Summary Prospectus July 31, 2017, as supplemented December 27, 2017

Transcription

1 AlphaClne Alternative Alpha ETF (ALFA) Listed n the Cbe BZX Exchange, Inc. Summary Prspectus July 31, 2017, as supplemented December 27, 2017 alphaclnefunds.cm Befre yu invest, yu may want t review the Fund s prspectus and statement f additinal infrmatin ( SAI ), which cntain mre infrmatin abut the Fund and its risks. The current prspectus and SAI dated July 31, 2017, as supplemented frm time t time, are incrprated by reference int this Summary Prspectus. Yu can find the Fund s prspectus, SAI, and ther infrmatin abut the Fund nline Yu can als get this infrmatin at n cst by calling r by sending an request t ETF@usbank.cm. Investment Objective The AlphaClne Alternative Alpha ETF (the Alternative Alpha ETF r the Fund ) seeks t track the price and yield, befre fees and expenses, f the AlphaClne Hedge Fund Masters Index (the Index ). Fees and Expenses f the Fund This table describes the fees and expenses that yu may pay if yu buy and hld shares f the Fund ( Shares ). This table and the example belw d nt include the brkerage cmmissins that investrs may pay n their purchases and sales f Shares. Annual Fund Operating Expenses (expenses that yu pay each year as a percentage f the value f yur investment) Management Fees % Distributin and Service (Rule 12b-1) Fees Nne Other Expenses % Ttal Annual Fund Operating Expenses 0.65% 1 Restated t reflect the Fund s cntractual management fee and investment bjective effective December 27, Expense Example This Example is intended t help yu cmpare the cst f investing in the Fund with the cst f investing in ther funds. The Example assumes that yu invest $10,000 in the Fund fr the time perids indicated and then redeem all f yur Shares at the end f thse perids. The Example als assumes that yur investment has a 5% return each year and that the Fund s perating expenses remain the same. Althugh yur actual csts may be higher r lwer, based n these assumptins yur csts wuld be: Prtfli Turnver 1 Year: $66 3 Years: $208 5 Years: $ Years: $810 The Fund pays transactin csts, such as cmmissins, when it buys and sells securities (r turns ver its prtfli). A higher prtfli turnver rate may indicate higher transactin csts and may result in higher taxes when Shares are held in a taxable accunt. These csts, which are nt reflected in annual fund perating expenses r in the example, affect the Fund s perfrmance. Fr the fiscal year ended March 31, 2017, the Fund s prtfli turnver rate was 183% f the average value f its prtfli. 1

2 Principal Investment Strategies The Alternative Alpha ETF uses a passive management (r indexing) apprach t track the perfrmance, befre fees and expenses, f the Index. AlphaClne Hedge Fund Masters Index The Index utilizes a prprietary, quantitative Clne Scre methdlgy develped by AlphaClne, Inc. ( AlphaClne ), the Fund s index prvider, t replicate the U.S. equity securities favred as investments by hedge funds and institutinal investrs. The Index was established by AlphaClne in 2017 and is cmpsed f up t 50 U.S.-listed equity securities f small, mid, r large capitalizatin cmpanies and recnstituted quarterly. AlphaClne s Clne Scre methdlgy analyzes the histrical returns f a given hedge fund s r institutinal investr s hldings and assigns a Clne Scre (i.e., ranking) t each such hedge fund and institutinal investr based n such returns. Clne Scres are recalculated semi-annually. The Clne Scre methdlgy incrprates infrmatin frm hedge fund and institutinal investr public disclsure filings (e.g., Frm 13F filings) with the U.S. Securities and Exchange Cmmissin t identify their disclsed hldings at the end f each quarter. The Index is made up f the equity securities held by thse hedge funds and institutinal investrs with the highest Clne Scres. Index cnstituents are equal weighted at the time f each recnstitutin, althugh each individual cnstituent is limited t a 5% weighting at the time f each recnstitutin. The equity securities that may cmprise the Index include, but are nt limited t, U.S.