As filed with the Securities and Exchange
Commission on January 12, 2015
Registration No. 333-199190
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Pre-Effective
Amendment No. 2
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
ETF Managers Group Commodity Trust I
(Registrant)
Delaware
(State or other jurisdiction of incorporation
or organization)
6799
(Primary Standard Industrial Classification
Code Number)
(I.R.S. Employer Identification No.)
c/o ETF Managers Capital LLC
35 Beechwood Road
Suite 2B
Summit, NJ 07901
Phone: (908) 897-0518
(Address, including zip code, and telephone
number, including area code, of Registrant’s principal executive offices)
Samuel Masucci III
Chief Executive Officer
ETF Managers Capital LLC
35 Beechwood Road
Suite 2B
Summit, NJ 07901
Phone: (908) 897-0518
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
Copy to:
W. Thomas Conner, Esq.
Reed Smith LLP
1301 K Street, N.W.
Suite 1100, East Tower
Washington, DC 20005-3317
Approximate date of commencement of proposed
sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box.
x
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.
o
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
o
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
o
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company under Rule 12b-2 of
the Securities Exchange Act of 1934. (Check one):
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
x
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CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities
to be Registered
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Amount
to be
Registered
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Proposed
Maximum
Offering
Price
Per
Share*
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Proposed
Maximum
Aggregate
Offering
Price*
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Amount of
Registration
Fee*(1)
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Common shares of Sit Rising Rate ETF, a series of the Registrant
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20,000,000 shares
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$25
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$500,000,000
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$58,100.00
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*
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Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(d) under the Securities Act of 1933.
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(1)
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Amount previously paid.
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The registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
THE INFORMATION IN THIS PROSPECTUS IS
NOT COMPLETE AND SUBJECT TO CHANGE. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Preliminary Prospectus Subject
to Change Dated January 12, 2015
PROSPECTUS
SIT RISING RATE ETF
20,000,000 Shares
*Principal U.S. Listing Exchange: NYSE Arca, Inc.
The Sit Rising Rate ETF (the “Fund”), a series
of the ETF Managers Group Commodity Trust I (the “Trust”), is an exchange traded fund that issues shares that trade
on the NYSE Arca stock exchange (“NYSE Arca”). The Fund’s investment objective is to profit from rising interest
rates by tracking the performance of a portfolio (the “Benchmark Portfolio”) consisting of exchange traded
futures contracts and options on futures on 2, 5 and 10-year U.S. Treasury securities (“Treasury Instruments”) weighted
to achieve a targeted negative 10 year average effective portfolio duration (the “Benchmark Component Instruments”). The Benchmark Portfolio is maintained by
Sit Fixed Income Advisors II, LLC.
The Fund and the Trust are managed and controlled by their sponsor
and investment manager, ETF Managers Capital LLC (the “Sponsor”). The Fund pays the Sponsor a management fee (the “Management Fee”), calculated daily and paid monthly,
equal to 0.50% annually. The Fund is also responsible for paying all of the routine operational, administrative and other ordinary
expenses of the Fund, (collectively, “Other Expenses”). The Sponsor
has contractually agreed to waive its receipt of the Management Fee and/or reimburse the Fund for its expenses (excluding brokerage
fees, interest expenses, and extraordinary expenses) to cap the Fund’s total annual expenses (“Total Expenses”)
(i.e., the Management Fee plus Other Expenses) at 1.50% per annum through February 1, 2016. The Fund may also be responsible for certain non-recurring or extraordinary fees and expenses.
In order for a hypothetical investment in shares to break
even over the next 12 months, assuming a selling price of $25.00 (the price at which the Fund will sell shares to the initial
Authorized Participant), the investment would have to generate 1.68% return or $0.42.
The Fund is an exchange traded fund. This means that most investors
who decide to buy or sell shares of the Fund shares place their trade orders through their brokers and may incur customary brokerage
commissions and charges. Shares trade on the NYSE Arca under the ticker symbol “RISE” and are bought and sold throughout
the trading day at bid and ask prices like other publicly traded securities.
Shares trade on the NYSE Arca after they are
initially purchased by “Authorized Participants,” institutional firms that purchase shares in blocks of 25,000
shares called “baskets” through the Fund’s distributor, Esposito Securities, LLC (the
“Distributor”). Nomura Securities International Inc. is expected to be the initial Authorized Participant. The price of a
basket is equal to the net asset value of 25,000 shares on the day that the order to purchase the basket is accepted by the
Distributor. The net asset value is calculated by taking the current market value of the Fund’s total assets (after
close of NYSE Arca) subtracting any liabilities and dividing that total by the total number of outstanding shares. The
offering of the Fund’s shares is a “best efforts” offering, which means that neither the Distributor nor
any Authorized Participant is required to purchase a specific number or dollar amount of shares. The Fund pays the
Distributor a distribution fee consisting of a fixed annual amount plus an incentive fee based on the amount of shares sold.
Authorized Participants will not receive from the Fund, the Sponsor or any of their affiliates any fee or other compensation
in connection with the sale of shares. Aggregate compensation paid to the Distributor and any affiliate of the Sponsor for
distribution-related services in connection with this offering of shares will not exceed 10% of the gross proceeds of the
offering.
Investors who buy or sell shares during the day from their broker
may do so at a premium or discount relative to the Net Asset Value (as defined below) of the Fund’s total net assets due
to supply and demand forces at work in the secondary trading market for shares that are closely related to, but not identical to,
the same forces influencing the prices of the futures and options on U.S. Treasury securities in which the Fund invests and the
U.S. Treasury securities and other cash equivalents that the Fund holds. Investing in the Fund involves significant risks. See
“
Risk Factors Involved with an Investment in the Fund
” beginning on page 4.
The offering of the Fund’s shares is registered with the
SEC in accordance with the Securities Act of 1933 (the “1933 Act”). The offering is intended to be a continuous offering
and is not expected to terminate until all of the registered shares have been sold or three years from the date of the original
offering, whichever is earlier, although the offering may be temporarily suspended if and when no suitable investments for the
Fund are available or practicable. The Fund is not a mutual fund registered under the Investment Company Act of 1940 (“1940
Act”) and is not subject to regulation under such act.
NEITHER THE SEC NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR
DISAPPROVED OF THE SECURITIES OFFERED IN THIS PROSPECTUS, OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL
OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Fund is a commodity pool and the Sponsor is a commodity
pool operator subject to regulation by the CFTC and the NFA under the Commodity Exchange Act of 1976. The Sponsor is registered with the
CFTC as a commodity pool operator and is a member of the NFA.
THE COMMODITY FUTURES TRADING COMMISSION
HAS NOT PASSED UPON THE
MERITS OF PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON
THE ADEQUACY OR ACCURACY OF THIS
DISCLOSURE DOCUMENT.
The date of this prospectus is
January 22, 2015
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER
YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT COMMODITY INTEREST
TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL
AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW
YOUR PARTICIPATION IN THE POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT
TO SUBSTANTIAL CHARGES FOR MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO
THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS
A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGE 41 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO
BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 41.
THIS BRIEF STATEMENT CANNOT DISCLOSE
ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU DECIDE TO
PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING THE DESCRIPTION OF THE PRINCIPAL
RISK FACTORS OF THIS INVESTMENT, AT PAGE 4.
Table of Contents
This prospectus is in two parts: a disclosure
document and a Statement of Additional Information.
These parts are bound together, and both parts contain important information.
Prospectus Summary
This is only a summary of the prospectus and, while it contains
material information about the Fund and its shares, it does not contain or summarize all of the information about the Fund and
the shares contained in this prospectus that is material and/or which may be important to you. You should read this entire prospectus,
including “Risk Factors Involved with an Investment in the Fund” beginning on page 4, before making an investment decision
about the shares. For a glossary of defined terms, see Appendix A.
The ETF Managers Group Commodity Trust I (the “Trust”)
is a Delaware statutory trust formed on July 23, 2014. The Trust is a series trust formed pursuant to the Delaware Statutory Trust
Act, of which the Fund is currently the sole series. The Fund is a commodity pool that continuously issues common shares of beneficial interest
that may be purchased and sold on the NYSE Arca stock exchange (“NYSE Arca”). The Fund is managed and controlled by
ETF Managers Capital LLC (the “Sponsor”), a Delaware limited liability company. The Sponsor is registered with the Commodity Futures Trading
Commission (“CFTC”) as a commodity pool operator (“CPO”) and is a member of the National
Futures Association (“NFA”). Sit Fixed Income Advisors II, LLC (“Sit”) is registered as
a “commodity trading advisor” (“CTA”) and will act as such for the Fund.
The principal office of the Trust and Fund is located at 35 Beechwood Road, Suite 2B, Summit, NJ 07901. The telephone
number is (844) 383-6477. The Sponsor’s principal office is also located at 35 Beechwood Road, Suite 2B, Summit, NJ 07901, and its telephone number is also (844) 383-6477.
The Fund’s Investment Objective and Strategy
The Fund’s investment objective is to profit from rising
interest rates by tracking the performance of a portfolio (the “Benchmark Portfolio”) consisting of exchange
traded futures contracts and options on futures on 2, 5 and 10-year U.S. Treasury securities (“Treasury Instruments”)
weighted to achieve a targeted negative 10 year average effective portfolio duration (the “Benchmark Component Instruments”).
The Fund seeks to achieve its investment objective by investing in the Benchmark Component Instruments currently constituting the
Benchmark Portfolio. The Benchmark Portfolio is maintained by Sit and will be rebalanced, reconstituted, or both, monthly (typically on the 15th of
each month and on the next business day if the 15th is a holiday, weekend, or other day on which the national exchanges are closed) to maintain a negative 10 year average effective duration. The Benchmark Portfolio and the Fund will each maintain a
short position in Treasury Instruments. The Fund does not use futures contracts or options to
obtain leveraged investment results. The Benchmark Component Instruments currently constituting the Benchmark Portfolio and anticipated
rebalancing dates, as well as the daily holdings of the Fund, are available on the Fund’s website at www.risingratefund.com.
The weighting of the Treasury Instruments constituting the Benchmark
Component Instruments will be based on each maturity’s duration contribution. The expected range for the duration weighted
percentage of the 2 year and 5 year maturity Treasury Instruments will be from 30% to 70%. The expected range for the duration
weighted percentage of the 10 year maturity Treasury Instruments will be from 5% to 25%. The relative weightings
of the Benchmark Component Instruments will be shifted between maturities when there are material changes in the shape of the yield curve, for example, if the Federal Reserve began raising short term interest rates more than long term interest rates. In such an
instance, Sit, which maintains the Benchmark Portfolio,
will increase the weightings of the 2 year and reduce the weighting in the 10 year maturity Treasury Instruments. Conversely,
Sit will do the opposite if the Federal Reserve began raising long term interest rates more than short term interest rates.
Reconstitution and rebalancing each will occur monthly, on the 15th, except for as noted above or if there are radical
changes in the yield curve such that effective duration is outside of a range from negative nine to negative 11-year average
effective duration, in which case Sit will adjust the maturities of the Treasury Instruments before the next expected monthly
reconstitution.
The Sponsor anticipates that approximately 5% to 15% of the
Fund’s assets will be used as payment for or collateral for Treasury Instruments. In order to collateralize its Treasury
Instrument positions the Fund will hold such assets, from which it will post margin to its futures commission merchant (“FCM”),
in an amount equal to the margin required by the relevant exchange, and transfer to its FCM any additional amounts that may be
separately required by the FCM. When establishing positions in Treasury Instruments, the Fund will be required to deposit initial
margin with a value of approximately 3% to 10% of the value of each Treasury Instrument position at the time it is established.
These margin requirements are subject to change from time to time by the exchange or the FCM. On a daily basis, the Fund will be
obligated to pay, or entitled to receive, variation margin in an amount equal to the change in the daily settlement level of its
Treasury Instruments positions. Any assets not required to be posted as margin with the FCM will be held at the Fund’s administrator
in cash or cash equivalents as discussed below.
The Benchmark Portfolio will be invested in Benchmark Component
Instruments and rebalanced, as noted above, to maintain a negative average effective portfolio duration of approximately 10 years. Duration
is a measure of estimated price sensitivity relative to changes in interest rates. Portfolios with longer durations are typically
more sensitive to changes in interest rates. For example, if interest rates rise by 1%, the market value of a security with an
effective duration of 5 years would decrease by 5%, with all other factors being constant, and likewise the market value of a security
with an effective duration of negative 5 years would increase by 5%, with all other factors being constant. Duration estimates
are based on assumptions by Sit and are subject to a number of limitations. Duration is a more accurate estimate of price sensitivity
provided interest rate changes are small and occur equally in short-term and long-term securities. Investments in debt securities
typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities.
The Fund will incur certain expenses in connection with its
operations. The Fund will hold cash or cash equivalents such as U.S. Treasuries or other high credit quality, short-term fixed-income
or similar securities for direct investment or as collateral for the Treasury Instruments and for other liquidity purposes and
to meet redemptions that may be necessary on an ongoing basis. These expenses and income from the cash and cash equivalent holdings
may cause imperfect correlation between changes in the Fund’s NAV and changes in the Benchmark Portfolio, because the Benchmark
Portfolio does not reflect expenses or income.
Principal Investment Risks of an Investment in the Fund
An investment in the Fund involves risk. As with any investment,
you could lose all or part of your investment in the Fund, and the Fund’s performance could trail that of other investments.
The Fund is subject to the principal risks noted below which may adversely affect the Fund’s net asset value per share (“NAV”),
trading price, yield, total return and ability to meet its investment objective. Some of the risks you may face are summarized
below. A more extensive discussion of these risks appears beginning on page 4.
Interest Rate Risk
Investments in debt securities typically decrease in value when
interest rates rise. However, the Fund attempts to maintain a negative effective duration and therefore anticipates that an increase
in interest rates will increase the Fund’s net asset value, and a decrease in rates will reduce the Fund’s net asset
value.
Political and Governmental Action Risk
Interest rate movements are heavily influenced by the action
of the Board of Governors of the Federal Reserve System and other central banks. Their actions are based on judgments and policies
that involve numerous political and economic factors which are unpredictable. Recent interest rate and monetary policies have been
unprecedented and may continue to be so. Interest rates have been at historic lows since the 2008 market disruptions and may continue
to be low.
Yield Curve Risk
The Fund will invest in U.S. Treasuries and Treasury Instruments
with exposure to different maturity dates. Generally, the Fund’s exposure to securities with maturities of 2 and 5 years
will be greater than its exposure to securities with maturities of 10 years. Interest rates do not change uniformly for U.S. Treasuries
of different maturities and therefore if interest rates rise, the investment performance of the Fund will be impacted by the Fund’s
current maturity exposure, which may be different from the expectations of the Sponsor and investors in the Fund.
Tracking Risk
As with all funds that track a benchmark, the
performance of the Fund may not closely track the performance of the benchmark for a variety of reasons.
Short Sale Risk
The risk of loss of a short futures position is potentially
unlimited. While that risk is somewhat mitigated by the current low interest rate environment, the potential for loss will increase
if rates rise and then fall.
Futures and Options Market Risk
Futures and options contracts have expiration dates. Before
or upon the expiration of a contract, the Fund may be required to enter into a replacement contract that is priced higher or that
have less favorable terms than the contract being replaced.
Tax Risk
The Trust is organized as a Delaware statutory trust, but taxed
as a partnership in accordance with the provisions of the governing trust agreement and applicable state law and, therefore, has
a more complex tax treatment than conventional mutual funds. The Fund will furnish shareholders each year with tax information
on IRS Schedule K-1 (Form 1065) and each U.S. shareholder is required to report on its U.S. federal income tax return its allocable
share of income, gain, loss and deduction of the Fund. The tax reporting of a partnership interest can be complex and shareholders
may be advised to consult a tax expert.
Market Trading Risk
Market trading risks faced by the Fund include, but are not
limited to, the potential lack of an active market for Fund shares, losses from trading in secondary markets, periods of high volatility
and disruption in the process through which shares of the Fund are sold and redeemed. Any of these factors may lead to the Fund’s
shares trading at a premium or discount to its NAV.
Management Risk
The investment strategy used by the Sponsor or its implementation
may not produce the intended results.
Other Risks
The Fund pays fees and expenses that are incurred regardless
of whether it is profitable. In order for an investor making an investment in shares of the Fund to break even over the 12 month
period following the date of this prospectus, assuming a selling price of $25.00 (the price at which the Fund expects to initially
issue shares, the investment would have to generate a 1.68% return or $00.42 for the investor not to lose money.
Unlike mutual funds, commodity pools or other investment pools
that manage their investments in an attempt to realize income and gains and distribute such income and gains to their investors,
the Fund generally does not distribute cash to shareholders. You should not invest in the Fund if you will need cash distributions
from the Fund to pay taxes on your share of income and gains of the Fund, if any, or for any other reason.
You will have no rights to participate in the management of
the Fund and will have to rely on the duties and judgment of the Sponsor to manage the Fund.
The Fund is subject to actual and potential inherent conflicts
involving the Sponsor and its principals, various commodity futures brokers and Authorized Participants. The Sponsor was recently
organized and has no operating history and its officers, directors and employees do not devote their time exclusively to the Fund.
The Sponsor’s directors, officers or employees may serve in the same or different function of other entities that may compete
with the Fund for their services, including other commodity pools that the Sponsor or its trading principal manages or may manage
in the future (these pools are referred to in this
prospectus as the “Related Pools” and are identified
in the Glossary). These persons could have a conflict between their responsibilities to the Fund and to those other entities.
The Fund has no prior operating history. There can be no assurance
that the Fund will grow to or maintain an economically viable size, in which case the Sponsor may liquidate the Fund. Investors
could lose part or all of their investment.
The Fund’s Fees and Expenses
This table describes the fees and expenses that you may pay
if you buy and hold shares of the Fund. You should note that you may pay brokerage commissions on purchases and sales of the Fund’s
Shares, which are not reflected in the table. Authorized Participants will pay applicable creation and redemption fees.
See
“Creation and Redemption of Shares-Creation and Redemption Transaction Fee,” page 62.
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Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
(1)
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Management Fee
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0.50
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%
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Maximum Other Expenses(2)
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1.00
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%
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Maximum Total Annual Fund Expenses
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1.50
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%(1)
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(1) The Sponsor has contractually agreed to waive the Management
Fee and/or reimburse the Fund for its Other Expenses (which term excludes brokerage fees, interest expenses, and extraordinary
expenses) to cap Total Annual Fund Expenses at 1.50% through February 1, 2016. After that date, the expense limitation may be terminated
and Fund shareholders may incur expenses higher than 1.50% annually. It cannot be predicted with any certainty what such expenses
could be. As the Fund’s assets increase, Other Expenses may decrease as a percentage of the Fund’s assets. Above a certain size the Other Expenses may be less than 1.00%. The Fund may also be responsible for certain non-recurring or extraordinary fee and expenses.
(2) The Fund will be responsible for its Other Expenses, including professional services (e.g., outside auditor’s fees and legal fees and expenses), shareholder tax return preparation, regulatory compliance, and other services provided by affiliated and non-affiliated service providers.
Risk Factors Involved with an Investment
in the Fund
You should consider carefully the risks
described below before making an investment decision. You should also refer to the other information included in this prospectus.
An investment in the Fund involves risk.
As with any investment, you could lose all or part of your investment in the Fund, and the Fund’s performance could trail
that of other investments. The Fund is subject to the principal risks noted below which may adversely affect the Fund’s NAV,
trading price, yield, total return and ability to meet its investment objective.
The value of the Shares of the Fund relates directly to
the value of, and realized profit or loss from, the Treasury Instruments and other assets held by the Fund, and fluctuations
in price could materially affect the Shares.
The NAV of the Fund’s shares relates directly to the value
of the U.S. Treasuries, cash and cash equivalents held by the Fund and the portfolio’s negative effective duration established
and maintained through the Fund’s investment in Treasury Instruments. Fluctuations in the prices of these assets could materially
adversely affect the value and performance of an investment in the Fund’s shares. Past performance is not necessarily indicative
of futures results; all or substantially all of an investment in the Fund could be lost. The primary types of investment-related
risk are discussed below.
The Fund’s investment strategy is based upon certain movements in interest rates that may not develop or to the magnitude or at the time expected, if such movements do not occur as expected, the Shares may be adversely affected.
Investments in debt securities typically decrease in value when
interest rates rise, however, the Fund attempts to maintain a portfolio with a negative effective duration and therefore anticipates
that an increase in interest rates may increase the Fund’s value, and a decrease in rates may lower the Fund’s value.
The NAV of the Fund’s shares relates directly to the value of U.S. Treasuries and Treasury Instruments held by the Fund which
are materially impacted by interest rate movements. The magnitude of the impact on value from a change in interest rates is often
greater for longer-term fixed income securities than shorter-term securities. Interest rates have been near historic lows since
the market events of 2008 and may remain low.
Interest rates are heavily influenced by political and
governmental bodies and their actions may be unpredictable and may materially affect the Fund.
Interest rate movements are heavily influenced by the action
of the Board of Governors of the Federal Reserve System and other central banks. Their actions are based on judgments and policies
which involve numerous political and economic factors which are unpredictable. Recent interest rate and monetary policies have
been unprecedented and may continue to be so. Interest rates have been near historic lows since the 2008 market disruptions and
may continue to be low.
Several factors may affect the Fund’s ability to
consistently track the Benchmark Portfolio and achieve the Fund’s investment objective.
As with all funds that track a benchmark, the
performance of the Fund may not closely track the performance of the benchmark for a variety of reasons. For example, the Fund
incurs operating expenses and portfolio transaction costs not incurred by the benchmark. The Fund is also required to manage cash
flows and may experience operational inefficiencies the benchmark does not. In addition, the Fund may not be fully invested in
the contents of its benchmark at all times or may hold securities not included in its benchmark.
Interest rates may not uniformly change across maturities
and the Benchmark Portfolio’s weighting may not be optimal for the yield curve.
The Fund will invest in Treasury Instruments and U.S. Treasuries
with exposure to different maturity dates. Generally, the Fund’s exposure to securities with maturities of 2 and 5 years
will be greater than its exposure to securities with maturities of 10 years. Interest rates do not change uniformly for U.S. Treasuries
of different maturities and therefore if interest rates rise, the investment performance of the Fund will be impacted by the Fund’s
current maturity exposure which may be different from the expectations of the Sponsor and investors in the Fund. At any time, the
Fund’s maturity exposure may not be optimal with respect to a movement in interest rates which would negatively impact performance.
Short sale exposure can be unlimited and if interest
rates decrease investors may lose their investment.
The risk of loss of a short futures position is potentially
unlimited. While that risk is somewhat mitigated by the current low interest rate environment, the potential for loss will increase
if interest rates rise and then fall.
The futures markets are highly volatile and price movements
can be rapid and substantial.
Futures contracts have a high degree of price variability and
are subject to occasional rapid and substantial changes. Consequently, you could lose all or substantially all of your investment
in the Fund.
The Fund will not take defensive positions to protect
against declining interest rates, which could cause a decline to the value of the Fund’s shares.
The Fund will maintain a portfolio with a targeted average effective
duration of approximately negative 10 years regardless of the Sponsor’s views on expected interest rate movements. The Fund
will not take a
defensive position if interest rates decline or if the Sponsor
expects rates to decline. The Fund’s performance will be highly sensitive to interest rate changes due to the negative effective
duration target and the value of the Fund’s shares will decrease as interest rates fall.
The market price at which investors buy or sell shares
may be significantly more or less than NAV.
The market price at which investors buy or sell shares may be
significantly less or more than NAV.
The Fund’s per share NAV will change throughout the day
as fluctuations occur in the market value of the Fund’s portfolio assets. The public trading price at which an investor buys
or sells shares during the day from their broker may be different from the NAV of the shares. Price differences may relate primarily
to supply and demand forces at work in the secondary trading market for the Fund’s shares that are closely related to, but
not identical to, the same forces influencing the prices of the Treasury Instruments and U.S. Treasuries, cash and cash equivalents
that constitute the Fund’s assets.
The NAV of the Fund’s shares may also be influenced by
non-concurrent trading hours between the NYSE Arca and the exchanges on which U.S. Treasuries and Treasury Instruments are traded
(primarily exchanges within the CME Group of exchanges, collectively “CME”), where the Fund expects most of its trading
transactions to occur. While the Fund’s shares trade on the NYSE Arca from 9:30 a.m. to 4:00 p.m. Eastern Time, the trading
hours for the CME do not coincide during all of this time. As a result, trading spreads and the resulting premium or discount on
the shares may widen and, therefore, increase the difference between the price of the shares and the NAV of the shares.
The Trust is taxed as a partnership and the applicable
rules are complex and burdensome on investors.
An investor’s tax liability may exceed the amount of distributions,
if any, on its shares. Cash or property will be distributed at the sole discretion of the Sponsor. The Sponsor has not and does
not currently intend to make cash or other distributions with respect to shares. Investors will be required to pay U.S. federal
income tax and, in some cases, state, local, or foreign income tax, on their allocable share of the Fund’s taxable income,
without regard to whether they receive distributions or the amount of any distributions. Therefore, the tax liability of an investor
with respect to its shares may exceed the amount of cash or value of property (if any) distributed.
An investor’s allocable share of taxable income or loss
may differ from its economic income or loss on its shares.
Due to the application of the assumptions and conventions applied
by the Fund in making allocations for tax purposes and other factors, an investor’s allocable share of the Fund’s income,
gain, deduction or loss may be different than its economic profit or loss from its shares for a taxable year. This difference could
be temporary or permanent and, if permanent, could result in it being taxed on amounts in excess of its economic income.
Items of income, gain, deduction, loss and credit with respect
to shares could be reallocated if the U.S. Internal Revenue Service (“IRS”) does not accept the assumptions and conventions
applied by the Fund in allocating those items, with potential adverse consequences for an investor.
The U.S. tax rules pertaining to entities taxed as partnerships
are complex and their application to large, publicly traded partnership treated entities such as the Fund is in many respects uncertain.
The Fund applies certain assumptions and conventions in an attempt to comply with the intent of the applicable rules and to report
taxable income, gains, deductions, losses and credits in a manner that properly reflects shareholders’ economic gains and
losses. These assumptions and conventions may not fully comply with all aspects of the Internal Revenue Code (the “Code”)
and applicable Treasury Regulations, however, and
it is possible that the IRS will successfully challenge the
Fund’s allocation methods and require the Fund to reallocate items of income, gain, deduction, loss or credit in a manner
that adversely affects investors. If this occurs, investors may be required to file an amended tax return and to pay additional
taxes plus deficiency interest.
The Fund could be treated as a corporation for federal
income tax purposes, which may substantially reduce the value of the shares.
The Fund intends to obtain an opinion of counsel that, under
current U.S. federal income tax laws, the Fund will be treated as a trust that is not taxable as a corporation for U.S. federal
income tax purposes, provided that (i) at least 90 percent of the Fund’s annual gross income consists of “qualifying
income” as defined in the Code, (ii) the Fund is organized and operated in accordance with its governing agreements and applicable
law and (iii) the Fund does not elect to be taxed as a corporation for federal income tax purposes. Although the Sponsor anticipates
that the Fund will satisfy the “qualifying income” requirement for all of its taxable years, that result cannot be
assured. The Fund has not requested and will not request any ruling from the IRS with respect to its classification as a trust
not taxable as a corporation for federal income tax purposes. If the IRS were to successfully assert that the Fund is taxable as
a corporation for federal income tax purposes in any taxable year, rather than passing through its income, gains, losses and deductions
proportionately to shareholders, the Fund would be subject to tax on its net income for the year at corporate tax rates. In addition,
although the Sponsor does not currently intend to make distributions with respect to shares, any distributions would be taxable
to shareholders as dividend income. Taxation of the Fund as a corporation could materially reduce the after-tax return on an investment
in shares and could substantially reduce the value of the shares.
The Fund is organized and operated as a Delaware statutory
trust in accordance with the provisions of the declaration of trust and applicable state law, and therefore, the Fund has a more
complex tax treatment than traditional mutual funds.
The Fund is organized and operated as a trust in accordance
with the provisions of the governing trust agreement (the “Trust Agreement”) and applicable state law. No U.S. federal
income tax is paid by the Fund on its income. Instead, the Fund will furnish shareholders each year with tax information on IRS
Schedule K-1 (Form 1065) and each U.S. shareholder is required to report on its U.S. federal income tax return its allocable share
of the income, gain, loss and deduction of the Fund. This must be reported without regard to the amount (if any) of cash or property
the shareholder receives as a distribution from the Fund during the taxable year. The tax reporting of a partnership interest can
be complex and shareholders may be advised to consult a tax expert. A shareholder, therefore, may be allocated income or gain by
the Fund but receive no cash distribution with which to pay the tax liability resulting from the allocation, or may receive a distribution
that is insufficient to pay such liability.
In addition to federal income taxes, shareholders may be subject
to other taxes, such as state and local income taxes, unincorporated business taxes, business franchise taxes and estate, inheritance
or intangible taxes that may be imposed by the various jurisdictions in which the Fund does business or owns property or where
the shareholders reside. Although an analysis of those various taxes is not presented here, each prospective shareholder should
consider their potential impact on its investment in the Fund. It is each shareholder’s responsibility to file the appropriate
U.S. federal, state, local and foreign tax returns.
Other Risks
Certain of the Fund’s investments could be illiquid,
which could cause large losses to investors at any time or from time to time.
Futures and option positions cannot always be liquidated at
the desired price. It is difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell
orders in a market. A market disruption can also make it difficult to liquidate a position. The large size of the positions that
the Fund may acquire increases the risk of illiquidity both by making its positions more difficult to liquidate and by potentially
increasing losses while trying to do so.
The NYSE Arca may halt trading in the Fund’s shares,
which would adversely impact an investor’s ability to sell shares.
The Fund’s shares are listed for trading on the NYSE Arca
under the market symbol “RISE.” Trading in shares may be halted due to market conditions or, in light of NYSE Arca
rules and procedures, for reasons that, in the view of the NYSE Arca, make trading in shares inadvisable. In addition, trading
is subject to trading halts caused by extraordinary market volatility pursuant to “circuit breaker” rules that require
trading to be halted for a specified period based on a specified market decline. Additionally, there can be no assurance that the
requirements necessary to maintain the listing of the Fund’s shares will continue to be met or will remain unchanged. NYSE Arca listing rules require a minimum of 100,000 shares to be outstanding for continued listing and will be the Fund’s minimum.
The lack of an active trading market for the Fund’s
shares may result in losses on an investor’s investment in the Fund at the time the investor sells the shares.
Although the Fund’s shares are listed and traded on the
NYSE Arca, there can be no guarantee that an active trading market for the shares will be maintained. If an investor needs to sell
shares at a time when no active trading market for them exists, the price the investor receives upon sale of the shares, assuming
they were able to be sold, likely would be lower than if an active market existed.
The Sponsor is leanly staffed and relies heavily on key
personnel to manage the Fund and other funds.
In managing and directing the day-to-day activities and affairs
of the Fund, the Sponsor relies heavily on the services of its CEO, Samuel Masucci III, its COO, Dave Weissman, and its CFO, John
Flanagan. If any of the group were to leave or be unable to carry out his present responsibilities, it may have an adverse effect
on the management of the Fund.
There is a risk that the Fund will
not earn trading gains sufficient to compensate for the fees and expenses that it must pay and as such the Fund may not earn any
profit.
As discussed in more detail in the section of this prospectus
entitled “Breakeven Analysis” on page 41, the Fund has estimated that in order for a hypothetical investment in shares
to break even over the next 12 months, assuming a selling price of $25.00 (the price at which the Fund expects to initially issue
shares), the investment would have to generate a 1.68% return or $0.42. Both the Fund and its manager, the Sponsor, are newly
formed and have no operating history, and accordingly, the breakeven amount may be higher than estimated. The Fund’s Management
Fee and Other Expenses must be paid in all cases regardless of whether the Fund’s activities are profitable. Accordingly,
the Fund must earn trading gains sufficient to compensate for these fees and expenses before it can earn any profit.
