSet Research Systems Inc
|
|
59
|
|
15,830
|
|
Catalent Inc
|
|
306
|
|
17,228
|
|
Fair Isaac Corporation
|
|
40
|
|
14,987
|
See accompanying Notes, which are an integral
part of the Financial Statements.
SYNTAX INDEX SERIES LP
Syntax 400 Series
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2019
Syntax 400 Series (Continued)
|
Common Stocks
|
|
Shares
|
|
Fair Value (US$)
|
|
Common Stocks
|
|
Shares
|
|
Fair Value (US$)
|
|
Federated Investors Inc Class B
|
|
159
|
|
5,182
|
|
Lamar Advertising Company Class A
|
|
11
|
|
982
|
|
First American Financial Corporation
|
|
75
|
|
4,374
|
|
Lancaster Colony Corporation
|
|
77
|
|
12,328
|
|
First Financial Bankshares Inc
|
|
41
|
|
1,439
|
|
Landstar System Inc
|
|
43
|
|
4,896
|
|
First Horizon National Corporation
|
|
217
|
|
3,594
|
|
Lear Corporation
|
|
21
|
|
2,881
|
|
First Industrial Realty Trust Inc
|
|
65
|
|
2,698
|
|
Legg Mason Inc
|
|
149
|
|
5,351
|
|
First Solar Inc
|
|
73
|
|
4,085
|
|
LendingTree Inc
|
|
37
|
|
11,227
|
|
FirstCash Inc
|
|
44
|
|
3,548
|
|
Lennox International Inc
|
|
23
|
|
5,611
|
|
Five Below Inc
|
|
64
|
|
8,183
|
|
Liberty Property Trust
|
|
20
|
|
1,201
|
|
Flowers Foods Inc
|
|
558
|
|
12,131
|
|
Life Storage Inc
|
|
102
|
|
11,045
|
|
Fluor Corporation
|
|
278
|
|
5,249
|
|
Ligand Pharmaceuticals Incorporated
|
|
150
|
|
15,643
|
|
Foot Locker Inc
|
|
368
|
|
14,348
|
|
Lincoln Electric Holdings Inc
|
|
85
|
|
8,222
|
|
Fulton Financial Corporation
|
|
82
|
|
1,429
|
|
Littelfuse Inc
|
|
25
|
|
4,782
|
|
GATX Corporation
|
|
48
|
|
3,977
|
|
LivaNova Plc
|
|
186
|
|
14,030
|
|
GEO Group Inc
|
|
272
|
|
4,518
|
|
LiveRamp Holdings Inc
|
|
110
|
|
5,288
|
|
GRAND CANYON ED INC
|
|
59
|
|
5,652
|
|
LogMeIn Inc
|
|
64
|
|
5,487
|
|
Gentex Corporation
|
|
144
|
|
4,173
|
|
Louisiana-Pacific Corporation
|
|
124
|
|
3,679
|
|
Genworth Financial Inc Class A
|
|
2,308
|
|
10,155
|
|
Lumentum Holdings Inc
|
|
428
|
|
33,940
|
|
Globus Medical Inc Class A
|
|
243
|
|
14,308
|
|
MAXIMUS Inc
|
|
62
|
|
4,612
|
|
Goodyear Tire & Rubber Company
|
|
167
|
|
2,598
|
|
MDU Resources Group Inc
|
|
184
|
|
5,467
|
|
Graco Inc
|
|
104
|
|
5,408
|
|
MEDNAX Inc
|
|
388
|
|
10,783
|
|
Graham Holdings Co.
|
|
8
|
|
5,112
|
|
MKS Instruments Inc
|
|
97
|
|
10,671
|
|
Green Dot Corporation Class A
|
|
173
|
|
4,031
|
|
MSA Safety Inc
|
|
47
|
|
5,939
|
|
Greif Class A
|
|
40
|
|
1,768
|
|
MSC Industrial Direct Co. Inc Class A
|
|
27
|
|
2,119
|
|
Grubhub Inc
|
|
147
|
|
7,150
|
|
Macerich Company
|
|
37
|
|
996
|
|
HNI Corporation
|
|
151
|
|
5,656
|
|
Mack-Cali Realty Corporation
|
|
57
|
|
1,318
|
|
Haemonetics Corporation
|
|
30
|
|
3,447
|
|
Manhattan Associates Inc
|
|
69
|
|
5,503
|
|
Hain Celestial Group Inc
|
|
319
|
|
8,280
|
|
ManpowerGroup Inc
|
|
83
|
|
8,059
|
|
Hancock Whitney Corporation
|
|
83
|
|
3,642
|
|
Marriott Vacations Worldwide Corporation
|
|
21
|
|
2,704
|
|
Hanover Insurance Group Inc
|
|
39
|
|
5,330
|
|
MasTec Inc
|
|
264
|
|
16,938
|
|
Hawaiian Electric Industries Inc
|
|
176
|
|
8,247
|
|
Masimo Corporation
|
|
68
|
|
10,748
|
|
HealthEquity Inc
|
|
64
|
|
4,740
|
|
Matador Resources Company
|
|
514
|
|
9,237
|
|
Healthcare Realty Trust Incorporated
|
|
494
|
|
16,485
|
|
Mattel Inc
|
|
449
|
|
6,084
|
|
Healthcare Services Group Inc
|
|
197
|
|
4,791
|
|
Medical Properties Trust Inc
|
|
803
|
|
16,951
|
|
Helen of Troy Limited
|
|
115
|
|
20,676
|
|
Mercury General Corporation
|
|
219
|
|
10,672
|
|
Herman Miller Inc
|
|
129
|
|
5,373
|
|
Mercury Systems Inc
|
|
56
|
|
3,870
|
|
Highwoods Properties Inc
|
|
26
|
|
1,272
|
|
Meredith Corporation
|
|
151
|
|
4,903
|
|
Hill-Rom Holdings Inc
|
|
32
|
|
3,633
|
|
Minerals Technologies Inc
|
|
56
|
|
3,227
|
|
Home BancShares Inc
|
|
75
|
|
1,474
|
|
Molina Healthcare Inc
|
|
82
|
|
11,127
|
|
Hubbell Incorporated Class B
|
|
33
|
|
4,878
|
|
Monolithic Power Systems Inc
|
|
61
|
|
10,859
|
|
ICU Medical Inc
|
|
10
|
|
1,871
|
|
Murphy Oil Corporation
|
|
318
|
|
8,522
|
|
IDACORP Inc
|
|
76
|
|
8,117
|
|
Murphy USA Inc
|
|
68
|
|
7,956
|
|
II-VI Incorporated
|
|
125
|
|
4,209
|
|
NCR Corporation
|
|
469
|
|
16,490
|
|
ITT Inc
|
|
55
|
|
4,065
|
|
NOW Inc
|
|
178
|
|
2,001
|
|
Ingevity Corporation
|
|
36
|
|
3,146
|
|
National Fuel Gas Company
|
|
103
|
|
4,794
|
|
Ingredion Incorporated
|
|
91
|
|
8,458
|
|
National Instruments Corporation
|
|
501
|
|
21,212
|
|
Insperity Inc
|
|
55
|
|
4,732
|
|
National Retail Properties Inc
|
|
19
|
|
1,019
|
|
Integra LifeSciences Holdings Corporation
|
|
29
|
|
1,690
|
|
Navient Corp
|
|
752
|
|
10,287
|
|
InterDigital Inc
|
|
198
|
|
10,789
|
|
Nektar Therapeutics
|
|
751
|
|
16,210
|
|
Interactive Brokers Group Inc Class A
|
|
228
|
|
10,629
|
|
NetScout Systems Inc
|
|
672
|
|
16,175
|
|
International Bancshares Corporation
|
|
34
|
|
1,464
|
|
New Jersey Resources Corporation
|
|
110
|
|
4,903
|
|
JBG SMITH Properties
|
|
30
|
|
1,197
|
|
New York Community Bancorp Inc
|
|
122
|
|
1,466
|
|
Jabil Inc
|
|
399
|
|
16,491
|
|
New York Times Company Class A
|
|
163
|
|
5,244
|
|
Jack in the Box Inc
|
|
104
|
|
8,115
|
|
NewMarket Corporation
|
|
6
|
|
2,919
|
|
Janus Henderson Group PLC
|
|
214
|
|
5,232
|
|
Nordson Corporation
|
|
49
|
|
7,979
|
|
Jefferies Financial Group Inc
|
|
248
|
|
5,300
|
|
NorthWestern Corporation
|
|
114
|
|
8,170
|
|
JetBlue Airways Corporation
|
|
645
|
|
12,074
|
|
Nu Skin Enterprises Inc Class A
|
|
492
|
|
20,162
|
|
John Wiley & Sons Inc Class A
|
|
109
|
|
5,289
|
|
NuVasive Inc
|
|
187
|
|
14,463
|
|
Jones Lang LaSalle Incorporated
|
|
62
|
|
10,794
|
|
OGE Energy Corp
|
|
184
|
|
8,182
|
|
KAR Auction Services Inc
|
|
558
|
|
12,159
|
|
ONE Gas Inc
|
|
53
|
|
4,959
|
|
KB Home
|
|
305
|
|
10,452
|
|
Old Republic International Corporation
|
|
237
|
|
5,302
|
|
KBR Inc
|
|
160
|
|
4,880
|
|
Olin Corporation
|
|
155
|
|
2,674
|
|
Kemper Corporation
|
|
141
|
|
10,927
|
|
Ollie's Bargain Outlet Holdings Inc
|
|
116
|
|
7,576
|
|
Kennametal Inc
|
|
213
|
|
7,858
|
|
Omega Healthcare Investors Inc
|
|
195
|
|
8,258
|
|
Kilroy Realty Corporation
|
|
14
|
|
1,175
|
|
Oshkosh Corp
|
|
44
|
|
4,165
|
|
Kirby Corporation
|
|
65
|
|
5,819
|
|
Owens Corning
|
|
41
|
|
2,670
|
|
Knight-Swift Transportation Holdings Inc A
|
|
128
|
|
4,588
|
|
Owens-Illinois Inc
|
|
160
|
|
1,909
|
See accompanying Notes, which are an integral
part of the Financial Statements.