-listed cmmn and preferred stck f dmestic and freign cmpanies, including thse in emerging markets, real estate investment trusts ( REITs ), master limited partnerships ( MLPs ), and American Depsitary Receipts ( ADRs ). Such securities may be issued by small, mid, r large capitalizatin cmpanies and meeting certain liquidity threshlds. The Fund s Investment Strategy The Alternative Alpha ETF attempts t invest all, r substantially all, f its assets in the cmpnent securities that make up the Index. Under nrmal circumstances, at least 80% f the Fund s ttal assets (exclusive f any cllateral held frm securities lending) will be invested in the cmpnent securities f the Index. The Fund expects that, ver time, the crrelatin between the Fund s perfrmance and that f the Index, befre fees and expenses, will be 95% r better. The Fund will generally use a replicatin strategy t achieve its investment bjective, meaning the Fund generally will invest in all f the cmpnent securities f the Index in apprximately the same prprtin as in the Index. Hwever, the Fund may use a representative sampling strategy, meaning it may invest in a sample f the securities in the Index whse risk, return, and ther characteristics clsely resemble the risk, return, and ther characteristics f the Index as a whle, when the Fund s sub-adviser believes it is in the best interests f the Fund (e.g., when replicating the Index invlves practical difficulties r substantial csts, an Index cnstituent becmes temprarily illiquid, unavailable r less liquid, r as a result f legal restrictins r limitatins that apply t the Fund but nt t the Index). The Fund generally may invest up t 20% f its ttal assets (exclusive f any cllateral held frm securities lending) in securities r ther investments nt included in the Index, but which the Fund s sub-adviser believes will help the Fund track the Index. Fr example, the Fund may invest in securities that are nt cmpnents f the Index t reflect varius crprate actins and ther changes t the Index (such as recnstitutins, additins and deletins). On a day-t-day basis, the Fund als may hld mney market mutual funds r shrt-term debt instruments that have terms-t-maturity f less than 397 days and exhibit high quality credit prfiles, including U.S. gvernment securities and repurchase agreements. T the extent the Index cncentrates (i.e., hlds mre than 25% f its ttal assets) in the securities f a particular industry r grup f related industries, the Fund will cncentrate its investments t apprximately the same extent as the Index. As f June 30, 2017, securities in the sftware and services grup f industries represented a significant prtin f the Index. Principal Investment Risks The principal risks f investing in the Fund are summarized belw. As with any investment, there is a risk that yu culd lse all r a prtin f yur investment in the Fund. The fllwing risks culd affect the value f yur investment in the Fund: ADR Risk. ADRs invlve risks similar t thse assciated with investments in freign securities, such as changes in plitical r ecnmic cnditins f ther cuntries and changes in the exchange rates f freign currencies. ADRs listed n U.S. exchanges are issued by banks r trust cmpanies, and entitle the hlder t all dividends and capital gains that are paid ut n the underlying freign shares. Cncentratin Risk. The Fund s investments will be cncentrated in an industry r grup f industries t the extent that the Index is s cncentrated. In such event, the value f the Shares may rise and fall mre than the value f Shares that invests in securities f cmpanies in a brader range f industries. 2

3 Currency Exchange Rate Risk. The underlying freign shares f ADRs in which the Fund invests may be denminated in nn-u.s. currencies. Changes in currency exchange rates and the relative value f nn-u.s. currencies may affect the value f the ADRs and the value f yur Shares. Currency exchange rates can be very vlatile and can change quickly and unpredictably. As a result, the value f an investment in the Fund may change quickly and withut warning and yu may lse mney. Emerging Markets Risk. Investments in ADRs that prvide expsure t securities traded in develping r emerging markets may additinally invlve substantial risk due t limited infrmatin; different accunting, auditing and financial reprting standards; a cuntry s dependence n revenue frm particular cmmdities r internatinal aid; and exprpriatin, natinalizatin r ther adverse plitical r ecnmic develpments. Plitical and ecnmic structures in many emerging market cuntries may be underging significant evlutin and rapid develpment, and such cuntries may lack the scial, plitical and ecnmic stability characteristics f mre develped cuntries. Sme f these cuntries may have in the past failed t recgnize private prperty rights and have at times natinalized r exprpriated the assets f private cmpanies. Equity Market Risk. The equity securities held in the Fund s prtfli may experience sudden, unpredictable drps in value r lng perids f decline in value. This may ccur because f factrs that affect securities markets generally r factrs affecting