Regulation of the futures and options
markets is extensive and constantly changing; future regulatory developments are impossible to predict but may significantly and
adversely affect the Fund.
The futures markets are subject to comprehensive statutes, regulations,
and margin requirements. In addition, the CFTC and futures exchanges are authorized to take extraordinary actions in the event
of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements,
the establishment of daily price limits and the suspension of trading.
Regulation of commodity interest transactions in the United
States is a rapidly changing area of law and is subject to ongoing modification by governmental and judicial action. Considerable
regulatory attention has been focused on non-traditional investment pools that are publicly distributed in the United States. The
effect of any future regulatory change on the Fund is impossible to predict, but it could be substantial and adverse.
An investment in the Fund may provide little or no diversification
benefits.
Interest rates historically have experienced a correlation with
other asset classes. Accordingly, if interest rates decline, an investor in Fund shares will experience a loss at the same time
the investor may suffer losses with respect to other investments.
The Fund is not a registered investment company so shareholders
do not have the protections of the 1940 Act.
The Fund is not an investment company subject to the 1940 Act.
Accordingly, investors do not have the protections afforded by that statute, which, for example, requires investment companies
to have a majority of disinterested directors and regulates the relationship between the investment company and its investment
manager.
The Fund and the Sponsor may have conflicts of interests.
The Fund is subject to actual and potential inherent conflicts
involving the Sponsor, various commodity futures brokers and Authorized Participants. The Sponsor’s officers, directors and
employees do not devote their time exclusively to the Fund. These persons are directors, officers or employees of other entities
that may compete with the Fund for their services. They could have a conflict between their responsibilities to the Fund and to
those other entities.
The Fund may also be subject to certain conflicts with respect
to its FCM through which it places trades in certain Treasury Instruments, including, but not limited to, conflicts that result
from receiving greater amounts of compensation from other clients, or purchasing opposite or competing positions on behalf of third
party accounts traded through the FCM.
Shareholders have only very limited voting rights and
have the power to replace the Sponsor only under specific circumstances. Shareholders do not participate in the management of the
Fund and do not control the Sponsor, so they do not have any influence over basic matters that affect the Fund.
Shareholders have very limited voting rights with respect
to the Fund’s affairs and have none of the statutory rights normally associated with the ownership of shares of a
corporation (including, for example, the right to bring “oppression” or “derivative” actions). Shareholders may
elect a replacement sponsor only if the Sponsor resigns voluntarily or loses its corporate charter. Shareholders are not
permitted to participate in the management or control of the Fund or the conduct of its business. Shareholders must therefore
rely upon the duties and judgment of the Sponsor to manage the Fund’s affairs.
The Fund could terminate at any time and cause the liquidation
and potential loss of an investor’s investment and could upset the overall maturity and timing of an investor’s investment
portfolio.
The Fund may terminate at any time, regardless of whether the
Fund has incurred losses, subject to the terms of the Trust Agreement. In particular, unforeseen circumstances, including the death,
adjudication of incompetence, bankruptcy, dissolution, or removal of the Sponsor as the manager of the Fund could cause the Fund
to terminate unless a majority interest of the security holders within 90 days of the event elects to continue the Fund. However,
no level of losses will require the Sponsor to terminate the Fund. The Fund’s termination would cause the liquidation and
potential loss of an investor’s investment. Termination could also negatively affect the overall maturity and timing of an
investor’s investment portfolio.
The Fund does not expect to make cash distributions.
Unlike mutual funds, commodity pools or other investment pools
that actively manage their investments in an attempt to realize income and gains from their investing activities and distribute
such income and gains to their investors, the Fund generally does not expect to distribute cash to security holders. An investor
should not invest in the Fund if the investor will need cash distributions from the Fund to pay
taxes on its share of income and gains of the Fund, if any,
or for any other reason. Nonetheless, although the Fund does not intend to make cash distributions, the income earned from its
investments held directly or posted as margin may reach levels that merit distribution, e.g., at levels where such income is not
necessary to support its underlying investments and investors adversely react to being taxed on such income without receiving distributions
that could be used to pay such tax. If this income becomes significant then cash distributions may be made.
An unanticipated number of redemption requests during
a short period of time could have an adverse effect on the Fund’s NAV.
If a substantial number of requests for redemptions are received
by the Fund during a relatively short period of time, the Fund may not be able to satisfy the requests from the Fund’s assets
not committed to trading. As a consequence, it could be necessary to liquidate positions in the Fund’s trading positions
before the time that the trading strategies would otherwise dictate liquidation.
The financial markets are currently
in a slow period of recovery and the financial markets are still relatively fragile.
Since 2008, the financial markets have
experienced very difficult conditions and volatility as well as significant adverse trends. Although the financial markets have
recovered somewhat, the financial markets are still fragile. A poor financial recovery could adversely affect the financial condition
and results of operations of the Fund’s service providers and Authorized Participants, which would impact the ability of
the Sponsor to achieve the Fund’s investment objective.
The failure or bankruptcy of a clearing broker or the
Fund’s Custodian could result in a substantial loss of the Fund’s assets and could impair the Fund in its ability to
execute trades.
Under CFTC regulations, a clearing broker maintains customers’
assets in a bulk segregated account. If a clearing broker fails to do so, or even if the customers’ funds are segregated
by the clearing broker but the clearing broker is unable to satisfy a substantial deficit in a customer account, the clearing broker’s
other customers may be subject to risk of a substantial loss of their funds in the event of that clearing broker’s bankruptcy.
In that event, the clearing broker’s customers, such as the Fund, are entitled to recover, even in respect of property specifically
traceable to them, only a proportional share of all property available for distribution to all of that clearing broker’s
customers. The bankruptcy of a clearing broker could result in the complete loss of the Fund’s assets posted with the clearing
broker. The Fund may also be subject to the risk of the failure of, or delay in performance by, any exchanges and markets and their clearing
organizations, if any, on which commodity interest contracts are traded.
In addition, to the extent the Fund’s clearing broker
is required to post the Fund’s assets as margin to a clearinghouse, the margin will be maintained in an omnibus account containing
the margin of all the clearing broker’s customers. If the Fund’s clearing broker defaults to a clearinghouse because
of a default by one of the clearing broker’s other customers or otherwise, then the clearinghouse can look to all of the
margin in the omnibus account, including margin posted by the Fund and any other non-defaulting customers of the clearing broker
to satisfy the obligations of the clearing broker.
From time to time, clearing brokers may be subject to legal
or regulatory proceedings in the ordinary course of their business. A clearing broker’s involvement in costly or time-consuming
legal proceedings may divert financial resources or personnel away from the clearing broker’s trading operations, which could
impair the clearing broker’s ability to successfully execute and clear the Fund’s trades.
In addition, the majority of the Fund’s assets are held
in U.S. Treasury securities, cash and/or cash equivalents with U.S. Bancorp Fund Services, LLC (the “Custodian”). The insolvency of the Custodian could result in a
complete loss of the Fund’s assets held by that Custodian, which, at any given time, could comprise a substantial
portion of the Fund’s total assets.
Although the Shares of the Fund are limited liability
investments, certain circumstances such as bankruptcy could increase a shareholder’s liability.
The Shares of the Fund are limited liability investments;
shareholders may not lose more than they invest plus any profits recognized on their investment. However, shareholders could
be required, as a matter of bankruptcy law, to return to the estate of the Fund any distribution they received at a time when
the Fund was in fact insolvent or in violation of its Trust Agreement.
Forward-Looking Statements
This prospectus includes “forward-looking
statements” which generally relate to future events or future performance. In some cases, you can identify forward-looking
statements by terminology such as “may,” “will,” “should,” “expect,” “plan,”
“anticipate,” “believe,” “estimate,” “predict,” “potential” or the
negative of these terms or other comparable terminology. All statements (other than statements of historical fact) included in
this prospectus that address activities, events or developments that will or may occur in the future, including such matters as
movements in the futures markets and indexes that track such movements, the Fund’s operations, the Sponsor’s plans
and references to the Fund’s future success and other similar matters, are forward-looking statements. These statements are
only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses
the Sponsor has made based on its perception of historical trends, current conditions and expected future developments, as well
as other factors appropriate in the circumstances. Whether or not actual results and developments will conform to the Sponsor’s
expectations and predictions, however, is subject to a number of risks and uncertainties, including the special considerations
discussed in this prospectus, general economic, market and business conditions, changes in laws or regulations, including those
concerning taxes, made by governmental authorities or regulatory bodies, and other world economic and political developments. Consequently,
all the forward-looking statements made in this prospectus are qualified by these cautionary statements, and there can be no assurance
that actual results or developments the Sponsor anticipates will be realized or, even if substantially realized, that they will
result in the expected consequences to, or have the expected effects on, the Fund’s operations or the value of its shares.
Additional Information About the Fund, Its Investment Objective
and Investments
The Trust is a Delaware statutory trust formed on July 23, 2014.
The Trust is a series trust formed pursuant to the Delaware Statutory Trust Act, of which the Fund is currently the sole series.
The Fund is a commodity pool that issues common shares of beneficial interest that may be purchased and sold on the NYSE Arca stock
exchange (“NYSE Arca”). The Fund is managed and controlled by the Sponsor. The Sponsor is registered
with the CFTC as a CPO and is a member of the NFA. Sit is registered as a CTA and will act as such
for the Fund.
The Fund’s Investment Objective and Strategy
The Fund’s investment objective is to profit
from rising interest rates by tracking the performance of a portfolio (the “Benchmark Portfolio”) consisting
of exchange traded futures contracts and options on futures on 2, 5 and 10-year U.S. Treasury securities
(“Treasury Instruments”) weighted to achieve a targeted negative 10 year average effective portfolio duration
(the “Benchmark Component Instruments”). The Fund seeks to achieve its investment objective by investing in
the Benchmark Component Instruments currently constituting the Benchmark Portfolio. The Benchmark Portfolio is maintained by
Sit and will be rebalanced, reconstituted, or both, monthly (typically on the 15th of each month and on the next business day
if the 15th is a holiday, weekend, or other day on which the national exchanges are closed) to maintain a negative 10 year
average effective duration. The Benchmark Portfolio and the Fund will each maintain a short position in Treasury Instruments.
The Fund does not use futures contracts or options to obtain leveraged investment results. The Fund will not invest in swaps
or other over-the-counter derivative instruments. The Benchmark Component Instruments currently constituting the
Benchmark Portfolio and anticipated rebalancing dates, as well as the daily holdings of the Fund are available on the
Fund’s website at www.risingratefund.com.
The weighting of the Treasury Instruments
constituting the Benchmark Component Instruments will be based on each maturity’s duration contribution. The expected range
for the duration weighted percentage of the 2 year and 5 year maturity Treasury Instruments will be from 30% to 70%. The expected
range for the duration weighted percentage of the 10 year maturity Treasury Instruments will be from 5% to 25%.
The relative weightings of the Benchmark Component Instruments will be shifted between maturities when there are material changes in the shape of the yield curve, for example, if the Federal Reserve
began raising short term interest rates more than long term interest rates. In such an instance, Sit, which maintains the Benchmark Portfolio, will elect to increase
the weightings of the 2 year and reduce the weighting in the 10 year maturity. Conversely, Sit will do the opposite if the Federal Reserve began raising
long term interest rates more than short term interest rates. Reconstitution and rebalancing each will occur monthly, on the 15th,
except for as noted above or if there are radical changes in the yield curve such that effective duration is outside of a range
from negative nine to negative 11-year average effective duration, in which case Sit will adjust the maturities of the Treasury
Instruments before the next expected monthly reconstitution.
The Sponsor anticipates that approximately 5% to 15% of the
Fund’s assets will be used as payment for or collateral for Treasury Instruments. In order to collateralize its Treasury
Instrument positions the Fund will hold such assets, from which it will post margin to its futures commission merchant (“FCM”),
in an amount equal to the margin required by the relevant exchange, and transfer to its FCM any additional amounts that may be
separately required by the FCM. When establishing positions in Treasury Instruments, the Fund will be required to deposit initial
margin with a value of approximately 3% to 10% of the value of each Treasury Instrument position at the time it is established.
These margin requirements are subject to change from time to time by the exchange or the FCM. On a daily basis, the Fund will be
obligated to pay, or entitled to receive, variation margin in an amount equal to the change in the daily settlement level of its
Treasury Instruments positions.Any assets not required to be posted as margin with the FCM will be held at the Fund’s administrator
in cash or cash equivalents as discussed below.
The Benchmark Portfolio will be invested in Benchmark Component
Instruments and rebalanced, as noted above to maintain a negative average effective portfolio duration of approximately 10 years.
Duration is a measure of estimated price sensitivity relative to changes in interest rates. Portfolios with longer durations are
typically more sensitive to changes in interest rates. For example, if interest rates rise by 1%, the market value of a security
with an effective duration of 5 years would decrease by 5%, with all other factors being constant, and likewise the market value
of a security with an effective duration of negative 5 years would increase by 5%, with all other factors being constant. The correlation
between duration and price sensitivity is greater for securities rated investment-grade than it is for securities rated below investment-grade.
Duration estimates are based on assumptions by Sit and are subject to a number of limitations. Effective duration is calculated
based on historical price changes of U.S. Treasuries and Treasury Instruments held by the Benchmark Portfolio, and therefore is
a more accurate estimate of price sensitivity provided interest rates remain within their historical range. Investments in debt
securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities.
The Fund will incur certain expenses in connection with its
operations. The Fund will hold cash or cash equivalents such as U.S. Treasuries or other high credit quality, short-term fixed-income
or similar securities for direct investment or as collateral for the Treasury Instruments and for other liquidity purposes and
to meet redemptions that may be necessary on an ongoing basis. These expenses and income from the cash and cash equivalent holdings
may cause imperfect correlation between changes in the Fund’s NAV and changes in the Benchmark Portfolio, because the Benchmark
Portfolio does not reflect expenses or income.
The Fund seeks to trade its positions prior to maturation; accordingly,
natural market forces may cost the Fund while rebalancing. Each time the Fund seeks to reconstitute its positions, barring movement
in the underlying securities, the futures and option prices may be higher or lower. Such differences in price, barring a movement
in the price of the underlying security, will constitute “roll yield” and may inhibit the Fund’s ability to achieve
its investment objective.
Impact of Futures Roll and Time Decay
of Options on Total Returns
Several factors determine the total return from investing in
a futures contract position. One factor that impacts the total return that will result from investing in near month futures contracts
and “rolling” those contracts forward each month is the price relationship between the current near month contract
and the next month contract.
When the Sponsor purchases an option that expires “out
of the money,” the Fund will realize a loss. The Sponsor may not be able to invest the Fund’s assets in futures and
options contracts having an aggregate notional amount exactly equal to that which is required to achieve a negative 10 year average
effective duration. For example, as standardized contracts, U.S. Treasury futures contracts are denominated in specific dollar
amounts, and the Fund’s NAV and the proceeds from the sale of a block of shares referred to as a “creation basket”
(“Creation Basket”) are unlikely to be an exact multiple of the amounts of those contracts. As a result, in such circumstances,
the Fund may be better able to achieve the exact amount of exposure desired through the use of other investments.
The Sponsor will close existing positions when it determines
it would be appropriate to do so and reinvest the proceeds in other positions. Positions may also be closed out to meet orders
for Redemption Baskets.
THE POOL HAS NOT COMMENCED TRADING YET
AND DOES NOT HAVE ANY PERFORMANCE HISTORY
Management’s Discussion
The Fund is newly formed and has not commenced
operations. Prior to the inception of operations the Fund does not have any financial information of which to assess the Fund’s
financial condition.
Fund Trading Policies
Liquidity
The Fund invests principally in exchange traded futures and
options on futures on U.S. Treasuries that, in the opinion of the Sponsor, are traded in sufficient volume to permit the ready
taking of orders and liquidation of positions in these financial interests.
Borrowings
Borrowings are not used by the Fund.
The Fund’s
Operations
The Sponsor
and its Management and Trading Principal
The Sponsor is a single member limited liability company that
was formed in the state of Delaware on June 12, 2014. The Sponsor maintains its main business office at 35 Beechwood Road, Suite
2B, Summit, NJ 07901. The Sponsor is registered as a registered commodity pool operator with the Commodity Futures
Trading Commission (“CFTC”). The Sponsor is a member of the National Futures Association (“NFA”). The Sponsor registered as a CPO with the CFTC and became a member of the NFA on September 23, 2014.
The Sponsor is a wholly-owned subsidiary of Exchange Traded
Managers Group LLC (“ETFMG”), a single member limited liability company domiciled and headquartered in New Jersey.
The Sponsor maintains its main business office at 35 Beechwood Road, Suite 2B, Summit, NJ 07901.
Neither the Trust nor the Fund has executive officers. Pursuant
to the terms of the Trust Agreement, the Fund’s affairs are managed by the Sponsor. The business and affairs of the Sponsor
are managed by its chief executive officer, Samuel Masucci, III.
The following are individual Principals, as that term is defined
in CFTC Rule 3.1, for the Sponsor: Samuel R. Masucci, III, John A. Flanagan, and David H. Weissman. These individuals are principals
due to their positions; however, Mr. Masucci is also a principal due to his controlling stake in ETFMG.
Samuel R. Masucci, III
. Mr. Masucci is
the founder of Exchange Traded Managers Group LLC and ETFMG has been the Managing Owner since November 2013. Mr. Masucci
was listed as a principal of ETF Managers Capital LLC on September 23, 2014. Mr. Masucci serves as Chairman and Chief
Executive Officer of ETFMG with responsibilities for managing all ETF issuers and related service activities. Since June of
2012, Mr. Masucci has served as the Chief Executive Officer of Factor Advisors, LLC, a financial services
company, and as the Chairman since March 2013; in this position Mr. Masucci was listed as a principal of Factor Capital Management LLC on June 20, 2012 and deregistered as a principal on September 23, 2014. Mr. Masucci has
also served as the Chief Executive Officer of GENCAP Ventures, LLC, a financial services company, since May 2012 and is
responsible for managing all ETF issuers and related service activities. Mr. Masucci was out of the job market from January
to May 2012. Mr. Masucci worked as Chief Executive Officer for MacroMarkets LLC from April 2005 to December 2011, with
responsibility for running the day to day operations of an issuer of public securities and a registered broker-dealer. From
April 2005 to December 2011, Mr. Masucci also worked as the Chief Executive Officer, managing partner and Chief Compliance
Officer of Macro Financial LLC, which was a registered broker-dealer. From July 2001 to April 2005, Mr. Masucci worked as an
owner and manager of The Cobblestone Group offering fixed income consulting services to the investment banking and commercial
banking industries.
From March 1999 to June 2001, Mr. Masucci worked in mortgage
trading as a Managing Director for Bear Stearns Inc., a financial institution. Mr. Masucci was out of the job market from December
1998 to February 1999. From June 1996 to November 1998, Mr. Masucci worked at SBC Warburg/UBS, a financial institution, as an Executive
Director managing an asset backed securities group. From January 1992 to June 1996, Mr. Masucci worked in structured products (specifically,
structuring mortgage derivatives and hedge funds), at Merrill Lynch, a financial institution, as a Vice President. From January
1990 to January 1992, Mr. Masucci worked as a financial consultant for Merrill Lynch in the private client group in connection
with retail investors. From November 1987 to January 1990, Mr. Masucci worked at MetLife Insurance Company, an insurance company,
as a retail salesperson qualified to sell financial and insurance products to retail clients. From August 1984 to October 1987,
Mr. Masucci
worked as a manager of jobsites for Forestdale Inc., which is
a residential property developer. Mr. Masucci received his B.S. from Penn State University in Finance in July 1984.
John A. Flanagan.
Mr. Flanagan serves as
the Principal Financial Officer of the Sponsor and the Trust. Mr. Flanagan was listed as a principal pending approval of ETF
Managers Capital LLC on September 24, 2014. Since June 2014, Mr. Flanagan serves as an Independent Trustee of Absolute Shares
Trust, a multi-series exchange traded fund. Mr. Flanagan has been the President and sole owner of John A Flanagan CPA,
LLC since December 2010. Mr. Flanagan was Chief Financial Officer of MacroMarkets LLC, an exchange traded fund issuer
from January 2007 to December 2010.
David H. Weissman.
Mr. Weissman
joined Exchange Traded Mangers Group LLC, a financial services company, and its subsidiaries on September 15, 2014 and serves
as COO and CCO, overseeing and managing the implementation of all elements of operations and the regulatory compliance
requirements and reporting pursuant to SEC, FINRA and NYSE rules and regulations. Mr. Weissman was registered and listed as
both an associated person and principal of ETF Managers Capital LLC on September 23, 2014. Prior to joining Exchange Trade
Managers Group, Mr. Weissman served as Chief Administrative and Chief Compliance Officer of ARK Investment Management LLC, a
Registered Investment Advisor and ETF issuer, from January 2014 to August 2014, overseeing and managing the office and ETF
operations and the regulatory compliance requirements pursuant to SEC, FINRA and NYSE rules and regulations. Prior to joining
ARK, Mr. Weissman served as Chief Compliance Officer to Factor Advisors, Factor Capital Management, LLC and FactorShares
Trust from January 2013 to December 2013, as well as the Associated Person to the Factor Capital Management, a CPO; the
Factor entities are a collection of financial services companies. Prior to joining Factor Advisors, Mr. Weissman was an
independent consultant to issuers in the ETF market from July 24, 2012 to December 31, 2012. Prior to that, Mr. Weissman
served as COO and CCO to FocusShares LLC, a wholly-owned subsidiary of Scottrade LLC, an ETF issuer and Investment Adviser
from June 2010 to July 2012, overseeing and managing the implementation of all elements of FocusShares’ operations
and the regulatory compliance requirements and reporting pursuant to SEC, FINRA and NYSE rules and regulations, as well as
the Associated Person to the FocusShares LLC CPO. Prior to FocusShares being acquired by Scottrade in June 2010, Mr.
Weissman served in the same positions with the same roles from September 2007 to June 2010, except for the role as Associated
Person which he initially began serving as in September 2011.
Performance of Related Public Funds
Since June of 2012, Mr. Masucci has served as the Chief Executive
Officer of Factor Advisors, LLC, and as the Chairman since March 2013. Mr. Masucci was listed as a principal of Factor Capital
Management LLC until September 23, 2014 and during this time period Factor Capital Management LLC was the sponsor of the FactorShares
exchange-traded funds noted below (the “FactorShares funds”). Each of these funds was a “commodity pool”
and therefore although the funds were liquidated in November 2013, in conformity with regulatory requirements, the performance
of the FactorShares funds is shown below. Investors should be aware that there are significant differences between the Fund and
the related pools below; principally, the FactorShares funds were leveraged funds seeking investment exposure to equities and commodities.
The Fund has an investment objective of seeking to profit from rising interest rates by tracking the performance of a portfolio
of Treasury Instruments weighted to achieve a targeted negative 10 year average effective portfolio duration. Given the significantly
different investment objectives of the Fund and the FactorShares funds, the performance of the Fund is not expected to have any
relationship to that of the FactorShares funds.
PERFORMANCE OF FACTORSHARES 2X: OIL BULL/S&P500
BEAR (
TICKER: FOL
)
Name of Pool
: Factorshares 2X: Oil Bull/S&P500
Bear
Type of Pool
: Public, Exchange-Listed
Commodity Pool
Inception of Trading
: February 22, 2011
Cessation of Operations
: November 21,
2013
Aggregate Gross Capital Subscriptions as
of December 1, 2014:
$10,998,571
Net Asset Value as of December 1, 2014:
$0.00
Net Asset Value per Share as of December
1, 2014:
$0.00
Worst Monthly Drawdown
: (25.51)% May
2012
Worst Peak-to-Valley Drawdown
: (85.84)%
April 2011 – November 2013
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
|
2013(%)
|
2012(%)
|
2011(%)
|
|
Annual Rate of Return
|
(5.49)
|
(54.81)
|
(13.33)
|
|
*
|
The fund commenced investment operations on February 22, 2011. The fund ceased investment operations November 21, 2013
|
PERFORMANCE OF FACTORSHARES 2X: TBOND BULL/S&P500
BEAR (
TICKER: FSA
)
Name of Pool
: Factorshares 2X: TBond
Bull/S&P500 Bear
Type of Pool
: Public, Exchange-Listed
Commodity Pool
Inception of Trading
: February 22, 2011
Cessation of Operations
: November 21,
2013
Aggregate Gross Capital Subscriptions as
of December 1, 2014:
$9,239,791
Net Asset Value as of December 1, 2014:
$0.00
Net Asset Value per Share as of December
1, 2014:
$0.00
Worst Monthly Drawdown
: (29.18)% November
2013
Worst Peak-to-Valley Drawdown
: (86.12)%
September 2011 – November 2013
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
|
2013(%)
|
2012(%)
|
2011(%)
|
|
Annual Rate of Return
|
(13.63)
|
(35.05)
|
19.77
|
|
*
|
The fund commenced investment operations on February 22, 2011. The fund ceased investment operations November 21, 2013
|
PERFORMANCE OF FACTORSHARES 2X: S&P500
BULL/TBOND BEAR (
TICKER: FSE
)
Name of Pool
: Factorshares 2X: S&P500
Bull/TBond Bear
Type of Pool
: Public, Exchange-Listed
Commodity Pool
Inception of Trading
: February 22, 2011
Cessation of Operations
: November 21,
2013
Aggregate Gross Capital Subscriptions as
of December 1, 2014:
$5,000,000
Net Asset Value as of December 1, 2014:
$0.00
Net Asset Value per Share as of December
1, 2014:
$0.00
Worst Monthly Drawdown
: (27.43)% August
2011
Worst Peak-to-Valley Drawdown
: (60.86)%
April 2011 – November 2012
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
|
2013(%)
|
2012(%)
|
2011(%)
|
|
Annual Rate of Return
|
2.82
|
(14.67)
|
(51.45)
|
|
*
|
The fund commenced investment operations on February 22, 2011. The fund ceased investment operations November 21, 2013
|
PERFORMANCE OF FACTORSHARES 2X: GOLD BULL/S&P500
BEAR (
TICKER: FSG
)
Name of Pool
: Factorshares 2X: Gold Bull/S&P500
Bear
Type of Pool
: Public, Exchange-Listed
Commodity Pool
Inception of Trading
: February 22, 2011
Cessation of Operations
: November 21,
2013
Aggregate Gross Capital Subscriptions as
of December 1, 2014:
$41,776,771
Net Asset Value as of December 1, 2014:
$0.00
Net Asset Value per Share as of December
1, 2014:
$0.00
Worst Monthly Drawdown
: (24.04)% December
2011
Worst Peak-to-Valley Drawdown
: (87.32)%
August 2011 – November 2013
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
|
2013(%)
|
2012(%)
|
2011(%)
|
|
Annual Rate of Return
|
(15.10)
|
(21.71)
|
5.85
|
|
*
|
The fund commenced investment operations on February 22, 2011. The fund ceased investment operations November 21, 2013
|
PERFORMANCE OF FACTORSHARES 2X: S&P500
BULL/USD BEAR (
TICKER: FSU
)
Name of Pool
: Factorshares 2X: S&P500
Bull/USD Bear
Type of Pool
: Public, Exchange-Listed
Commodity Pool
Inception of Trading
: February 22, 2011
Cessation of Operations
: November 21,
2013
Aggregate Gross Capital Subscriptions as
of December 1, 2014:
$5,000,000
Net Asset Value as of December 1, 2014:
$0.00
Net Asset Value per Share as of December
1, 2014:
$0.00
Worst Monthly Drawdown
: (24.10)% September
2011
Worst Peak-to-Valley Drawdown
: (43.31)%
April 2011 – September 2011
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
|
2013(%)
|
2012(%)
|
2011(%)
|
|
Annual Rate of Return
|
6.21
|
10.52
|
(23.65)
|
|
*
|
The fund commenced investment operations on February 22, 2011. The fund ceased investment operations November 21, 2013
|
Commodity Trading Advisor
The Commodity Trading Advisor (“CTA”) for the Fund
is Sit Fixed Income Advisors II, LLC (“Sit”). Sit Fixed Income Advisors II, LLC is a Delaware limited liability company
and a subsidiary of Sit Investment Associates, Inc. Sit Investment Associates, Inc. was founded in July 1981 in Minneapolis by
Eugene C. Sit. Sit Investment Associates, Inc. is an employee owned Minnesota corporation with a staff in excess of 70 persons
including 25 full-time investment professionals. Sit Investment Associates, Inc. and its affiliates manage $14.07 billion in assets
as of June 30, 2014 in portfolios with a variety of investment objectives. Sit Investment Associates, Inc. manages the assets of
separate accounts, private investment funds, and the Sit Mutual Funds, a family of 12 no-load mutual funds. Sit Investment Associates,
Inc. manages two private funds which have investment objectives that are similar to the Fund’s investment objectives. Information
regarding such private investment funds with similar investment objectives is included below. Sit is registered
as a CTA with the CFTC and is a member of the NFA. Sit registered as a CTA and became a member of the NFA on November 21, 2014.
The Sponsor has also entered into a Licensing and Services
Agreement with Sit. Under this agreement, Sit has agreed to compose and maintain the Benchmark Portfolio and license to the Sponsor
the use of the Benchmark Portfolio. For this license, the Sponsor pays a fee to Sit.
Sit has agreed to be responsible for the payment of certain
expenses in excess of the expense limitation although the Sponsor retains the ultimate obligation to the Fund to waive and/or reimburse
such expenses.
The following are individual Principals, as that term is defined
in CFTC Rule 3.1, for Sit Fixed Income Advisors II, LLC: Roger J. Sit, Michael, C. Brilley, Paul J. Jungquist, Paul E. Rasmussen,
Carla J. Rose, Debra A. Sit, Mark H. Book, Bryce A. Doty, and Chris M. Rasmussen. These individuals are principals due to their
positions. The following individuals will serve as investment professionals and senior management in regards to the Fund:
Roger J. Sit
.
Roger Sit is the Chairman and Chief
Executive Officer. Mr. Sit was listed as principal of Sit on November 4, 2014. Mr. Sit joined the organization in January 1998. Mr. Sit directs the overall investment management activities
for Sit Investment Associates, Inc. and Sit International.
Michael C. Brilley
.
Michael
Brilley is the President and Chief Fixed Income Officer. Mr. Brilley joined Sit Investment Associates, Inc. in April 1984.
Mr. Brilley was listed as a principal of Sit on October 29, 2014 and was listed as a pending associated person on October
14, 2014.
Bryce A. Doty.
Bryce
Doty is a Senior Vice President and Senior Portfolio Manager. Mr. Doty joined Sit Investment Associates, Inc. in
November 1995. Mr. Doty was listed as a principal of Sit on October 29, 2014 and was listed as an associated person on November
21, 2014. He is responsible for taxable bond portfolio management serving as portfolio manager for short duration
accounts.
Mark H. Book, CFA, CMA
.
Mark
Book is a Vice President and Portfolio Manager. Mr. Book joined Sit Investment Associates, Inc. in August 2000 as a Portfolio
Manager and Fixed Income Analyst. Mr. Book was listed as a principal of Sit on October 31, 2014 and was listed as a pending associated person on October
14, 2014. He is responsible for
taxable bond portfolio management and credit research.
Christopher M. Rasmussen, CFA
.
Chris Rasmussen is a Vice President and Portfolio Manager. Mr. Rasmussen joined Sit Investment Associates, Inc. in February
1999. Mr. Rasmussen was listed as a principal of Sit on October 29, 2014 and listed as an associated person on November 21, 2014.
He is responsible for taxable bond portfolio management and credit research. Mr. Rasmussen has worked in the Sit mutual fund
group as well as the client administration area, and moved to fixed income in August 2002.
Sit’s Trading Program
Sit’s investment in commodities on behalf
of its clients’ accounts is currently limited to investment in exchange traded futures and options on futures in three strategies:
Rising Interest Rate Strategy.