SYNTAX INDEX SERIES LP
Syntax 400 Series
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2019
|
Common Stocks
|
|
Shares
|
|
Fair Value (US$)
|
|
Common Stocks
|
|
Shares
|
|
Fair Value (US$)
|
|
PBF Energy Inc Class A
|
|
267
|
|
8,376
|
|
Stifel Financial Corp
|
|
173
|
|
10,492
|
|
PNM Resources Inc
|
|
160
|
|
8,114
|
|
Synaptics Incorporated
|
|
166
|
|
10,918
|
|
PRA Health Sciences Inc
|
|
83
|
|
9,225
|
|
Syneos Health Inc Class A
|
|
151
|
|
8,981
|
|
PS Business Parks Inc
|
|
7
|
|
1,154
|
|
Synovus Financial Corp
|
|
37
|
|
1,450
|
|
PTC Inc
|
|
285
|
|
21,344
|
|
TCF Financial Corporation
|
|
32
|
|
1,498
|
|
PacWest Bancorp
|
|
38
|
|
1,454
|
|
TEGNA Inc
|
|
658
|
|
10,982
|
|
Papa John's International Inc
|
|
132
|
|
8,336
|
|
TRI Pointe Group Inc
|
|
677
|
|
10,548
|
|
Park Hotels & Resorts Inc
|
|
64
|
|
1,656
|
|
Tanger Factory Outlet Centers Inc
|
|
64
|
|
943
|
|
Patterson Companies Inc
|
|
85
|
|
1,741
|
|
Taubman Centers Inc
|
|
32
|
|
995
|
|
Patterson-UTI Energy Inc
|
|
529
|
|
5,554
|
|
Tech Data Corporation
|
|
14
|
|
2,010
|
|
Pebblebrook Hotel Trust
|
|
61
|
|
1,635
|
|
Teledyne Technologies Incorporated
|
|
34
|
|
11,782
|
|
Penn National Gaming Inc
|
|
64
|
|
1,636
|
|
Telephone and Data Systems Inc
|
|
664
|
|
16,886
|
|
Penumbra Inc
|
|
11
|
|
1,807
|
|
Tempur Sealy International Inc
|
|
69
|
|
6,007
|
|
Perspecta Inc
|
|
304
|
|
8,038
|
|
Tenet Healthcare Corporation
|
|
287
|
|
10,915
|
|
Pilgrim's Pride Corporation
|
|
249
|
|
8,146
|
|
Teradata Corporation
|
|
201
|
|
5,381
|
|
Pinnacle Financial Partners Inc
|
|
23
|
|
1,472
|
|
Teradyne Inc
|
|
160
|
|
10,910
|
|
Polaris Inc
|
|
81
|
|
8,238
|
|
Terex Corporation
|
|
134
|
|
3,991
|
|
PolyOne Corporation
|
|
85
|
|
3,127
|
|
Tetra Tech Inc
|
|
62
|
|
5,342
|
|
Pool Corporation
|
|
10
|
|
2,124
|
|
Texas Capital Bancshares Inc
|
|
132
|
|
7,494
|
|
Post Holdings Inc
|
|
75
|
|
8,182
|
|
Texas Roadhouse Inc
|
|
169
|
|
9,518
|
|
PotlatchDeltic Corporation
|
|
83
|
|
3,591
|
|
Thor Industries Inc
|
|
116
|
|
8,618
|
|
Prestige Consumer Healthcare Inc
|
|
411
|
|
16,645
|
|
Timken Company
|
|
47
|
|
2,647
|
|
Primerica Inc
|
|
78
|
|
10,184
|
|
Toll Brothers Inc
|
|
268
|
|
10,589
|
|
Prosperity Bancshares Inc(R)
|
|
20
|
|
1,438
|
|
Tootsie Roll Industries Inc
|
|
342
|
|
11,676
|
|
RLI Corp.
|
|
58
|
|
5,221
|
|
Toro Company
|
|
74
|
|
5,896
|
|
RPM International Inc
|
|
35
|
|
2,687
|
|
Transocean Ltd.
|
|
872
|
|
5,999
|
|
Rayonier Inc
|
|
112
|
|
3,669
|
|
TreeHouse Foods Inc
|
|
162
|
|
7,857
|
|
Regal Beloit Corp
|
|
48
|
|
4,109
|
|
Trex Company Inc
|
|
68
|
|
6,112
|
|
Reinsurance Group of America Incorporated
|
|
65
|
|
10,599
|
|
Trimble Inc
|
|
148
|
|
6,170
|
|
Reliance Steel & Aluminum Co.
|
|
33
|
|
3,952
|
|
Trinity Industries Inc
|
|
175
|
|
3,876
|
|
RenaissanceRe Holdings Ltd.
|
|
55
|
|
10,781
|
|
TripAdvisor Inc
|
|
218
|
|
6,623
|
|
Repligen Corporation
|
|
96
|
|
8,880
|
|
Trustmark Corporation
|
|
42
|
|
1,449
|
|
Resideo Technologies Inc
|
|
505
|
|
6,025
|
|
Tyler Technologies Inc
|
|
19
|
|
5,700
|
|
Restoration Hardware Holdings Inc.
|
|
22
|
|
4,697
|
|
UGI Corporation
|
|
109
|
|
4,922
|
|
Royal Gold Inc
|
|
34
|
|
4,156
|
|
UMB Financial Corporation
|
|
232
|
|
15,924
|
|
Ryder System Inc
|
|
77
|
|
4,182
|
|
Umpqua Holdings Corporation
|
|
83
|
|
1,469
|
|
SEI Investments Company
|
|
81
|
|
5,304
|
|
United Bankshares Inc
|
|
38
|
|
1,469
|
|
SLM Corp
|
|
1,194
|
|
10,639
|
|
United States Steel Corporation
|
|
291
|
|
3,320
|
|
SYNNEX Corporation
|
|
16
|
|
2,061
|
|
United Therapeutics Corporation
|
|
178
|
|
15,678
|
|
Sabra Health Care REIT Inc
|
|
389
|
|
8,301
|
|
Universal Display Corporation
|
|
21
|
|
4,327
|
|
Sabre Corp
|
|
284
|
|
6,373
|
|
Urban Edge Properties
|
|
51
|
|
978
|
|
Sally Beauty Holdings Inc
|
|
178
|
|
3,248
|
|
Urban Outfitters Inc
|
|
511
|
|
14,190
|
|
Sanderson Farms Inc
|
|
48
|
|
8,459
|
|
Valley National Bancorp
|
|
126
|
|
1,443
|
|
Science Applications International Corp
|
|
95
|
|
8,267
|
|
Valmont Industries Inc
|
|
18
|
|
2,696
|
|
Scientific Games Corporation
|
|
573
|
|
15,345
|
|
Valvoline Inc
|
|
124
|
|
2,655
|
|
Scotts Miracle-Gro Company Class A
|
|
188
|
|
19,962
|
|
ViaSat Inc
|
|
222
|
|
16,249
|
|
Selective Insurance Group Inc
|
|
81
|
|
5,280
|
|
Vishay Intertechnology Inc
|
|
520
|
|
11,071
|
|
Semtech Corporation
|
|
221
|
|
11,691
|
|
Visteon Corporation
|
|
44
|
|
3,810
|
|
Senior Housing Properties Trust
|
|
1,084
|
|
9,149
|
|
WEX Inc
|
|
22
|
|
4,608
|
|
Sensient Technologies Corporation
|
|
50
|
|
3,304
|
|
WPX Energy Inc
|
|
365
|
|
5,015
|
|
Service Corporation International
|
|
70
|
|
3,222
|
|
WW International Inc
|
|
84
|
|
3,210
|
|
Service Properties Trust
|
|
68
|
|
1,654
|
|
Washington Federal Inc
|
|
217
|
|
7,953
|
|
Signature Bank
|
|
11
|
|
1,503
|
|
Watsco Inc
|
|
11
|
|
1,982
|
|
Silgan Holdings Inc
|
|
59
|
|
1,834
|
|
Webster Financial Corporation
|
|
153
|
|
8,164
|
|
Silicon Laboratories Inc
|
|
94
|
|
10,902
|
|
Weingarten Realty Investors
|
|
32
|
|
1,000
|
|
Six Flags Entertainment Corporation
|
|
59
|
|
2,661
|
|
Wendy's Company
|
|
366
|
|
8,129
|
|
Skechers U.S.A. Inc Class A
|
|
329
|
|
14,210
|
|
Werner Enterprises Inc
|
|
130
|
|
4,731
|
|
SolarEdge Technologies Inc
|
|
53
|
|
5,040
|
|
West Pharmaceutical Services Inc
|
|
12
|
|
1,804
|
|
Sonoco Products Company
|
|
43
|
|
2,654
|
|
Williams-Sonoma Inc
|
|
46
|
|
3,378
|
|
Southwest Gas Holdings Inc
|
|
64
|
|
4,862
|
|
Wintrust Financial Corporation
|
|
52
|
|
3,687
|
|
Spire Inc
|
|
60
|
|
4,999
|
|
Woodward Inc
|
|
32
|
|
3,790
|
|
Spirit Realty Capital Inc
|
|
20
|
|
984
|
|
World Fuel Services Corporation
|
|
188
|
|
8,163
|
|
Sprouts Farmers Markets Inc
|
|
487
|
|
9,423
|
|
World Wrestling Entertainment Inc Class A
|
|
254
|
|
16,477
|
|
Steel Dynamics Inc
|
|
115
|
|
3,915
|
|
Worthington Industries Inc
|
|
67
|
|
2,826
|
|
Stericycle Inc
|
|
75
|
|
4,786
|
|
Wyndham Destinations Inc
|
|
54
|
|
2,791
|
|
Sterling Bancorp
|
|
69
|
|
1,455
|
|
Wyndham Hotels & Resorts Inc
|
|
27
|
|
1,696
|
See accompanying Notes, which are an integral
part of the Financial Statements.