specific issuers, industries, sectrs r cmpanies in which the Fund invests. Cmmn stcks are generally expsed t greater risk than ther types f securities, such as preferred stck and debt bligatins, because cmmn stckhlders generally have inferir rights t receive payment frm issuers. Freign Markets Risk. Investments in ADRs that prvide expsure t nn-u.s. securities invlve certain risks that may nt be present with investments in U.S. securities. Fr example, the value f nn-u.s. securities may be subject t risk f decline due t freign currency fluctuatins r t plitical r ecnmic instability. Investments in ADRs als may be subject t withhlding r ther taxes and may be indirectly subject t additinal trading, settlement, custdial, and peratinal risks. These and ther factrs can make investments in the Fund mre vlatile and ptentially less liquid than ther types f investments. High Prtfli Turnver Risk. The Fund may trade all r a significant prtin f the securities in its prtfli in cnnectin with each rebalance and recnstitutin f its Index. A high prtfli turnver rate increases transactin csts, which may increase the Fund s expenses. Frequent trading may als cause adverse tax cnsequences fr investrs in the Fund due t an increase in shrt-term capital gains. MLP Risk. MLP investment returns are enhanced during perids f declining r lw interest rates and tend t be negatively influenced when interest rates are rising. In additin, mst MLPs are fairly leveraged and typically carry a prtin f a flating rate debt. As such, a significant upward swing in interest rates wuld als drive interest expense higher. Furthermre, mst MLPs grw by acquisitins partly financed by debt, and higher interest rates culd make it mre difficult t make acquisitins. MLP investments als entail many f the general tax risks f investing in a partnership. Limited partners in an MLP typically have limited cntrl and limited rights t vte n matters affecting the partnership. Additinally, there is always the risk that an MLP will fail t qualify fr favrable tax treatment. Mdels and Data Risk. The cmpsitin f the Index is heavily dependent n prprietary quantitative mdels as well as infrmatin and data supplied by third parties ( Mdels and Data ). When Mdels and Data prve t be incrrect r incmplete, any decisins made in reliance theren may lead t the inclusin r exclusin f securities frm the Index that wuld have been excluded r included had the Mdels and Data been crrect and cmplete. If the cmpsitin f the Index reflects such errrs, the Fund s prtfli can be expected t reflect the errrs, t. Passive Investment Risk. The Fund is nt actively managed and its sub-adviser wuld nt sell shares f an equity security due t current r prjected underperfrmance f a security, industry r sectr, unless that security is remved frm the Index r the selling f shares f that security is therwise required upn a rebalancing f the Index as addressed in the Index methdlgy. REIT Investment Risk. Investments in REITs invlve unique risks. REITs may have limited financial resurces, may trade less frequently and in limited vlume, and may be mre vlatile than ther securities. REITs may be affected by changes in the value f their underlying prperties r mrtgages r by defaults by their brrwers r tenants. Furthermre, these entities depend upn specialized management skills, have limited diversificatin and are, therefre, subject t risks inherent in financing a limited number f prjects. In additin, the perfrmance f a REIT may be affected by changes in the tax laws r by its failure t qualify fr tax-free pass-thrugh f incme. 3

4 Sectr Risk. T the extent the Fund invests mre heavily in particular sectrs f the ecnmy, its perfrmance will be especially sensitive t develpments that significantly affect thse sectrs. Cnsumer Sectrs Risk. The success f cnsumer prduct manufacturers and retailers is tied clsely t the perfrmance f dmestic and internatinal ecnmies, interest rates, exchange rates, cmpetitin, cnsumer cnfidence, changes in demgraphics and cnsumer preferences. Cmpanies in the cnsumer staples sectr, such as cmpanies that prduce r sell fd, beverage, and drug retail r ther husehld items, may be adversely impacted by changes in glbal and ecnmic cnditins, rising energy prices, and changes in the supply r price f cmmdities. Cmpanies in the cnsumer discretinary sectr, such as autmbile, textile, retail, and media cmpanies, depend heavily n dispsable husehld incme and cnsumer spending, and may be strngly affected by scial trends and marketing campaigns. These cmpanies may be subject t severe cmpetitin, which may have an