The objective of the strategy is to achieve
a superior risk-adjusted return to the Barclays U.S. Treasury Bellwether 30-Year Index. Sit attempts to maintain the account’s
average effective duration at approximately -11 to -9 years by investing 5 to 15% of its total assets in futures and options on
2, 5, and 10-year U.S. Treasury futures contracts. The portfolios and composites managed under this strategy are:
Rising Interest Rate II
Rising Interest Rate
The Benchmark Portfolio shares the “Rising Interest Rate Strategy” trading
program described above.
Certain accounts utilizing this trading program have been managed by Sit under investment objectives that are substantially similar to that of the Fund; the performance of such accounts has
been provided below in accordance with applicable regulatory requirements. When reviewing this information, you should be aware
that the investment strategies in accordance with which these accounts are managed to achieve their investment objectives differ
in certain respects from those in accordance with which the Fund is managed. Generally, the investment strategies used in managing
the Fund (described previously) permit less flexibility in managing the Fund’s investments than those used in managing the
accounts. The accounts may rebalance and reconstitute their portfolios at their discretion.
Interest Rate Hedging Strategy.
The objective of the strategy is to maintain
the account’s average effective duration at a level to hedge against anticipated changes in interest rates by investing a
portion of the account’s total assets (not to exceed 5%) in futures and options on 2, 5, and 10-year U.S. Treasury futures
contracts. The portfolios and composites managed under this strategy are:
Taxable Short Duration Hedged Composite
Quality Income Hedged Composite
Custom Alpha Bond Portfolio Hedged Composite
U.S. Government Securities Hedged
Custom Alpha Strategy.
The objective of the strategy is to achieve
a superior risk-adjusted return to the relative to a specified benchmark by investing 5 to 15% of the account’s total assets
in futures contracts relative to the index. The indices currently utilized include Standard and Poor’s S&P 500
®
Index, Barclays U.S. 5-year Note future USD ER Index, Barclays U.S. long bond future USD ER Index, and MSCI EAFE Index. The portfolios
and composites managed under this strategy are:
Custom Alpha – S&P 500
Custom Alpha – 5-Year Treasury
Custom Alpha – 30-Year Treasury
Custom Alpha – Composite Equity
Index
Custom Alpha – EAFE
Custom Alpha – Client Directed
A
Custom Alpha – 5-Year Treasury
B
Custom Alpha – Series D
PERFORMANCE OF RISING INTEREST RATE STRATEGY
Name of Trading Program
: Rising Interest
Rate II
Inception of Trading
: June 30, 2012
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $136,366,701
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $92,159,155
Worst Monthly
Drawdown
:
September 2013 (3.05%)
Worst Peak-to-Valley Drawdown
: November
‘12 to May ‘14 (9.83%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
|
January
|
(2.36)
|
(0.56)
|
|
|
February
|
(0.39)
|
(0.62)
|
|
|
March
|
1.94
|
(0.56)
|
|
|
April
|
(0.02)
|
(0.51)
|
|
|
May
|
(2.94)
|
0.82
|
|
|
June
|
1.89
|
0.17
|
|
|
July
|
1.80
|
(0.77)
|
(0.09)
|
|
August
|
0.29
|
(0.47)
|
0.07
|
|
September
|
1.06
|
(3.05)
|
1.95
|
|
October
|
(1.78)
|
(2.28)
|
0.49
|
|
November
|
(0.14)
|
(0.47)
|
(0.93)
|
|
December
|
0.73
|
2.74
|
0.15
|
|
Annual Rate of Return
|
(0.06)
|
(5.54)
|
1.63
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (1.63%), trading advisor fees (0.32%), and performance fees, which for capsule purposes are accrued at a rate of 30% on returns in excess of the benchmark.
|
Name of Trading Program
: Rising Interest
Rate
Inception of Trading
: July 31, 2011
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $136,366,701
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $44,207,546
Worst Monthly Drawdown
: September 2013
(3.46%)
Worst Peak-to-Valley Drawdown
: July ‘12
to November ‘13 (8.72%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
|
January
|
(2.17)
|
(0.60)
|
(0.78)
|
|
|
February
|
0.17
|
(0.57)
|
2.33
|
|
|
March
|
2.64
|
(0.28)
|
1.22
|
|
|
April
|
(0.07)
|
(0.90)
|
0.52
|
|
|
May
|
(3.11)
|
1.02
|
(0.03)
|
|
|
June
|
2.21
|
(0.51)
|
0.88
|
|
|
July
|
2.22
|
(0.39)
|
(1.47)
|
|
|
August
|
0.22
|
(0.13)
|
(0.45)
|
(1.93)
|
|
September
|
0.91
|
(3.46)
|
1.65
|
0.35
|
|
October
|
(1.51)
|
(2.04)
|
0.21
|
0.15
|
|
November
|
0.00
|
(0.73)
|
(0.77)
|
(1.44)
|
|
December
|
1.35
|
2.78
|
0.43
|
0.84
|
|
Annual Rate of Return
|
2.71
|
(5.77)
|
3.71
|
(2.04)
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (1.63%), trading advisor fees (0.32%), and performance fees, which for capsule purposes are accrued at a rate of 30% on returns in excess of the benchmark.
|
PERFORMANCE OF INTEREST RATE HEDGING STRATEGY
Name of Trading Program
: Taxable Short
Duration Hedged Composite
Inception of Trading
: March 31, 2010
Number of Accounts Traded Pursuant to Program
:
6
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $1,583,338,236
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $354,102,608
Worst Monthly Drawdown
: June 2013 (0.59%)
Worst Peak-to-Valley Drawdown
: May ‘13
to October ‘13 (1.40%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
0.07
|
(0.29)
|
0.41
|
0.47
|
|
|
February
|
0.21
|
0.39
|
0.61
|
0.47
|
|
|
March
|
0.06
|
0.09
|
0.14
|
0.36
|
|
|
April
|
0.19
|
0.18
|
0.77
|
0.09
|
(0.36)
|
|
May
|
(0.06)
|
(0.35)
|
0.37
|
0.53
|
0.22
|
|
June
|
0.40
|
(0.59)
|
0.03
|
0.41
|
0.69
|
|
July
|
0.48
|
(0.02)
|
0.52
|
0.55
|
0.76
|
|
August
|
0.36
|
(0.34)
|
0.22
|
(0.01)
|
0.39
|
|
September
|
0.12
|
(0.02)
|
0.47
|
0.01
|
0.34
|
|
October
|
(0.43)
|
(0.07)
|
(0.02)
|
0.21
|
0.92
|
|
November
|
0.19
|
0.08
|
0.27
|
(0.02)
|
0.57
|
|
December
|
0.29
|
0.26
|
(0.03)
|
0.56
|
(0.08)
|
|
Annual Rate of Return
|
1.86
|
(0.72)
|
3.78
|
3.66
|
3.48
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.40%).
|
Name of Trading Program
: Quality Income
Hedged Composite
Inception of Trading
: December 31, 2012
Number of Accounts Traded Pursuant to Program
:
3
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $1,583,338,236
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $343,687,326
Worst Monthly Drawdown
: June 2013 (0.36%)
Worst Peak-to-Valley Drawdown
: May ‘13
to June ‘13 (0.49%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
|
January
|
0.12
|
0.18
|
|
February
|
0.11
|
0.09
|
|
March
|
0.09
|
0.22
|
|
April
|
0.16
|
0.34
|
|
May
|
0.15
|
(0.14)
|
|
June
|
0.14
|
(0.36)
|
|
July
|
0.06
|
0.04
|
|
August
|
0.13
|
0.16
|
|
September
|
0.02
|
0.03
|
|
October
|
(0.01)
|
0.14
|
|
November
|
0.07
|
(0.02)
|
|
December
|
0.05
|
0.22
|
|
Annual Rate of Return
|
1.09
|
0.89
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.40%).
|
Name of Trading Program
: Custom Alpha Bond
Portfolio Hedged Composite
Inception of Trading
: March 31, 2008
Number of Accounts Traded Pursuant to Program
:
3
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $1,583,338,236
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $299,258,557
Worst Monthly Drawdown
: April 2010 (2.15%)
Worst Peak-to-Valley Drawdown
: December
‘12 to November ‘13 (7.56%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(0.31)
|
(1.43)
|
0.61
|
1.00
|
1.15
|
|
February
|
0.44
|
0.42
|
1.64
|
2.22
|
(0.34)
|
|
March
|
0.89
|
(0.28)
|
0.60
|
1.14
|
2.41
|
|
April
|
0.89
|
0.22
|
2.65
|
0.34
|
(2.15)
|
|
May
|
(1.44)
|
(1.28)
|
0.97
|
1.08
|
0.50
|
|
June
|
1.69
|
(1.79)
|
0.23
|
1.36
|
2.69
|
|
July
|
1.25
|
(0.08)
|
0.38
|
1.32
|
1.85
|
|
August
|
1.71
|
(1.50)
|
(0.20)
|
(0.40)
|
0.64
|
|
September
|
0.11
|
(1.05)
|
1.66
|
0.37
|
1.05
|
|
October
|
0.58
|
(1.25)
|
(0.16)
|
0.40
|
3.20
|
|
November
|
1.40
|
(0.28)
|
0.15
|
(0.90)
|
2.84
|
|
December
|
0.33
|
0.42
|
(0.01)
|
1.74
|
0.22
|
|
Annual Rate of Return
|
7.76
|
(7.63)
|
8.80
|
10.07
|
14.86
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (1.50%), and trading advisor fees (0.07%).
|
Name of Trading Program
: U.S. Government
Securities Hedged
Inception of Trading
: May 31, 1987
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $1,583,338,236
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $586,289,745
Worst Monthly Drawdown
: May 2013 (0.91%)
Worst Peak-to-Valley Drawdown
: December
‘12 to December ‘13 (2.14%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
0.38
|
(0.40)
|
0.22
|
0.14
|
0.70
|
|
February
|
0.16
|
0.25
|
0.51
|
0.36
|
0.03
|
|
March
|
0.09
|
(0.12)
|
0.25
|
0.24
|
0.53
|
|
April
|
0.15
|
0.23
|
0.60
|
0.51
|
(0.07)
|
|
May
|
(0.05)
|
(0.91)
|
0.24
|
0.63
|
0.41
|
|
June
|
0.26
|
(0.81)
|
(0.10)
|
0.35
|
0.75
|
|
July
|
0.21
|
0.10
|
0.40
|
0.31
|
0.45
|
|
August
|
0.21
|
(0.40)
|
0.16
|
0.14
|
0.88
|
|
September
|
0.18
|
(0.04)
|
0.29
|
(0.03)
|
0.16
|
|
October
|
0.08
|
(0.03)
|
(0.05)
|
0.04
|
0.70
|
|
November
|
0.23
|
0.15
|
0.18
|
(0.25)
|
0.62
|
|
December
|
0.31
|
(0.11)
|
(0.06)
|
0.24
|
(0.36)
|
|
Annual Rate of Return
|
2.22
|
(2.08)
|
2.67
|
2.72
|
4.91
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.80%).
|
PERFORMANCE OF CUSTOM ALPHA STRATEGY
Name of Trading Program
: Custom Alpha –
S&P 500
Inception of Trading
: March 31, 2008
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $71,179,611
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $12,944,375
Worst Monthly Drawdown
: May 2010 (7.84%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (13.75%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(3.56)
|
3.76
|
4.54
|
3.22
|
(2.82)
|
|
February
|
5.18
|
1.70
|
5.38
|
5.25
|
2.69
|
|
March
|
2.03
|
3.42
|
3.73
|
0.53
|
8.01
|
|
April
|
1.52
|
1.85
|
1.53
|
3.04
|
(0.01)
|
|
May
|
0.89
|
1.09
|
(5.16)
|
(0.41)
|
(7.84)
|
|
June
|
3.56
|
(3.59)
|
4.12
|
(0.57)
|
(3.36)
|
|
July
|
0.09
|
5.09
|
1.49
|
(1.07)
|
8.04
|
|
August
|
5.38
|
(4.14)
|
1.83
|
(5.71)
|
(4.76)
|
|
September
|
(1.27)
|
1.64
|
3.85
|
(6.63)
|
9.96
|
|
October
|
2.93
|
3.58
|
(2.18)
|
10.91
|
6.44
|
|
November
|
4.07
|
2.61
|
0.64
|
(0.92)
|
2.84
|
|
December
|
(0.05)
|
2.84
|
0.85
|
2.54
|
6.84
|
|
Annual Rate of Return
|
22.39
|
21.25
|
22.07
|
9.38
|
27.02
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (1.50%), and trading advisor fees (0.32%).
|
Name of Trading Program
: Custom Alpha –
5-Year Treasury
Inception of Trading
: March 31, 2008
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $71,179,611
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $740,309
Worst Monthly Drawdown
: June 2013 (3.46%)
Worst Peak-to-Valley Drawdown
: October
‘12 to December ‘13 (10.55%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
1.00
|
(1.95)
|
0.93
|
1.91
|
2.80
|
|
February
|
0.96
|
0.94
|
0.71
|
1.55
|
0.22
|
|
March
|
0.73
|
(0.16)
|
0.07
|
0.57
|
1.35
|
|
April
|
1.29
|
0.45
|
3.45
|
1.51
|
(0.81)
|
|
May
|
(0.61)
|
(2.66)
|
1.24
|
2.35
|
1.33
|
|
June
|
1.55
|
(3.46)
|
0.11
|
1.53
|
3.34
|
|
July
|
1.09
|
0.30
|
0.74
|
2.57
|
2.37
|
|
August
|
2.32
|
(2.05)
|
(0.16)
|
1.29
|
0.75
|
|
September
|
(0.18)
|
(0.27)
|
1.44
|
0.31
|
1.65
|
|
October
|
1.67
|
(0.56)
|
(0.64)
|
0.37
|
3.57
|
|
November
|
2.21
|
(0.45)
|
0.54
|
(0.44)
|
2.43
|
|
December
|
(0.16)
|
(0.90)
|
(0.14)
|
2.22
|
(1.47)
|
|
Annual Rate of Return
|
12.47
|
(10.33)
|
8.56
|
16.87
|
18.86
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (1.50%), and trading advisor fees (0.32%).
|
Name of Trading Program
: Custom Alpha –
30-Year Treasury
Inception of Trading
: March 31, 2008
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $71,179,611
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $951,404
Worst Monthly Drawdown
: May 2013 (6.12%)
Worst Peak-to-Valley Drawdown
: December
‘12 to December ‘13 (18.54%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
4.15
|
(4.04)
|
0.72
|
0.02
|
3.97
|
|
February
|
1.47
|
1.63
|
(0.25)
|
3.05
|
(0.10)
|
|
March
|
1.51
|
0.25
|
(2.04)
|
0.66
|
0.88
|
|
April
|
2.20
|
2.61
|
6.00
|
1.83
|
0.80
|
|
May
|
1.06
|
(6.12)
|
5.33
|
3.75
|
3.45
|
|
June
|
1.50
|
(5.20)
|
(0.71)
|
0.10
|
5.95
|
|
July
|
1.69
|
(1.31)
|
2.00
|
4.57
|
2.09
|
|
August
|
4.55
|
(1.91)
|
(0.46)
|
6.22
|
5.13
|
|
September
|
(1.30)
|
(0.33)
|
0.11
|
4.77
|
0.33
|
|
October
|
2.84
|
0.00
|
(0.37)
|
(2.04)
|
0.93
|
|
November
|
3.45
|
(2.54)
|
1.41
|
0.94
|
1.53
|
|
December
|
1.55
|
(1.42)
|
(1.57)
|
3.91
|
(3.86)
|
|
Annual Rate of Return
|
27.50
|
(17.24)
|
10.28
|
31.19
|
22.80
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (1.50%), and trading advisor fees (0.32%).
|
Name of Trading Program
: Custom Alpha –
Composite Equity Index
Inception of Trading
: December 31, 2008
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $71,179,611
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $40,222,719
Worst Monthly Drawdown
: January 2009 (11.70%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (15.23%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(3.73)
|
2.74
|
3.16
|
0.59
|
(4.66)
|
|
February
|
3.30
|
1.10
|
3.91
|
4.02
|
0.90
|
|
March
|
1.75
|
1.96
|
1.64
|
(1.37)
|
9.05
|
|
April
|
0.91
|
2.29
|
2.33
|
4.69
|
(2.59)
|
|
May
|
0.28
|
(2.57)
|
(4.14)
|
(1.40)
|
(10.30)
|
|
June
|
3.13
|
(4.21)
|
3.56
|
0.62
|
(2.22)
|
|
July
|
0.57
|
2.46
|
1.25
|
(1.09)
|
10.41
|
|
August
|
3.21
|
(4.43)
|
0.27
|
(5.97)
|
(2.51)
|
|
September
|
(0.71)
|
2.76
|
3.49
|
(8.13)
|
6.09
|
|
October
|
1.64
|
1.34
|
(1.80)
|
7.87
|
4.34
|
|
November
|
3.08
|
1.91
|
0.37
|
(3.45)
|
(0.10)
|
|
December
|
(0.50)
|
2.49
|
1.64
|
2.72
|
3.29
|
|
Annual Rate of Return
|
13.47
|
7.68
|
16.50
|
(2.01)
|
10.20
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (1.50%), and trading advisor fees (0.32%).
|
Name of Trading Program
: Custom Alpha –
EAFE
Inception of Trading
: May 31, 2009
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $71,179,611
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $1,402,009
Worst Monthly Drawdown
: May 2010 (11.08%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (22.95%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(5.29)
|
2.20
|
5.56
|
3.07
|
(4.91)
|
|
February
|
6.75
|
(0.92)
|
6.04
|
5.62
|
0.17
|
|
March
|
0.71
|
1.07
|
0.77
|
(2.22)
|
8.61
|
|
April
|
2.30
|
4.56
|
(0.03)
|
6.22
|
(4.31)
|
|
May
|
0.38
|
(3.96)
|
(10.40)
|
(2.52)
|
(11.08)
|
|
June
|
2.40
|
(4.63)
|
7.11
|
0.17
|
(0.64)
|
|
July
|
(1.18)
|
4.91
|
0.18
|
(2.09)
|
12.39
|
|
August
|
1.85
|
(3.08)
|
2.54
|
(9.48)
|
(3.38)
|
|
September
|
(3.69)
|
5.99
|
3.75
|
(10.96)
|
10.30
|
|
October
|
0.41
|
2.16
|
0.95
|
10.40
|
6.19
|
|
November
|
1.45
|
(0.62)
|
2.93
|
(2.78)
|
(1.81)
|
|
December
|
(3.50)
|
3.15
|
4.40
|
(0.94)
|
9.10
|
|
Annual Rate of Return
|
2.01
|
10.60
|
25.12
|
(7.38)
|
19.16
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (1.50%), and trading advisor fees (0.32%).
|
Name of Trading Program
: Custom Alpha –
Client Directed -- A
Inception of Trading
: August 31, 2012
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $71,179,611
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $9,852,319
Worst Monthly Drawdown
: January 2014 (6.59%)
Worst Peak-to-Valley Drawdown
: May ‘13
to June ‘13 (8.66%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
|
January
|
(6.59)
|
0.93
|
|
|
February
|
6.06
|
(1.15)
|
|
|
March
|
0.68
|
0.10
|
|
|
April
|
1.99
|
4.15
|
|
|
May
|
0.08
|
(4.12)
|
|
|
June
|
3.13
|
(4.74)
|
|
|
July
|
(0.44)
|
3.62
|
|
|
August
|
2.04
|
(2.82)
|
|
|
September
|
(4.99)
|
7.29
|
4.05
|
|
October
|
0.83
|
1.54
|
0.19
|
|
November
|
1.18
|
(1.20)
|
2.48
|
|
December
|
(3.13)
|
2.02
|
4.76
|
|
Annual Rate of Return
|
0.15
|
5.08
|
11.92
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (1.50%), and trading advisor fees (0.32%).
|
Name of Trading Program
: Custom Alpha –
5-Year Treasury -- B
Inception of Trading
: August 31, 2012
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $71,179,611
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $3,385,631
Worst Monthly Drawdown
: June 2013 (2.90%)
Worst Peak-to-Valley Drawdown
: December
‘12 to December ‘13 (11.82%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
|
January
|
0.35
|
(2.65)
|
|
|
February
|
0.63
|
0.98
|
|
|
March
|
(0.21)
|
(0.74)
|
|
|
April
|
1.07
|
0.44
|
|
|
May
|
(1.20)
|
(2.22)
|
|
|
June
|
2.00
|
(2.90)
|
|
|
July
|
1.13
|
(0.46)
|
|
|
August
|
2.00
|
(1.60)
|
|
|
September
|
(0.96)
|
0.80
|
0.93
|
|
October
|
1.80
|
(1.53)
|
(1.13)
|
|
November
|
2.18
|
(0.88)
|
0.53
|
|
December
|
0.20
|
(1.49)
|
(0.16)
|
|
Annual Rate of Return
|
9.29
|
(11.67)
|
0.15
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (1.50%), and trading advisor fees (0.32%).
|
Name of Trading Program
: Custom Alpha –
Series D
Inception of Trading
: June 30, 2010
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Strategy as
of December 31, 2014
: $71,179,611
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $1,680,842
Worst Monthly Drawdown
: June 2013 (5.90%)
Worst Peak-to-Valley Drawdown
: December
‘12 to December ‘13 (18.46%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
2.00
|
(2.21)
|
0.25
|
1.00
|
|
|
February
|
1.12
|
0.19
|
0.66
|
2.77
|
|
|
March
|
0.51
|
(0.03)
|
(0.61)
|
1.47
|
|
|
April
|
2.06
|
0.76
|
3.86
|
2.69
|
|
|
May
|
0.74
|
(5.43)
|
2.01
|
1.20
|
|
|
June
|
1.83
|
(5.90)
|
(0.39)
|
2.15
|
|
|
July
|
1.24
|
0.39
|
1.67
|
4.58
|
0.03
|
|
August
|
1.75
|
(3.02)
|
(0.48)
|
0.68
|
1.42
|
|
September
|
(2.23)
|
0.08
|
1.58
|
0.15
|
1.82
|
|
October
|
1.28
|
(0.63)
|
0.43
|
1.91
|
4.95
|
|
November
|
1.47
|
(1.86)
|
0.48
|
(0.63)
|
0.44
|
|
December
|
(1.22)
|
(1.42)
|
(0.90)
|
1.48
|
(1.88)
|
|
Annual Rate of Return
|
10.97
|
(17.72)
|
8.79
|
21.15
|
6.84
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (1.50%), and trading advisor fees (0.32%).
|
Also, Sit manages fixed income accounts. These
accounts are generally within two strategies.
Municipal Fixed Income General Strategy
.
Interest income provides the vast majority of a bond portfolio’s total return over an interest rate cycle. Sit’s municipal
fixed income process focuses on strong individual security analysis and seeks investment grade quality securities which have high
levels of coupon interest income and complexities such as sinking fund and prepayment provisions. The former provides income and
lower volatility. The latter produces shorter expected lives and relatively higher yield.
Taxable Fixed Income General Strategy
.
Interest income provides the vast majority of a bond portfolio’s total return over an interest rate cycle. Sit’s taxable
fixed income process focuses on earning high levels of interest income from high quality securities. In general, we underweight
U.S. Government & Agency bonds and overweight corporate, asset-backed and mortgage pass through-securities.
In conformity with regulatory requirements, the
performance of Sit’s other accounts is shown below.
Name of Trading Program
: Municipal Total
Return Composite
Inception of Trading
: February 28, 1994
Number of Accounts Traded Pursuant to Program
:
4
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $705,460,040
Worst Monthly Drawdown
: June 2013 (3.59%)
Worst Peak-to-Valley Drawdown
: December
‘12 to August ‘13 (7.11%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
2.75
|
0.70
|
3.28
|
(1.04)
|
0.53
|
|
February
|
1.26
|
0.42
|
0.27
|
2.02
|
1.07
|
|
March
|
0.57
|
(0.42)
|
(0.63)
|
(0.08)
|
0.06
|
|
April
|
1.27
|
1.21
|
1.33
|
1.74
|
1.22
|
|
May
|
1.66
|
(1.17)
|
1.36
|
2.06
|
0.95
|
|
June
|
0.11
|
(3.59)
|
(0.01)
|
0.72
|
0.12
|
|
July
|
0.23
|
(1.41)
|
1.71
|
1.09
|
1.21
|
|
August
|
1.71
|
(1.66)
|
0.26
|
1.74
|
2.49
|
|
September
|
0.18
|
2.51
|
0.79
|
1.53
|
0.17
|
|
October
|
1.15
|
0.89
|
0.38
|
(0.24)
|
(0.31)
|
|
November
|
0.27
|
(0.01)
|
2.09
|
0.51
|
(2.45)
|
|
December
|
0.68
|
(0.24)
|
(1.32)
|
2.05
|
(2.71)
|
|
Annual Rate of Return
|
12.44
|
(2.89)
|
9.83
|
12.70
|
2.23
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.40%).
|
Name of Trading Program
: Municipal Intermediate
Return Composite
Inception of Trading
: December 31, 1987
Number of Accounts Traded Pursuant to Program
:
24
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $610,226,586
Worst Monthly Drawdown
: June 2013 (3.11%)
Worst Peak-to-Valley Drawdown
: May ‘13
to August ‘13 (7.19%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
2.41
|
0.50
|
2.38
|
(0.80)
|
0.58
|
|
February
|
1.10
|
0.38
|
0.29
|
1.67
|
0.97
|
|
March
|
0.43
|
(0.31)
|
(0.56)
|
0.11
|
0.10
|
|
April
|
1.23
|
0.96
|
1.16
|
1.45
|
1.10
|
|
May
|
1.63
|
(1.18)
|
1.09
|
1.78
|
0.77
|
|
June
|
0.06
|
(3.11)
|
0.10
|
0.59
|
0.33
|
|
July
|
0.11
|
(1.39)
|
1.38
|
1.00
|
1.17
|
|
August
|
1.50
|
(1.70)
|
0.27
|
1.63
|
1.92
|
|
September
|
0.21
|
2.30
|
0.74
|
1.16
|
0.18
|
|
October
|
0.93
|
0.75
|
0.40
|
(0.14)
|
(0.14)
|
|
November
|
0.20
|
(0.08)
|
1.64
|
0.41
|
(1.69)
|
|
December
|
0.77
|
(0.06)
|
(1.06)
|
1.58
|
(1.85)
|
|
Annual Rate of Return
|
11.06
|
(3.00)
|
8.07
|
10.92
|
3.39
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.40%).
|
Name of Trading Program
: Municipal Intermediate
7-Year Return Composite
Inception of Trading
: December 31, 1997
Number of Accounts Traded Pursuant to Program
:
3
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $412,507,606
Worst Monthly Drawdown
: June 2013 (4.11%)
Worst Peak-to-Valley Drawdown
: May ‘13
to August ‘13 (9.10%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
3.20
|
0.48
|
2.90
|
(1.00)
|
0.47
|
|
February
|
1.34
|
0.39
|
0.25
|
1.92
|
0.94
|
|
March
|
0.65
|
(0.45)
|
(0.68)
|
0.03
|
(0.09)
|
|
April
|
1.51
|
1.09
|
1.28
|
1.58
|
1.01
|
|
May
|
1.94
|
(1.40)
|
1.25
|
1.91
|
0.79
|
|
June
|
0.07
|
(4.11)
|
0.02
|
0.73
|
0.09
|
|
July
|
0.22
|
(1.78)
|
1.63
|
1.02
|
1.15
|
|
August
|
1.77
|
(2.10)
|
0.35
|
1.63
|
2.13
|
|
September
|
0.19
|
2.93
|
0.74
|
1.21
|
0.14
|
|
October
|
1.01
|
1.01
|
0.45
|
(0.18)
|
(0.25)
|
|
November
|
0.24
|
0.08
|
2.01
|
0.41
|
(2.08)
|
|
December
|
0.88
|
(0.17)
|
(1.27)
|
1.83
|
(2.19)
|
|
Annual Rate of Return
|
13.74
|
(4.17)
|
9.19
|
11.60
|
2.00
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.40%).
|
Name of Trading Program
: Municipal Short
Duration Composite
Inception of Trading
: June 30, 1990
Number of Accounts Traded Pursuant to Program
:
4
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $54,664,568
Worst Monthly Drawdown
: August 2013 (1.21%)
Worst Peak-to-Valley Drawdown
: May ‘13
to August ‘13 (2.35%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
1.25
|
0.32
|
0.65
|
(0.05)
|
0.50
|
|
February
|
0.68
|
0.49
|
0.63
|
0.83
|
0.67
|
|
March
|
0.31
|
0.26
|
0.17
|
0.12
|
0.09
|
|
April
|
0.65
|
0.50
|
0.68
|
0.76
|
0.67
|
|
May
|
0.92
|
(0.21)
|
0.61
|
0.93
|
0.54
|
|
June
|
0.00
|
(0.60)
|
0.11
|
0.55
|
0.26
|
|
July
|
(0.08)
|
(0.34)
|
0.43
|
0.73
|
0.84
|
|
August
|
0.66
|
(1.21)
|
0.44
|
0.72
|
1.00
|
|
September
|
0.18
|
0.96
|
0.25
|
0.41
|
0.21
|
|
October
|
0.29
|
0.33
|
0.63
|
0.07
|
0.13
|
|
November
|
0.25
|
0.13
|
0.66
|
0.05
|
(0.37)
|
|
December
|
0.21
|
0.02
|
(0.16)
|
0.62
|
(0.41)
|
|
Annual Rate of Return
|
5.40
|
0.60
|
5.20
|
5.85
|
4.19
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.40%).
|
Name of Trading Program
: Municipal High
Income Composite
Inception of Trading
: March 31, 2007
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $10,653,616
Worst Monthly Drawdown
: June 2013 (2.71%)
Worst Peak-to-Valley Drawdown
: May ‘13
to August ‘13 (5.98%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
2.25
|
0.96
|
2.64
|
(1.28)
|
0.94
|
|
February
|
1.16
|
0.40
|
0.76
|
1.14
|
1.17
|
|
March
|
1.00
|
(0.17)
|
0.17
|
(0.72)
|
0.15
|
|
April
|
1.57
|
1.39
|
1.55
|
0.94
|
1.51
|
|
May
|
2.02
|
(0.59)
|
1.08
|
1.62
|
0.70
|
|
June
|
0.37
|
(2.71)
|
0.46
|
1.08
|
0.10
|
|
July
|
0.23
|
(1.36)
|
1.58
|
1.26
|
1.34
|
|
August
|
0.48
|
(1.45)
|
0.39
|
1.08
|
2.48
|
|
September
|
0.45
|
1.93
|
0.79
|
1.72
|
0.34
|
|
October
|
0.97
|
0.77
|
0.90
|
(0.19)
|
(0.18)
|
|
November
|
0.36
|
(0.04)
|
1.22
|
1.01
|
(2.46)
|
|
December
|
0.83
|
0.14
|
(0.15)
|
1.76
|
(2.09)
|
|
Annual Rate of Return
|
12.29
|
(0.84)
|
11.94
|
9.75
|
3.97
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.40%).
|
Name of Trading Program
: Taxable Municipal
Composite
Inception of Trading
: August 31, 2010
Number of Accounts Traded Pursuant to Program
:
4
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $226,414,857
Worst Monthly Drawdown
: June 2013 (2.57%)
Worst Peak-to-Valley Drawdown
: May ‘13
to August ‘13 (4.72%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
2.97
|
(0.33)
|
1.43
|
0.61
|
|
|
February
|
0.90
|
1.16
|
(0.04)
|
1.02
|
|
|
March
|
0.41
|
0.67
|
(0.35)
|
0.50
|
|
|
April
|
1.33
|
1.73
|
2.35
|
1.91
|
|
|
May
|
1.80
|
(1.80)
|
1.76
|
1.93
|
|
|
June
|
0.28
|
(2.57)
|
(0.38)
|
0.03
|
|
|
July
|
0.46
|
(0.23)
|
1.28
|
2.85
|
|
|
August
|
1.83
|
(0.18)
|
0.31
|
2.52
|
|
|
September
|
0.06
|
1.25
|
0.32
|
2.63
|
0.20
|
|
October
|
0.88
|
0.89
|
0.27
|
(0.47)
|
(0.25)
|
|
November
|
1.31
|
(0.05)
|
1.61
|
(0.03)
|
(0.85)
|
|
December
|
0.70
|
(0.43)
|
(0.40)
|
1.50
|
(1.41)
|
|
Annual Rate of Return
|
13.67
|
0.02
|
8.42
|
15.99
|
(2.31)
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.40%).