SYNTAX INDEX SERIES LP
Syntax 400 Series
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2019
Syntax 400 Series (Continued)
|
Common Stocks
|
Shares
|
|
Fair Value (US$)
|
|
Risk Group
|
Percent of
Net Assets
|
|
XPO Logistics Inc
|
58
|
|
4,623
|
|
Syntax 400 Series
|
|
|
Yelp Inc
|
190
|
|
6,618
|
|
Financials Risk Group
|
13.90%
|
|
j2 Global Inc
|
170
|
|
15,931
|
|
Energy Risk Group
|
7.58%
|
|
nVent Electric plc
|
195
|
|
4,988
|
|
Industrials Risk Group
|
13.76%
|
|
Total Common Stocks
|
|
|
|
|
Information Tools Risk Group
|
14.39%
|
|
(Cost $2,336,433)
|
|
$
|
2,734,304
|
|
Information Products & Services Risk Group
|
14.21%
|
|
|
|
|
|
|
Consumer Risk
Group
|
14.55%
|
|
|
|
|
|
|
Food Risk Group
|
7.05%
|
|
|
|
|
|
|
Healthcare Risk Group
|
14.31%
|
|
|
|
|
|
|
Total
|
99.75%
|
See accompanying Notes, which are an integral
part of the Financial Statements.
SYNTAX INDEX SERIES LP
Syntax 400 Series
STATEMENT OF OPERATIONS
Year ended December 31, 2019
|
|
|
Syntax 400
|
|
|
Income
|
|
Series
|
|
|
|
|
|
|
|
Dividend income
|
|
$
|
38,286
|
|
|
Interest income
|
|
|
7
|
|
|
|
|
|
|
|
|
Total income
|
|
|
38,293
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Custodian fees
|
|
|
1,626
|
|
|
Management fees
|
|
|
7,573
|
|
|
Expenses in excess of cap
|
2(g)
|
|
(3,143
|
)
|
|
|
|
|
|
|
|
Total expenses
|
|
|
6,056
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
32,237
|
|
|
|
|
|
|
|
|
Net realized gain/(loss) on investments
|
|
|
(37,163
|
)
|
|
Net unrealized gain/(loss) on investments
|
|
|
523,828
|
|
|
|
|
|
|
|
|
Net realized gains/(losses) and net change in unrealized
|
|
|
|
|
|
gain/(loss) on investments
|
|
|
486,665
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in partners’ capital resulting
|
|
|
|
|
|
from operations
|
|
$
|
518,902
|
|
|
|
|
|
|
|
|
Pro-rata allocation of income
|
|
|
|
|
|
Limited Partners
|
|
$
|
516,032
|
|
|
General Partner
|
|
|
2,870
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in partners’ capital resulting
|
|
|
|
|
|
from operations
|
|
$
|
518,902
|
|
See accompanying Notes, which are an integral
part of the Financial Statements.
SYNTAX INDEX SERIES LP
Syntax 400 Series
STATEMENT
OF CHANGES IN PARTNERS’ CAPITAL
Year ended December 31, 2019
|
|
|
General
|
|
|
Limited
|
|
|
|
|
|
|
|
Partner
|
|
|
Partners
|
|
|
Total
|
|
|
Syntax 400 Series
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital January 1, 2019
|
|
$
|
12,289
|
|
|
$
|
2,209,845
|
|
|
$
|
2,222,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Capital withdrawals
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net decrease in Partners' capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
resulting from operations
|
|
|
2,870
|
|
|
|
516,032
|
|
|
|
518,902
|
|
|
Total increase/(decrease) in Partners' capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
during the year
|
|
|
2,870
|
|
|
|
516,032
|
|
|
|
518,902
|
|
|
Partners’ capital December 31, 2019
|
|
$
|
15,159
|
|
|
$
|
2,725,877
|
|
|
$
|
2,741,036
|
|
See accompanying Notes, which are an integral
part of the Financial Statements.
SYNTAX INDEX SERIES LP
Syntax 400 Series
STATEMENT OF CASH FLOWS
Year ended December 31, 2019
|
|
|
Syntax 400
|
|
|
|
|
Series
|
|
|
Cash Flows from operating activities:
|
|
|
|
|
Net increase/(decrease) in partners' capital from operations
|
|
$
|
518,902
|
|
|
Adjustments to reconcile net increase in partners' capital from
|
|
|
|
|
|
operations to net cash flows from operating activities:
|
|
|
|
|
|
Purchase of investment securities
|
|
|
(1,083,179
|
)
|
|
Proceeds from disposition of investment securities
|
|
|
1,051,614
|
|
|
Unrealized gain/(loss) on investments
|
|
|
(523,828
|
)
|
|
Net realized gain/(loss) from investments
|
|
|
37,163
|
|
|
Decrease (increase) in interest and dividends receivable
|
|
|
257
|
|
|
Increase (decrease) in amounts due to brokers
|
|
|
7,637
|
|
|
Decrease (increase) in amounts due from brokers
|
|
|
-
|
|
|
Increase (decrease) in accrued expenses
|
|
|
1,353
|
|
|
Net cash provided by/(used in) operating activities
|
|
|
9,919
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from contributions
|
|
|
-
|
|
|
Decrease (Increase) in contributions receivable
|
|
|
-
|
|
|
Increase (Decrease) in contributions received in advance
|
|
|
-
|
|
|
Increase (Decrease) in withdrawals payable
|
|
|
-
|
|
|
Payments for withdrawals
|
|
|
-
|
|
|
Net cash provided by/(used in) financing activities
|
|
|
-
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
9,919
|
|
|
Beginning cash and cash equivalents balance
|
|
|
7,218
|
|
|
Ending cash and cash equivalents balance
|
|
$
|
17,137
|
|
See accompanying Notes, which are an integral
part of the Financial Statements.
SYNTAX INDEX SERIES LP
NOTES
TO THE FINANCIAL STATEMENTS
December
31, 2019
|
|
1.
|
ORGANIZATION AND PURPOSE
|
These separate set of financial statements
of the Syntax 400 Series within the Syntax Index Series, LP have been prepared for the purpose of the Syntax ETF Trust’s
Statement of Additional Information in the Registration Statement (Form N-1A No. 333-215607). As further described in Note 10 Subsequent
Events, on January 15, 2020 the Syntax 400 Series transferred substantially all of its asset and liabilities to the Syntax Stratified
Midcap ETF (ticker: SMDY). In exchange for the transfer the investors of the Syntax 400 Series received shares in the Syntax Stratified
Midcap ETF in place of each investors holding in the Syntax 400 Series. Following this, the Syntax 400 Series within Syntax Index
Series, LP ceased its trading activities.
Syntax Index Series LP ("Fund"
or "Partnership") was formed as a limited partnership and organized under the laws of the State of Delaware. The name
was changed from Syntax 900 I, L.P. to Syntax Index Series LP on January 1, 2015. The Partnership commenced operations on November
28, 2010. The General Partner of the Partnership is Syntax Index Series GP, LLC ("General Partner"). The name of the
General Partner was changed from Syntax 900 I GP, LLC to Syntax Index Series GP, LLC on December 14, 2016. The Partnership’s
investment manager is Syntax Advisors LLC (“Manager”). The registered offices of the General Partner are located at
One Liberty Plaza, New York, NY 10006.
On January 1, 2015, with the consent of
a majority of the Limited Partners, the Partnership was restructured into a Delaware Series Limited Partnership. The Partnership
also changed its name from Syntax 900 I, L.P. to Syntax Index Series LP at the time of the restructuring. Prior to the restructuring,
the Partnership operated as a single investment vehicle that was managed as eleven sub-portfolios. These sub-portfolios reflect
the securities included in each of the Syntax 900, 500 and 400 as well as the Syntax Financials, Energy, Industrials, Information
Tools, Information Products, Consumer Products, Food and Healthcare Portfolios. In the opinion of the General Partner, it was in
the best interests of the Partnership and the Limited Partners to create segregated, individually investable portfolios (“Series”)
within the Partnership to hold securities included in each index and industry grouping described above. The assets, liabilities
and income of each Series are accounted for individually and separate from other Series. The assets and liabilities of the Partnership
were split among the newly created Series.
The investment objective of the Partnership
is to deliver returns that provide an equity risk premium commensurate with the risk of a broad-based, diversified US large cap
equity portfolio. The Manager utilizes a proprietary methodology developed by its affiliate, Syntax Indices LLC, called “stratification”.
Stratification is a statistical technique designed to identify and quantify non-systematic risk. The investment universe that Syntax
uses to accomplish its investment objectives are 900 large and mid-cap US companies. An integral part of the Fund’s investment
objective is to provide this broad-based equity exposure while minimizing non-systematic risk. A portfolio is exposed to non-systematic
risk when its intended weights or exposures to specific business risks deviate from their original values due to changes in market
values of the constituents of the portfolio. Syntax manages its portfolio’s exposure to non-systematic risk by hierarchically
stratifying the constituents of its portfolio into specific predetermined risk groups and sub-groups. It then assigns specific
relative weights to each predetermined risk exposure. Syntax actively maintains these risk exposures by resetting the weights no
less than quarterly. Syntax believes that through this active risk management process, a portfolio’s exposure to and the
impact from non-systematic risks can be minimized and Syntax can create an optimal risk profile in which the only concentrated
risk is systematic. Traditional stock indices use another approach: capitalization weighting. These indices typically have relative
weights based on their respective market capitalizations.
SYNTAX INDEX SERIES LP
NOTES
TO THE FINANCIAL STATEMENTS (continued)
December
31, 2019
|
|
1.
|
ORGANIZATION AND PURPOSE (Continued)
|
Because of the hierarchical risk stratification
methodology used by the Fund to manage specific risk exposure and control for selection biases in a portfolio, the Fund’s
investment objective is, by definition, not to provide returns consistent with a capitalization-weighted portfolio. Rather, the
Fund’s investment strategy is to provide investors with normalized returns that should be expected from an equity portfolio
that consistently maintains broad-based and well-distributed exposure to each risk category in its portfolio. By using Syntax’
patented attribute-based bar code technology, the Fund’s strategy is to control for these selection biases that are endemic
to a capitalization weighted portfolio and, thus, protect its portfolio from the downside pressure that results from non-systematic
variables. By using the 900 large and mid-cap companies as its investment universe, the Fund provides a direct ongoing comparison
between these two different approaches to portfolio management.