adverse impact n their prfitability. Financial Sectr Risk. This sectr can be significantly affected by changes in interest rates, gvernment regulatin, the rate f defaults n crprate, cnsumer and gvernment debt, the availability and cst f capital, and fallut frm the husing and sub-prime mrtgage crisis. Insurance cmpanies, in particular, may be significantly affected by changes in interest rates, catastrphic events, price and market cmpetitin, the impsitin f premium rate caps, r ther changes in gvernment regulatin r tax law and/r rate regulatin, which may have an adverse impact n their prfitability. This sectr has experienced significant lsses in the recent past, and the impact f mre stringent capital requirements and f recent r future regulatin n any individual financial cmpany r n the sectr as a whle cannt be predicted. In recent years, cyber attacks and technlgy malfunctins and failures have becme increasingly frequent in this sectr and have caused significant lsses. Health Care Sectr Risk. Cmpanies in the health care sectr are subject t extensive gvernment regulatin and their prfitability can be significantly affected by restrictins n gvernment reimbursement fr medical expenses, rising csts f medical prducts and services, pricing pressure (including price discunting), limited prduct lines, an increased emphasis n the delivery f healthcare thrugh utpatient services, lss r impairment f intellectual prperty rights and litigatin regarding prduct r service liability. Industrial Sectr Risk. The industrial sectr can be significantly affected by, amng ther things, wrldwide ecnmic grwth, supply and demand fr specific prducts and services, rapid technlgical develpments, internatinal plitical and ecnmic develpments, envirnmental issues, and tax and gvernmental regulatry plicies. As the demand fr, r prices f, industrials increase, the value f the Fund s investments generally wuld be expected t als increase. Cnversely, declines in the demand fr, r prices f, industrials generally wuld be expected t cntribute t declines in the value f such securities. Such declines may ccur quickly and withut warning and may negatively impact the value f the Fund and yur investment. Infrmatin Technlgy Sectr Risk. Market r ecnmic factrs impacting infrmatin technlgy cmpanies and cmpanies that rely heavily n technlgical advances culd have a significant effect n the value f the Fund's investments. The value f stcks f infrmatin technlgy cmpanies and cmpanies that rely heavily n technlgy is particularly vulnerable t rapid changes in technlgy prduct cycles, rapid prduct bslescence, gvernment regulatin and cmpetitin, bth dmestically and internatinally, including cmpetitin frm freign cmpetitrs with lwer prductin csts. Stcks f infrmatin technlgy cmpanies and cmpanies that rely heavily n technlgy, especially thse f smaller, less-seasned cmpanies, tend t be mre vlatile than the verall market. Infrmatin technlgy cmpanies are heavily dependent n patent and intellectual prperty rights, the lss r impairment f which may adversely affect prfitability. Shares May Trade at Prices Other Than Net Asset Value ( NAV ). As with all ETFs, Shares may be bught and sld in the secndary market at market prices. Althugh it is expected that the market price f Shares will apprximate the Fund s NAV, there may be times when the market price f Shares is mre than the NAV intra-day (premium) r less than the NAV intra-day (discunt) due t supply and demand f Shares r during perids f market vlatility. This risk is heightened in times f market vlatility, perids f steep market declines, and perids when there is limited trading activity fr Shares in the secndary market, in which case such premiums r discunts may be significant. Smaller Cmpanies Risk. The equity securities f smaller cmpanies have histrically been subject t greater investment risk than securities f larger cmpanies. The prices f equity securities f smaller cmpanies tend t be mre vlatile and less liquid than the prices f equity securities f larger cmpanies. Tracking Errr Risk. As with all index funds, the perfrmance f the Fund and its Index may differ frm each ther fr a variety f reasns. Fr example, the Fund incurs perating expenses and prtfli transactin csts nt incurred by the Index. In additin, the Fund may nt be fully invested in the securities f the Index at all times r may hld securities nt included in the Index. 4