|
Name of Trading Program
: Taxable Total
Return Composite
Inception of Trading
: December 31, 1987
Number of Accounts Traded Pursuant to Program
:
10
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $522,813,185
Worst Monthly Drawdown
: June 2013 (1.89%)
Worst Peak-to-Valley Drawdown
: May ‘13
to August ‘13 (3.69%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
1.40
|
(0.38)
|
1.08
|
0.42
|
1.92
|
|
February
|
0.77
|
0.81
|
0.49
|
0.75
|
0.71
|
|
March
|
0.13
|
0.02
|
(0.05)
|
0.00
|
0.98
|
|
April
|
0.93
|
1.28
|
1.17
|
0.95
|
1.56
|
|
May
|
1.07
|
(1.08)
|
0.86
|
1.30
|
(0.18)
|
|
June
|
0.31
|
(1.89)
|
0.06
|
0.04
|
1.49
|
|
July
|
0.00
|
(0.26)
|
1.08
|
1.12
|
1.02
|
|
August
|
1.21
|
(0.51)
|
0.62
|
0.30
|
1.24
|
|
September
|
(0.61)
|
0.65
|
0.67
|
0.49
|
0.50
|
|
October
|
0.81
|
0.83
|
0.36
|
(0.32)
|
0.57
|
|
November
|
0.88
|
(0.27)
|
0.12
|
0.24
|
(0.19)
|
|
December
|
0.17
|
(0.27)
|
(0.18)
|
1.39
|
(0.44)
|
|
Annual Rate of Return
|
7.24
|
(1.13)
|
6.42
|
6.83
|
9.50
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.40%).
|
Name of Trading Program
: Taxable Int Gov/Corp
Composite
Inception of Trading
: December 31, 1995
Number of Accounts Traded Pursuant to Program
:
7
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $304,601,721
Worst Monthly Drawdown
: June 2013 (1.24%)
Worst Peak-to-Valley Drawdown
: May ‘13
to August ‘13 (2.72%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
1.02
|
(0.33)
|
0.69
|
0.61
|
1.78
|
|
February
|
0.47
|
0.58
|
0.57
|
0.48
|
0.52
|
|
March
|
(0.09)
|
0.19
|
0.07
|
0.38
|
0.68
|
|
April
|
0.58
|
0.66
|
0.97
|
0.86
|
1.14
|
|
May
|
0.75
|
(1.07)
|
0.67
|
0.97
|
0.45
|
|
June
|
0.20
|
(1.24)
|
(0.08)
|
0.16
|
1.15
|
|
July
|
(0.03)
|
0.00
|
0.93
|
1.02
|
0.94
|
|
August
|
0.84
|
(0.43)
|
0.34
|
0.17
|
1.13
|
|
September
|
(0.11)
|
0.73
|
0.53
|
0.07
|
0.57
|
|
October
|
0.64
|
0.43
|
0.20
|
0.14
|
0.75
|
|
November
|
0.64
|
0.08
|
0.43
|
0.10
|
0.07
|
|
December
|
0.00
|
(0.42)
|
(0.10)
|
0.87
|
(0.47)
|
|
Annual Rate of Return
|
4.98
|
(0.86)
|
5.34
|
5.97
|
9.03
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.40%).
|
Name of Trading Program
: Taxable Int Gov’t
Composite
Inception of Trading
: December 31, 1987
Number of Accounts Traded Pursuant to Program
:
2
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $594,236,206
Worst Monthly Drawdown
: May 2013 (0.95%)
Worst Peak-to-Valley Drawdown
: May ‘13
to September ‘13 (2.10%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
0.40
|
(0.36)
|
0.27
|
0.19
|
0.71
|
|
February
|
0.18
|
0.24
|
0.51
|
0.29
|
0.06
|
|
March
|
0.04
|
(0.15)
|
0.24
|
0.25
|
0.47
|
|
April
|
0.10
|
0.33
|
0.55
|
0.61
|
(0.12)
|
|
May
|
0.02
|
(0.95)
|
0.24
|
0.54
|
0.45
|
|
June
|
0.30
|
(0.81)
|
(0.03)
|
0.31
|
0.73
|
|
July
|
0.15
|
0.11
|
0.37
|
0.46
|
0.52
|
|
August
|
0.30
|
(0.38)
|
0.09
|
0.08
|
0.85
|
|
September
|
0.07
|
(0.10)
|
0.30
|
0.02
|
0.17
|
|
October
|
0.14
|
0.04
|
0.00
|
0.08
|
0.69
|
|
November
|
0.26
|
0.12
|
0.13
|
(0.35)
|
0.59
|
|
December
|
0.26
|
(0.15)
|
(0.06)
|
0.22
|
(0.37)
|
|
Annual Rate of Return
|
2.25
|
(2.01)
|
2.67
|
2.75
|
4.89
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.80%).
|
Name of Trading Program
: Taxable Short
Duration Composite
Inception of Trading
: December 31, 1990
Number of Accounts Traded Pursuant to Program
:
41
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $1,533,993,041
Worst Monthly Drawdown
: May 2013 (0.84%)
Worst Peak-to-Valley Drawdown
: May ‘13
to August ‘13 (1.87%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
0.70
|
(0.15)
|
0.37
|
0.59
|
0.83
|
|
February
|
0.37
|
0.44
|
0.53
|
0.34
|
0.13
|
|
March
|
(0.40)
|
0.04
|
0.08
|
0.35
|
0.74
|
|
April
|
0.50
|
0.34
|
0.82
|
0.53
|
0.00
|
|
May
|
0.44
|
(0.84)
|
0.47
|
0.66
|
0.46
|
|
June
|
0.05
|
(0.73)
|
0.01
|
0.47
|
0.77
|
|
July
|
0.16
|
0.16
|
0.52
|
0.57
|
0.84
|
|
August
|
0.65
|
(0.47)
|
0.15
|
0.25
|
0.49
|
|
September
|
0.02
|
0.64
|
0.42
|
0.01
|
0.45
|
|
October
|
0.61
|
0.29
|
0.00
|
0.18
|
1.11
|
|
November
|
0.59
|
0.19
|
0.29
|
0.04
|
0.52
|
|
December
|
(0.13)
|
(0.54)
|
(0.02)
|
0.62
|
(0.02)
|
|
Annual Rate of Return
|
3.57
|
(0.66)
|
3.68
|
4.68
|
6.49
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.40%).
|
Name of Trading Program
: Taxable Core Plus
Composite
Inception of Trading
: September 30, 1997
Number of Accounts Traded Pursuant to Program
:
16
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $390,269,953
Worst Monthly Drawdown
: May 2013 (3.71%)
Worst Peak-to-Valley Drawdown
: May ‘13
to August ‘13 (10.10%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
1.32
|
1.83
|
4.20
|
(0.14)
|
1.87
|
|
February
|
2.14
|
0.11
|
1.45
|
0.79
|
2.07
|
|
March
|
0.15
|
0.07
|
(0.63)
|
0.90
|
2.62
|
|
April
|
1.70
|
1.84
|
1.53
|
1.37
|
1.88
|
|
May
|
1.28
|
(3.71)
|
0.22
|
2.62
|
(1.87)
|
|
June
|
0.93
|
(3.28)
|
1.07
|
0.18
|
3.21
|
|
July
|
(1.62)
|
(1.74)
|
2.75
|
(1.66)
|
3.33
|
|
August
|
1.29
|
(1.76)
|
1.21
|
0.96
|
0.72
|
|
September
|
(1.35)
|
2.25
|
1.85
|
(1.71)
|
1.23
|
|
October
|
0.95
|
1.56
|
(0.23)
|
1.73
|
0.15
|
|
November
|
0.59
|
(1.25)
|
0.19
|
0.05
|
(1.52)
|
|
December
|
(0.61)
|
1.57
|
(0.65)
|
1.68
|
(0.81)
|
|
Annual Rate of Return
|
6.88
|
(2.74)
|
13.59
|
6.87
|
13.46
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (0.40%), and performance fees, which for capsule purposes are accrued at a rate of 20% on returns in excess of the benchmark.
|
Name of Trading Program
: Targeted Opportunity
Composite
Inception of Trading
: March 31, 2013
Number of Accounts Traded Pursuant to Program
:
5
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $328,144,758
Worst Monthly Drawdown
: September 2014
(2.01%)
Worst Peak-to-Valley Drawdown
: May ‘13
to August ‘13 (3.46%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
|
January
|
0.16
|
|
|
February
|
3.12
|
|
|
March
|
0.16
|
|
|
April
|
1.23
|
1.02
|
|
May
|
1.52
|
(1.39)
|
|
June
|
2.08
|
(1.24)
|
|
July
|
(1.14)
|
0.55
|
|
August
|
2.47
|
(1.42)
|
|
September
|
(2.01)
|
2.14
|
|
October
|
0.35
|
3.68
|
|
November
|
0.91
|
(0.61)
|
|
December
|
(0.75)
|
4.13
|
|
Annual Rate of Return
|
8.27
|
6.87
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (1.00%), and performance fees, which for capsule purposes are accrued at a rate of 20% on
returns in excess of the benchmark.
|
Name of Trading Program
: Municipal Core
Plus Composite
Inception of Trading
: June 30, 2006
Number of Accounts Traded Pursuant to Program
:
6
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $96,631,127
Worst Monthly Drawdown
: May 2013 (5.53%)
Worst Peak-to-Valley Drawdown
: December
‘12 to August ‘13 (10.10%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
4.73
|
2.89
|
4.53
|
(1.91)
|
2.03
|
|
February
|
1.28
|
(1.35)
|
0.09
|
1.45
|
0.72
|
|
March
|
0.53
|
(1.31)
|
(1.95)
|
1.68
|
1.90
|
|
April
|
2.48
|
1.46
|
2.05
|
0.38
|
1.71
|
|
May
|
2.33
|
(5.53)
|
1.81
|
3.49
|
0.52
|
|
June
|
(0.21)
|
(2.85)
|
0.83
|
0.65
|
1.42
|
|
July
|
(1.74)
|
(4.92)
|
3.28
|
(1.46)
|
3.37
|
|
August
|
2.43
|
(2.38)
|
(0.49)
|
4.23
|
3.55
|
|
September
|
(0.71)
|
4.42
|
2.93
|
2.18
|
0.16
|
|
October
|
1.84
|
0.55
|
(0.12)
|
(0.17)
|
(1.25)
|
|
November
|
0.05
|
(3.19)
|
2.03
|
2.58
|
(4.52)
|
|
December
|
1.38
|
2.45
|
(3.91)
|
3.10
|
(4.90)
|
|
Annual Rate of Return
|
15.14
|
(9.88)
|
11.33
|
17.18
|
4.39
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, management fees (0.40%), and performance fees, which for capsule purposes are accrued at a rate of 20% on returns in excess of the benchmark.
|
Name of Trading Program
: Fixed Special
Objective Composite
Inception of Trading
: December 31, 1995
Number of Accounts Traded Pursuant to Program
:
8
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $1,218,442,216
Worst Monthly Drawdown
: June 2013 (3.34%)
Worst Peak-to-Valley Drawdown
: May ‘13
to August ‘13 (7.85%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
2.78
|
0.72
|
2.54
|
(0.80)
|
0.74
|
|
February
|
1.35
|
0.36
|
0.52
|
1.43
|
1.02
|
|
March
|
0.74
|
(0.14)
|
(0.28)
|
0.15
|
0.26
|
|
April
|
1.44
|
1.11
|
1.36
|
1.27
|
1.08
|
|
May
|
1.77
|
(1.30)
|
1.36
|
1.81
|
0.89
|
|
June
|
0.23
|
(3.34)
|
0.30
|
0.81
|
0.43
|
|
July
|
0.18
|
(1.75)
|
1.63
|
0.92
|
1.18
|
|
August
|
1.57
|
(1.69)
|
0.31
|
1.46
|
2.01
|
|
September
|
0.26
|
2.36
|
0.82
|
1.46
|
0.32
|
|
October
|
0.94
|
0.94
|
0.52
|
(0.10)
|
(0.13)
|
|
November
|
0.36
|
(0.09)
|
1.62
|
0.68
|
(2.00)
|
|
December
|
0.73
|
0.04
|
(1.11)
|
1.89
|
(1.80)
|
|
Annual Rate of Return
|
13.03
|
(2.87)
|
9.97
|
11.51
|
3.99
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.40%).
|
Name of Trading Program
: Large Cap Growth
Composite
Inception of Trading
: January 1, 1982
Number of Accounts Traded Pursuant to Program
:
7
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $152,476,520
Worst Monthly Drawdown
: May 2010 (7.91%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (16.50%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(3.81)
|
6.09
|
5.63
|
1.39
|
(4.28)
|
|
February
|
4.95
|
0.81
|
4.60
|
3.04
|
3.17
|
|
March
|
(0.87)
|
3.11
|
3.52
|
0.13
|
5.09
|
|
April
|
(0.53)
|
0.88
|
(0.79)
|
2.97
|
0.26
|
|
May
|
2.44
|
2.51
|
(7.67)
|
(1.32)
|
(7.91)
|
|
June
|
2.18
|
(2.37)
|
3.65
|
(2.22)
|
(5.38)
|
|
July
|
(1.13)
|
5.09
|
0.95
|
(1.06)
|
6.48
|
|
August
|
4.31
|
(2.63)
|
2.34
|
(5.51)
|
(5.67)
|
|
September
|
(1.87)
|
3.68
|
2.23
|
(7.44)
|
9.33
|
|
October
|
2.80
|
3.96
|
(2.43)
|
11.84
|
4.31
|
|
November
|
2.63
|
3.42
|
1.41
|
(0.59)
|
1.14
|
|
December
|
(0.53)
|
2.91
|
(0.10)
|
(0.85)
|
5.89
|
|
Annual Rate of Return
|
10.65
|
30.69
|
13.38
|
(0.85)
|
11.22
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.75%).
|
Name of Trading Program
: Large Cap Growth
(Russell 1000 Growth) Composite
Inception of Trading
: September 30, 2000
Number of Accounts Traded Pursuant to Program
:
9
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $533,190,736
Worst Monthly Drawdown
: May 2010 (7.85%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (15.63%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(3.42)
|
5.37
|
5.87
|
1.32
|
(4.69)
|
|
February
|
5.06
|
0.48
|
4.78
|
2.81
|
3.53
|
|
March
|
(1.33)
|
2.91
|
3.54
|
0.11
|
4.83
|
|
April
|
(0.53)
|
0.86
|
(0.79)
|
3.31
|
0.13
|
|
May
|
2.63
|
2.42
|
(7.46)
|
(1.02)
|
(7.85)
|
|
June
|
1.93
|
(2.57)
|
3.16
|
(2.11)
|
(5.00)
|
|
July
|
(1.02)
|
5.22
|
1.05
|
(0.81)
|
6.67
|
|
August
|
4.37
|
(2.32)
|
2.66
|
(5.32)
|
(5.30)
|
|
September
|
(1.79)
|
3.76
|
2.23
|
(7.28)
|
9.69
|
|
October
|
2.88
|
4.07
|
(2.93)
|
11.58
|
4.57
|
|
November
|
2.88
|
3.41
|
1.74
|
(0.53)
|
0.84
|
|
December
|
(0.78)
|
2.83
|
(0.42)
|
(1.35)
|
5.58
|
|
Annual Rate of Return
|
11.01
|
29.42
|
13.44
|
(0.49)
|
11.85
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.75%).
|
Name of Trading Program
: Mid Cap Growth
Composite
Inception of Trading
: December 31, 1982
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $178,241,947
Worst Monthly Drawdown
: September 2011
(10.29%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (22.66%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(3.48)
|
6.13
|
9.22
|
1.05
|
(4.37)
|
|
February
|
6.29
|
(0.98)
|
6.18
|
3.34
|
7.09
|
|
March
|
(1.53)
|
2.78
|
3.23
|
0.50
|
5.94
|
|
April
|
(1.61)
|
(0.39)
|
(0.59)
|
3.52
|
3.12
|
|
May
|
0.85
|
3.71
|
(8.04)
|
(0.52)
|
(6.66)
|
|
June
|
2.45
|
(2.23)
|
2.74
|
(2.13)
|
(6.11)
|
|
July
|
(3.03)
|
6.60
|
(2.05)
|
(3.94)
|
7.52
|
|
August
|
4.67
|
(1.34)
|
3.87
|
(7.82)
|
(5.01)
|
|
September
|
(3.19)
|
6.00
|
1.02
|
(10.29)
|
11.92
|
|
October
|
3.12
|
3.42
|
(1.48)
|
15.47
|
4.08
|
|
November
|
3.19
|
2.89
|
2.24
|
(1.17)
|
2.98
|
|
December
|
(0.98)
|
3.35
|
1.78
|
(2.39)
|
5.95
|
|
Annual Rate of Return
|
6.32
|
33.76
|
18.49
|
(6.41)
|
27.28
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (1.00%).
|
Name of Trading Program
: Small Cap Growth
Composite
Inception of Trading
: July 1, 1994
Number of Accounts Traded Pursuant to Program
:
6
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $270,262,121
Worst Monthly Drawdown
: September 2011
(10.16%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (21.48%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(2.49)
|
6.09
|
8.07
|
2.00
|
(3.11)
|
|
February
|
4.91
|
(1.40)
|
5.23
|
6.52
|
5.01
|
|
March
|
(2.15)
|
3.28
|
3.14
|
1.10
|
6.52
|
|
April
|
(4.01)
|
(0.25)
|
(1.41)
|
3.22
|
4.06
|
|
May
|
(0.52)
|
3.71
|
(6.05)
|
(0.97)
|
(7.03)
|
|
June
|
4.30
|
(1.31)
|
1.87
|
(2.03)
|
(4.58)
|
|
July
|
(4.54)
|
7.70
|
(2.53)
|
(3.81)
|
5.78
|
|
August
|
5.28
|
(0.84)
|
3.21
|
(6.46)
|
(5.32)
|
|
September
|
(3.60)
|
6.69
|
1.60
|
(10.16)
|
13.12
|
|
October
|
4.22
|
2.28
|
(2.05)
|
14.69
|
1.82
|
|
November
|
1.21
|
2.87
|
2.30
|
(0.46)
|
3.12
|
|
December
|
0.34
|
3.12
|
1.09
|
(1.76)
|
7.06
|
|
Annual Rate of Return
|
2.23
|
36.35
|
14.56
|
(0.28)
|
27.42
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (1.00%).
|
Name of Trading Program
: Dividend Growth
Composite
Inception of Trading
: December 31, 2003
Number of Accounts Traded Pursuant to Program
:
16
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $3,743,411,519
Worst Monthly Drawdown
: September 2011
(7.39%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (15.76%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(4.08)
|
6.07
|
4.45
|
2.12
|
(3.48)
|
|
February
|
3.94
|
1.54
|
2.99
|
2.87
|
2.87
|
|
March
|
1.72
|
3.55
|
2.60
|
0.45
|
5.10
|
|
April
|
0.14
|
1.75
|
(0.76)
|
3.44
|
1.14
|
|
May
|
2.04
|
1.40
|
(5.64)
|
(0.85)
|
(7.22)
|
|
June
|
2.44
|
(1.46)
|
3.98
|
(1.11)
|
(3.92)
|
|
July
|
(1.72)
|
4.16
|
1.84
|
(2.76)
|
7.50
|
|
August
|
4.15
|
(2.83)
|
1.61
|
(4.59)
|
(4.43)
|
|
September
|
(1.78)
|
2.61
|
2.35
|
(7.39)
|
9.31
|
|
October
|
2.55
|
3.65
|
(0.89)
|
11.55
|
3.65
|
|
November
|
2.35
|
3.03
|
0.50
|
0.55
|
0.22
|
|
December
|
0.11
|
2.24
|
0.41
|
0.59
|
6.58
|
|
Annual Rate of Return
|
12.14
|
28.57
|
13.83
|
3.74
|
16.98
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.75%).
|
Name of Trading Program
: Concentrated Growth
Composite
Inception of Trading
: March 31, 1998
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $34,950,883
Worst Monthly Drawdown
: May 2010 (9.28%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (17.73%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(4.20)
|
6.32
|
5.90
|
1.98
|
(3.85)
|
|
February
|
4.76
|
0.25
|
3.96
|
3.05
|
3.35
|
|
March
|
0.27
|
3.40
|
2.07
|
(0.48)
|
4.34
|
|
April
|
0.19
|
1.98
|
(0.67)
|
2.88
|
(0.78)
|
|
May
|
1.87
|
1.38
|
(7.97)
|
(1.32)
|
(9.28)
|
|
June
|
2.65
|
(2.99)
|
3.44
|
(2.34)
|
(5.76)
|
|
July
|
(1.95)
|
4.92
|
2.01
|
(1.11)
|
9.10
|
|
August
|
3.30
|
(3.37)
|
0.76
|
(5.38)
|
(4.84)
|
|
September
|
(2.36)
|
4.25
|
2.21
|
(8.76)
|
9.31
|
|
October
|
2.52
|
3.28
|
(1.67)
|
12.11
|
5.00
|
|
November
|
1.90
|
2.76
|
1.13
|
(0.99)
|
1.03
|
|
December
|
(0.90)
|
3.58
|
0.57
|
(2.25)
|
6.39
|
|
Annual Rate of Return
|
7.95
|
28.41
|
11.64
|
(3.95)
|
12.66
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.75%).
|
Name of Trading Program
: Equity Special
Objective Composite
Inception of Trading
: December 31, 1995
Number of Accounts Traded Pursuant to Program
:
2
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $56,570,069
Worst Monthly Drawdown
: January 2014 (7.48%)
Worst Peak-to-Valley Drawdown
: May ‘10
to June ‘10 (10.14%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(7.48)
|
4.00
|
1.13
|
(0.85)
|
0.03
|
|
February
|
6.67
|
2.73
|
6.85
|
0.34
|
1.76
|
|
March
|
(0.79)
|
4.99
|
1.80
|
(1.42)
|
3.15
|
|
April
|
2.67
|
2.34
|
(0.84)
|
0.72
|
2.17
|
|
May
|
(1.14)
|
(1.00)
|
(3.96)
|
1.13
|
(6.31)
|
|
June
|
1.91
|
(1.46)
|
3.04
|
(2.43)
|
(4.09)
|
|
July
|
0.06
|
4.50
|
3.33
|
4.04
|
4.78
|
|
August
|
1.82
|
(6.20)
|
1.54
|
(3.63)
|
(0.73)
|
|
September
|
(0.03)
|
1.90
|
2.25
|
(6.68)
|
7.67
|
|
October
|
1.07
|
2.49
|
(0.04)
|
9.35
|
1.78
|
|
November
|
7.34
|
0.73
|
0.74
|
(1.80)
|
3.27
|
|
December
|
(0.56)
|
0.40
|
(3.03)
|
(0.85)
|
4.39
|
|
Annual Rate of Return
|
11.27
|
15.93
|
13.09
|
(2.91)
|
18.45
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (1.10%).
|
Name of Trading Program
: Balanced Composite
Inception of Trading
: September 30, 1981
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $16,935,640
Worst Monthly Drawdown
: May 2010 (4.75%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (9.23%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(1.94)
|
3.59
|
3.64
|
0.95
|
(1.84)
|
|
February
|
3.48
|
0.90
|
3.14
|
2.06
|
2.05
|
|
March
|
(0.62)
|
2.09
|
2.18
|
0.06
|
3.54
|
|
April
|
(0.02)
|
1.01
|
(0.08)
|
2.20
|
0.73
|
|
May
|
1.89
|
1.04
|
(4.48)
|
(0.34)
|
(4.75)
|
|
June
|
1.50
|
(2.00)
|
2.11
|
(1.46)
|
(2.60)
|
|
July
|
(0.76)
|
3.10
|
0.90
|
(0.32)
|
4.09
|
|
August
|
3.24
|
(1.84)
|
1.58
|
(3.27)
|
(2.79)
|
|
September
|
(1.42)
|
2.60
|
1.46
|
(4.14)
|
5.57
|
|
October
|
2.12
|
2.82
|
(1.35)
|
6.88
|
2.69
|
|
November
|
2.01
|
2.22
|
1.01
|
(0.10)
|
0.60
|
|
December
|
(0.26)
|
1.78
|
(0.10)
|
(0.19)
|
3.31
|
|
Annual Rate of Return
|
9.44
|
18.55
|
10.19
|
1.93
|
10.48
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.75%).
|
Name of Trading Program
: EAFE+ Growth Composite
Inception of Trading
: June 30, 1990
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $16,281,345
Worst Monthly Drawdown
: September 2011
(11.34%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (23.90%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(5.34)
|
3.75
|
6.23
|
1.74
|
(4.36)
|
|
February
|
5.56
|
(1.46)
|
4.70
|
2.91
|
0.96
|
|
March
|
(0.26)
|
1.30
|
0.04
|
(1.09)
|
6.50
|
|
April
|
(0.17)
|
4.09
|
0.50
|
6.27
|
(2.40)
|
|
May
|
1.48
|
(1.29)
|
(10.51)
|
(2.98)
|
(11.15)
|
|
June
|
1.48
|
(3.19)
|
5.60
|
(1.06)
|
(1.42)
|
|
July
|
(2.97)
|
5.20
|
0.94
|
(2.00)
|
9.21
|
|
August
|
0.54
|
(1.32)
|
2.09
|
(8.75)
|
(4.23)
|
|
September
|
(3.63)
|
6.10
|
2.77
|
(11.34)
|
9.80
|
|
October
|
(0.67)
|
2.12
|
1.04
|
11.09
|
3.47
|
|
November
|
0.60
|
0.35
|
3.03
|
(2.19)
|
(3.52)
|
|
December
|
(2.87)
|
1.90
|
2.54
|
(1.54)
|
6.91
|
|
Annual Rate of Return
|
(6.52)
|
18.51
|
19.46
|
(10.39)
|
7.76
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.80%).
|
Name of Trading Program
: Pacific Basin
Growth Composite
Inception of Trading
: June 30, 2003
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $7,826,757
Worst Monthly Drawdown
: May 2012 (10.83%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (21.52%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(5.45)
|
2.32
|
7.27
|
(1.18)
|
(4.48)
|
|
February
|
2.67
|
(0.32)
|
5.02
|
(0.37)
|
1.62
|
|
March
|
(0.49)
|
0.06
|
(1.19)
|
0.65
|
6.35
|
|
April
|
(0.40)
|
5.17
|
0.98
|
3.88
|
0.49
|
|
May
|
2.95
|
(2.78)
|
(10.83)
|
(2.84)
|
(9.52)
|
|
June
|
2.41
|
(3.34)
|
3.25
|
(1.18)
|
(0.61)
|
|
July
|
1.10
|
2.38
|
(0.34)
|
0.40
|
6.90
|
|
August
|
1.84
|
(2.17)
|
0.03
|
(8.82)
|
(2.46)
|
|
September
|
(5.15)
|
6.69
|
4.78
|
(10.71)
|
10.61
|
|
October
|
0.26
|
2.48
|
(0.01)
|
9.75
|
2.31
|
|
November
|
(0.78)
|
1.07
|
3.20
|
(3.81)
|
(0.03)
|
|
December
|
(3.60)
|
0.57
|
3.37
|
(2.12)
|
5.22
|
|
Annual Rate of Return
|
(5.01)
|
12.25
|
15.31
|
(16.52)
|
15.80
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.90%).
|
Name of Trading Program
: Global Growth
Composite
Inception of Trading
: June 30, 1989
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $17,510,348
Worst Monthly Drawdown
: May 2010 (9.18%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (19.29%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(4.68)
|
5.36
|
5.45
|
1.55
|
(4.40)
|
|
February
|
4.51
|
0.29
|
3.46
|
3.11
|
1.90
|
|
March
|
0.80
|
2.43
|
1.63
|
0.15
|
5.62
|
|
April
|
0.77
|
2.36
|
(0.60)
|
4.04
|
(0.59)
|
|
May
|
1.55
|
0.18
|
(7.76)
|
(2.25)
|
(9.18)
|
|
June
|
1.37
|
(2.92)
|
4.47
|
(1.16)
|
(3.70)
|
|
July
|
(2.20)
|
5.07
|
2.24
|
(2.07)
|
8.44
|
|
August
|
2.88
|
(2.38)
|
1.90
|
(6.19)
|
(5.18)
|
|
September
|
(2.40)
|
3.18
|
2.02
|
(9.07)
|
9.57
|
|
October
|
1.74
|
2.77
|
(0.37)
|
11.66
|
3.98
|
|
November
|
1.92
|
1.82
|
1.13
|
(0.98)
|
(1.71)
|
|
December
|
(1.12)
|
2.22
|
0.98
|
(0.20)
|
6.94
|
|
Annual Rate of Return
|
4.89
|
21.94
|
14.86
|
(2.83)
|
10.13
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.80%).
|
Name of Trading Program
: Developing Market
Growth Composite
Inception of Trading
: June 30, 1994
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $9,485,486
Worst Monthly Drawdown
: September 2011
(14.37%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (23.34%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(7.33)
|
2.38
|
8.41
|
(3.50)
|
(7.89)
|
|
February
|
5.13
|
(2.21)
|
3.97
|
(0.08)
|
2.44
|
|
March
|
1.48
|
(1.36)
|
(1.27)
|
3.28
|
7.24
|
|
April
|
(0.29)
|
1.07
|
(0.12)
|
2.59
|
(0.35)
|
|
May
|
1.88
|
(1.61)
|
(12.67)
|
(2.22)
|
(9.76)
|
|
June
|
2.35
|
(6.41)
|
4.01
|
(1.53)
|
(1.43)
|
|
July
|
1.52
|
2.32
|
(0.40)
|
(0.36)
|
9.31
|
|
August
|
3.91
|
(1.82)
|
0.09
|
(6.68)
|
(3.09)
|
|
September
|
(8.53)
|
7.22
|
5.69
|
(14.37)
|
10.70
|
|
October
|
0.12
|
3.62
|
(0.17)
|
13.30
|
3.64
|
|
November
|
(1.17)
|
(0.66)
|
0.31
|
(3.33)
|
(2.15)
|
|
December
|
(4.48)
|
(0.18)
|
5.00
|
(3.05)
|
7.84
|
|
Annual Rate of Return
|
(6.23)
|
1.73
|
11.84
|
(16.84)
|
15.02
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.90%).
|
Name of Trading Program
: International
Growth Composite
Inception of Trading
: December 31, 1991
Number of Accounts Traded Pursuant to Program
:
1
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $21,185,128
Worst Monthly Drawdown
: May 2010 (11.36%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (23.88%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(5.27)
|
3.91
|
5.97
|
1.95
|
(4.43)
|
|
February
|
5.30
|
(1.49)
|
4.73
|
3.09
|
0.96
|
|
March
|
(0.10)
|
1.18
|
0.03
|
(0.98)
|
6.57
|
|
April
|
(0.22)
|
4.14
|
0.60
|
6.47
|
(2.21)
|
|
May
|
1.39
|
(1.07)
|
(10.52)
|
(3.22)
|
(11.36)
|
|
June
|
1.44
|
(3.31)
|
5.57
|
(1.12)
|
(1.44)
|
|
July
|
(2.86)
|
5.11
|
1.11
|
(2.16)
|
9.59
|
|
August
|
0.44
|
(1.43)
|
2.03
|
(8.58)
|
(4.35)
|
|
September
|
(3.62)
|
6.04
|
2.72
|
(11.06)
|
10.14
|
|
October
|
(0.70)
|
2.15
|
1.01
|
11.08
|
3.35
|
|
November
|
0.66
|
1.95
|
2.94
|
(2.63)
|
(3.40)
|
|
December
|
(2.89)
|
1.95
|
2.38
|
(1.08)
|
7.08
|
|
Annual Rate of Return
|
(6.65)
|
20.34
|
19.00
|
(9.76)
|
8.42
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.80%).
|
Name of Trading Program
: Global Dividend
Growth Composite
Inception of Trading
: June 30, 2006
Number of Accounts Traded Pursuant to Program
:
7
Total Assets Traded Pursuant to Program as
of December 31, 2014
: $172,856,005
Worst Monthly Drawdown
: September 2011
(8.84%)
Worst Peak-to-Valley Drawdown
: May ‘11
to September ‘11 (18.54%)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
|
Monthly Rate of Return
|
2014(%)
|
2013(%)
|
2012(%)
|
2011(%)
|
2010(%)
|
|
January
|
(4.72)
|
5.28
|
4.87
|
1.63
|
(3.83)
|
|
February
|
4.40
|
0.41
|
3.30
|
3.25
|
1.87
|
|
March
|
0.93
|
2.69
|
1.71
|
0.06
|
5.59
|
|
April
|
0.90
|
2.47
|
(0.51)
|
4.30
|
(0.72)
|
|
May
|
1.64
|
0.20
|
(7.54)
|
(1.80)
|
(8.67)
|
|
June
|
1.54
|
(2.64)
|
4.68
|
(1.16)
|
(3.28)
|
|
July
|
(2.07)
|
4.81
|
2.05
|
(2.32)
|
8.27
|
|
August
|
3.04
|
(2.44)
|
1.87
|
(5.76)
|
(4.24)
|
|
September
|
(2.40)
|
3.01
|
2.04
|
(8.84)
|
9.26
|
|
October
|
2.04
|
2.83
|
(0.46)
|
11.38
|
3.64
|
|
November
|
1.97
|
1.90
|
0.87
|
(0.49)
|
(1.49)
|
|
December
|
(1.22)
|
2.09
|
0.79
|
(0.17)
|
6.89
|
|
Annual Rate of Return
|
5.84
|
22.26
|
13.89
|
(1.30)
|
12.15
|
|
*
|
Performance is net of commissions, exchange fees, regulatory fees, and management fees (0.80%).
|
The Fund’s
Service Providers
Administrator, Custodian, Fund Accountant, and Transfer Agent
U.S. Bank, a national banking association, with its principal
office in Milwaukee, Wisconsin, provides custody and fund accounting to the Trust and Fund. Its affiliate, U.S. Bancorp Fund Services,
is the transfer agent (“Transfer Agent”) for Fund shares and administrator for the Fund (“Administrator”).