The debts, liabilities and obligations
incurred, contracted for or otherwise existing with respect to the Series are enforceable only against the assets of the Series
and not against any other assets of the Partnership generally or any other Series and none of the debts, liabilities, obligations
and expenses incurred, contracted for or otherwise existing with respect to the Partnership generally or any other Series are enforceable
against the assets of the Series.
|
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
(a) Basis of Accounting
The financial statements are expressed
in US dollars. They are prepared in accordance with accounting principles generally accepted in the United States of America ("US
GAAP"). The Fund is an investment company and follows accounting and reporting guidance in Accounting Standards Codification
Topic 946, Financial Services - Investment Companies.
(b) Use of Estimates
The preparation of financial statements
in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Management believes that the estimates utilized in preparing its financial statements are reasonable
and prudent. Actual results could differ from these estimates.
(c) Cash and Cash Equivalents
Cash and cash equivalents include amounts
due from banks on demand and interest bearing deposits with original maturities of three months or less. There are no restrictions
on cash balances.
(d) Investments
Security transactions are recorded on the
trade date basis. Realized gains and losses are computed by use of the specific identification method. Dividend income is recognized
on the ex-dividend date while interest is recorded on an accrual basis.
Securities are fair valued as of the close
of trading on the primary market in which each security trades on the reporting date. Equity securities are valued at the latest
quoted sales prices or official closing prices taken from the primary market in which each security trades. Securities not traded
on the valuation date are fair valued at the mean of the latest quoted bid and ask prices. To the extent these securities are actively
traded and valuation adjustments are not applied, they are categorized in level 1 of the fair value hierarchy.
SYNTAX INDEX SERIES LP
NOTES
TO THE FINANCIAL STATEMENTS (continued)
December
31, 2019
|
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
(e) Accrued Expenses
Expenses such as custodian fees are estimated
and accrued monthly. Management believes that the amounts so accrued are reasonable and reflective of actual charges incurred.
The General Partner pays or reimburses the Fund for all Fund expenses including the cost of the audit of the Partnership’s
financial statements, tax return preparation fees, bank charges.
(f) Expense Cap
The Manager and the General Partner have
agreed to limit the expenses for the life of the Fund, including management fees and trading costs, charged to limited partners
to no more than 0.30% per annum in the 400 Series. Actual expenses to the Fund exceeded this limit by $3,143 during the year which
amount the General Partner reimbursed the Fund.
(g) Tax
The Partnership files annual
tax returns as a combined whole and, therefore, the Series is included in the Partnership’s annual tax filing. As a result,
the following discussion is related to the Partnership as a whole and not to the Series individually. The Partnership is subject
to the provisions of the FASB ASC 740-10-65-1 requirements for accounting for uncertainty in income taxes. These standards establish
consistent thresholds as it relates to accounting for income taxes. It defines the threshold for recognizing the benefits of tax-return
positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority and requires
measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50% likely
to be realized. The general partner has analyzed the Partnership's inventory of tax positions taken with respect to applicable
income tax issues for all open tax years (in each respective jurisdiction) and has concluded that no provision for income tax is
required in the Partnership's financial statements nor in the 400 Series financial statements. The federal and state income tax
returns of the Partnership for 2019 are subject to examination by the IRS and state taxing authorities, generally for three years
after they were filed.
(h) Recently Adopted Accounting
Pronouncement
In August 2018, the FASB issued
ASU No. 2018-13 (“ASU 2018-13”), “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to
the Disclosure Requirements for Fair Value Measurement”.
ASU 2018-13 removes the requirement
to disclose the following: the policy for the timing of transfers between the levels of the fair value hierarchy, the valuation
processes for Level 3 fair value measurements and the changes in unrealized gains/(losses) for the period included in earnings
for recurring Level 3 fair value measurements held at the end of the reporting period. ASU 2018-13 also requires the following
modification: in lieu of a rollforward for recurring Level 3 investments, the Partnership is required to disclose the purchases
of Level 3 assets and liabilities and the transfers into and out of Level 3 of the fair value hierarchy. ASU 2018-13 is effective
for fiscal years beginning after December 15, 2019, however early adoption is permitted. The General Partner has elected to early
adopt ASU 2018-13 as of January 1, 2018.
SYNTAX INDEX SERIES LP
NOTES
TO THE FINANCIAL STATEMENTS (continued)
December
31, 2019
Investments in securities are carried at
fair value. Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a three-tier fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and lowest priority to
unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC Topic 820 are described below:
Level 1 Unadjusted
quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities:
Level 2 Quoted
prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly
or indirectly:
Level 3 Prices
or valuation that requires inputs that are both significant to the fair value measurement and unobservable.
There were no transfers of securities between
levels of the fair value hierarchy during the year ended December 31, 2019. All investments in securities were classified as Level
1 at December 31, 2019 with a fair value of $2,734,304.
The Investment Manager (Syntax Analytics
LLC) is entitled to receive a management fee at an annual rate of between 0.25% and 0.30% calculated based on assets under management
as of the last day of each calendar month including General Partner capital. Management fees are charged at the Series level. The
rates charged vary by Series between 0.25% and 0.30%. Management fees are charged to the 400 Series at 0.30% per annum and totaled
$7,573 during the year.
|
|
5.
|
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK
|
At December 31, 2019, the Partnership had
all of its individual counterparty credit risk with Citibank N.A. in the United States. Senior debt of Citibank N.A. is rated A+
by Standard and Poor’s and is rated A1 by Moody’s. In addition, all cash and cash equivalents are held with Citibank
N.A. in the United States. The Partnership continuously monitors the credit standing of its broker and does not expect any material
losses as a result of this concentration.
All securities transactions of the Partnership
are cleared by registered brokers/dealers pursuant to customer agreements. In the event the brokers/dealers are unable to fulfill
their obligations, the Partnership would be subject to credit risk.
SYNTAX INDEX SERIES LP
NOTES
TO THE FINANCIAL STATEMENTS (continued)
December
31, 2019
|
|
6.
|
PORTFOLIO GAINS AND LOSSES
|
The 400 Series within the Fund is a passive
portfolio in that it owns and maintains a portfolio of securities whose only constituents are those constituting the Syntax 400.
Gains and losses for the Series are allocated pro-rata to those Partners invested in the Series. Except for additions and deletions
to the constituent base that happen from time to time as part of the indexing process, the underlying securities in the Series
do not change. The primary difference between the Fund and a traditional US stock index is their approach to risk management. As
opposed to capitalization-weighting the constituents, the Fund hierarchically stratifies the constituents into specific risk exposures.
The Fund manages the portfolio’s specific risk exposure using a predetermined weighting algorithm for each group and each
hierarchically ordered sub-group. Because the constituents of a Series are dynamic and their relative market values change over
time, the relative weights of these risk groups will change over time also. To adjust for this, the Fund resets the relative weights
of each risk group within a Series on a quarterly basis. This process by which the Fund resets risk exposures will generate inter-period
gains and losses. The only source of gains and/or losses from the sales of securities for the Fund is from this quarterly rebalancing
process of resetting the relative risk exposures of the constituents within each Series of the Fund and from additions and deletions
to the portfolio as the underlying constituents change.
|
Index Series
|
Net
Investment Income
|
Realized
Gain
|
Unrealized
Gain
|
Net
Increase/(Decrease)
in Assets from
Operations
|
|
Syntax 400 Series
|
$ 32,237
|
$ (37,163)
|
$ 523,828
|
$ 518,902
|
|
|
7.
|
COMMITMENTS AND CONTINGENCIES
|
Management is aware of no outstanding commitments
or contingencies.
The following represents operating performance
of the 400 Series within the Fund, ratios to average net assets and total return information for the year ended December 31, 2019:
|
Syntax 400 Series Financial Highlights:
|
|
|
Total return to limited partners (a)
|
23.35%
|
|
Ratio of gross expenses to average limited partners’ capital (b)
|
0.36%
|
|
Ratio of net expenses to average limited partners’ capital (b)
|
0.24%
|
|
Ratio of net investment income to average partners’ capital (c)
|
1.26%
|
|
|
(a)
|
Total return is calculated based on net asset value for the limited partner class taken as a whole.
An individual investor’s return may vary from these returns based on timing of capital transactions.
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|
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(b)
|
The expense ratios are calculated as a percentage of average net assets and is calculated for the
limited partner class taken as a whole. The computation of such ratios based on the amount of expenses assessed to an individual
investor’s capital may vary from these ratios based on the timing of capital transactions.
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|
|
(c)
|
The ratio of net investment income is calculated as a percentage of average net assets.
|
SYNTAX INDEX SERIES LP
NOTES
TO THE FINANCIAL STATEMENTS (continued)
December
31, 2019
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|
9.
|
RELATED PARTY TRANSACTIONS
|
Capital
Transactions
The General
Partner had $15,159 invested in the 400 Series at December 31, 2019. Persons who are members of the General Partner’s family
had $112,279 invested in the 400 Series at December 31, 2019 and management of the Investment Manager had $6,672invested in the
Series at December 31, 2019.
The minimum
required initial capital contribution of each Limited Partner in respect of a Series shall be $250,000, or such lesser amount as
the General Partner may permit, in its sole discretion. The General Partner reserves the right to reject subscriptions and may
change the required minimum contribution amount at any time. Interests generally will be available for subscription on the first
Business Day of each calendar quarter or such other times as the General Partner shall determine. However, subscriptions may be
suspended or restricted to existing investors, as determined by the General Partner. The Partnership may accept additional contributions
in such amounts as of the first Business Day of each calendar quarter or at such other times as the General Partner may permit,
but no Limited Partner shall be obligated to make any additional capital contribution to the Partnership.
Limited
Partners may voluntarily withdraw all or part of its Series Capital Account balance effective as of the last Business Day of any
calendar quarter (and at such other times as the General Partner may determine). Irrevocable written notice of any withdrawal must
be given to the General Partner at least 60 days prior to the proposed Withdrawal Date.
In connection with the preparation of the
accompanying financial statements as of December 31, 2019, management has evaluated the impact of all subsequent events on the
Fund through April 27, 2020, the date the financial statements were issued, and has determined that there were no additional subsequent
events requiring recognition or disclosure other than as set forth below.
On January 15, 2020, the Syntax 400 Series
made an in-kind, tax free distribution of its entire Net Asset Value to the Syntax Stratified Midcap ETF (ticker: SMDY). In exchange
for the in-kind contribution, the Syntax 400 Series received 93,096 shares of the Syntax Stratified Midcap ETF. Such shares, and
residual cash, were subsequently distributed on a pro rata basis to the investors in the Syntax 400 Series. Following the distribution,
the Syntax 400 Series ceased trading activities.