5 Perfrmance The fllwing perfrmance infrmatin indicates sme f the risks f investing in the Alternative Alpha ETF. The bar chart shws the Fund s perfrmance fr calendar years ended December 31. The table illustrates hw the Fund s average annual returns fr the 1-year and since inceptin perids cmpare with thse f a brad measure f market perfrmance and the Index. The Fund s past perfrmance, befre and after taxes, des nt necessarily indicate hw it will perfrm in the future. Updated perfrmance infrmatin is als available n the Fund s website at r by calling the Fund tll free at Calendar Year Ttal Returns 40% 36.13% 30% 20% 10% 12.39% 0% -10% -20% % -5.96% Fr the year-t-date perid ended June 30, 2017, the Fund s ttal return was 12.95%. During the perid f time shwn in the bar chart, the Fund s highest quarterly return was 11.81% fr the quarter ended September 30, 2013, and the lwest quarterly return was % fr the quarter ended March 31, Average Annual Ttal Returns Fr the Perid Ended December 31, 2016 AlphaClne Alternative Alpha ETF 1 Year Since Inceptin (5/31/2012) Return Befre Taxes -5.96% 8.07% Return After Taxes n Distributins -5.96% 7.96% Return After Taxes n Distributins and Sale f Shares -3.37% 6.30% AlphaClne Hedge Fund Dwnside Hedged Index 1 (reflects n deductin fr fees, expenses, r taxes) S&P 500 Index (reflects n deductin fr fees, expenses, r taxes) -5.13% 8.92% 11.96% 14.75% 1 Effective December 27, 2017, the Fund's investment bjective changed t track the perfrmance, befre fees and expenses, f the AlphaClne Hedge Fund Masters Index. Prir t December 27, 2017, the Fund's investment bjective was t track the price and ttal return perfrmance, befre fees and expenses, f the AlphaClne Hedge Fund Dwnside Hedged Index. After-tax returns are calculated using the histrical highest individual federal marginal incme tax rates during the perid cvered by the table abve and d nt reflect the impact f state and lcal taxes. Actual after-tax returns depend n an investr s tax situatin and may differ frm thse shwn. In certain cases, the figure representing Return After Taxes n Distributins and Sale f Shares may be higher than the ther return figures fr the same perid. A higher after-tax return results when a capital lss ccurs upn redemptin and prvides an assumed tax deductin that benefits the investr. After-tax returns shwn are nt relevant t investrs wh hld their Shares thrugh tax-deferred arrangements such as an individual retirement accunt ( IRA ) r ther tax-advantaged accunts. 5

6 Prtfli Management Adviser Sub-Adviser Prtfli Manager Exchange Traded Cncepts, LLC ( ETC ) Vident Investment Advisry, LLC ( VIA ) Denise M. Krisk, CFA, President f VIA, has primary respnsibility fr the day-t-day management f the Fund. Ms. Krisk has managed the Fund with VIA since January 2015 and previusly managed the Fund with the Fund s previus sub-adviser frm its inceptin in 2012 until Nvember Purchase and Sale f Shares Shares are listed n Cbe BZX Exchange, Inc. (the Exchange ), and mst investrs will buy and sell Shares thrugh brkers at market prices, rather than NAV. Because Shares trade at market prices rather than NAV, Shares may trade at a price greater than NAV (premium) r less than NAV (discunt). The Fund issues and redeems Shares at NAV nly in large blcks knwn as Creatin Units, which nly Authrized Participants ( APs ) (typically, brker-dealers) may purchase r redeem. Creatin Units generally cnsist f 50,000 Shares, thugh this may change frm time t time. The Fund generally issues and redeems Creatin Units in exchange fr a prtfli f securities clsely apprximating the hldings f the Fund (the Depsit Securities ) and/r a designated amunt f U.S. cash. Tax Infrmatin Fund distributins are generally taxable as rdinary incme, qualified dividend incme, r capital gains (r a cmbinatin), unless yur investment is in an IRA r ther tax-advantaged accunt. Distributins n investments made thrugh tax-deferred arrangements may be taxed later upn withdrawal f assets frm thse accunts. Financial Intermediary Cmpensatin If yu purchase Shares thrugh a brker-dealer r ther financial intermediary (such as a bank) (an Intermediary ), ETC, VIA, r their affiliates may pay Intermediaries fr certain activities related t the Fund, including participatin in activities that are designed t make Intermediaries mre knwledgeable abut exchange traded prducts, including the Fund, r fr ther activities, such as marketing, educatinal training r ther initiatives related t the sale r prmtin f Shares. These payments may create a cnflict f interest by influencing the Intermediary and yur salespersn t recmmend the Fund ver anther investment. Any such arrangements d nt result in increased Fund expenses. Ask yur salespersn r visit the Intermediary s website fr mre infrmatin. 6