It performs certain administrative and accounting services for the Fund and prepares certain SEC, NFA and CFTC reports on behalf
of the Fund. (U.S. Bank and U.S. Bancorp Fund Services are referred to collectively hereinafter as “U.S. Bank”).
For the first year of services, the Fund has agreed to pay
U.S. Bank 0.05% of assets under management (“AUM”), with a $45,000 minimum annual fee payable for its
administrative, accounting and transfer agent services and 0.01% of AUM, with a minimum of $4,800 for custody services.
Delaware Trustee
Wilmington Trust, N.A. (the ”Trustee“) serves as the Trust’s
corporate trustee as required under the Delaware Statutory Trust Act (”DSTA“). The Trustee will receive $2,500 for the first
year of its services.
The Trustee is the sole trustee of the Trust. The rights
and duties of the Trustee and the Sponsor with respect to the offering of the Shares and Fund management and the shareholders are
governed by the provisions of the DSTA and by the Trust Agreement. The Trustee will accept service of legal process on the Trust
in the State of Delaware and will make certain filings under the DSTA. The Trustee does not owe any other duties to the Trust,
the Sponsor or the shareholders of any Fund. The Trustee’s principal offices are located at 1100 North Market Street, Wilmington,
Delaware 19890. The Trustee is unaffiliated with the Sponsor.
The Trustee is permitted to resign upon at least sixty (60)
days’ notice to the Trust, provided, that any such resignation will not be effective until a successor Trustee is appointed
by the Sponsor. The Sponsor has the discretion to replace the Trustee.
Only the assets of the Trust and the Sponsor are subject
to issuer liability under the federal securities laws for the information contained in this Prospectus and under federal securities
laws with respect to the issuance and sale of the Shares. Under such laws, neither the Trustee, either in its capacity as Trustee
or in its individual capacity, nor any director, officer or controlling person of the Trustee is, or has any liability as, the
issuer or a director, officer or controlling person of the issuer of the Shares. The Trustee’s liability in connection with
the issuance and sale of the Shares is limited solely to the express obligations of the Trustee set forth in the Trust Agreement.
Under the Trust Agreement, the Sponsor has exclusive management
and control of all aspects of the Trust’s business. The Trustee has no duty or liability to supervise the performance of
the Sponsor, nor will the Trustee have any liability for the acts or omissions of the Sponsor. The shareholders have no voice in
the day to day management of the business and operations of the Funds and the Trust, other than certain limited voting rights as
set forth in the Trust Agreement. In the course of its management of the business and affairs of the Funds and the Trust, the Sponsor
may, in its sole and absolute discretion, appoint an affiliate or affiliates of the Sponsor as additional sponsors and retain such
persons, including affiliates of the Sponsor, as it deems necessary to effectuate and carry out the purposes, business and objectives
of the Trust.
Because the Trustee has no authority over the Trust’s
operations, the Trustee itself is not registered in any capacity with the CFTC.
Distributor
The Fund has contracted with Esposito Securities LLC (the “Distributor”)
to provide statutory and wholesaling distribution services, which is further discussed under “What is the Plan of Distribution?”
in the Statement of Additional Information. The Fund pays Esposito Securities an annual fee for such distribution services, which
for the first year will equal 0.02% of assets under management (“AUM”) (declining if the Fund’s AUM increases
above $250,000,000), with a minimum of $15,000 payable annually. In no event will the aggregate compensation paid to the Distributor
and any affiliate of the Sponsor for distribution-related services in connection with the offering of shares exceed ten percent
(10%) of the gross proceeds of the offering. The Distributor’s principal business address is 300 Crescent Court, Suite 650,
Dallas, Texas 75201.
Futures Commission Merchant
Newedge USA LLC serves as the Fund’s futures commission
merchant (“FCM”). The Fund estimates that it will pay 0.118% of the Fund’s NAV in brokerage fees during the first
year of its operations for execution and clearing services on behalf of the Fund. Such brokerage fees are not included in the Fund’s
Other Fees and Expenses discussed below.
Newedge USA is headquartered at 550 W. Jackson, Suite 500,
Chicago, IL 60661 with branch offices in New York, New York; Cypress, Texas (futures only); Santa Monica, California (securities
only) and Montreal, Canada (futures only).
Prior to January 2, 2008, Newedge USA was known as Fimat
USA, LLC. On September 1, 2008, Newedge USA merged with future commission merchant and broker dealer Newedge Financial Inc. (“NFI”)
– formerly known as Calyon Financial Inc. Newedge USA was the surviving entity.
In February 2011, Newedge USA settled, without admitting
or denying the allegations, a disciplinary action brought by the CFTC alleging that Newedge USA exceeded speculative limits in
the October 2009 live cattle futures contract on the Chicago Mercantile Exchange and failed to provide accurate and timely reports
to the CFTC regarding their larger trader positions. Newedge USA paid a $140,000 civil penalty and disgorgement value of $80,910
to settle this matter. In addition, the CFTC Order required Newedge USA to implement and maintain a program designed to prevent
and detect reporting violations of the Commodity Exchange Act and CFTC regulations.
In January 2012, Newedge USA settled, without admitting or
denying the allegations, a disciplinary action brought by the CFTC alleging that Newedge USA failed to file accurate and timely
reports to the CFTC and failed to report certain large trader information to the CFTC. Newedge USA paid a $700,000 civil penalty
to settle this matter. In addition, the CFTC Order required Newedge USA to timely submit accurate position reports and notices,
and to implement and maintain procedures to prevent and detect reporting violations of the Commodity Exchange Act and CFTC regulations.
In July 2013, Newedge USA settled, without admitting or denying
the allegations, a matter brought by FINRA, on its behalf and on behalf of NYSE/NYSE ARCA, BATS and NASDAQ exchanges, involving
rules and regulations pertaining to supervision of equities direct market access and sponsored access business, Regulation SHO
and books and records retention. In connection with this matter, Newedge USA paid a fine of $9,500,000. In addition, Newedge USA
agreed to retain an independent consultant to review its policies, systems, procedures and training relating to these areas and
to implement the recommendation of such consultant based on its review and written reports.
Other than the foregoing proceedings, which did not have
a material adverse effect upon the financial condition of Newedge USA, there have been no material administrative, civil or criminal
actions brought, pending or concluded against Newedge USA or its principals in the past five years.
Neither Newedge USA nor any affiliate, officer, director
or employee thereof have passed on the merits of this prospectus or offering, or give any guarantee as to the performance or any
other aspect of the Fund.
Newedge is not affiliated with the Fund or the Sponsor. Therefore,
the Sponsor and the Fund do not believe that the Fund has any conflicts of interest with Newedge or its trading principals arising
from their acting as the Fund’s FCM.
Other Fees and Expenses
The Fund will be responsible for its Other
Expenses, including professional services (e.g., outside auditor’s fees and legal fees and expenses), shareholder tax return
preparation, regulatory compliance, and other services provided by affiliated and non-affiliated service providers. The amount
of such Other Expenses is estimated to be 1.0% annually through February 1, 2016 due to the Sponsor’s agreement to reimburse
the Fund for its Other Expenses which together with the Management Fee exceed a certain amount as discussed below. After such date,
the expense limitation may be terminated and the Fund’s Other Expenses could be higher.
The Fund’s Fees and Expenses
This table describes the net fees and expenses that you may
pay if you buy and hold Shares of the Fund. You should note that you may pay brokerage commissions on purchases and sales of the
Fund’s Shares, which are not reflected in the table; however, the Fund’s brokerage fees and commissions are included
(those costs associated with rolling futures). Authorized Participant will pay applicable creation and redemption fees.
See
“Creation and Redemption of Shares-Creation and Redemption Transaction Fee,” page 62.
|
|
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
(1)
|
|
|
Management Fee
|
|
|
0.50
|
%
|
|
Maximum Other Expenses
|
|
|
1.00
|
%
|
|
Maximum Total Annual Fund Expenses
|
|
|
1.50
|
%(1)
|
(1) The Sponsor has contractually agreed to waive the Management
Fee and/or reimburse the Fund for its Other Expenses (which term excludes brokerage fees, interest expenses, and extraordinary
expenses) to cap Total Annual Fund Expenses at 1.50% through February 1, 2016. After that date, the expense limitation may be terminated
and Fund shareholders may incur expenses higher than 1.50% annually. It cannot be predicted with any certainty what such expenses
could be. As the Fund‘s assets increase, Other Expenses may decrease as a percentage of the Fund‘s assets. Above a certain size the Other Expenses may be less than 1.00%. The Fund may also be responsible for certain non-recurring or extraordinary fee and expenses.
Breakeven Analysis
The breakeven analysis below indicates the approximate dollar
returns and percentage required for the redemption value of a hypothetical initial investment in a single share of the Fund to
equal the amount invested twelve months after the investment was made. For purposes of this breakeven analysis, an initial selling
price of $25.00 per share which will be the selling price of the shares sold in the initial Creation Basket was assumed. This breakeven
analysis refers to the redemption of baskets by Authorized Participants and is not related to any gains an individual investor
would have to achieve in order to break even. The breakeven analysis is an approximation only.
|
Assumed initial selling price per Share
|
|
$
|
25.00
|
|
|
|
|
|
|
|
|
Management Fee (0.50%)
(1)
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
Creation Basket Fee
(2)
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
Estimated Brokerage Fee (0.118%)
(3)
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
Rebalancing Costs (0.01%)
|
|
$
|
0.003
|
|
|
|
|
|
|
|
|
Other Expenses (1.0%)
(1)(4)
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
Interest Income (.02%)
(5)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
Amount of trading income required for the Fund’s NAV to break even
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
Percentage of initial selling price per share
|
|
|
1.68
|
%
|
|
(1)
|
The Sponsor has contractually agreed to waive its management fee and/or reimburse the Fund for
its expenses (excluding brokerage fees, interest expenses, and extraordinary expenses) to cap Total Annual Fund Expenses at 1.50%
per annum through February 1, 2016. After that date, the expense limitation may be terminated and Fund shareholders may incur expenses
higher than 1.50% annually. It cannot be predicted with any certainty what such expenses could be. The Fund may also be responsible
for certain non-recurring or extraordinary fee and expenses.
|
|
(2)
|
Authorized Participants are required to pay a Creation Basket fee of $500 for each order they place
to create one or more baskets. An order must be at least one basket, which is 25,000 shares. This breakeven analysis assumes a
hypothetical investment in a single share so the Creation Basket fee is $0.02 (500/25,000).
|
|
(3)
|
This amount is based on estimated brokerage fees for the Fund calculated on an annualized basis.
|
|
(4)
|
Other Expenses are based on estimated amounts for the current fiscal year including the Sponsor’s
contractual agreement to waive its management fee and/or reimburse the Fund for its expenses (excluding brokerage fees, interest
expenses, and extraordinary expenses) to cap Total Annual Fund Expenses at 1.50%, see note 1 above. The Sponsor has paid all of
the expenses related to the organization and offering of the shares in this prospectus.
|
|
(5)
|
The Fund earns interest on funds it deposits with the futures commission merchant
and the custodian and it estimates that the interest rate will be 0.02% based on the interest rate on three-month Treasury Bills
as of November, 2014. The actual rate may vary and not
all assets of the Fund will earn interest.
|
Conflicts
of Interest
There are present and potential future conflicts of interest
in the Fund’s structure and operation you should consider before you purchase shares. The Sponsor and Sit will use this notice of
conflicts as a defense against any claim or other proceeding made. If the Sponsor or Sit is not able to resolve these conflicts of interest
adequately, it may impact the Fund’s ability to achieve its investment objectives. The Fund, the Sponsor and Sit may have inherent
conflicts to the extent the Sponsor attempts to maintain the Fund’s asset size in order to preserve its fee income.
The Sponsor’s and Sit’s officers,
directors and employees, do not devote their time exclusively to the Fund. These persons are directors, officers or employees
of other entities which may compete with the Fund for their services. They could have a conflict between their
responsibilities to the Fund and to those other entities. The Sponsor and Sit believe that they have sufficient personnel,
time, and working capital to discharge their responsibilities in a fair manner and that these persons’ conflicts should
not impair their ability to provide services to the Fund. The Sponsor and its principals will not invest in futures for their
proprietary accounts. Sit and its principals may trade futures on behalf of their own accounts, other clients accounts, and
private funds, including such other parties in which Sit may have an interest. Sit and its principals will not have any
obligation to shareholders to make available any information regarding other trading activities, strategies, or transactions
by Sit or its principals.
The Sponsor has sole current authority to manage the investments
and operations of the Fund, and this may allow it to act in a way that furthers its own interests which may create a conflict with
your best interests. Security holders have limited voting control, which will limit their ability to influence matters such as
amendment of the Declaration of Trust, change in the Fund’s basic investment policy, dissolution of the Fund, or the sale
or distribution of the Fund’s assets.
The previous risk factors and conflicts of interest are complete
as of the date of this prospectus; however, additional risks and conflicts may occur which are not presently foreseen by the Sponsor.
You may not construe this prospectus as legal or tax advice. Before making an investment in this fund, you should read this entire
prospectus, including the Declaration of Trust which can be found on the Fund’s website at www.risingratefund.com. You should
also consult with your personal legal, tax, and other professional advisors.
Security Ownership of Certain Beneficial Owners and Management
The Sponsor owns 40
shares of the Fund. As of the date of this Prospectus, none of its principals has an ownership or beneficial interest in
the Fund.
Sit Fixed Income Advisors II, LLC, located at 3300 IDS Certer, 80 South Eighth Street, Minneapolis, MN, owns 200,000 shares representing more than 99% of the beneficial ownership on the date of this Prospectus.
Related Party Transactions
There have been no related party transactions in the past
year in excess of $120,000 nor are any related party transactions proposed. Further, the Fund has not been involved in any
related party transactions. As noted above, Sit Fixed Income Advisors II, LLC acquired an interest in the Fund. Sit was not a related
party by serving as commodity trading advisor, but acquired such status upon its initial purchase of Fund shares.
Interests of Named Experts and Counsel
The Sponsor employed Reed Smith LLP to assist in preparing this
prospectus. Neither the law firm nor any other expert hired by the Fund to give advice on the preparation of this offering document
has been hired on a contingent fee basis. Nor does any such party have any present or future expectation of interest in the Sponsor,
Distributor, Authorized Participants, Custodian, Administrator or other service providers to the Fund.
Fiduciary and Regulatory Duties of the Sponsor
The general fiduciary duties which would otherwise be imposed on
the Sponsor (which would make its operation of the Trust as described herein impracticable due to the strict prohibition imposed
by such duties on, for example, conflicts of interest on behalf of a fiduciary in its dealings with its beneficiaries), are replaced
by the terms of the Trust Agreement (to which terms all shareholders, by subscribing to the shares, are deemed to consent).
Additionally, under
the terms of the Trust Agreement, the Sponsor is required to:
(i)
Devote
such of its time to the business and affairs of the Trust as it shall, in its discretion exercised in good faith, determine to
be necessary to conduct the business and affairs of the Trust for the benefit of the Trust;
(ii)
Execute,
file, record and/or publish all certificates, statements and other documents and do any and all other things as may be appropriate
for the formation, qualification and operation of the Trust and for the conduct of its business in all appropriate jurisdictions;
(iii)
Retain
independent public accountants to audit the accounts of the Trust;
(iv)
Employ
attorneys to represent the Trust;
(v)
Select
the Trust’s Trustee, Administrator, Transfer Agent, Custodian and Commodity Broker, and any other service provider;
(vi)
Use
its best efforts to maintain the status of the Trust as a “statutory trust” for state law purposes and as a “partnership”
for U.S. federal income tax purposes;
(vii)
Monitor
the brokerage fees charged to the Trust, and the services rendered by futures commission merchants to the Trust, to determine whether
the fees paid by, and the services rendered to,
the Trust for futures
brokerage are at competitive rates and are the best price and services available under the circumstances, and if necessary, renegotiate
the brokerage fee structure to obtain such rates and services for the Trust;
(viii)
Have
fiduciary responsibility for the safekeeping and use of the Trust, whether or not in the Sponsor’s immediate possession or
control, and the Sponsor will not employ or permit others to employ such funds or in any manner except for the benefit of the Trust,
including, among other things, the utilization of any portion of the Trust Estate as compensating balances for the exclusive benefit
of the Sponsor. The Sponsor shall at all times act with integrity and good faith and exercise due diligence in all activities relating
to the conduct of the business of the Trust and in resolving conflicts of interest;
(ix)
Interact
with the Depository as required;
(x)
Delegate
those of its duties hereunder as it shall determine from time to time to the Administrator or Distributor, as applicable;
(xi)
Perform
such other services as the Sponsor believes that the Trust may from time to time require;
(xii)
In
its sole discretion, cause the Trust to do one or more of the following: to make, refrain from making, or once having made, to
revoke, the election referred to in Section 754 of the Code, and any similar election provided by state or local law, or any similar
provision enacted in lieu thereof; and
In its sole discretion, cause the Trust to do one or more of
the following: to make, refrain from making, or once having made, to revoke the election by a qualified fund under Code Section
988(c)(1)(E)(iii)(V), and any similar election provided by state or local law, or any similar provision enacted in lieu thereof.
The Sponsor shall have no liability to the Trust or to any shareholder
for any loss suffered by the Trust which arises out of any action or inaction of the Sponsor if the Sponsor, in good faith, determined
that such course of conduct was in the best interest of the Trust and such course of conduct did not constitute fraud, gross negligence,
bad faith, or willful misconduct of the Sponsor. Subject to the foregoing, the Sponsor shall not be personally liable for the return
or repayment of all or any portion of the capital or profits of any shareholder or assignee thereof. The Sponsor shall not be liable
for the conduct or misconduct of any Administrator or other delegatee selected by the Sponsor with reasonable care.
Under Delaware law, a beneficial owner of a statutory trust (such
as a shareholder of the Fund) may, under certain circumstances, institute legal action on behalf of himself and all other similarly
situated beneficial owners (a “class action”) to recover damages for violations of fiduciary duties, or on behalf
of a statutory trust (a “derivative action”) to recover damages from a third party where there has been a failure
or refusal to institute proceedings to recover such damages. In addition, beneficial owners may have the right, subject to certain
legal requirements, to bring class actions in federal court to enforce their rights under the federal securities laws and the
rules and regulations promulgated thereunder by the SEC. Beneficial owners who have suffered losses in connection with the purchase
or sale of their beneficial interests may be able to recover such losses from the Sponsor where the losses result from a violation
by the Sponsor of the anti-fraud provisions of the federal securities laws.
Under certain circumstances, shareholders also have the right to
institute a reparations proceeding before the CFTC against the Sponsor (a registered commodity pool operator), an FCM, as well
as those of their respective employees who are required to be registered under the CEA, and the rules and regulations promulgated
thereunder. Private rights of action are conferred by the CEA. Investors in futures and in commodity pools may, therefore, invoke
the protections provided thereunder.
The foregoing summary describing in general terms the remedies available
to shareholders under federal law is based on statutes, rules and decisions as of the date of this Prospectus. As this is a rapidly
developing and changing area of the law, shareholders who believe that they may have a legal cause of action against any of the
foregoing parties should consult their own counsel as to their evaluation of the status of the applicable law at such time.
Management; Voting by Shareholders
The shareholders of the Fund take no part in the management or
control, and have no voice in the Trust’s operations or business.
The Sponsor has the right unilaterally to amend the Trust Agreement
as it applies to the Trust provided that the shareholders have the right to vote only if expressly required under Delaware or
federal law or rules or regulations of the Exchange, or if submitted to the shareholders by the Sponsor in its sole discretion.
No amendment affecting the Trustee shall be binding upon or effective against the Trustee unless consented to by the Trustee in
the form of an instruction letter.
Meetings
Meetings of the Trust’s shareholders may be called by the
Sponsor and may be called by it upon the written request of shareholders holding at least 50% of the outstanding shares of the
Trust or the Fund, as applicable. The Sponsor shall deposit in the United States mail or electronically transmit written notice
to all shareholders of the Fund of the meeting and the purpose of the meeting, which shall be held on a date not less than 30
nor more than 60 days after the date of mailing of such notice, at a reasonable time and place. Where the meeting is called upon
the written request of the shareholders such written notice shall be mailed or transmitted not more than 45 days after such written
request for a meeting was received by the Sponsor. Any notice of meeting shall be accompanied by a description of the action to
be taken at the meeting. shareholders may vote in person or by proxy at any such meeting.
Any action required or permitted to be taken by shareholders by
vote may be taken without a meeting by written consent setting forth the actions so taken. Such written consents shall be treated
for all purposes as votes at a meeting. If the vote or consent of any shareholder to any action of the Trust, the Fund or any
shareholder, as contemplated by the Trust Agreement, is solicited by the Sponsor, the solicitation shall be effected by notice
to each shareholder given in the manner provided in accordance with the Trust Agreement. Without written objection by the shareholder,
in accordance with the Trust Agreement, any vote or consent solicited may be deemed cast or granted, respectively. The Sponsor
and all parties dealing with the Trust may act in reliance on such deemed activity.
Liability and Indemnification
The Sponsor will be indemnified by the Trust against any losses,
judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by it in connection with its activities
for the Trust, provided that (i) the Sponsor was acting on behalf of or performing services for the Trust and has determined, in
good faith, that such course of conduct was in the best interests of the Trust and such liability or loss was not the result of
fraud, gross negligence, bad faith, willful misconduct, or a material breach of the Trust Agreement on the part of the Sponsor
and (ii) any such indemnification will only be recoverable from the Trust. All rights to indemnification permitted herein and payment
of associated expenses shall not be affected by the dissolution or other cessation to exist of the Sponsor, or the withdrawal,
adjudication of bankruptcy or insolvency of the Sponsor, or the filing of a voluntary or involuntary petition in bankruptcy under
Title 11 of the Code by or against the Sponsor.
Notwithstanding the provisions above, the Sponsor and any broker-dealer
for the Trust will not be indemnified for any losses, liabilities or expenses arising from or out of an alleged violation of U.S.
federal or state securities laws unless (i) there has been a successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee and the court approves the indemnification of such expenses (including,
without limitation, litigation costs), (ii) such claims have
been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee and the court approves the indemnification of such expenses (including, without limitation,
litigation costs) or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee
and finds that indemnification of the settlement and related costs should be made.
The Trust will not incur the cost of that portion of any insurance
which insures any party against any liability, the indemnification of which is herein prohibited.
Expenses incurred in defending a threatened or pending civil,
administrative or criminal action suit or proceeding against the Sponsor will be paid by the Trust in advance of the final disposition
of such action, suit or proceeding, if (i) the legal action relates to the performance of duties or services by the Sponsor on
behalf of the Trust; (ii) the legal action is initiated by a third party who is not a shareholder or the legal action is initiated
by a shareholder and a court of competent jurisdiction specifically approves such advance; and (iii) the Sponsor undertakes to
repay the advanced funds with interest to the Trust in cases in which it is not entitled to indemnification under this Section.
Termination Events
The Trust will dissolve at any time upon the happening of any of
the following events:
|
|
•
|
The filing of a certificate of dissolution or revocation
of the Sponsor’s charter (and the expiration of 90 days
after the date of notice to the Sponsor of revocation without
a reinstatement of its charter) or upon written notice by the Sponsor of its withdrawal as Sponsor, unless (i) at the time there
is at least one remaining Sponsor and that remaining
Sponsor carries on the business of the Trust or (ii)
within 90 days of such event of withdrawal all the remaining
shareholders agree in writing to continue the business of the
Trust and to select, effective as of the date of such event,
one or more successor Sponsors. If the Trust is terminated
as the result of an event of withdrawal and a failure of all
remaining shareholders to continue the business of the Trust
and to appoint a successor Sponsor as provided above
within 120 days of such event of withdrawal, shareholders holding
shares representing at least a majority (over 50%) of the net
asset value (not including shares held by the Sponsor and its
affiliates) may elect to continue the business of the Trust
by forming a new statutory trust, or reconstituted trust, on
the same terms and provisions as set forth in the Trust Agreement.
Any such election must also provide for the election of a Sponsor to the reconstituted trust. If such an election is made,
all shareholders of the Trust shall be bound thereby and continue
as shareholders of the reconstituted trust.
|
|
|
•
|
The occurrence of any event which would make unlawful the
continued existence of the Trust.
|
|
|
•
|
In the event of the suspension, revocation or termination
of the Sponsor’s registration as a commodity pool operator,
or membership as a commodity pool operator with the NFA (if,
in either case, such registration is required at such time unless
at the time there is at least one remaining Sponsor whose registration
or membership has not been suspended, revoked or terminated).
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The Trust becomes insolvent or bankrupt.
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The shareholders holding shares representing at least seventy-five
percent (75%) of the net asset value (which excludes the shares
of the Sponsor) vote to dissolve the Fund, notice of which is
sent to the Sponsor not less than ninety (90) business days
prior to the effective date of termination.
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The determination of the Sponsor that the aggregate net
assets of the Fund in relation to the operating expenses of
the Trust make it unreasonable or imprudent to continue the
business of the Trust.
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The Trust is required to be registered as an investment
company under the Investment Company Act of 1940.
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DTC is unable or unwilling to continue to perform its functions,
and a comparable replacement is unavailable.
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Provisions of Law
According to applicable law, indemnification
of the Sponsor is payable only if the Sponsor is determined, in good faith, that the act, omission or conduct that gave rise to
the claim for indemnification was in the best interest of the Trust and the Fund and the act, omission or activity that was the
basis for such loss, liability, damage, cost or expense was not the result of negligence or misconduct and such liability or loss
was not the result of negligence or misconduct by the Sponsor, and such indemnification or agreement to hold harmless is recoverable
only out of the assets of the Fund.
Provisions of Federal and State Securities
Laws
This offering is made pursuant to federal
and state securities laws. The SEC and state securities agencies take the position that indemnification of the Sponsor that arises
out of an alleged violation of such laws is prohibited unless certain conditions are met.
These conditions require that no indemnification
of the Sponsor or any underwriter for the Fund may be made in respect of any losses, liabilities or expenses arising from or out
of an alleged violation of federal or state securities laws unless: (i) there has been a successful adjudication on the merits
of each count involving alleged securities law violations as to the party seeking indemnification and the court approves the indemnification;
(ii) such claim has been dismissed with prejudice on the merits by a court of competent jurisdiction as to the party seeking indemnification;
or (iii) a court of competent jurisdiction approves a settlement of the claims against the party seeking indemnification and finds
that indemnification of the settlement and related costs should be made, provided that, before seeking such approval, the Sponsor
or other indemnitee must apprise the court of the position held by regulatory agencies against such indemnification. These agencies
are the SEC and the securities administrator of the State or States in which the plaintiffs claim they were offered or sold interests.
Provisions of the 1933 Act and NASAA Guidelines
Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to the Sponsor or its directors, officers, or persons controlling the Trust and the Fund, the Sponsor
has been informed that SEC and the various State administrators believe that such indemnification is against public policy as expressed
in the 1933 Act and the North American Securities Administrators Association, Inc. (“NASAA”) commodity pool guidelines
and is therefore unenforceable.
Books and Records
The books and records of the Fund may be made available for
inspection and copying (upon payment of reasonable reproduction costs) by Shareholders of the Fund or their representatives for
any purposes reasonably related to a Shareholder’s interest as a beneficial owner of the Fund upon reasonable advance
notice during regular business hours at the office of the Sponsor.
The Sponsor will maintain and preserve the books and records of each Fund for a period of not less than six years.
Statements, Filings, and Reports
The Trust will furnish to DTC Participants
for distribution to shareholders annual reports (as of the end of each fiscal year) for the Fund as are required to be provided
to shareholders by the CFTC and the NFA. These annual reports will contain financial statements prepared by the Sponsor and audited
by an independent registered public accounting firm designated by the Sponsor. The Trust will also post monthly reports to the
Fund’s website (www.risingratefund.com). These monthly reports will contain certain unaudited financial information regarding
the Fund, including the Fund’s NAV. The Sponsor will furnish to the shareholders other reports or information which the Sponsor,
in its discretion, determines to be necessary or appropriate. In addition, under SEC rules the Trust will be required to file quarterly
and annual reports for the Fund with the SEC, which need not be sent to shareholders but will be publicly available through the
SEC. The Trust will post the same information that would otherwise be provided in the Trust’s CFTC, NFA and SEC reports on
the Fund’s website www.risingratefund.com.
The Sponsor is responsible for the registration
and qualification of the Shares under the federal securities laws, federal commodities laws, and laws of any other jurisdiction
as the Sponsor may select. The Sponsor is responsible for preparing all required reports, but has entered into an agreement with
the Administrator to prepare these reports on the Trust’s behalf.
The accountants’ report on its audit
of the Fund’s financial statements will be furnished by the Trust to shareholders upon request. The Trust will make such
elections, file such tax returns, and prepare, disseminate and file such tax reports for the Fund, as it is advised by its counsel
or accountants are from time to time required by any applicable statute, rule or regulation.
Emerging Growth Company Status
The Fund is an “emerging growth company” as defined
under the JOBS Act. The Fund will remain an “emerging growth company” for up to five years, or until the earliest of:
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the last day of the first fiscal year in which its total annual gross revenues exceed $1 billion,
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the date that it becomes a “large accelerated filer” as defined in Rule 12b-2 under
Exchange Act, which would occur if the market value of its shares that are held by non-affiliates exceeds $700 million as of the
last business day of its most recently completed second fiscal quarter, or
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the date on which it has issued more than $1 billion in non-convertible debt during the preceding
three year period.