Certain impacts to public health conditions
particular to the coronavirus (covid-19) outbreak that occurred subsequent to year end and the resulting potential for further
subsequent events particular to the industries in which the Fund’s investment conducts its operations, as well as general
economic, political and public health conditions, may have a significant negative impact on the Fund’s operations and profitability.
The extent of the impact to the financial performance of the Fund will depend of future developments, including (i) the duration
and spread of the outbreak, (ii) the restrictions and advisories, (III) the effects on the financial markets, and (iv) the effects
on the economy overall, all of which are highly uncertain and unpredictable at this time.
APPENDIX A
PROXY VOTING POLICIES
Background
An investment adviser has a duty of
care and loyalty to its Clients and Investors with respect to monitoring corporate events and exercising proxy authority in the
best interests of such Clients and Investors. Vantage Consulting Group Inc. (“VCG”) will adhere to Rule 206(4)-6 of
the Advisers Act and all other applicable laws and regulations in regard to the voting of proxies.
Policies and Procedures
As an investment advisor, VCG may have
the authority to vote proxies relating to securities on behalf of clients. In certain circumstances, when permitted by the client
VCG may outsource the proxy voting. These policies and procedures are designed to deal with the complexities which may arise in
cases where VCG's interests conflict or appear to conflict with the interests of its clients and to communicate to clients the
methods and rationale whereby VCG exercises proxy authority. This document is available to any client upon request. VCG will also
make available the record of VCG's votes promptly upon request.
The CCO of VCG is responsible for monitoring
the effectiveness of this policy. Unless contractually obligated to vote in a certain manner, VCG will reach its voting decisions
independently, after appropriate investigation. It does not generally intend to delegate its decision making or to rely on the
recommendations of any third party, although it may take such recommendations into consideration. Where VCG deviates from the guidelines
listed below, or depends upon a third party to make the decision, the reasons shall be documented. VCG may consult with such other
experts, such as CPA's, investment bankers, attorneys, etc., as it regards necessary to help it reach informed decisions.
Non-Voting of Proxies
VCG will generally not vote proxies in
the following situations:
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|
•
|
Proxies are received for equity securities where, at the
time of receipt, VCG's position, across all clients that it advises, is less than, or equal to, 1% of the total outstanding
voting equity (an "immaterial position").
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|
|
•
|
Proxies are received for equity securities where, at the
time of receipt, VCG's Clients and Investors no longer hold that position.
|
Management Proposals
Absent good reason to the contrary, VCG
will generally give substantial weight to management recommendations regarding voting. This is based on the view that management
is usually in the best position to know which corporate actions are in the best interests of common shareholders as a whole.
VCG will generally vote for routine matters
proposed by issuer management, such as setting a time or place for an annual meeting, changing the name or fiscal year of the company,
or voting for directors in favor of the management proposed slate. Other routine matters in which VCG will generally vote along
with company management include: appointment of auditors, fees paid to board members, and change in the board structure. As long
as the proposal does not: i) measurably change the structure, management, control or operations of the company; ii) measurably
change the terms of, or fees or expenses associated with, an investment in the company; and the proposal is consistent with customary
industry standards and practices, as well as the laws of the state of incorporation applicable to the company, VCG will generally
vote along with management.
Non-Routine Matters
|
Non-routine matters might include such things as:
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|
•
|
Amendments to management incentive plans
|
|
•
|
The authorization of additional common or preferred stock
|
|
•
|
Initiation or termination of barriers to takeover or acquisition
|
|
•
|
Mergers or acquisitions
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|
•
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Corporate reorganizations
|
|
•
|
"Contested" director slates
|
In non-routine matters, VCG will attempt
to be generally familiar with the questions at issue. Non- routine matters will be voted on a case-by-case basis, given the complexity
of many of these issues.
Processing Proxy Votes
The CCO will be responsible for determining
whether each proxy is for a "routine" matter, as described above, and whether the Policy and Procedures set forth herein
actually address the specific issue. For proxies that are not clearly "routine", VCG, in conjunction with the CCO, will
determine how to vote each such proxy by applying these policies and procedures. Upon making a decision, the proxy will be executed
and returned for submission to the company. VCG's proxy voting record will be updated at the time the proxy is submitted.
An independent proxy voting advisory and research firm may be
appointed as a "Proxy Service" for voting VCG's proxies after approval by the CCO.
Documenting Proxy Voting
VCG will maintain copies of each proxy
statement received and of each executed proxy; however, VCG may rely on the SEC's EDGAR system for records of proxy statements.
VCG will also maintain records relating to each proxy, including the voting decision on each proxy, and any documents that were
material to making the voting decision.
VCG will also maintain a record of each
written request from a Client or Investor for proxy voting information and VCG's written response to any request from a Client
or Investor for proxy voting information. These records shall be maintained in compliance with Rule 204-2.
Actual and Apparent Conflicts of Interest
Potential conflicts of interest between
VCG and its clients may arise when VCG's relationships with an issuer or with a related third party actually conflict, or appear
to conflict, with the best interests of the VCG's clients.
If the issue is specifically addressed
in these policies and procedures, VCG will vote in accordance with these policies. In a situation where the issue is not specifically
addressed in these Policies and Procedures and an apparent or actual conflict exists, VCG shall either: i) delegate the voting
decision to an independent third party; ii) inform clients of the conflict of interest and obtain advance consent of a majority
of such clients for a particular voting decision; or iii) obtain approval of a voting decision from VCG's CCO, who will be responsible
for documenting the rationale for the decision made and voted.
In all such cases, VCG will make disclosures
to clients of all material conflicts and will keep documentation supporting its voting decisions.
Syntax
ETF Trust
PART C - OTHER INFORMATION
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(a)
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Declaration of Syntax ETF Trust (“Registrant”) is incorporated herein by reference to Exhibit (a) of the Registrant’s Initial Registration Statement on Form N-1A, as filed with the SEC on January 18, 2017.
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(b)
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Amended and Restated By-Laws of the Registrant are incorporated herein by reference to Exhibit (b) of the Registrant’s Post-Effective Amendment No. 2 filing, as filed with the SEC on April 25, 2019.
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(c)
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Not applicable.
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(d)
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(i)
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Investment Advisory Agreement by and between Registrant and Syntax Advisors, LLC, is incorporated herein by reference to Exhibit (d)(i) of Pre-Effective Amendment 5, as filed with the SEC on August 22, 2018.
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(a)
|
Amendment dated January 6, 2020 to the Investment Advisory Agreement between the Registrant and Syntax Advisors, LLC, is incorporated herein by reference to Exhibit (d) (a) of the Registrant’s Post-Effective Amendment 7, as filed with the SEC on January 14, 2020.
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(b)
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Amendment dated February 24, 2020 to the Investment Advisory Agreement between the Registrant and Syntax Advisors, LLC, as filed with the SEC on February 27, 2020.
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(ii)
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Investment Sub-Advisory Agreement by and between Syntax Advisors, LLC and Vantage Consulting Group, is incorporated herein by reference to Exhibit (d)(ii) of Pre-Effective Amendment 5, as filed with the SEC on August 22, 2018.
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(a)
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Amendment dated January 7, 2020 to the Investment Sub-Advisory Agreement between the Registrant and Vantage Consulting Group, is incorporated herein by reference to Exhibit (d) (ii) of the Registrant’s Post-Effective Amendment 7, as filed with the SEC on January 14, 2020.
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(b)
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Amendment dated February 19, 2020 to Appendix A of the Investment Sub-Advisory Agreement with Vantage, as filed with the SEC on February 27, 2020.
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(iii)
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Investment Sub-Advisory Agreement by and between Syntax Advisors, LLC and Swan Global Investments, LLC dated as of February 19, 2020 with respect to Syntax Stratified U.S. Total Market Hedged ETF, is incorporated herein by reference to Exhibit (d)(iii) of Post-Effective Amendment 14, as filed with the SEC on April 22, 2020.
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(iv)
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Expense Limitation and Reimbursement Agreement between the Registrant and the Syntax Advisors, LLC, is incorporated herein by reference to Exhibit (d)(iii) of Pre-Effective Amendment 5, as filed with the SEC on August 22, 2018.
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(a)
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Amendment dated July 15, 2019 to the Expense Limitation and Reimbursement Agreement by between the Registrant and the Syntax Advisors, LLC, is incorporated herein by reference to Exhibit (d)(iii)(a) of the Registrant’s Post-Effective Amendment 7, as filed with the SEC on January 14, 2020.
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(b)
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Amendment dated February 19, 2020 to the Expense Limitation and Reimbursement Agreement between the between the Registrant and the Syntax Advisors, LLC, is incorporated herein by reference to Exhibit (d)(iv)(b) of Post-Effective Amendment 14, as filed with the SEC on April 22, 2020.
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(v)
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Expense Limitation and Reimbursement Agreement dated February 19, 2020 between the Registrant and the Syntax Advisors, LLC on behalf of Syntax Stratified U.S. Total Market ETF, as filed with the SEC on February 27, 2020.
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(e)
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ETF Distribution Agreement by and between Registrant and Foreside Fund Services, LLC, is incorporated herein by reference to Exhibit (e) of Pre-Effective Amendment 5, as filed with the SEC on August 22, 2018.
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(a)
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Amendment dated January 6, 2020 to the ETF Distribution Agreement by and between Registrant and Foreside Fund Services, is incorporated herein by reference to Exhibit (d) (a) of the Registrant’s Post-Effective Amendment 7, as filed with the SEC on January 14, 2020.
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(b)
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Amendment dated February 24, 2020 to the ETF Distribution Agreement by and between Registrant and Foreside Fund Services, as filed with the SEC on February 27, 2020.
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(f)
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Not Applicable.
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(g)
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Master Custodian Agreement by and between Registrant and State Street Bank and Trust Company, is incorporated herein by reference to Exhibit (g) of Pre-Effective Amendment 5, as filed with the SEC on August 22, 2018.
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(a)
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Amended Appendix A to the Master Custodian Agreement by and between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Exhibit (g) (a) of the Registrant’s Post-Effective Amendment 7, as filed with the SEC on January 14, 2020.
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(b)
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Amended Appendix A dated February 19, 2020 to the Master Custodian Agreement by and between Registrant and State Street Bank and Trust Company, as filed with the SEC on February 27, 2020.
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(h)
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(i)
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Administration Agreement by and between Registrant and State Street Bank and Trust Company, is incorporated herein by reference to Exhibit (h)(i) of Pre-Effective Amendment 5, as filed with the SEC on August 22, 2018.
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(a)
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Amended Schedule A to the Administration Agreement by and between Registrant and State Street Bank and Trust Company, is incorporated herein by reference to Exhibit (h) (i) (a) of the Registrant’s Post-Effective Amendment 7, as filed with the SEC on January 14, 2020.
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(b)
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Amended Schedule A dated February 19, 2020 to the Administration Agreement by and between Registrant and State Street Bank and Trust Company, as filed with the SEC on February 27, 2020.
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(ii)
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Transfer Agency and Service Agreement by and between Registrant and State Street Bank and Trust Company, is incorporated herein by reference to Exhibit (h)(ii) of Pre-Effective Amendment 5, as filed with the SEC on August 22, 2018.
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(a)
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Amended Schedule A to the Transfer Agency and Service Agreement by and between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Exhibit (h) (ii) (a) of the Registrant’s Post-Effective Amendment 7, as filed with the SEC on January 14, 2020.
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(b)
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Amended Schedule A dated February 19, 2020 to the Transfer Agency and Service Agreement by and between Registrant and State Street Bank and Trust Company, as filed with the SEC on February 27, 2020.
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(iii)
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Fund CCO and AMLO Agreement with Foreside Fund Officer Services, LLC, is incorporated herein by reference to Exhibit (h)(iii) of Pre-Effective Amendment 5, as filed with the SEC on August 22, 2018.
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(iv)
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Master Index and Technology License Agreement, dated October 29, 2018 between Syntax LLC and Syntax Advisors, as filed with the SEC on February 27, 2020.
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(a)
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Stratified Technology and Data License Agreement dated February 24, 2020, between Syntax LLC and Syntax Advisors for Syntax Stratified U.S. Total Market ETF, as filed with the SEC on February 27, 2020.
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(b)
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Statement of Work to the Master Index and Technology License Agreement dated April 7, 2020, between Syntax LLC and Syntax Advisors for Syntax Stratified LargeCap II ETF and Syntax Stratified U.S. Total Market Hedged ETF, is incorporated herein by reference to Exhibit (h)(iv)(b) of Post-Effective Amendment 14, as filed with the SEC on April 22, 2020.
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(v)
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Master Custom Index Agreement, dated October 1, 2016 between S&P Opco, LLC and Locus Analytics, LLC, a Syntax affiliate, as filed with the SEC on February 27, 2020.
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(i)
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(i)
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Opinion and consent of Trust counsel, filed herein.
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(ii)
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Not Applicable.
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(j)
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(i)
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Consent of Independent Auditors, filed herein.
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(ii)
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Consent of Ernst & Young, Dublin, Ireland, filed herein.
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(k)
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Not Applicable.
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(l)
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Not Applicable.
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(m)
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Rule 12b-1 Plan, is incorporated herein by reference to Exhibit (m) of Pre-Effective Amendment 5, as filed with the SEC on August 22, 2018.
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(a)
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Amended Schedule A dated December 5, 2019 to the Rule 12b-1 Plan dated March 28, 2018, is incorporated herein by reference to Exhibit (m) (a) of the Registrant’s Post-Effective Amendment 7, as filed with the SEC on January 14, 2020.
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(b)
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Amended Schedule A dated February 19, 2020 to the Rule 12b-1 Plan dated March 28, 2018, as filed with the SEC on February 27, 2020.
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(n)
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Not Applicable.
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(o)
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Reserved.
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(p)
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(i)
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Code of Ethics of the Registrant is incorporated herein by reference to Exhibit (p)(i) of Pre-Effective Amendment 5, as filed with the SEC on August 22, 2018.
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(ii)
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Code of Ethics of Syntax Advisors, LLC is incorporated herein by reference to Exhibit (p)(ii) of Pre-Effective Amendment 5, as filed with the SEC on August 22, 2018.
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(iii)
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Code of Ethics of Vantage Consulting Group is incorporated herein by reference to Exhibit (p)(iii) of Pre-Effective Amendment 5, as filed with the SEC on August 22, 2018.
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(iv)
|
Code of Ethics of Swan Global Investments, LLC, is incorporated herein by reference to Exhibit (p)(iv) of Post-Effective Amendment 14, as filed with the SEC on April 22, 2020.
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(v)
|
Code of Ethics of Foreside Fund Services, LLC, is incorporated herein by reference to Exhibit (p)(v) of Post-Effective Amendment 14, as filed with the SEC on April 22, 2020.
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(q)
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Power of Attorney dated February 15, 2019, is incorporated herein by reference to Exhibit (q) of the Registrant’s Post-Effective Amendment No. 2 filing, as filed with the SEC on April 25, 2019.
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Item 29.
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Persons Controlled by or under Common Control with Registrant.
|
To the knowledge of the Registrant,
neither the Registrant nor any Series thereof is directly or indirectly controlled by or under common control with any other person.
The Registrant has no subsidiaries.
Additionally, see the “Control Persons
and Principal Holders of Securities” section of the Statement of Additional Information for a list of shareholders who own
more than 5% of the funds’ outstanding shares and such information is incorporated by reference to this Item.
Reference is made to Section 8 of the Registrant’s
Trust Instrument referenced in Item 28(a)(1) with respect to the indemnification of the Registrant’s trustees and officers,
which is set forth below:
Section 8.1
General Provisions.
Section 8.1.1
General Limitation of Liability. No personal liability for any debt or obligation of
the Trust shall attach to any Trustee of the Trust. Without limiting the foregoing, a Trustee shall not be responsible for or liable
in any event for any neglect or wrongdoing of any officer, agent, employee, investment advisor, subadvisor, principle underwriter
or custodian of the Trust, nor shall any Trustee be responsible or liable for the act or omission of any other Trustee. Every note,
bond, contract, instrument, certificate, Share or undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any Trustee in connection with Trust shall be conclusively deemed to have been executed
or done only in or with respect to their, his or her capacity as Trustees or Trustee and neither such Trustees or Trustee nor the
Shareholders shall be personally liable thereon.
Section 8.1.2
Notice of Limited Liability. Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or officer shall recite that the same was executed or made by or
on behalf of the Trust by them as Trustees or Trustee or as officers or officer and not individually and that the obligations of
such instrument are not binding upon any of them or the Shareholders individually but are binding only upon the assets and property
of the Trust or belonging or attributable to a Series or Class thereof, and may contain such further recitals as they, he or she
may deem appropriate, but the omission thereof shall not operate to bind any Trustees or Trustee or officers or officer or Shareholders
or Shareholder individually.
Section 8.1.3
Liability Limited to Assets of the Trust. All persons extending credit to, contracting
with or having any claim against the Trust shall look only to the assets of the Trust or belonging to a Series or Class thereof,
as appropriate, for payment under such credit, contract or claim, and neither the Shareholders nor the Trustees nor any of the
Trust’s officers, employees or agents, whether past, present or future, shall be personally liable therefor.
Section 8.2
Liability of Trustee. The exercise by the Trustees of their powers and discretion hereunder
shall be binding upon the Trust, the Shareholders and any other person dealing with the Trust. The liability of this Trustees,
however, shall be limited by this Section 8.2.
Section 8.2.1
Liability for Own Actions. A Trustee shall be liable to the Trust or the Shareholders
only for his or her own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct
of the office of Trustee, and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law.
Section 8.2.2
Liability for Actions of Others. The Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee, consultant, advisor, administrative distributor, principal
underwriter, custodian, transfer agent, dividend disbursing agent, Shareholder servicing agent or accounting agent of the Trust,
nor shall any Trustee be responsible for any act or omission of any other Trustee.
Section 8.2.3
Advice of Experts and Reports of Others. The Trustees may take advice of counsel or
other experts with respect to the meaning and operation of this Declaration of Trust and their duties as Trustees hereunder, and
shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. In discharging
their duties, the Trustees, when acting in good faith, shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officers appointed by them, any independent public accountant and (with respect to
the subject matter of the contract involved) any officer, partner or responsible employee of any other party to any contract entered
into hereunder.
Section 8.2.4
Bond. Except as provided for in Section 8.5.4, the Trustees shall not be
required to give any bond as such, nor any surety if a bond is required.
Section 8.2.5
Declaration of Trust Governs Issues of Liability. The provisions of this Declaration
of Trust, to the extent that they restrict the duties and liabilities of the Trustees otherwise existing at law or in equity, are
agreed by the Shareholders and all other Persons bound by this Declaration of Trust to replace such other duties and liabilities
of the Trustees.
Section 8.3
Liability of Third Persons Dealing with Trustees. No person dealing with the Trustees
shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon the order of the Trustees.
Section 8.4
Liability of Shareholders. Without limiting the provisions of this Section 8.4
or the DSTA, the Shareholders shall be entitled to the same limitation of personal liability extended to stockholders of private
corporations organized for profit under the General Corporation Law of the State of Delaware.
Section 8.4.1
Limitation of Liability. No personal liability for any debt or obligation of the Trust
shall attach to any Shareholder or former Shareholder of the Trust, and neither the Trustees, nor any officer, employee or agent
of the Trust shall have any power to bind any Shareholder personally or to call upon any Shareholder for the payment of any sum
of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay by way of subscription
for any Shares or otherwise.
Section 8.4.2
Indemnification of Shareholders. In case any Shareholder or former Shareholder of the
Trust shall be held to be personally liable solely by reason of being or having been a Shareholder and not because of such Shareholder’s
acts or omissions or for some other reason, the Shareholder or former Shareholder (or, in the case of a natural person, his or
her 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 out of the assets of the Trust to be held harmless from and indemnified against all
loss and expense arising from such liability; provided, however, there shall be no liability or obligation of the
Trust arising hereunder to reimburse any Shareholder for taxes paid by reason of such Shareholder’s ownership of any Shares
or for losses suffered by reason of any changes in value of any Trust assets. The Trust shall, upon request by the Shareholder
or former Shareholder, assume the defense of any claim made against the Shareholder for any act or obligation of the Trust and
satisfy any judgment thereon.