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As an “emerging growth company,” the Fund may
take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that
are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor
attestation requirements of Section 404(b) of the Sarbanes-Oxley Act as long as it is a “non-accelerated filer,”
which includes issuers that had a public float of less than $75 million as of the last business day of their most recently
completed second fiscal quarter, issuers that have not been subject to the requirements of Section 13(a) or 15(d) of the
Exchange Act for a period of at least 12 calendar months and issuers that have not filed at least one annual report pursuant
thereto.
In addition, Section 107 of the JOBS Act provides that an “emerging
growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act
for complying with new or revised accounting standards. Under this provision, an “emerging growth company” can delay
the adoption of certain accounting standards until those standards would otherwise apply to private companies.
However, the Fund is choosing to “opt out” of such
extended transition period and, as a result, will comply with new or revised accounting standards on the relevant dates on which
adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that this decision
to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
Fiscal Year
The fiscal year of the Fund is July 1 to June 30. The Sponsor
may select an alternate fiscal year.
Governing Law; Consent to Delaware Jurisdiction
The rights of the Sponsor, the Fund, DTC (as registered owner
of the Fund’s global certificate for shares) and the shareholders, are governed by the laws of the State of Delaware. The
Sponsor, the Fund, DTC, and by accepting shares, each DTC Participant and each shareholder, consent to the jurisdiction of the
courts of the State of Delaware and any federal courts located in Delaware. Such consent is not required for any person to assert
a claim of Delaware jurisdiction over the Sponsor or the Fund.
Legal Matters
Litigation and Claims
Within the past 5 years of the date of this prospectus, there
have been no material administrative, civil or criminal actions against the Sponsor, underwriter, or any principal or affiliate
of either of them. This includes any actions pending, on appeal, concluded, threatened, or otherwise known to them.
Legal Opinion
Reed Smith LLP is counsel to advise the Fund, the Trust and
the Sponsor with respect to the shares being offered hereby and has passed upon the validity of the shares being issued hereunder.
Reed Smith LLP has also provided the Sponsor with its opinion with respect to federal income tax matters addressed herein.
Experts
WithumSmith+Brown, P.C. an independent registered public accounting
firm, has audited the financial statements of the Fund and the Sponsor.
U.S. Federal Income Tax Considerations
The following discussion summarizes the material U.S. federal
income tax consequences of the purchase, ownership and disposition of shares in the Fund, and the U.S. federal income tax treatment
of the Fund, as of the date hereof. This discussion is applicable to a beneficial owner of shares who purchases shares in the offering
to which this prospectus relates, including a beneficial owner who purchases shares from an Authorized Participant. Except where
noted otherwise, it deals only with shares held as capital assets and does not deal with special situations, such as those of dealers
in securities or currencies, financial institutions, tax-exempt entities, insurance companies, persons holding shares as a part
of a position in a “straddle” or as part of a “hedging,” “conversion” or other integrated transaction
for federal income tax purposes, traders in securities or commodities that elect to use a mark-to-market method of accounting,
or holders of shares whose “functional currency” is not the U.S. dollar. Furthermore, the discussion below is based
upon the provisions of the Code , as amended, and regulations (“Treasury Regulations”), rulings and judicial decisions
thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in U.S. federal income
tax consequences different from those discussed below.
Persons considering the purchase, ownership or disposition of
shares should consult their own tax advisors concerning the United States federal income tax consequences in light of their particular
situations as well as any consequences arising under the laws of any other taxing jurisdiction. As used
herein, a “U.S. shareholder” of a share means a
beneficial owner of a share that is, for United States federal income tax purposes, (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof,
(iii) an estate the income of which is subject to United States federal income taxation regardless of its source or (iv) a trust
(X) that is subject to the supervision of a court within the United States and the control of one or more United States persons
as described in section 7701(a)(30) of the Code or (Y) that has a valid election in effect under applicable Treasury Regulations
to be treated as a United States person. A “Non-U.S. shareholder” is a holder that is not a U.S. shareholder. If a
partnership holds our shares, the tax treatment of a partner will generally depend upon the status of the partner and the activities
of the partnership. If you are a partner of a partnership holding our shares, you should consult your own tax advisor regarding
the tax consequences.
The Sponsor, on behalf of the Fund, has received the opinion
of Reed Smith LLP, counsel to the Fund, that the material U.S. federal income tax consequences to the Fund and to U.S. shareholders
and Non-U.S. shareholders will be as described below. In rendering its opinion, Reed Smith LLP has relied on the facts described
in this prospectus as well as certain factual representations made by the Fund and the Sponsor. The opinion of Reed Smith LLP is
not binding on the IRS, and as a result, the IRS may not agree with the tax positions taken by the Fund. If challenged by the IRS,
the Fund’s tax positions might not be sustained by the courts. No ruling has been requested from the IRS with respect to
any matter affecting the Fund or prospective investors.
EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS OWN TAX
ADVISOR AS TO HOW U.S. FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE FUND. APPLY TO YOU AND AS TO HOW THE APPLICABLE
STATE, LOCAL OR FOREIGN TAXES APPLY TO YOU.
Tax Status of the Fund
The Fund is organized and operated as a statutory trust in accordance
with the provisions of the Trust Agreement and Delaware law. As a statutory trust, the Fund will be taxable as a partnership unless
it elects to be taxable as a corporation under current tax law. The Fund does not intend to elect to be taxable as a corporation.
Even if the Fund doesn’t elect to be taxed as a corporation, under the Code, an entity classified as a partnership that is
deemed to be a “publicly traded partnership” is generally taxable as a corporation for federal income tax purposes.
The Code provides an exception to this general rule for a publicly traded partnership whose gross income for each taxable year
of its existence consists of at least 90% “qualifying income” (“qualifying income exception”). For this
purpose, section 7704 defines “qualifying income” as including, in pertinent part, interest (other than from a financial
business), dividends and gains from the sale or disposition of capital assets held for the production of interest or dividends.
In addition, in the case of a partnership a principal activity of which is the buying and selling of commodities (other than as
inventory) or of futures, forwards and options with respect to commodities, “qualifying income” includes income and
gains from such commodities and futures, forwards and options with respect to commodities. The Fund and the Sponsor have represented
the following to Reed Smith LLP:
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At least 90% of the Fund’s gross income for each taxable year will constitute “qualifying income” within
the meaning of Code section 7704 (as described above);
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the Fund is organized and operated in accordance with its governing agreements and applicable law;
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the Fund has not elected, and will not elect, to be classified as a corporation for U.S. federal income tax purposes.
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Based in part on these representations, Reed Smith LLP is of
the opinion that the Fund classifies as a partnership for federal income tax purposes and that it is not taxable as a corporation
for such purposes.
If the Fund failed to satisfy the qualifying income exception
in any year, other than a failure that is determined by the IRS to be inadvertent and that is cured within a reasonable time after
discovery, the Fund would be taxable as a corporation for federal income tax purposes and would pay federal income tax on its income
at regular corporate rates. In that event, shareholders would not report their share of the Fund’s income or loss on their
returns.
In addition, distributions to shareholders would be treated
as dividends to the extent of the Fund’s current and accumulated earnings and profits. To the extent a distribution exceeded
the Fund’s earnings and profits, the distribution would be treated as a return of capital to the extent of a shareholder’s
basis in its shares, and thereafter as gain from the sale of shares. Accordingly, if the Fund were to be taxable as a corporation,
it would likely have a material adverse effect on the economic return from an investment in the Fund and on the value of the shares.
The remainder of this summary assumes that the Fund is classified
as a partnership for federal income tax purposes and that it is not taxable as a corporation.
U.S. Shareholders
Tax Consequences of Ownership of Shares
Taxation of the Fund’s Income
. No U.S. federal
income tax is paid by the Fund on its income. Instead, the Fund files annual information returns, and each U.S. shareholder is
required to report on its U.S. federal income tax return its allocable share of the income, gain, loss and deduction of the Fund.
For example, shareholders must take into account their share of ordinary income realized by the Fund from accruals of interest
on U.S. Treasuries and other investments, and their share of gain from Treasury Interests. These items must be reported without
regard to the amount (if any) of cash or property the shareholder receives as a distribution from the Fund during the taxable year.
Consequently, a shareholder may be allocated income or gain by the Fund but receive no cash distribution with which to pay its
tax liability resulting from the allocation, or may receive a distribution that is insufficient to pay such liability. Because
the Sponsor currently does not intend to make distributions, it is likely that in any year the Fund realizes net income and/or
gain that a U.S. shareholder will be required to pay taxes on its allocable share of such income or gain from sources other than
the Fund distributions. In addition, for taxable years beginning after December 31, 2012, individuals with income in excess of
$200,000 ($250,000 in the case of married individuals filing jointly) and certain estates and trusts are subject to an additional
3.8% tax on their “net investment income,” which generally includes net income from interest, dividends, annuities,
royalties, and rents, and net capital gains (other than certain amounts earned from trades or businesses). Also included as income
subject to the additional 3.8% tax is income from businesses involved in the trading of financial instruments or commodities.
Allocations of the Fund’s Profit and Loss
. Under
Code section 704, the determination of a partner’s distributive share of any item of income, gain, loss, deduction or credit
is governed by the applicable organizational document unless the allocation provided by such document lacks “substantial
economic effect.”
An allocation that lacks substantial economic effect nonetheless
will be respected if it is in accordance with the partners’ interests in the partnership, determined by taking into account
all facts and circumstances relating to the economic arrangements among the partners.
In general, the Fund applies a monthly closing-of-the-books
convention in determining allocations of economic profit or loss to shareholders. Income, gain, loss and deduction are determined
on a monthly “mark-to-market” basis, taking into account our accrued income and deductions and realized and unrealized
gains and losses for the month. These items are allocated among the holders of shares in proportion to the number of shares owned
by them as of the close of business on the last business day of the month. Items of taxable income, deduction, gain, loss and credit
recognized by the Fund for federal income tax purposes for any taxable year are allocated among holders in a manner that equitably
reflects the allocation of economic profit or loss. The Fund has made the election permitted by section 754 of the Code, which
election is irrevocable without the consent of the Service. The effect of this election is that when a secondary market sale of
our shares occurs, we adjust the purchaser’s proportionate share of the tax basis of our assets to fair market value, as
reflected in the price paid for the shares, as if the purchaser had directly acquired an interest in our assets. The section 754
election is intended to eliminate disparities between a partner’s basis in its partnership interest and its share of the
tax bases of the partnership’s assets, so that the partner’s allocable share of taxable gain or loss on a disposition
of an asset will correspond to its share of the appreciation or depreciation in the value of the asset since it acquired its interest.
Depending on the price paid for shares and the tax bases of the Fund’s assets at the time of the purchase, the effect of
the section 754 election on a purchaser of shares may be favorable or unfavorable.
The Fund applies certain conventions in determining and allocating
items for tax purposes in order to reduce the complexity and costs of administration. The Sponsor believes that application of
these conventions is consistent with the intent of the partnership provisions of the Code, and that the resulting allocations will
have substantial economic effect or otherwise are respected as being in accordance with shareholders’ interests in the Fund
for federal income tax purposes. The Code and existing Treasury Regulations do not expressly permit adoption of these conventions
although the monthly allocation convention described above is consistent with a semi-monthly method permitted under recently proposed
Treasury Regulations, as well as the legislative history for the provisions that requires allocations to appropriately reflect
changes in ownership interest. It is possible that the IRS could successfully challenge this method and require a shareholder to
report a greater or lesser share of items of income, gain, loss, deduction, or credit than if our method were respected. The Sponsor
is authorized to revise our allocation method to conform to any method permitted under future Treasury Regulations.
The assumptions and conventions used in making tax allocations
may cause a shareholder to be allocated more or less income or loss for federal income tax purposes than its proportionate share
of the economic income or loss realized by the Fund during the period it held its shares. This “mismatch” between taxable
and economic income or loss in some cases may be temporary, reversing itself in a later year when the shares are sold, but could
be permanent. For example, a shareholder could be allocated income accruing before it purchased its shares, resulting in an increase
in the basis of the shares (see “Tax Basis of Shares,” below). On a subsequent disposition of the shares, the additional
basis might produce a capital loss the deduction of which may be limited (see “
Limitations on Deductibility of Losses
and Certain Expenses,
” below).
Mark to Market of Certain Exchange-Traded Contracts
.
For federal income tax purposes, the Fund generally is required to use a “mark-to-market” method of accounting under
which unrealized gains and losses on instruments constituting “section 1256 contracts” are recognized currently. A
section 1256 contract is defined as: (1) a futures contract that is traded on or subject to the rules of a national securities
exchange which is registered with the SEC, a domestic board of trade designated as a contract market by the CFTC, or any other
board of trade or exchange designated by the Secretary of the Treasury, and with respect to which the amount required to be deposited
and the amount that may be withdrawn depends on a system of “marking to market”; (2) a forward contract on exchange-traded
foreign currencies, where the contracts are traded in the interbank market; (3) a non-equity option traded on or subject to the
rules of a qualified board or exchange; (4) a dealer equity option; or (5) a dealer securities futures contract.
Under these rules, section 1256 contracts held by the Fund at
the end of each taxable year, including for example futures contracts and options on futures contracts traded on a U.S. exchange
or board of trade or certain foreign exchanges, are treated as if they were sold by the Fund for their fair market value on the
last business day of the taxable year. A shareholder’s distributive share of the Fund’s net gain or loss with respect
to each section 1256 contract generally is treated as long-term capital gain or loss to the extent of 60 percent thereof, and as
short-term capital gain or loss to the extent of 40 percent thereof, without regard to the actual holding period.
Many of the Fund’s Futures Contracts and some of their
other commodity interests will qualify as “section 1256 contracts” under the Code. Gain or loss recognized through
disposition, termination or marking-to-market of the Fund’s section 1256 contracts will be subject to 60/ 40 treatment and
allocated to shareholders in accordance with the monthly allocation convention. Under recently enacted legislation, cleared swaps
and other commodity swaps will most likely not qualify as section 1256 contracts. If a commodity swap is not treated as a section
1256 contract, any gain or loss on the swap recognized at the time of disposition or termination will be long-term or short-term
capital gain or loss depending on the holding period of the swap.
Limitations on Deductibility of Losses and Certain Expenses
.
A number of different provisions of the Code may defer or disallow the deduction of losses or expenses allocated to you by the
Fund, including but not limited to those described below.
A shareholder’s deduction of its allocable share of any
loss of the Fund is limited to the lesser of (1) the tax basis in its shares or (2) in the case of a shareholder that is an individual
or a closely held corporation, the amount which the shareholder is considered to have “at risk” with respect to our
activities. In general, the amount at risk will be your invested capital plus your share of any recourse debt of the Fund for which
you are liable. Losses in excess of the lesser of tax basis or the amount at risk must be deferred until years in which the Fund
generates additional taxable income against which to offset such carryover losses or until additional capital is placed at risk.
Noncorporate taxpayers are permitted to deduct capital losses
only to the extent of their capital gains for the taxable year plus $3,000 of other income. Unused capital losses can be carried
forward and used to offset capital gains in future years. In addition, a noncorporate taxpayer may elect to carry back net losses
on section 1256 contracts to each of the three preceding years and use them to offset section 1256 contract gains in those years,
subject to certain limitations. Corporate taxpayers generally may deduct capital losses only to the extent of capital gains, subject
to special carryback and carryforward rules.
Otherwise deductible expenses incurred by noncorporate taxpayers
constituting “miscellaneous itemized deductions,” generally including investment-related expenses (other than interest
and certain other specified expenses), are deductible only to the extent they exceed 2% of the taxpayer’s adjusted gross
income for the year. Although the matter is not free from doubt, we believe management fees we pay to the Sponsor and other expenses
we incur constitute investment-related expenses subject to the miscellaneous itemized deduction limitation, rather than expenses
incurred in connection with a trade or business, and will report these expenses consistent with that interpretation. The Code imposes
additional limitations on the amount of certain itemized deductions allowable to individuals with adjusted gross income in excess
of certain amounts by reducing the otherwise allowable portion of such deductions by an amount equal to the lesser of:
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3% of the individual’s adjusted gross income in excess of certain threshold amounts; or
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80% of the amount of certain itemized deductions otherwise allowable for the taxable year.
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Noncorporate shareholders generally may deduct “investment
interest expense” only to the extent of their “net investment income.” Investment interest expense of a shareholder
will generally include any interest accrued by the Fund and any interest paid or accrued on direct borrowings by a shareholder
to purchase or carry its shares, such as interest with respect to a margin account. Net investment income generally includes gross
income from property held for investment (including “portfolio income” under the passive loss rules but not, absent
an election, long-term capital gains or certain qualifying dividend income) less deductible expenses other than interest directly
connected with the production of investment income.
To the extent that we allocate losses or expenses to you that
must be deferred or disallowed as a result of these or other limitations in the Code, you may be taxed on income in excess of your
economic income or distributions (if any) on your shares. As one example, you could be allocated and required to pay tax on your
share of interest income accrued by the Fund for a particular taxable year, and in the same year allocated a share of a capital
loss that you cannot deduct currently because you have insufficient capital gains against which to offset the loss. As another
example, you could be allocated and required to pay tax on your share of interest income and capital gain for a year, but be unable
to deduct some or all of your share of management fees and/or margin account interest incurred by you with respect to your shares.
Shareholders are urged to consult their own professional tax advisors regarding the effect of limitations under the Code on your
ability to deduct your allocable share of the Fund’s losses and expenses.
Tax Basis of Shares
. A shareholder’s tax basis
in its shares is important in determining (1) the amount of taxable gain it will realize on the sale or other disposition of its
shares, (2) the amount of non-taxable distributions that it may receive from the Fund and (3) its ability to utilize its distributive
share of any losses of the Fund on its tax return. A shareholder’s initial tax basis of its shares will equal its cost for
the shares plus its share of the Fund’s liabilities (if any) at the time of purchase. In general, a shareholder’s “share”
of those liabilities will equal the sum of (i) the entire amount of any otherwise nonrecourse liability of the Fund as to which
the shareholder or an affiliate is the creditor (a “partner nonrecourse liability”) and (ii) a
pro rata
share
of any nonrecourse liabilities of the Fund that are not partner nonrecourse liabilities as to any shareholder.
A shareholder’s tax basis in its shares generally will
be (1) increased by (a) its allocable share of the Fund’s taxable income and gain and (b) any additional contributions by
the shareholder to the Fund and (2) decreased (but not below zero) by (a) its allocable share of the Fund’s tax deductions
and losses and (b) any distributions by the Fund to the shareholder. For this purpose, an increase in a shareholder’s share
of the Fund’s liabilities will be treated as a contribution of cash by the shareholder to the Fund and a decrease in that
share will be treated as a distribution of cash by the Fund to the shareholder. Pursuant to certain IRS rulings, a shareholder
will be required to maintain a single, “unified” basis in all shares that it owns. As a result, when a shareholder
that acquired its shares at different prices sells less than all of its shares, such shareholder will not be entitled to specify
particular shares (e.g., those with a higher basis) as having been sold. Rather, it must determine its gain or loss on the sale
by using an “equitable apportionment” method to allocate a portion of its unified basis in its shares to the shares
sold.
Treatment of Fund Distributions
. If the Fund makes non-liquidating
distributions to shareholders, such distributions generally will not be taxable to the shareholders for federal income tax purposes
except to the extent that the sum of (i) the amount of cash and (ii) the fair market value of marketable securities distributed
exceeds the shareholder’s adjusted basis of its interest in the Fund immediately before the distribution. Any cash distributions
in excess of a shareholder’s tax basis generally will be treated as gain from the sale or exchange of shares.
Constructive Termination of the Partnership
. We will
be considered to have been terminated for tax purposes if there is a sale or exchange of 50 percent or more of the total interests
in our shares within a 12-month period. A termination would result in the closing of our taxable year for all shareholders. In
the case of a shareholder reporting on a taxable year other
than a fiscal year ending December 31, the closing of our taxable year may result in more than 12 months of our taxable income
or loss being includable in its taxable income for the year of termination. We would be required to make new tax elections after
a termination. A termination could result in tax penalties if we were unable to determine that the termination had occurred. Moreover,
a termination might either accelerate the application of, or subject us to, any tax legislation enacted before the termination.
Tax Consequences of Disposition of Shares
. If a shareholder
sells its shares, it will recognize gain or loss equal to the difference between the amount realized and its adjusted tax basis
for the shares sold. A shareholder’s amount realized will be the sum of the cash or the fair market value of other property
received plus its share of any the Fund debt outstanding.
Gain or loss recognized by a shareholder on the sale or exchange
of shares held for more than one year will generally be taxable as long-term capital gain or loss; otherwise, such gain or loss
will generally be taxable as short-term capital gain or loss. A special election is available under the Treasury Regulations that
will allow shareholders to identify and use the actual holding periods for the shares sold for purposes of determining whether
the gain or loss recognized on a sale of shares will give rise long-term or short-term capital gain or loss. It is expected that
most shareholders will be eligible to elect, and generally will elect, to identify and use the actual holding period for shares
sold. If a shareholder fails to make the election or is not able to identify the holding periods of the shares sold, the shareholder
will have a split holding period in the shares sold. Under such circumstances, a shareholder will be required to determine its
holding period in the shares sold by first determining the portion of its entire interest in the Fund that would give rise to long-term
capital gain or loss if its entire interest were sold and the portion that would give rise to short-term capital gain or loss if
the entire interest were sold. The shareholder would then treat each share sold as giving rise to long-term capital gain or loss
and short-term capital gain or loss in the same proportions as if it had sold its entire interest in the Fund.
Under Section 751 of the Code, a portion of a shareholder’s
gain or loss from the sale of shares (regardless of the holding period for such shares), will be separately computed and taxed
as ordinary income or loss to the extent attributable to “unrealized receivables” or “inventory” owned
by the Fund. The term “unrealized receivables” includes, among other things, market discount bonds and short-term debt
instruments to the extent such items would give rise to ordinary income if sold by the Fund.
If some or all of your shares are lent by your broker or other
agent to a third party - for example, for use by the third party in covering a short sale - you may be considered as having made
a taxable disposition of the loaned shares, in which case -
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you may recognize
taxable gain or loss to the same extent as if you had sold the shares for cash;
·
any of the
Fund’s income, gain, loss or deduction allocable to those shares during the period of the loan will not be reportable by
you for tax purposes; and
·
any distributions
you receive with respect to the shares will be fully taxable, most likely as ordinary income.
Shareholders desiring to avoid these and other possible consequences
of a deemed disposition of their shares should consider modifying any applicable brokerage account agreements to prohibit the lending
of their shares.
Other Tax Matters
Information Reporting
. We report tax information to the
beneficial owners of shares. Shareholders who have become additional shareholders are treated as partners for federal income tax
purposes. The IRS has ruled that assignees of partnership interests who have not been admitted to a partnership as partners but
who have the capacity to exercise substantial dominion and control
over the assigned partnership interests will be considered partners for federal income tax purposes. On the basis of such ruling,
except as otherwise provided herein, we treat the following persons as partners for federal income tax purposes: (1) assignees
of shares who are pending admission as shareholders, and (2) shareholders whose shares are held in street name or by another nominee
and who have the right to direct the nominee in the exercise of all substantive rights attendant to the ownership of their shares.
The Fund will furnish shareholders each year with tax information on IRS Schedule K-1 (Form 1065), which will be used by the shareholders
in completing their tax returns.
Persons who hold an interest in the Fund as a nominee for another
person are required to furnish to us the following information: (1) the name, address and taxpayer identification number of the
beneficial owner and the nominee; (2) whether the beneficial owner is (a) a person that is not a U.S. person, (b) a foreign government,
an international organization or any wholly-owned agency or instrumentality of either of the foregoing, or (c) a tax-exempt entity;
(3) the amount and description of shares acquired or transferred for the beneficial owner; and (4) certain information including
the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the
amount of net proceeds from sales. Brokers and financial institutions are required to furnish additional information, including
whether they are U.S. persons and certain information on shares they acquire, hold or transfer for their own account. A penalty
of $100 per failure, up to a maximum of $1,500,000 per calendar year, is imposed by the Code, as amended for failure to report
such information to us. The nominee is required to supply the beneficial owner of the shares with the information furnished to
us.
Partnership Audit Procedures
. The IRS may audit the federal
income tax returns filed by the Fund. Adjustments resulting from any such audit may require each shareholder to adjust a prior
year’s tax liability and could result in an audit of the shareholder’s own return. Any audit of a shareholder’s
return could result in adjustments of non-partnership items as well as the Fund items. Partnerships are generally treated as separate
entities for purposes of federal tax audits, judicial review of administrative adjustments by the IRS, and tax settlement proceedings.
The tax treatment of partnership items of income, gain, loss and deduction are determined at the partnership level in a unified
partnership proceeding rather than in separate proceedings with the shareholders. The Code provides for one shareholder to be designated
as the “tax matters partner” and represent the partnership purposes of these proceedings. The Trust Agreement appoints
the Sponsor as the tax matters partner of the Fund.
Tax Shelter Disclosure Rules
. In certain circumstances
the Code and Treasury Regulations require that the IRS be notified of taxable transactions through a disclosure statement attached
to a taxpayer’s United States federal income tax return. In addition, certain “material advisers” must maintain
a list of persons participating in such transactions and furnish the list to the IRS upon written request. These disclosure rules
may apply to transactions irrespective of whether they are structured to achieve particular tax benefits. They could require disclosure
by the Fund or shareholders (1) if a shareholder incurs a loss in excess a specified threshold from a sale or redemption of its
shares, (2) if the Fund engages in transactions producing differences between its taxable income and its income for financial reporting
purposes, or (3) possibly in other circumstances. While these rules generally do not require disclosure of a loss recognized on
the disposition of an asset in which the taxpayer has a “qualifying basis” (generally a basis equal to the amount of
cash paid by the taxpayer for such asset), they apply to a loss recognized with respect to interests in a pass-through entity,
such as the shares, even if the taxpayer’s basis in such interests is equal to the amount of cash it paid. In addition, under
recently enacted legislation, significant penalties may be imposed in connection with a failure to comply with these reporting
requirements.
Investors should consult their own tax advisors concerning the application of these reporting requirements to
their specific situation.
Tax-Exempt Organizations
. Subject to numerous exceptions,
qualified retirement plans and individual retirement accounts, charitable organizations and certain other organizations that otherwise
are exempt from federal income tax (collectively “exempt organizations”) nonetheless are subject to the tax on unrelated
business taxable income (“UBTI”). Generally, UBTI means the gross income derived by an exempt organization from a trade
or business that it regularly carries on, the conduct of which is not substantially related to the exercise or performance of its
exempt purpose or function, less allowable deductions directly connected with that trade or business. If the Fund were to regularly
carry on (directly or indirectly) a trade or business that is unrelated with respect to an exempt organization shareholder, then
in computing its UBTI, the shareholder must include its share of (1) the Fund’s gross income from the unrelated trade or
business, whether or not distributed, and (2) the Fund’s allowable deductions directly connected with that gross income.
UBTI generally does not include dividends, interest, or payments
with respect to securities loans and gains from the sale of property (other than property held for sale to customers in the ordinary
course of a trade or business). Nonetheless, income on, and gain from the disposition of, “debt-financed property”
is UBTI. Debt-financed property generally is income-producing property (including securities), the use of which is not substantially
related to the exempt organization’s tax-exempt purposes, and with respect to which there is “acquisition indebtedness”
at any time during the taxable year (or, if the property was disposed of during the taxable year, the 12-month period ending with
the disposition). Acquisition indebtedness includes debt incurred to acquire property, debt incurred before the acquisition of
property if the debt would not have been incurred but for the acquisition, and debt incurred subsequent to the acquisition of property
if the debt would not have been incurred but for the acquisition and at the time of acquisition the incurrence of debt was foreseeable.
The portion of the income from debt-financed property attributable to acquisition indebtedness is equal to the ratio of the average
outstanding principal amount of acquisition indebtedness over the average adjusted basis of the property for the year. The Fund
currently does not anticipate that it will borrow money to acquire investments; however, the Fund cannot be certain that it will
not borrow for such purpose in the future. In addition, an exempt organization shareholder that incurs acquisition indebtedness
to purchase its shares in the Fund may have UBTI.
The federal tax rate applicable to an exempt organization shareholder
on its UBTI generally will be either the corporate or trust tax rate, depending upon the shareholder’s form of organization.
The Fund may report to each such shareholder information as to the portion, if any, of the shareholder’s income and gains
from the Fund for any year that will be treated as UBTI; the calculation of that amount is complex, and there can be no assurance
that the Fund’s calculation of UBTI will be accepted by the Service. An exempt organization shareholder will be required
to make payments of estimated federal income tax with respect to its UBTI.
Regulated Investment Companies
. Under recently enacted
legislation, interests in and income from “qualified publicly traded partnerships” satisfying certain gross income
tests are treated as qualifying assets and income, respectively, for purposes of determining eligibility for regulated investment
company (“RIC”) status. A RIC may invest up to 25% of its assets in interests in a qualified publicly traded partnership.
The determination of whether a publicly traded partnership such as the Fund is a qualified publicly traded partnership is made
on an annual basis. The Fund expects to be a qualified publicly traded partnership in each of its taxable years. However, such
qualification is not assured.
Non-U.S. Shareholders
Generally, non-U.S. persons who derive U.S. source income or
gain from investing or engaging in a U.S. business are taxable on two categories of income. The first category consists of amounts
that are fixed, determinable, annual and periodic income, such as interest, dividends and rent that are not connected with the
operation of a U.S. trade or business (“FDAP”). The second category is income that is effectively
connected with the conduct of a U.S. trade or business (“ECI”).
FDAP income (other than interest that is considered “portfolio interest”) is generally subject to a 30% withholding
tax, which may be reduced for certain categories of income by a treaty between the U.S. and the recipient’s country of residence.
In contrast, ECI is generally subject to U.S. tax on a net basis at graduated rates upon the filing of a U.S. tax return. Where
a non-U.S. person has ECI as a result of an investment in a partnership, the ECI is subject to a withholding tax at a rate of 39.6%
for individual shareholders and a rate of 35% for corporate Shareholders.
Withholding on Allocations and Distributions
. The Code
provides that a non-U.S. person who is a partner in a partnership that is engaged in a U.S. trade or business during a taxable
year will also be considered to be engaged in a U.S. trade or business during that year. Classifying an activity by a partnership
as an investment or an operating business is a factual determination. Under certain safe harbors in the Code, an investment fund
whose activities consist of trading in stocks, securities, or commodities for its own account generally will not be considered
to be engaged in a U.S. trade or business unless it is a dealer is such stocks, securities, or commodities. This safe harbor applies
to investments in commodities only if the commodities are of a kind customarily dealt in on an organized commodity exchange and
if the transaction is of a kind customarily consummated at such place. Although the matter is not free from doubt, the Fund believes
that the activities directly conducted by the Fund do not result in the Fund being engaged in a trade or business within in the
United States. However, there can be no assurance that the IRS would not successfully assert that the Fund’s activities constitute
a U.S. trade or business.
In the event that the Fund’s activities were considered
to constitute a U.S. trade or business, the Fund would be required to withhold at the highest rate specified in Code section 1
(currently 39.6%) on allocations of our income to individual Non-U.S. Shareholders and the highest rate specified in Code section
11(b) (currently 35%) on allocations of our income to corporate Non-U.S. Shareholders, when such income is allocated or distributed.
A non-U.S. shareholder with ECI will generally be required to file a U.S. federal income tax return, and the return will provide
the non-U.S. shareholder with the mechanism to seek a refund of any withholding in excess of such shareholder’s actual U.S.
federal income tax liability. Any amount withheld by the Fund on behalf of a non-U.S. shareholder will be treated as a distribution
to the non-U.S. shareholder to the extent possible. In some cases, the Fund may not be able to match the economic cost of satisfying
its withholding obligations to a particular non-U.S. shareholder, which may result in such cost being borne by the Fund, generally,
and accordingly, by all shareholders.
If the Fund is not treated as engaged in a U.S. trade or business,
a non-U.S. shareholder may nevertheless be treated as having FDAP income, which would be subject to a 30% withholding tax (possibly
subject to reduction by treaty), with respect to some or all of its distributions from the Fund or its allocable share of the Fund
income. Amounts withheld on behalf of a non-U.S. shareholder will be treated as being distributed to such shareholder.