Section 8.5
Indemnification.
Section 8.5.1
Indemnification of Covered Persons. Subject to the exceptions and limitations contained
in Section 8.5.2, every person who is or has been a Trustee, officer, employee or agent of the Trust, including persons
who serve at the request of the Trust as directors, trustees, officers, employees or agents of another organization in which the
Trust has an interest as a shareholder, creditor or otherwise (each, a “Covered Person”), shall be indemnified
by the Trust to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him
or her in connection with any claim, action, suit or proceeding in which he or she becomes involved as a party or otherwise by
virtue of his or her being or having been such a director, trustee, officer, employee or agent and against amounts paid or incurred
by him or her in settlement thereof.
Section 8.5.2
Exceptions. No indemnification shall be provided hereunder to a Covered Person:
(a)
for any liability to the Trust or its Shareholders arising out of a final adjudication by the court or other body before
which the proceeding was brought that the Covered Persons engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office;
(b)
with respect to any matter as to which the Covered Person shall have been finally adjudicated not to have acted in good
faith in the reasonable belief that his or her action was in the best interests of the Trust; or
(c)
in the event of a settlement or other disposition not involving a final adjudication (as provided in paragraph (a)
or (b) of this Section 8.5.2) and resulting in a payment by a Covered Person, unless there has been either a
determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office or position by the court or other body approving the settlement or other
disposition, or a reasonable determination, based on a review of readily available facts (as opposed to a full trial-type inquiry),
that he or she did not engage in such conduct, such determination being made by: (i) a vote of a majority of the Disinterested
Trustees (as such term is defined in Section 8.5.2) acting on the matter (provided that a majority of Disinterested
Trustees then in office act on the matter); or (ii) a written opinion of independent legal counsel.
Section 8.5.3
Rights of Indemnification. The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, and shall be severable, shall not 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, 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 Trust personnel other than Covered Persons may be entitled by contract or otherwise under law.
Section 8.5.4
Expenses of Indemnification. Expenses of preparation and presentation of a defense
to any claim, action, suit or proceeding subject to a claim for indemnification under this Section 8.5 shall be advanced
by the Trust prior to final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount
if it is ultimately determined that he or she is not entitled to indemnification under this Section 8.5, provided that
either:
(a)
Such undertaking is secured by a surety bond or some other appropriate security of the Trust shall be insured against losses
arising out of any such advances; or
(b)
a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then
in office act on the matter) or independent legal counsel in a written opinion shall determine, based upon a review of the readily
available facts (as opposed to the facts available upon a full trial), that there is a reason to believe that the recipient ultimately
will be found entitled to indemnification.
Section 8.5.5
Certain Defined Terms Relating to Indemnification. As used in this Section 8.5,
the following words shall have the meanings set forth below:
(a)
“Claim,” “action,” “suit” or “proceeding” shall apply to all claims, actions,
suits, proceedings (civil, criminal, administrative or other, including appeals), actual or threatened;
(b)
a “Disinterested Trustee” is one (i) who is not an Interested Person of the Trust (including anyone, as
such Disinterested Trustee, who has been exempted from being an Interested Person by any rule, regulation or order of the Commission),
and (ii) against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the
same or similar grounds is then or has been pending; and
(c)
“Liability” and “expenses” shall include, without limitation, attorneys’ fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
Section 8.6
Jurisdiction, Venue, and Waiver of Jury Trial. In accordance with Section 3804(e) of the DSTA, any suit, action
or proceeding brought by or in the right of any Shareholder or any person claiming any interest in any Shares seeking to enforce
any provision of, or based on any matter arising out of, or in connection with, this Declaration of Trust or the Trust, any Series
or Class or any Shares, including any claim of any nature against the Trust, any Series or Class, the Trustees or officers of the
Trust, shall be brought exclusively in the Court of Chancery of the State of Delaware to the extent there is subject matter jurisdiction
in such court for the claims asserted or, if not, then in the Superior Court of the State of Delaware, and all Shareholders and
other such Persons hereby irrevocably consent to the jurisdiction of such courts (and the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waive, to the fullest extent permitted by law, any objection they may make
now or hereafter have to the laying of the venue of any such suit, action or proceeding in such court or that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient forum and further, IN CONNECTION WITH ANY SUCH SUIT,
ACTION, OR PROCEEDING BROUGHT IN THE SUPERIOR COURT IN THE STATE OF DELAWARE, ALL SHAREHOLDERS AND ALL OTHER SUCH PERSONS HEREBY
IRREVOCABLY WAIVE THE RIGHT TO A TRIAL BY JURY TO THE FULLEST EXTENT PERMITTED BY LAW. All Shareholders and other such persons
agree that service of summons, complaint or other process in connection with any proceedings may be made by registered or certified
mail or by overnight courier addressed to such person at the address shown on the books and records of the Trust for such person
or at the address of the person shown on the books and records of the Trust with respect to the Shares that such person claims
an interest in. Service of process in any such suit, action or proceeding against the Trust or any Trustee or officer of the Trust
may be made at the address of the Trust’s registered agent in the State of Delaware. Any service so made shall be effective
as if personally made in the State of Delaware.
|
|
Item 31.
|
Business and Other Connections of Investment Adviser
|
Syntax Advisors, LLC (the “Adviser”)
serves as the investment adviser for the Registrant with respect to each of its series. The principal business address
of the Adviser is One Liberty Plaza, 46th Floor, New York, NY 10006. With respect to the Adviser, the response to this
Item is incorporated by reference to the Adviser’s Uniform Application for Investment Adviser Registration (“Form ADV”)
on file with the Securities and Exchange Commission (“SEC”) and dated October 9, 2019.
Vantage Consulting Group (the “Sub-Adviser”)
serves as the investment sub-adviser for the Registrant with respect to each of its series. The principal business address
of the Sub-Adviser is 3500 Pacific Ave. Virginia Beach, VA 23451. With respect to the Sub-Adviser, the response to this
Item is incorporated by reference to the Sub-Adviser’s Uniform Application for Investment Adviser Registration (“Form
ADV”) on file with the Securities and Exchange Commission (“SEC”) and dated August 22, 2019.
Swan Global Investments, LLC (the “Options
Sub-Advisor”) serves as an investment sub-adviser to only the options strategies of Syntax Stratified U.S. Total Market ETF.
The principal business address of the Options Sub-Adviser is 1099 Main Avenue Suite 206, Durango, CO 81301. With respect
to the Options Sub-Adviser, the response to this Item is incorporated by reference to the Sub-Adviser’s Uniform Application
for Investment Adviser Registration (“Form ADV”) on file with the Securities and Exchange Commission (“SEC”)
and dated March 13, 2020.
The Adviser’s and Sub-Adviser’s
respective Form ADVs may be obtained, free of charge, at the SEC's website at www.adviserinfo.sec.gov.
|
|
Item 32.
|
Principal Underwriters.
|
|
|
(a)
|
Foreside Fund Services, LLC (the “Distributor”) serves as principal underwriter for the following investment companies
registered under the Investment Company Act of 1940, as amended:
|
|
|
1.
|
ABS Long/Short Strategies Fund
|
|
|
4.
|
AGF Investments Trust (f/k/a FQF Trust)
|
|
|
5.
|
AlphaCentric Prime Meridian Income Fund
|
|
|
6.
|
American Century ETF Trust
|
|
|
7.
|
American Customer Satisfaction ETF, Series of ETF Series Solutions
|
|
|
10.
|
Bluestone Community Development Fund (f/k/a The 504 Fund)
|
|
|
11.
|
Braddock Multi-Strategy Income Fund, Series of Investment Managers Series Trust
|
|
|
12.
|
Brand Value ETF, Series of ETF Series Solutions
|
|
|
13.
|
Bridgeway Funds, Inc.
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|
|
14.
|
Brinker Capital Destinations Trust
|
|
|
15.
|
Calamos Convertible and High Income Fund
|
|
|
16.
|
Calamos Convertible Opportunities and Income Fund
|
|
|
17.
|
Calamos Global Total Return Fund
|
|
|
18.
|
Carlyle Tactical Private Credit Fund
|
|
|
19.
|
Center Coast Brookfield MLP & Energy Infrastructure Fund
|
|
|
20.
|
Cliffwater Corporate Lending Fund
|
|
|
21.
|
CornerCap Group of Funds
|
|
|
22.
|
Davis Fundamental ETF Trust
|
|
|
23.
|
Defiance Next Gen Connectivity ETF, Series of ETF Series Solutions
|
|
|
24.
|
Defiance Next Gen Food & Agriculture ETF, Series of ETF Series Solutions
|
|
|
25.
|
Defiance Quantum ETF, Series of ETF Series Solutions
|
|
|
26.
|
Direxion Shares ETF Trust
|
|
|
27.
|
Eaton Vance NextShares Trust
|
|
|
28.
|
Eaton Vance NextShares Trust II
|
|
|
30.
|
Ellington Income Opportunities Fund
|
|
|
31.
|
EntrepreneurShares Series Trust
|
|
|
32.
|
Esoterica Thematic Trust
|
|
|
33.
|
Evanston Alternative Opportunities Fund
|
|
|
34.
|
EventShares U.S. Legislative Opportunities ETF, Series of Listed Funds Trust
|
|
|
35.
|
Exchange Listed Funds Trust (f/k/a Exchange Traded Concepts Trust II)
|
|
|
36.
|
Fiera Capital Series Trust
|
|
|
40.
|
Friess Small Cap Growth Fund, Series of Managed Portfolio Series
|
|
|
41.
|
GraniteShares ETF Trust
|
|
|
42.
|
Guinness Atkinson Funds
|
|
|
43.
|
Infinity Core Alternative Fund
|
|
|
45.
|
Innovator ETFs Trust II (f/k/a Elkhorn ETF Trust)
|
|
|
46.
|
Ironwood Institutional Multi-Strategy Fund LLC
|
|
|
47.
|
Ironwood Multi-Strategy Fund LLC
|
|
|
49.
|
John Hancock Exchange-Traded Fund Trust
|
|
|
50.
|
Manor Investment Funds
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|
|
51.