To the extent any interest income allocated to a non-U.S. shareholder
that otherwise constitutes FDAP is considered “portfolio interest,” neither the allocation of such interest income
to the non-U.S. shareholder nor a subsequent distribution of such interest income to the non-U.S. shareholder will be subject to
withholding, provided that the non-U.S. shareholder is not otherwise engaged in a trade or business in the U.S. and provides the
Fund with a timely and properly completed and executed IRS Form W-8BEN or other applicable form. In general, “portfolio interest”
is interest paid on debt obligations issued in registered form, unless the “recipient” owns 10% or more of the voting
power of the issuer.
Most of the Fund’s interest income qualifies as “portfolio
interest.” In order for the Fund to avoid withholding on any interest income allocable to non-U.S. shareholders that would
qualify as “portfolio interest,” it will be necessary for all non-U.S. shareholders to provide the Fund with a timely
and properly
completed and executed Form W-8BEN (or other applicable form).
If a non-U.S. shareholder fails to provide a properly completed Form W-8BEN, the Sponsor may request that the non-U.S. shareholder
provide, within 15 days after the request by the Sponsor, a properly completed Form W-8BEN. If a non-U.S. shareholder fails to
comply with this request, the shares owned by such non-U.S. shareholder will be subject to redemption.
Gain from Sale of Shares
. Gain from the sale or exchange
of the shares may be taxable to a non-U.S. shareholder if the non-U.S. shareholder is a nonresident alien individual who is present
in the U.S. for 183 days or more during the taxable year. In such case, the nonresident alien individual will be subject to a 30%
withholding tax on the amount of such individual’s gain.
Branch Profits Tax on Corporate Non-U.S. Shareholders
.
In addition to the taxes noted above, any non-U.S. shareholders that are corporations may also be subject to an additional tax,
the branch profits tax, at a rate of 30%. The branch profits tax is imposed on a non-U.S. corporation’s dividend equivalent
amount, which generally consists of the corporation’s after-tax earnings and profits that are effectively connected with
the corporation’s U.S. trade or business but are not reinvested in a U.S. business. This tax may be reduced or eliminated
by an income tax treaty between the United States and the country in which the non-U.S. shareholder is a “qualified resident.”
Certain information reporting and withholding requirement
.
Recently enacted legislation that will become effective after June 30, 2014, generally imposes a 30% withholding tax on payments
of certain types of income to foreign financial institutions that fail to enter into an agreement with the United States Treasury
to report certain required information with respect to accounts held by U.S. persons (or held by foreign entities that have U.S.
persons as substantial owners). The types of income subject to the tax include U.S.-source interest and dividends and the gross
proceeds from the sale of any property that could produce U.S.-source interest or dividends. The information required to be reported
includes the identity and taxpayer identification number of each account holder that is a U.S. person and transaction activity
within the holder’s account. In addition, subject to certain exceptions, this legislation also imposes a 30% withholding
tax on payments to foreign entities that are not financial institutions unless the foreign entity certifies that it does not have
a greater than 10% U.S. owner or provides the withholding agent with identifying information on each greater than 10% U.S. owner.
When these provisions become effective, depending on the status of a non-U.S. shareholder and the status of the intermediaries
through which it holds shares, a non-U.S. shareholder could be subject to this 30% withholding tax with respect to distributions
on its shares and proceeds from the sale of its shares. Under certain circumstances, a non-U.S. shareholder might be eligible for
refund or credit of such taxes.
Prospective non-U.S. shareholders should consult their tax
advisor with regard to these and other issues unique to non-U.S. shareholders
.
Backup Withholding
The Fund may be required to withhold U.S. federal income tax
(“backup withholding”) at a rate of 28% from all taxable distributions payable to: (1) any shareholder who fails to
furnish the Fund with his, her or its correct taxpayer identification number or a certificate that the shareholder is exempt from
backup withholding, and (2) any shareholder with respect to whom the IRS notifies the Fund that the shareholder has failed to properly
report certain interest and dividend income to the IRS and to respond to notices to that effect. Backup withholding is not an additional
tax and may be returned or credited against a taxpayer’s regular federal income tax liability if appropriate information
is provided to the IRS.
Other Tax Considerations
In addition to federal income taxes, shareholders may be subject
to other taxes, such as state and local income taxes, unincorporated business taxes, business franchise taxes, and estate, inheritance
or intangible taxes that may be imposed by the various jurisdictions in which the Fund does business or owns property or where
the shareholders reside. Although an analysis of those various taxes is not presented here, each prospective shareholder should
consider their potential impact on its investment in the Fund. It is each shareholder’s responsibility to file the appropriate
U.S. federal, state, local, and foreign tax returns. Reed Smith LLP has not provided an opinion concerning any aspects of state,
local or foreign tax or U.S. federal tax other than those U.S. federal income tax issues discussed herein.
Investment by ERISA Accounts
General
Most employee benefit plans and individual retirement accounts
(“IRAs”) are subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or the
Code, or both. This section discusses certain considerations that arise under ERISA and the Code that a fiduciary of an employee
benefit plan as defined in ERISA or a plan as defined in Section 4975 of the Code who has investment discretion should take into
account before deciding to invest the plan’s assets in the Fund. Employee benefit plans and plans are collectively referred
to below as plans, and fiduciaries with investment discretion are referred to below as plan fiduciaries.
This summary is based on the provisions of ERISA and the Code
as of the date hereof. This summary is not intended to be complete, but only to address certain questions under ERISA and the Code
likely to be raised by your advisors. The summary does not include state or local law.
Potential plan investors are urged to consult with their
own professional advisors concerning the appropriateness of an investment in the Fund and the manner in which shares should be
purchased.
Special Investment Considerations
Each plan fiduciary must consider the facts and circumstances
that are relevant to an investment in the Fund, including the role that an investment in the Fund would play in the plan’s
overall investment portfolio. Each plan fiduciary, before deciding to invest in the Fund, must be satisfied that the investment
is prudent for the plan, that the investments of the plan are diversified so as to minimize the risk of large losses and that an
investment in the Fund complies with the terms of the plan.
The Fund and Plan Assets
A regulation issued under ERISA contains rules for determining
when an investment by a plan in an equity interest of a Delaware business trust will result in the underlying assets of the Delaware
business trust being deemed plan assets for purposes of ERISA and Section 4975 of the Code. Those rules provide that assets of
a Delaware business trust will not be plan assets of a plan that purchases an equity interest in the Delaware business trust if
the equity interest purchased is a publicly-offered security. If the underlying assets of a Delaware business trust are considered
to be assets of any plan for purposes of ERISA or Section 4975 of the Code, the operations of that Delaware business trust would
be subject to and, in some cases, limited by, the provisions of ERISA and Section 4975 of the Code.
The publicly-offered security exception described above applies
if the equity interest is a security that is:
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1.
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freely transferable (determined based on the relevant facts and circumstances);
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2.
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part of a class of securities that is widely held (meaning that the class of securities is owned by 100 or more investors independent
of the issuer and of each other); and
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3.
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either (a) part of a class of securities registered under Section 12(b) or 12(g) of the Exchange Act or (b) sold to the plan
as part of a public offering pursuant to an effective registration statement under the Securities Act of 1933 and the class of
which such security is a part is registered under the Exchange Act within 120 days (or such later time as may be allowed by the
SEC) after the end of the fiscal year of the issuer in which the offering of such security occurred.
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The plan asset regulations under ERISA state that the determination
of whether a security is freely transferable is to be made based on all the relevant facts and circumstances. In the case of a
security that is part of an offering in which the minimum investment is $10,000 or less, the following requirements, alone or in
combination, ordinarily will not affect a finding that the security is freely transferable: (1) a requirement that no transfer
or assignment of the security or rights relating to the security be made that would violate any federal or state law, (2) a requirement
that no transfer or assignment be made without advance written notice given to the entity that issued the security, and (3) any
restriction on the substitution of assignee as a shareholder of a partnership, including a general partner consent requirement,
provided that the economic benefits of ownership of the assignor may be transferred or assigned without regard to such restriction
or consent (other than compliance with any of the foregoing restrictions).
The Sponsor believes that the conditions described above are
satisfied with respect to the shares. The Sponsor believes that the shares therefore constitute publicly-offered securities, and
the underlying assets of the Fund are not considered to constitute plan assets of any plan that purchases shares.
Prohibited Transactions
ERISA and the Code generally prohibit certain transactions involving
the plan and persons who have certain specified relationships to the plan.
In general, shares may not be purchased with the assets of a
plan if the Sponsor, the clearing brokers, the trading advisors (if any), or any of their affiliates, agents or employees either:
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exercise any discretionary authority or discretionary control with respect to management of the plan;
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exercise any authority or control with respect to management or disposition of the assets of the plan;
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render investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property
of the plan;
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have any authority or responsibility to render investment advice with respect to any monies or other property of the plan;
or
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have any discretionary authority or discretionary responsibility in the administration of the plan.
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Also, a prohibited transaction may occur under ERISA or the
Code when circumstances indicate that (1) the investment in a share is made or retained for the purpose of avoiding application
of the fiduciary standards of ERISA, (2) the investment in a share constitutes an arrangement under which the Fund is expected
to engage in transactions that would otherwise be prohibited if entered into directly by the plan purchasing the share, (3) the
investing plan, by itself, has the authority or influence to cause the Fund to engage in such transactions, or (4) a person who
is prohibited from transacting with the investing plan may, but only with the aid of certain of its affiliates and the investing
plan, cause the Fund to engage in such transactions with such person.
Special IRA Rules
IRAs are not subject to ERISA’ s fiduciary standards,
but are subject to their own rules, including the prohibited transaction rules of Section 4975 of the Code, which generally mirror
ERISA’s prohibited transaction rules. For example, IRAs are subject to special custody rules and must maintain a qualifying
IRA custodial arrangement separate and distinct from the Fund and its custodial arrangement. Otherwise, if a separate qualifying
custodial arrangement is not maintained, an investment in the shares will be treated as a distribution from the IRA. Second, IRAs
are prohibited from investing in certain commingled investments, and the Sponsor makes no representation regarding whether an investment
in shares is an inappropriate commingled investment for an IRA. Third, in applying the prohibited transaction provisions of Section
4975 of the Code, in addition to the rules summarized above, the individual for whose benefit the IRA is maintained is also treated
as the creator of the IRA. For example, if the owner or beneficiary of an IRA enters into any transaction, arrangement, or agreement
involving the assets of his or her IRA to benefit the IRA owner or beneficiary (or his or her relatives or business affiliates)
personally, or with the understanding that such benefit will occur, directly or indirectly, such transaction could give rise to
a prohibited transaction that is not exempted by any available exemption. Moreover, in the case of an IRA, the consequences of
a non-exempt prohibited transaction are that the IRA’s assets will be treated as if they were distributed, causing immediate
taxation of the assets (including any early distribution penalty tax applicable under Section 72 of the Code), in addition to any
other fines or penalties that may apply.
Exempt Plans
Certain employee benefit plans may be governmental plans or
church plans. Governmental plans and church plans are generally not subject to ERISA, nor do the above-described prohibited transaction
provisions described above apply to them. These plans are, however, subject to prohibitions against certain related-party transactions
under Section 503 of the Code, which operate similar to the prohibited transaction rules described above. In addition, the fiduciary
of any governmental or church plan must consider any applicable state or local laws and any restrictions and duties of common law
imposed upon the plan.
No view is expressed as to whether an investment in the Fund
(and any continued investment in the Fund), or the operation and administration of the Fund, is appropriate or permissible for
any governmental plan or church plan under Code Section 503, or under any state, county, local or other law relating to that type
of plan.
Allowing an investment in the Fund is not to be construed
as a representation by the Fund, the Sponsor, any trading advisor, any clearing broker, the Distributor or legal counsel or other
advisors to such parties or any other party that this investment meets some or all of the relevant legal requirements with respect
to investments by any particular plan or that this investment is appropriate for any such particular plan. The person with investment
discretion should consult with the plan’s attorney and financial advisors as to the propriety of an investment in the Fund
in light of the circumstances of the particular plan, current tax law and ERISA.
Transfer of Shares
Transfers of Shares Only Through DTC
. The shares
are only transferable through the book-entry system of DTC. Shareholders who are not DTC Participants may transfer their shares
through DTC by instructing the DTC Participant holding their shares (or by instructing the Indirect Participant or other entity
through which their shares are held) to transfer the shares. Transfers are made in accordance with standard securities industry
practice.
Transfers of interests in shares with DTC are made in accordance
with the usual rules and operating procedures of DTC and the nature of the transfer. DTC has established procedures to facilitate
transfers among the participants and/or accountholders of DTC. Because DTC can only act on behalf of DTC Participants, who in turn
act on behalf of Indirect Participants, the ability of a person or entity having an interest in a global certificate to pledge
such interest to persons or entities that do not participate in DTC, or otherwise take actions in respect of such interest, may
be affected by the lack of a certificate or other definitive document representing such interest.
DTC has advised us that it will take any action permitted to
be taken by a shareholder (including, without limitation, the presentation of a global certificate for exchange) only at the direction
of one or more DTC Participants in whose account with DTC interests in global certificates are credited and only in respect of
such portion of the aggregate principal amount of the global certificate as to which such DTC Participant or Participants has or
have given such direction.
Calculating NAV
The Fund’s NAV is calculated by:
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Taking the current market value of its total assets;
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Subtracting any liabilities; and
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Dividing that total by the total number of outstanding
shares.
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The Administrator calculates the NAV of the Fund once each NYSE
Arca trading day. The NAV for a particular trading day is released after 4:00 p.m. New York time. Trading during the core trading
session on the NYSE Arca typically closes at 4:00 p.m. New York time. The Administrator uses the CME closing price (determined
at the earlier of the close of the CME) for the contracts traded on the CME, but calculates or determines the value of all other
Fund investments using market quotations, if available, or other information customarily used to determine the fair value of such
investments as of the earlier of the close of the NYSE Arca or 4:00 p.m. New York time, in accordance with the current Administrative
Agency Agreement among U.S. Bancorp Fund Services, the Fund and the Sponsor. “Other information” customarily used in
determining fair value includes information consisting of market data in the relevant market supplied by one or more third parties
including, without limitation, relevant rates, prices, yields, yield curves, volatilities, spreads, correlations or other market
data in the relevant market; or information of the types described above from internal sources if that information is of the same
type used by the Fund in the regular course of its business for the valuation of similar transactions. The information may include
costs of funding, to the extent costs of funding are not and would not be a component of the other information being utilized.
Third parties supplying quotations or market data may include, without limitation, dealers in the relevant markets, end-users of
the relevant product, information vendors, brokers and other sources of market information.
In addition, in order to provide updated information relating
to the Fund for use by investors and market professionals, the NYSE Arca calculates and disseminates throughout the core trading
session on each trading day an updated indicative fund value. The indicative fund value is calculated by using the prior day’s
closing NAV per share of the Fund as a base and updating that value throughout the trading day to reflect changes in the most recently
reported trade price for the futures and options held by the Fund
traded on the CME. The indicative fund value share basis disseminated
during NYSE Arca core trading session hours should not be viewed as an actual real time update of the NAV, because the NAV is calculated
only once at the end of each trading day based upon the relevant end of day values of the Fund’s investments.
The indicative fund value is disseminated on a per share basis
every 15 seconds during regular NYSE Arca core trading session hours of 9:30 a.m. New York time to 4:00 p.m. New York time. The
normal trading hours of the CME are 10:00 a.m. New York time to 2:30 p.m. New York time. This means that there is a gap in time
at the beginning and the end of each day during which the Fund’s shares are traded on the NYSE Arca, but real-time CME trading
prices for contracts traded on the CME are not available. During such gaps in time the indicative fund value will be calculated
based on the end of day price of such contracts from the CME’s immediately preceding trading session. In addition, other
investments and U.S. Treasuries held by the Fund will be valued by the Administrator, using rates and points received from client-approved
third party vendors (such as Reuters and WM Company) and advisor quotes. These investments will not be included in the indicative
fund value.
The NYSE Arca disseminates the indicative fund value through
the facilities of CTA/CQ High Speed Lines. In addition, the indicative fund value is published on the NYSE Arca’s website
and is available through on-line information services such as Bloomberg and Reuters.
Dissemination of the indicative fund value provides additional
information that is not otherwise available to the public and is useful to investors and market professionals in connection with
the trading of the Fund shares on the NYSE Arca. Investors and market professionals are able throughout the trading day to compare
the market price of the Fund and the indicative fund value. If the market price of the Fund shares diverges significantly from
the indicative fund value, market professionals will have an incentive to execute arbitrage trades. For example, if the Fund appears
to be trading at a discount compared to the indicative fund value, a market professional could buy the Fund shares on the NYSE
Arca and take the opposite position in Treasury Instruments. Such arbitrage trades can tighten the tracking between the market
price of the Fund and the indicative fund value and thus can be beneficial to all market participants.
Creation and Redemption of Shares
The Fund creates and redeems shares from time to time, but only
in one or more Creation Baskets or Redemption Baskets. The creation and redemption of baskets are only made in exchange for delivery
to the Fund or the distribution by the Fund of the amount of Treasuries and any cash represented by the baskets being created or
redeemed, the amount of which is based on the combined NAV of the number of shares included in the baskets being created or redeemed
determined as of 4:00 p.m. New York time on the day the order to create or redeem baskets is properly received.
Authorized Participants are the only persons that may place orders
to create and redeem baskets. Authorized Participants must be (1) registered broker-dealers or other securities market participants,
such as banks and other financial institutions, that are not required to register as broker-dealers to engage in securities transactions
described below, and (2) DTC Participants. To become an Authorized Participant, a person must enter into an Authorized Participant
Agreement with the Sponsor. The Authorized Participant Agreement provides the procedures for the creation and redemption of baskets
and for the delivery of the Treasuries and any cash required for such creation and redemptions. The Authorized Participant Agreement
and the related procedures attached thereto may be amended by the Fund, without the consent of any limited partner or shareholder
or Authorized Participant. Authorized Participant will pay a transaction fee of $500 to the Fund for each order they place to create
or redeem one or more baskets. Authorized Participant who make deposits with the Fund in exchange for baskets receive no fees, commissions
or other form of compensation or inducement of any kind from either the Fund or the Sponsor, and no such person will have any obligation
or responsibility to the Sponsor or the Fund to effect any sale or resale of shares.
Certain Authorized Participants are expected to be capable of
participating directly in the Treasury market and the related derivatives market. In some cases, Authorized Participants or their
affiliates may from time to time buy or sell Treasuries and related derivatives and may profit in these instances. The Sponsor
believes that the size and operation of the Treasury market make it unlikely that an Authorized Participant’s direct activities
in such markets will significantly affect the price of Treasuries, related derivatives or the price of the shares.
Each Authorized Participant is required to be registered as a
broker-dealer under the Exchange Act and is a member in good standing with FINRA, or exempt from being or otherwise not required
to be registered as a broker-dealer or a member of FINRA, and qualified to act as a broker or dealer in the states or other jurisdictions
where the nature of its business so requires. Certain Authorized Participants may also be regulated under federal and state banking
laws and regulations. Each Authorized Participant has its own set of rules and procedures, internal controls and information barriers
as it determines is appropriate in light of its own regulatory regime.
Under the Authorized Participant Agreement, the Sponsor has agreed
to indemnify the Authorized Participants against certain liabilities, including liabilities under the 1933 Act, and to contribute
to the payments the Authorized Participants may be required to make in respect of those liabilities.
The following description of the procedures for the creation
and redemption of baskets is only a summary and an investor should refer to the relevant provisions of the Trust Agreement and
the form of Authorized Participant Agreement for more detail, each of which is attached as an exhibit to the registration statement
of which this prospectus is a part. See “Where You Can Find More Information” for information about where you can obtain
the registration statement.
Creation Procedures
On any business day, an Authorized Participant may place an order
with the Distributor to create one or more baskets. For purposes of processing purchase and redemption orders, a “business
day” means any day other than a day when any of the NYSE Arca, the CME or the New York Stock Exchange is closed for regular
trading. Purchase orders must be placed by 12:00 p.m. New York time or the close of regular trading on the NYSE Arca, whichever
is earlier. The day on which the Distributor receives a valid purchase order is referred to as the purchase order date.
By placing a purchase order, an Authorized Participant agrees
to deposit U.S. Treasuries, cash or a combination of U.S. Treasuries and cash, as described below. Prior to the delivery of baskets
for a purchase order, the Authorized Participant must also have wired to the Custodian the non-refundable transaction fee due for
the purchase order.
The manner by which creations are made is dictated by the terms
of the Authorized Participant Agreement. By placing a purchase order, an Authorized Participant agrees to deposit U.S. Treasuries,
cash, or a combination of U.S. Treasuries and cash with the Custodian of the fund. If an Authorized Participant fails to so deposit,
the order shall be cancelled.
Determination of Required Deposits
The total deposit required to create each basket (“Creation
Basket Deposit”) is the amount of U.S. Treasuries and/or cash that is in the same proportion to the total assets of the Fund
(net of estimated accrued but unpaid fees, expenses and other liabilities) on the purchase order date as the number of shares to
be created under the purchase order is in proportion to the total number of shares outstanding on the purchase order dates. The
Sponsor determines, directly in its sole discretion or in consultation with the Administrator, the requirements for U.S. Treasuries
and the amount of cash, including the maximum permitted remaining maturity of a Treasury and proportions of each Treasury and cash
that may be included in deposits to create baskets. The Distributor will publish such requirements at the beginning of each business
day. The amount of cash deposit required is the difference between the aggregate market
value of the U.S. Treasuries required to be included in a Creation
Basket Deposit as of 4:00 p.m. New York time on the date the order to purchase is properly received and the total required deposit.
Delivery of Required Deposits
An Authorized Participant who places a purchase order is responsible
for transferring to the Fund’s account with the Custodian the required amount of U.S. Treasuries and cash by the end of the
third business day following the purchase order date. Upon receipt of the deposit amount, the Administrator directs DTC to credit
the number of baskets ordered to the Authorized Participant’s DTC account on the third business day following the purchase
order date. The expense and risk of delivery and ownership of U.S. Treasuries until such U.S. Treasuries have been received by
the Custodian on behalf of the Fund shall be borne solely by the Authorized Participant.
Because orders to purchase baskets must be placed by 12:00 p.m.,
New York time, but the total payment required to create a basket during the continuous offering period will not be determined until
after 4:00 p.m., New York time, on the date the purchase order is received, Authorized Participants will not know the total amount
of the payment required to create a basket at the time they submit an irrevocable purchase order for the basket. The Fund’s
NAV and the total amount of the payment required to create a basket could rise or fall substantially between the time a purchase
order is submitted and the time the amount of the purchase price in respect thereof is determined.
Rejection of Purchase Orders
The Sponsor acting by itself or through the Distributor shall
have the absolute right no obligation to reject a purchase order or a Creation Basket Deposit if:
·
it
determines that the investment alternative available to the Fund at that time will not enable it to meet its investment objective;
·
it
determines that the purchase order or the Creation Basket Deposit is not in proper form;
·
it
believes that the purchase order or the Creation Basket Deposit would have adverse tax consequences to the Fund, the limited partners
or its shareholders;
·
the
acceptance or receipt of the Creation Basket Deposit would, in the opinion of counsel to the Sponsor, be unlawful; or
·
circumstances
outside the control of the Sponsor, Distributor or Custodian make it, for all practical purposes, not feasible to process creations
of baskets.
None of the Sponsor, Distributor or Custodian will be liable
for the rejection of any purchase order or Creation Basket Deposit.
Redemption Procedures
The procedures by which
an Authorized Participant can redeem one or more baskets mirror the procedures for the creation of baskets. On any business day,
an Authorized Participant may place an order with the Distributor to redeem one or more baskets. Redemption orders must be placed
by 12:00 p.m. New York time or the close of regular trading on the NYSE Arca, whichever is earlier. A redemption order so received
will be effective on the date it is received in satisfactory form by the Distributor. The redemption procedures allow Authorized
Participants to redeem baskets and do not entitle an individual shareholder to redeem any shares in an amount less than a Redemption
Basket, or to redeem baskets other than through an Authorized Participant.
By placing a redemption order, an Authorized Participant agrees
to deliver the baskets to be redeemed through DTC’s book-entry system to the Fund, as described below. Prior to the delivery
of the redemption distribution for a redemption order, the Authorized Participant must also have wired to the Fund’s account
at the Custodian the non-refundable transaction fee due for the redemption order.
The manner by which redemptions are made is dictated by the
terms of the Authorized Participant Agreement. By placing a redemption order, an Authorized Participant agrees to (1) deliver the Redemption
Basket to be redeemed through DTC’s book-entry system to the fund’s account with the
Custodian not later than 3:00 p.m. New York time on the third
business day following the effective date of the redemption order (“Redemption Distribution Date”), and (2) if required
by the Sponsor in its sole discretion, enter into or arrange for a block trade, an exchange for swap, or any other transaction
(through itself or a designated acceptable broker) with the fund for the sale of a number and type of futures contracts at the
closing settlement price for such contracts on the Redemption Order Date. If an Authorized Participant fails to consummate (1) and
(2) above, the order shall be cancelled. The number and type of contracts specified shall be determined by the Sponsor, in its
sole discretion, to meet the Fund’s investment objective and shall be sold as a result of the Authorized Participant’s
sale of shares.
Determination of Redemption Distribution
The redemption distribution from the Fund consists of a transfer
to the redeeming Authorized Participant of an amount of U.S. Treasuries and/or cash that is in the same proportion to the total assets
of the Fund (net of estimated accrued but unpaid fees, expenses and other liabilities) on the date the order to redeem is properly
received as the number of shares to be redeemed under the redemption order is in proportion to the total number of shares outstanding
on the date the order is received. The Sponsor, directly or in consultation with the Administrator, determines the requirements
for U.S. Treasuries and the amounts of cash, including the maximum permitted remaining maturity of a Treasury, and the proportions
of U.S. Treasuries and cash that may be included in distributions to redeem baskets. The Distributor will publish an estimate of
the redemption distribution per basket as of the beginning of each business day.
Delivery of Redemption Distribution
The redemption distribution due from the Fund will be delivered
to the Authorized Participant by 3:00 p.m. New York time on the third business day following the redemption order date if, by 3:00
p.m. New York time on such third business day, the Fund’s DTC account has been credited with the baskets to be redeemed.
If the Fund’s DTC account has not been credited with all of the baskets to be redeemed by such time, the redemption distribution
will be delivered to the extent of whole baskets received. Any remainder of the redemption distribution will be delivered on the
next business day to the extent of remaining whole baskets received if the Fund receives the fee applicable to the extension of
the redemption distribution date which the Sponsor may, from time to time, determine and the remaining baskets to be redeemed are
credited to the Fund’s DTC account by 3:00 p.m. New York time on such next business day. Any further outstanding amount of
the redemption order shall be cancelled. Pursuant to information from the Sponsor, the Custodian will also be authorized to deliver
the redemption distribution notwithstanding that the baskets to be redeemed are not credited to the Fund’s DTC account by
3:00 p.m. New York time on the third business day following the redemption order date if the Authorized Participant has collateralized
its obligation to deliver the baskets through DTC’s book entry-system on such terms as the Sponsor may from time to time
determine.
Suspension or Rejection of Redemption Orders
The Sponsor may, in its discretion, suspend the right of redemption,
or postpone the redemption settlement date, (1) for any period during which the NYSE Arca or the CME is closed other than customary
weekend or holiday closings, or trading on the NYSE Arca or the CME is suspended or restricted, (2) for any period during which
an emergency exists as a result of which delivery, disposal or evaluation of U.S. Treasuries is not reasonably practicable, or
(3) for such other period as the Sponsor determines to be necessary for the protection of the limited partners or shareholders.
For example, the Sponsor may determine that it is necessary to suspend redemptions to allow for the orderly liquidation of the
Fund’s assets at an appropriate value to fund a redemption. If the Sponsor has difficulty liquidating its positions, e.g.,
because of a market disruption event in the futures markets or a suspension of trading by the exchange where the futures contracts
are listed, it may be appropriate to suspend redemptions until such time as such circumstances are rectified. None of the Sponsor,
the Distributor, the Administrator, or the Custodian will be liable to any person or in any way for any loss or damages that may
result from any such suspension or postponement.
Redemption orders must be made in whole baskets. The Sponsor
will reject a redemption order if the order is not in proper form as described in the Authorized Participant Agreement or if the
fulfillment of the order, in the opinion of its counsel, might be unlawful. The Sponsor may also reject a redemption order if the
number of shares being redeemed would reduce the remaining outstanding shares to 100,000 shares (minimum NYSE Arca listing requirement) or less, unless
the Sponsor has reason to believe that the placer of the redemption order does in fact possess all the outstanding shares and can
deliver them.
Creation and Redemption Transaction Fee
To compensate the Fund for its expenses in connection with the
creation and redemption of baskets, an Authorized Participant is required to pay a transaction fee to the Fund of $500 per order
to create or redeem baskets, regardless of the number of baskets in such order. An order may include multiple baskets. The transaction
fee may be reduced, increased or otherwise changed by the Sponsor. The Sponsor shall notify DTC of any change in the transaction
fee and will not implement any increase in the fee for the redemption of baskets until 30 days after the date of the notice.
Tax Responsibility
Authorized Participants are responsible for any transfer tax,
sales or use tax, stamp tax, recording tax, value added tax or similar tax or governmental charge applicable to the creation or
redemption of baskets, regardless of whether or not such tax or charge is imposed directly on the Authorized Participant, and agree
to indemnify the Sponsor and the Fund if they are required by law to pay any such tax, together with any applicable penalties,
additions to tax and interest thereon.
Secondary Market Transactions
As noted, the Fund creates and redeems shares from time to time,
but only in one or more Creation Baskets or Redemption Baskets. The creation and redemption of baskets are only made in exchange
for delivery to the Fund or the distribution by the Fund of the amount of U.S. Treasuries and cash represented by the baskets being
created or redeemed, the amount of which will be based on the aggregate NAV of the number of shares included in the baskets being
created or redeemed determined on the day the order to create or redeem baskets is properly received.
As discussed above, Authorized Participants are the only persons
that may place orders to create and redeem baskets. Authorized Participants must be registered broker-dealers or other securities
market participants, such as banks and other financial institutions that are not required to register as broker-dealers to engage
in securities transactions. An Authorized Participant is under no obligation to create or redeem baskets, and an Authorized Participant
is under no obligation to offer to the public shares of any baskets it does create. Authorized Participants that do offer to the
public shares from the baskets they create will do so at per-share offering prices that are expected to reflect, among other factors,
the trading price of the shares on the NYSE Arca, the NAV of the Fund at the time the Authorized Participant purchased the Creation
Baskets and the NAV of the shares at the time of the offer of the shares to the public, the supply of and demand for shares at
the time of sale, and the liquidity of the futures contract market and the market for Treasury Investments. The prices of shares
offered by Authorized Participants are expected to fall between the Fund’s NAV and the trading price of the shares on the NYSE
Arca at the time of sale. Shares initially comprising the same basket but offered by Authorized Participants to the public at different
times may have different offering prices. An order for one or more baskets may be placed by an Authorized Participant on behalf of
multiple clients. Authorized Participants who make deposits with the Fund in exchange for baskets receive no fees, commissions or
other form of compensation or inducement of any kind from either the Fund or the Sponsor, and no such person has any obligation
or responsibility to the Sponsor or the Fund to effect any sale or resale of shares. Shares trade in the secondary market on the
NYSE Arca. Shares may trade in the secondary market at prices that are lower or higher relative to their NAV per share. The amount
of the discount or premium in the trading price relative to the NAV per share may be influenced by various factors, including the
number of
investors who seek to purchase or sell shares in the secondary
market and the liquidity of the futures contracts market and the market for Treasury Investments. While the shares trade during
the core trading session on the NYSE Arca until 4:00 p.m. New York time, liquidity in the market for Treasury Interests may be
reduced after the close of the CME at 2:30 p.m. New York time. As a result, during this time, trading spreads, and the resulting
premium or discount, on the shares may widen.