|
Miller/Howard Funds Trust
|
|
|
52.
|
Miller/Howard High Income Equity Fund
|
|
|
53.
|
Moerus Worldwide Value Fund, Series of Northern Lights Fund Trust IV
|
|
|
54.
|
Morningstar Funds Trust
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|
|
56.
|
Overlay Shares Core Bond ETF, Series of Listed Funds Trust
|
|
|
57.
|
Overlay Shares Foreign Equity ETF, Series of Listed Funds Trust
|
|
|
58.
|
Overlay Shares Large Cap Equity ETF, Series of Listed Funds Trust
|
|
|
59.
|
Overlay Shares Municipal Bond ETF, Series of Listed Funds Trust
|
|
|
60.
|
Overlay Shares Small Cap Equity ETF, Series of Listed Funds Trust
|
|
|
61.
|
Pacific Global ETF Trust
|
|
|
62.
|
Palmer Square Opportunistic Income Fund
|
|
|
63.
|
Partners Group Private Income Opportunities, LLC
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|
|
64.
|
PENN Capital Funds Trust
|
|
|
65.
|
Performance Trust Mutual Funds, Series of Trust for Professional Managers
|
|
|
66.
|
Plan Investment Fund, Inc.
|
|
|
67.
|
PMC Funds, Series of Trust for Professional Managers
|
|
|
68.
|
Point Bridge GOP Stock Tracker ETF, Series of ETF Series Solutions
|
|
|
69.
|
Quaker Investment Trust
|
|
|
70.
|
Renaissance Capital Greenwich Funds
|
|
|
71.
|
Reverse Cap Weighted U.S. Large Cap ETF, Series of ETF Series Solutions
|
|
|
72.
|
RMB Investors Trust (f/k/a Burnham Investors Trust)
|
|
|
73.
|
Robinson Opportunistic Income Fund, Series of Investment Managers Series Trust
|
|
|
74.
|
Robinson Tax Advantaged Income Fund, Series of Investment Managers Series Trust
|
|
|
75.
|
Roundhill BITKRAFT Esports & Digital Entertainment ETF, Series of Listed Funds Trust
|
|
|
79.
|
Sound Shore Fund, Inc.
|
|
|
80.
|
Source Dividend Opportunity ETF, Series of Listed Funds Trust
|
|
|
83.
|
Tactical Income ETF, Series of Collaborative Investment Series Trust
|
|
|
85.
|
The Community Development Fund
|
|
|
86.
|
The Relative Value Fund
|
|
|
88.
|
Third Avenue Variable Series Trust
|
|
|
90.
|
TIFF Investment Program
|
|
|
91.
|
Timothy Plan High Dividend Stock ETF, Series of The Timothy Plan
|
|
|
92.
|
Timothy Plan International ETF, Series of The Timothy Plan
|
|
|
93.
|
Timothy Plan US Large Cap Core ETF, Series of The Timothy Plan
|
|
|
94.
|
Timothy Plan US Small Cap Core ETF, Series of The Timothy Plan
|
|
|
95.
|
Transamerica ETF Trust
|
|
|
96.
|
TrueMark AI & Deep Learning Fund, Series of Listed Funds Trust
|
|
|
97.
|
TrueMark ESG Active Opportunities Fund, Series of Listed Funds Trust
|
|
|
98.
|
U.S. Global Investors Funds
|
|
|
99.
|
Variant Alternative Income Fund
|
|
|
100.
|
VictoryShares Developed Enhanced Volatility Wtd ETF, Series of Victory Portfolios II
|
|
|
101.
|
VictoryShares Dividend Accelerator ETF, Series of Victory Portfolios II
|
|
|
102.
|
VictoryShares Emerging Market High Div Volatility Wtd ETF, Series of Victory Portfolios II
|
|
|
103.
|
VictoryShares Emerging Market Volatility Wtd ETF, Series of Victory Portfolios II
|
|
|
104.
|
VictoryShares International High Div Volatility Wtd ETF, Series of Victory Portfolios II
|
|
|
105.
|
VictoryShares International Volatility Wtd ETF, Series of Victory Portfolios II
|
|
|
106.
|
VictoryShares US 500 Enhanced Volatility Wtd ETF, Series of Victory Portfolios II
|
|
|
107.
|
VictoryShares US 500 Volatility Wtd ETF, Series of Victory Portfolios II
|
|
|
108.
|
VictoryShares US Discovery Enhanced Volatility Wtd ETF, Series of Victory Portfolios II
|
|
|
109.
|
VictoryShares US EQ Income Enhanced Volatility Wtd ETF, Series of Victory Portfolios II
|
|
|
110.
|
VictoryShares US Large Cap High Div Volatility Wtd ETF, Series of Victory Portfolios II
|
|
|
111.
|
VictoryShares US Multi-Factor Minimum Volatility ETF, Series of Victory Portfolios II
|
|
|
112.
|
VictoryShares US Small Cap High Div Volatility Wtd ETF, Series of Victory Portfolios II
|
|
|
113.
|
VictoryShares US Small Cap Volatility Wtd ETF, Series of Victory Portfolios II
|
|
|
114.
|
VictoryShares USAA Core Intermediate-Term Bond ETF, Series of Victory Portfolios II
|
|
|
115.
|
VictoryShares USAA Core Short-Term Bond ETF, Series of Victory Portfolios II
|
|
|
116.
|
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF, Series of Victory Portfolios II
|
|
|
117.
|
VictoryShares USAA MSCI International Value Momentum ETF, Series of Victory Portfolios II
|
|
|
118.
|
VictoryShares USAA MSCI USA Small Cap Value Momentum ETF, Series of Victory Portfolios II
|
|
|
119.
|
VictoryShares USAA MSCI USA Value Momentum ETF, Series of Victory Portfolios II
|
|
|
120.
|
Vivaldi Opportunities Fund
|
|
|
121.
|
West Loop Realty Fund, Series of Investment Managers Series Trust (f/k/a Chilton Realty Income & Growth Fund)
|
|
|
123.
|
WST Investment Trust
|
|
|
124.
|
XAI Octagon Floating Rate & Alternative Income Term Trust
|
|
|
Item 32(b)
|
The following are the Officers and Manager of the Distributor, the Registrant’s underwriter. The Distributor’s
main business address is Three Canal Plaza, Suite 100, Portland, Maine 04101.
|
|
Name
|
Address
|
Position with Underwriter
|
Position with Registrant
|
|
Richard J. Berthy
|
Three Canal Plaza, Suite 100, Portland, ME 04101
|
President, Treasurer and Manager
|
None
|
|
Mark A. Fairbanks
|
Three Canal Plaza, Suite 100, Portland, ME 04101
|
Vice President
|
None
|
|
Jennifer K. DiValerio
|
899 Cassatt Road, 400 Berwyn Park, Suite 110, Berwyn, PA 19312
|
Vice President
|
None
|
|
Nanette K. Chern
|
Three Canal Plaza, Suite 100, Portland, ME 04101
|
Vice President and Chief Compliance Officer
|
None
|
|
Jennifer E. Hoopes
|
Three Canal Plaza, Suite 100, Portland, ME 04101
|
Secretary
|
None
|
Item 32(c) Not applicable.
|
|
Item 33.
|
|
Location of Accounts and Records
|
The account books and other documents required
to be maintained by Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder will be
maintained at the offices of:
|
|
(a)
|
Syntax Advisors, LLC, One Liberty Plaza, 46th Floor, New York, NY 10006 (records as investment adviser);
|
|
|
(b)
|
Vantage Consulting Group, 3500 Pacific Ave. Virginia Beach, VA 23451;
|
|
|
(c)
|
Swan Global Investments, LLC, 1099 Main Avenue Suite 206, Durango, CO 81301;
|
|
|
(d)
|
State Street Bank and Trust Company, One Lincoln Street, Boston, MA 02111
|
(records as administrator, custodian
and transfer agent); and
|
|
(e)
|
Foreside Fund Services, LLC, Three Canal Plaza, Suite 100, Portland, Maine 04101 (records as distributor).
|
|
|
Item 34.
|
Management Services
|
The Registrant has no management related
service contract which is not discussed in Part A or Part B of this form.
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirement for effectiveness
of this registration statement under rule 485(b) under the Securities Act and has duly caused this Post-Effective Amendment No.
15 to Registration Statement No. 333-215607 to be signed on its behalf by the undersigned, duly authorized, in the City of New
York, State of New York, on the 28th day of April, 2020.
|
|
SYNTAX ETF TRUST
|
|
|
(Registrant)
|
|
|
|
|
|
|
By:
|
/s/ Rory B. Riggs
|
|
|
|
Rory B. Riggs
|
|
|
|
Chief Executive Officer (Principal Executive Officer)
|
Pursuant to the requirements of the Securities
Act of 1933, this Post-Effective Amendment No. 15 to its Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Rory B. Riggs
|
|
Chief Executive Officer (Principal Executive Officer) and Trustee
|
|
April 28, 2020
|
|
Rory B. Riggs
|
|
|
|
|
|
|
|
|
|
|
/s/ David Jaffin
|
|
Treasurer (Principal Financial Officer)
|
|
April 28, 2020
|
|
David Jaffin
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Kathy Cuocolo*
|
|
President and Trustee
|
|
April 28, 2020
|
|
Kathy Cuocolo
|
|
|
|
|
|
|
|
|
|
/s/ Deborah Fuhr*
|
|
Trustee
|
|
April 28, 2020
|
|
Deborah Fuhr
|
|
|
|
|
|
|
|
|
|
|
|
/s/ George Hornig*
|
|
Trustee
|
|
April 28, 2020
|
|
George Hornig
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Richard Lyons*
|
|
Trustee
|
|
April 28, 2020
|
|
Richard Lyons
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Stewart Myers*
|
|
Trustee
|
|
April 28, 2020
|
|
Steward Myers
|
|
|
|
|
|
|
|
|
|
|
|
* by: /s/ Carly Arison
|
|
Secretary
|
|
April 28, 2020
|
|
Carly Arison **
(**Secretary and attorney-in-fact pursuant to power of attorney
previously filed.)
|
|
|
|
|
Exhibits Filed With
Post-Effective Amendment No. 15 to
Registration Statement on
Form N-1A
Syntax
ETF Trust
Registration No. 333-215607
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