Use of Proceeds
The Sponsor causes the Fund to transfer the proceeds from the
sale of Creation Baskets to the Custodian or other custodian for trading activities. The Sponsor will invest the proceeds in U.S.
Treasuries with a maturity of 397 days or less, cash and/or cash equivalents and in futures contracts and options on futures contracts
on U.S. Treasuries. When the Fund purchases a futures contract, the Fund is required to deposit with the selling FCM on behalf
of the exchange a portion of the value of the contract or other interest as security to ensure payment for the obligation at maturity.
This deposit is known as initial margin. The Fund will receive or pay, depending on market movement, variation margin as the value
of the futures position increase or decreases. The Fund will pay premiums on the options contracts that it purchases. The Sponsor
will invest the assets that remain after margin and collateral are posted in U.S. Treasuries, cash and/or cash equivalents Subject
to these margin and collateral requirements, the Sponsor has sole authority to determine the percentage of assets that are:
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held on deposit with the FCM or other custodian,
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·
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used for other investments, and
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·
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held in bank accounts to pay current obligations and as reserves.
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Approximately 10% of the Fund’s assets are expected to
normally be committed as margin for futures contracts. However, from time to time, the percentage of assets committed as margin
may be substantially more, or less, than such range. Ongoing margin and collateral payments will generally be required for exchange-traded
contracts based on changes in their value. In light of the differing requirements for initial payments under exchange-traded contracts
and the fluctuating nature of ongoing margin and collateral payments, it is not possible to estimate what portion of the Fund’s
assets will be posted as margin or collateral at any given time. The U.S. Treasuries, cash and cash equivalents held by the Fund
will constitute reserves that will be available to meet ongoing margin and collateral requirements. All interest income will be
used for the Fund’s benefit. The Sponsor invests the balance of the Fund’s assets not invested in futures or options
on U.S. Treasuries with a maturity of 397 days or less, cash and cash equivalents and such funds are available as reserves for
changes in margin. All interest income is used for the Fund’s benefit.
An FCM, counterparty, government agency or commodity exchange
could increase margin or collateral requirements applicable to the Fund to hold trading positions at any time. Moreover, margin
is merely a security deposit and has no bearing on the profit or loss potential for any positions held.
The assets of the Fund posted as margin for futures contracts
will be held in segregation pursuant to the CEA and CFTC regulations.
Information You Should Know
This prospectus contains information you should consider when
making an investment decision about the shares. You may rely on the information contained in this prospectus. Neither the Fund
nor the Sponsor has authorized any person to provide you with different information and, if anyone provides you with different
or inconsistent information, you should not rely on it. This prospectus is not an offer to sell the shares in any jurisdiction
where the offer or sale of the shares is not permitted.
The information contained in this prospectus was obtained from
us and other sources believed by us to be reliable.
You should rely only on the information contained in this prospectus
or any applicable prospectus supplement or any information incorporated by reference to this prospectus. We have not authorized
anyone to provide you with any information that is different. If you receive any unauthorized information, you must not rely on
it. You should disregard anything we said in an earlier document that is inconsistent with what is included in this prospectus
or any applicable prospectus supplement or any information incorporated by reference to this prospectus. Where the context requires,
when we refer to this “prospectus,” we are referring to this prospectus and (if applicable) the relevant prospectus
supplement.
You should not assume that the information in this prospectus
or any applicable prospectus supplement is current as of any date other than the date on the front page of this prospectus or the
date on the front page of any applicable prospectus supplement.
We include cross references in this prospectus to captions in
these materials where you can find further related discussions. The table of contents tells you where to find these captions.
Summary of Promotional and Sales
Material
The Fund will utilize the following sales material:
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the Fund’s website, www.risingratefund.com;
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Press release dated the effective date of the Fund’s initial registration statement; and the Fund fact sheet available on the Fund’s website.
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Where You Can Find More Information
The Sponsor has filed on behalf of the Fund a registration statement
on Form S-1 with the SEC under the 1933 Act. This prospectus does not contain all of the information set forth in the registration
statement (including the exhibits to the registration statement), parts of which have been omitted in accordance with the rules
and regulations of the SEC. For further information about the Fund or the shares, please refer to the registration statement, which
you may inspect, without charge, at the public reference facilities of the SEC at the below address or online at www.sec.gov, or
obtain at prescribed rates from the public reference facilities of the SEC at the below address. Information about the Fund and
the shares can also be obtained from the Fund’s website, which is www.risingratefund.com. The Fund’s website address
is only provided here as a convenience to you and the information contained on or connected to the website is not part of this
prospectus or the registration statement of which this prospectus is part. The Fund is subject to the informational requirements
of the Exchange Act and the Sponsor and the Fund will each, on behalf of the Fund, file certain reports and other information with
the SEC. The Sponsor will file an updated prospectus annually for the Fund pursuant to the 1933 Act. The reports and other information
can be inspected at the public reference facilities of the SEC located at 100 F Street, NE, Washington, D.C. 20549 and online at
www.sec.gov. You may also obtain copies of such material from the public reference facilities of the SEC at 100 F Street, NE, Washington,
D.C. 20549, at prescribed rates. You may obtain more information concerning the operation of the public reference facilities of
the SEC by calling the SEC at 1-800-SEC-0330 or visiting online at www.sec.gov.
Statement Regarding Forward-Looking
Statements
This prospectus includes “forward-looking
statements” which generally relate to future events or future performance. In some cases, you can identify forward-looking
statements by terminology such as “may,” “will,” “should,” “expect,” “plan,”
“anticipate,” “believe,” “estimate,” “predict,” “potential” or the
negative of these terms or other comparable terminology. All statements (other than statements of historical fact) included in
this prospectus that address activities, events or developments that will or may occur in the future, including such matters as
movements in the futures markets and indexes that track such movements, the Fund’s operations, the Sponsor’s plans
and references to the Fund’s future success and other similar matters, are forward-looking statements. These statements are
only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses
the Sponsor has made based on its perception of historical trends, current conditions and expected future developments, as well
as other factors appropriate in the circumstances. Whether or not actual results and developments will conform to the Sponsor’s
expectations and predictions, however, is subject to a number of risks and uncertainties, including the special considerations
discussed in this prospectus, general economic, market and business conditions, changes in laws or regulations, including those
concerning taxes, made by governmental authorities or regulatory bodies, and other world economic and political developments. Consequently,
all the forward-looking statements made in this prospectus are qualified by these cautionary statements, and there can be no assurance
that actual results or developments the Sponsor anticipates will be realized or, even if substantially realized, that they will
result in the expected consequences to, or have the expected effects on, the Fund’s operations or the value of its shares.
Privacy Policy
The Fund and the Sponsor may collect or have access to certain
nonpublic personal information about current and former investors. Nonpublic personal information may include information received
from investors, such as an investor’s name, social security number and address, as well as information received from brokerage
firms about investor holdings and transactions in shares of the Fund.
The Fund and the Sponsor do not disclose nonpublic personal
information except as required by law or as described in their Privacy Policy. In general, the Fund and the Sponsor restrict access
to the nonpublic personal information they collect about investors to those of their and their affiliates’ employees and
service providers who need access to such information to provide products and services to investors.
The Fund and the Sponsor maintain safeguards that comply with
federal law to protect investors’ nonpublic personal information. These safeguards are reasonably designed to (1) ensure
the security and confidentiality of investors’ records and information, (2) protect against any anticipated threats or hazards
to the security or integrity of investors’ records and information, and (3) protect against unauthorized access to or use
of investors’ records or information that could result in substantial harm or inconvenience to any investor. Third-party
service providers with whom the Fund and the Sponsor share nonpublic personal information about investors must agree to follow
appropriate standards of security and confidentiality, which includes safeguarding such nonpublic personal information physically,
electronically and procedurally.
A copy of the Fund and the Sponsor’s
current Privacy Policy is provided to investors annually and is also available upon request.
Until [Date of 45 days after effectiveness],
all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver
a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
The Trust’s current SAI provides additional
detailed information about the Fund. The Trust has electronically filed the SAI with the SEC. It is incorporated by reference in
this Prospectus.
Additional information about the Fund’s
investments is or will be available in the Fund’s annual and semi-annual reports to shareholders. 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 last fiscal year, as applicable.
To make shareholder inquiries, for more detailed
information on the Fund, or to request the SAI or annual or semi-annual shareholder reports, as applicable, free of charge, please:
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Call:
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844-ETF-MGRS (844-383-6477)
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Monday through Friday
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8:00 a.m. – 8:00 p.m. (Eastern time)
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Write:
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ETF Managers Group Commodity Trust I
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c/o ETF Managers Capital LLC
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35 Beechwood Road
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Suite 2B
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Summit, NJ 07901
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Visit:
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www.risingratefund.com
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Information about the Funds (including the SAI)
can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C., and information on the operation of the
Public Reference Room may be obtained by calling the SEC at 1-202-551-8090. Reports and other information about the Funds are available
on the EDGAR Database on the SEC’s Internet site at www.sec.gov, and copies of this information may be obtained, after paying
a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public
Reference Section, Washington, D.C. 20549-1520.
No person is authorized to give any information
or to make any representations about any Fund and its shares not contained in this Prospectus and you should not rely on any other
information. Read and keep this Prospectus for future reference.
ETF Managers Group Commodity Trust I
35 Beechwood Road
Suite 2B
Summit, NJ 07901
The Fund is distributed by
Esposito Securities LLC
300 Crescent Court, Suite 650
Dallas, Texas 75201
SIT RISING RATE ETF
Statement of Additional Information
January 22, 2015.
This statement of additional information is the second part of a two part document. The first part is the Fund’s disclosure document. The disclosure document and this statement of additional information are bound together, and both parts contain important information. This statement of additional information should be read in conjunction with the disclosure document.
SIT RISING RATE ETF
TABLE OF CONTENTS
Form of Shares
Registered Form
. Shares are issued in registered
form in accordance with the Trust Agreement. US Bank has been appointed registrar and transfer agent for the purpose of transferring
shares in certificated form. US Bank keeps a record of all limited partners and holders of the shares in certificated form in the
registry (the “Register”). The Sponsor recognizes transfers of shares in certificated form only if done in accordance
with the Trust Agreement. The beneficial interests in such shares are held in book-entry form through participants and/or accountholders
in DTC.
Book Entry
. Individual certificates are not issued
for the shares. Instead, shares are represented by one or more global certificates, which are deposited by the Administrator with
DTC and registered in the name of Cede & Co., as nominee for DTC. The global certificates evidence all of the shares outstanding
at any time. Shareholders are limited to (1) participants in DTC such as banks, brokers, dealers and trust companies (“DTC
Participants”), (2) those who maintain, either directly or indirectly, a custodial relationship with a DTC Participant (“Indirect
Participants”), and (3) those banks, brokers, dealers, trust companies and others who hold interests in the shares through
DTC Participants or Indirect Participants, in each case who satisfy the requirements for transfers of shares. DTC Participants
acting on behalf of investors holding shares through such participants’ accounts in DTC will follow the delivery practice
applicable to securities eligible for DTC’s Same-Day Funds Settlement System. Shares are credited to DTC Participants’
securities accounts following confirmation of receipt of payment.
DTC
. DTC has advised us as follows. It is a limited
purpose trust company organized under the laws of the State of New York and is a member of the Federal Reserve System, a “clearing
corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant
to the provisions of Section 17A of the Exchange Act. DTC holds securities for DTC Participants and facilitates the clearance and
settlement of transactions between DTC Participants through electronic book-entry changes in accounts of DTC Participants.
What is the Plan of Distribution?
Buying and Selling Shares
Most investors buy and sell shares of the Fund in secondary
market transactions through brokers. Shares trade on the NYSE Arca under the ticker symbol “RISE” shares are bought
and sold throughout the trading day like other publicly traded securities. When buying or selling shares through a broker, most
investors incur customary brokerage commissions and charges. Investors are encouraged to review the terms of their brokerage account
for details on applicable charges.
Distributor and Authorized Participants
The offering of the Fund’s shares is a best efforts
offering. The Fund continuously offers Creation Baskets consisting of 25,000 shares through the Distributor, to Authorized
Participants. All Authorized Participants pay a $500 fee for each order to create or redeem one or more Creation Baskets or
Redemption Baskets. Sit Fixed Income Advisors II, LLC made an initial investment of $5,000,000 in exchange for 200,000 shares.
In accordance with applicable requirements of Regulation M under the Securities Exchange Act of 1934, no Creation Baskets will
be offered to Authorized Participants nor will units be listed for trading on the NYSE Arca until at least five business days (the
“Cooling-off Period”) has elapsed from the date of Sit’s purchase. It is expected that the proceeds from Sit’s
purchase will be invested at the end of the Cooling-off Period and that the initial per unit net asset value of the Fund will be
established as of 4:00 p.m. New York City time that day. Units offered in Creation Baskets on any subsequent day will be offered
at the per unit NAV calculated shortly after the close of the core trading session on the NYSE Arca. The shares purchased by Sit
will be redeemable by Sit on the same terms and conditions as those applicable to Authorized Participants.
The Distributor receives an annual fee for its distribution
services, which for the first year will equal 0.02% of assets under management (“AUM”) (declining if the Fund’s
AUM increases above $250,000,000), with a minimum of $15,000 payable annually. In no event will the aggregate compensation paid
to the Distributor and any affiliate of the Sponsor for distribution-related services in connection with the offering of shares
exceed ten percent (10%) of the gross proceeds of the offering. The activities of the Distributor may result in its being deemed
a participant in a distribution in a manner that would render it a statutory underwriter and subject it to the prospectus delivery
and liability provisions of the 1933 Act.
The offering of baskets is being made in compliance with Conduct
Rule 2310 of FINRA. Accordingly, Authorized Participants will not make any sales to any account over which they have discretionary
authority without the prior written approval of a purchaser of shares.
The per share price of shares offered in Creation Baskets on
any subsequent day will be the total NAV of the Fund calculated shortly after the close of the core trading session on the NYSE
Arca on that day divided by the number of issued and outstanding shares. An Authorized Participant is not required to sell any specific
number or dollar amount of shares.
By executing an Authorized Participant Agreement, an Authorized
Participant becomes part of the group of parties eligible to purchase baskets from, and put baskets for redemption to, the Fund.
An Authorized Participant is under no obligation to create or redeem baskets, and an Authorized Participant is under no obligation
to offer to the public shares of any baskets it does create.
As of January 12, 2015, the following are or are expected
to enter into Authorized Participant Agreements to purchase and sell shares of the Fund:
JP Morgan Securities LLC
Nomura Securities International, Inc.
KCG Holdings
Credit Suisse Securities (USA) LLC
Deutsche Bank Securities Inc.
Citigroup Global Markets Inc.
Because new shares can be created and issued on an ongoing basis,
at any point during the life of the Fund, a “distribution”, as such term is used in the 1933 Act, will be occurring.
Authorized Participants, other broker-dealers and other persons are cautioned that some of their activities may result in their being
deemed participants in a distribution in a manner that would render them statutory underwriters and subject them to the prospectus
delivery and liability provisions of the 1933 Act. For example, the Initial Authorized Participant was a statutory underwriter with
respect to its initial purchase of Creation Baskets. In addition, any purchaser who purchases shares with a view towards distribution
of such shares may be deemed to be a statutory underwriter. Authorized Participant will comply with the prospectus-delivery requirements
in connection with the sale of shares to customers. For example, an Authorized Participant, other broker-dealer firm or its client
will be deemed a statutory underwriter if it purchases a basket from the Fund, breaks the basket down into the constituent shares
and sells the shares to its 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 the shares. Authorized Participants
may also engage in secondary market transactions in shares that would not be deemed “underwriting”. For example, an
Authorized Participant may act in the capacity of a broker or dealer with respect to shares that were previously distributed by other
Authorized Participants. A determination of whether a particular market participant is an underwriter 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 would lead to designation as an underwriter
and subject them to the prospectus-delivery and liability provisions of the 1933 Act.
Dealers who are neither Authorized Participants nor “underwriters”
but are nonetheless participating in a distribution (as contrasted to ordinary secondary trading transactions), and thus dealing
with shares that are part of an “unsold allotment” within the meaning of Section 4(3)(C) of the 1933 Act, would be
unable to take advantage of the prospectus-delivery exemption provided by Section 4(3) of the 1933 Act.
The Sponsor may qualify the shares in states selected by the
Sponsor and intends that sales be made through broker-dealers who are members of FINRA. Investors intending to create or redeem
baskets through Authorized Participants in transactions not involving a broker-dealer registered in such investor’s state of
domicile or residence should consult their legal advisor regarding applicable broker-dealer or securities regulatory requirements
under the state securities laws prior to such creation or redemption.
While the Authorized Participants may be indemnified by the Sponsor,
they will not be entitled to receive a discount or commission from the Fund for their purchases of Creation Baskets.
APPENDIX A
Glossary of Defined Terms
In this prospectus, each of the following terms has the meanings
set forth after such term:
Administrator
: U.S. Bancorp Fund Services, LLC.
Authorized Participant
: One that purchases or redeems Creation
Baskets or Redemption Baskets, respectively, from or to the Fund.
Business Day
: Any day other than a day when any of the
NYSE Arca, the CME or the New York Stock Exchange is closed for regular trading.
CFTC
: Commodity Futures Trading Commission, an independent
agency with the mandate to regulate commodity futures and options in the United States.
Code
: Internal Revenue Code.
Commodity Pool
: An enterprise in which several individuals
contribute funds in order to trade futures or future options collectively.
Commodity Pool Operator or CPO
: Any person engaged in
a business which is of the nature of an investment trust, syndicate, or similar enterprise, and who, in connection therewith, solicits,
accepts, or receives from others, funds, securities, or property, either directly or through capital contributions, the sale of
stock or other forms of securities, or otherwise, for the purpose of trading in any commodity for future delivery or commodity
option on or subject to the rules of any contract market.
Creation Basket
: A block of 25,000 shares used by the
Fund to issue shares.
Custodian:
U.S. Bank, a national banking association
chartered by the Office of the Comptroller of the Currency.
Distributor
: Esposito Securities LLC.
Dodd-Frank Act
: The Dodd-Frank Wall Street Reform and
Consumer Protection Act that was signed into law July 21, 2010.
DTC
: The Depository Trust Company. DTC will act as the
securities depository for the shares.
DTC Participant
: An entity that has an account with DTC.
Exchange Act
: The Securities Exchange Act of 1934.
FINRA
: Financial Industry Regulatory Authority, formerly
the National Association of Securities Dealers.
Fund
: Sit Rising Rate ETF, a series of the Trust.
Indirect Participants
: Banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly.
Limited Liability Company (LLC)
: A type of business ownership
combining several features of corporation and partnership structures.
Margin
: The amount of equity required for an investment
in futures contracts.
NAV
: Net Asset Value of the Fund.
NFA
: National Futures Association.
1933 Act
: The Securities Act of 1933.
Option
: The right, but not the obligation, to buy or
sell a futures contract or forward contract at a specified price on or before a specified date.
Prudential Regulators
: the CFTC, the SEC and the Office
of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation,
the Farm Credit System and the Federal Housing Finance Agency, collectively.
Redemption Basket
: A block of 25,000 shares used by the
Fund to redeem shares.
SEC
: Securities and Exchange Commission.
Secondary Market
: The stock exchanges and the over-the-counter
market. Securities are first issued as a primary offering to the public. When the securities are traded from that first holder
to another, the issues trade in these secondary markets.
Shareholders:
Holder of Shares.
Shares:
Common shares representing fractional undivided
beneficial interests in the Fund.
Treasuries
: Obligations of the U.S. government.
Trust
: The ETF Managers Group Commodity Trust I, a Delaware
statutory trust.
Valuation Day
: Any day as of which the Fund calculates
its NAV.
You
: The owner of shares.
Report of Independent Registered Public Accounting Firm
To the Managing Owner of ETF Managers Group
Commodity Trust I
We have audited
the accompanying combined statement of assets and liabilities of
ETF Managers Group Commodity Trust I
and the individual statement of assets and liabilities of Sit Rising Rate ETF (collectively referred to as the “Trust”)
as of September 26, 2014. These statements of assets and liabilities are the responsibility of the Trust’s management. Our
responsibility is to express an opinion on these statements of assets and liabilities based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the statements of assets and liabilities are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statements of assets and liabilities,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall statements of
assets and liabilities presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion,
the statements of assets and liabilities referred to above present fairly, in all material respects, the combined financial position
of
ETF Managers Group Commodity Trust I
and the individual financial position of Sit Rising Rate
ETF as of September 26, 2014, in conformity with accounting principles generally accepted in the United States of America.
WithumSmith+Brown, P.C.
New York, NY
October 3, 2014
ETF Managers Group Commodity
Trust I
Combined Statement of Assets and Liabilities
September 26, 2014
|
Assets
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
1,000
|
|
|
Total Assets
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
Liabilities and Trust Capital
|
|
|
|
|
|
Liabilities
|
|
|
—
|
|
|
Trust Capital
|
|
$
|
1,000
|
|
|
Total Liabilities and Trust Capital
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
The Sit Rising Rate ETF
|
|
|
40
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
Sit Rising Rate ETF
Statement of Assets and
Liabilities
September 26, 2014
|
Assets
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
1,000
|
|
|
Total Assets
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
Liabilities and Fund Capital
|
|
|
|
|
|
Liabilities
|
|
|
—
|
|
|
Fund Capital
|
|
$
|
1,000
|
|
|
Total Liabilities and Fund Capital
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
Shares Outstanding
|
|
|
40
|
|
|
Net Asset Value Per Share
|
|
$
|
25.00
|
|
The accompanying notes are an integral part of these financial
statements.
ETF Managers Group Commodity Trust I
Sit Rising Rate ETF
Notes to Financial Statements
September 26, 2014
ETF Managers Group Commodity Trust I (the “Trust”)
is a Delaware statutory trust formed on July 23, 2014 as a series trust. The Trust currently consists of a sole series, the Sit
Rising Rate ETF (the “Fund”) that has not yet commenced operations. The Fund will issue common units of beneficial interest (the “Shares”)
which represent units of fractional undivided beneficial interest in and ownership of the Fund.
ETF Managers Capital LLC, a Delaware limited liability
corporation (the “Sponsor” and “Managing Owner”) will serve as the commodity pool operator of the Fund.
Sit Fixed Income Advisors II, LLC (“Sit”) has applied for registration as a “commodity trading advisor”
(“CTA”) with the Commodity Futures Trading Commission (“CFTC”) and will act as such for the Fund.
The only capital contributed as of September 26, 2014
is a capital contribution of $1,000 to the Fund by the Managing Owner whereby 40 shares were issued to the Managing Owner for a
capital contribution. From July 23, 2014 through September 26, 2014, the Fund and the Trust had no other activities other than
those related to their formations.
The Fund’s investment objective is to profit from
rising interest rates by maintaining a portfolio with a benchmark equal to a targeted negative 10 year average effective duration,
which is principally established and maintained using exchange traded futures and options on futures on 2, 5, and 10-year U.S.
Treasury securities. The Fund will not use futures contracts or options to obtain leveraged investment results. The Fund’s
assets will consist primarily of exchange traded futures and options on futures on U.S. Treasury securities, including deposits
with its Futures Commission Merchant held as collateral, U.S. Treasury securities, cash and other cash equivalents. U.S. Treasury
securities are debt obligations issued by the United States Department of the Treasury and include Treasury bills, Treasury notes,
and Treasury bonds (“U.S. Treasuries”).
The Fund will principally invest in exchange traded
futures and options on futures on 2, 5 and 10-year U.S. Treasuries. The Fund may also invest in over-the-counter swaps and other
derivative instruments involving U.S. Treasuries. These exchange traded futures, options on futures, and over-the-counter swaps
and other derivative instruments are collectively referred to as “Treasury Instruments”.
The Fund will invest in a portfolio of Treasury Instruments
with the intention of tracking a benchmark equal to a negative effective duration of approximately 10 years. The Fund will establish
and maintain a net short position on Treasury Instruments on 2, 5, and 10 year Treasuries. There will normally be substantially
more net short exposure than net long exposure. The mix of positions will depend on market conditions and will require periodic
rebalancing.
The Fund qualifies as an “emerging growth company”
as defined under the Jumpstart Our Business Startups Act of 2012.
The term of the Trust and the Fund is perpetual (unless
terminated in certain circumstances as described in the Prospectus.
|
|
(2)
|
Summary of Significant Accounting Policies
|
The following is a summary of significant accounting
policies followed by the Trust and Fund.
|
|
(a)
|
Basis of Presentation
|
Pursuant to rules and regulations of the U.S. Securities
and Exchange Commission (“SEC”), audited financial statements are presented for the Trust as a whole, as the SEC registrant
and the Fund individually. The liabilities and expenses incurred, contracted for or otherwise existing with respect to each series
of the Trust shall be enforceable only against the assets of each series of the Trust and not against the assets of the Trust generally
or any other series.
The preparation of the accompanying financial statements
in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
|
|
(c)
|
Cash and Cash Equivalents
|
The Trust and the Fund define cash and cash equivalents
to be highly liquid investments, with original maturities of three months or less.
The Fund will be classified as a partnership for United
States federal income tax purposes, and treated as a separate entity from any other series of the Trust for U.S. federal income
tax purposes. Accordingly, the Fund will not incur United States federal income taxes. No provision for federal, state, and local
income taxes has been made in the accompanying Statements of Assets and Liabilities, as shareholders are individually responsible
for their own income taxes, if any, on their allocable share of the Fund’s income, gain, loss, deductions and other items.
|
|
(e)
|
Related Party Transactions
|
The Fund will pay the Managing Owner a management fee,
monthly in arrears, in an amount equal to 0.50% per annum of the daily net asset value of the Fund (the “Management Fee”).
The Management Fee will be paid in consideration of the
Managing Owner’s advisory services to the Fund.
From the Management Fee, the Managing Owner will be responsible for paying any license fee relating to the index tracked by the
Fund.
The Managing Owner will contractually agree to waive
the Management Fee and/or reimburse the Fund for its Other Expenses (which term excludes brokerage fees, interest expense, and
extraordinary expenses) to cap Total Expenses at 1.50% per annum through February 1, 2016.
Expenses incurred in connection with organizing the
Fund and the offering of the Shares upon commencement of its trading operations will be paid by Exchange Traded Managers Group
LLC, the parent and sole owner of the Managing Owner. Expenses incurred in connection with the continuous offering of Shares of
the Fund after the commencement of its trading operations will be paid by the Fund.
|
|
(3)
|
The Offering of the Shares
|
The Shares of the Fund are offered on a continuous basis
pursuant to Rule 415 under the Securities Act of 1933. Shares may be purchase from the Fund only by certain eligible financial
institutions (the “Authorized Participants”), and only in one or more blocks of 25,000 Shares, each called a Basket,
although the initial Basket(s) will be purchased by an initial purchaser at $25 per Share ($625,000 per Basket). After the commencement
of investment operations, the Fund will issue Shares in Baskets only to Authorized Participants continuously as of 12:00 p.m. New
York time, on the third business day immediately following the date on which a valid order to create a Basket is accepted by the
Fund, at the net asset value of 25,000 Shares as of the closing time or NYSE Arca (“NYSE Arca”) on the date that a
valid order to create a Basket is accepted by the Fund. An Authorized Participant will be required to pay a transaction fee of
$500 per order to create or redeem one or more Baskets which will go to the Fund and will be recorded as other income.
|
|
(a)
|
Organization and Offering Expenses
|
Expenses incurred in connection with organizing the
Fund and expenses incurred up to the offering of its Shares upon commencement of its trading operations will be paid by Exchange
Traded Managers Group LLC, the parent and the sole owner of the Managing Owner.
Expenses incurred in connection with the continuous
offering of Shares of the Fund after the commencement of its trading operations will be paid by the Fund. These costs include registration
fees paid to regulatory agencies and all legal, accounting, printing and other expenses associated therewith. These costs will
be accounted for as a deferred charge and thereafter amortized to expense over twelve months on a straight-line basis or a shorter
period if warranted.
The Fund will pay the Managing Owner the Management
Fee as described in Note 2(e) above. The Management Fee will be paid in consideration of the Managing Owner’s advisory services.
From the Management Fee, the Managing Owner will be responsible for paying any license fee relating to the index tracked by the
Fund.
The Managing Owner will contractually agree to waive
the Management Fee and/or reimburse the Fund for its Other Expenses (which term excludes brokerage fees, interest expense, and
extraordinary expenses) to cap Total Expenses at 1.50% per annum through February 1, 2016.
|
|
(c)
|
Brokerage Commissions and Fees
|
The Fund will pay to its commodity broker all brokerage
commissions and fees charged in connection with its trading activities. The Sponsor does not expect brokerage commissions and fees
paid for execution and clearing services on behalf of the Fund to exceed 0.027% of the net asset value of the Fund in any year,
although the actual amount of brokerage commissions and fees in any year or any part of any year may be greater. For the period
July 23, 2014 through September 26, 2014 the Fund incurred no brokerage commissions or fees.
|
|
(d)
|
The Fund’s Fees and Other Expenses
|
The Fund will pay all of the routine offering, operational,
administrative and other ordinary expenses of the Fund, including, but not limited to Custody, Fund Accounting, Transfer Agent
and Distributor, legal and auditing fees and expenses, tax preparation expenses, filing fees, and printing, mailing and distribution
costs. Such routine expenses are not expected to exceed 1.00% of the net asset value of the Fund in any year, although the actual
amount of routine offering, operational, administrative and other ordinary expenses in any year or any part of any year may be
greater. For the period July 23, 2014 through September 26, 2014 the Fund incurred no routine offering, operational, administrative
and other ordinary expenses.
The Managing Owner will contractually agree to waive
the Management Fee and/or reimburse the Fund for its Other Expenses (which term excludes brokerage fees, interest expense, and
extraordinary expenses) to cap Total Expenses at 1.50% per annum through February 1, 2016.
|
|
(e)
|
Extraordinary Fees and Expenses
|
The Fund will pay all of its extraordinary fees and
expenses, if any. Extraordinary fees and expenses are fees and expenses which are non-recurring and unusual in nature, such as
legal claims and liabilities, litigation costs or indemnification or other unanticipated expenses. For the period July 23, 2014
through September 26, 2014 the Fund incurred no extraordinary fees or expenses.
On any business day, an Authorized Participant may place
an order with the Distributor to redeem one or more Baskets. Redemption orders must be placed by no later than 12:00 p.m. New York
time or the close of regular trading on the NYSE Arca, whichever is earlier. A Redemption order so received will be effective on
the date it is received in satisfactory form by the Distributor. Redemption orders are irrevocable. The redemption procedures allow
Authorized Participants to redeem Baskets. Individual Shareholders may not redeem directly from the Fund. Instead, individual Shareholders
may only redeem Shares in integral multiples of 25,000 and only through an Authorized Participant.
By placing a Redemption order, an Authorized Participant
agrees to deliver the Redemption Baskets to be redeemed through the Depository Trust Company’s (“DTC”) book entry
system to the Fund not later than 3 p.m. New York time on the third business day following the effective date of the Redemption
order. Prior to receipt of the redemption proceeds, an Authorized Participant’s DTC account will be charged the $500 transaction
fee due for the redemption order.
The redemption proceeds from the Fund will consist of
a transfer to the redeeming Authorized Participant of an amount of U.S. Treasuries and/or cash that is in the proportion to the
total assets of the Fund (net of accrued but unpaid fees, expenses and other liabilities) on the date the order to redeem is properly
received as the number of Shares to be redeemed under the redemption order is in proportion to the total number of Shares outstanding
on the date the order is received. The Managing Owner, directly or in consultation with the Administrator, determines the requirements
for U.S. Treasuries and the amounts of cash, including the maximum permitted remaining maturity of a Treasury, and the proportions
of U.S. Treasuries and cash that may be included in distributions to redeem Baskets.
The redemption distribution due from the Fund will be
delivered to the Authorized Participant by 3:00 p.m. New York time on the third business day following the redemption order date
if, by 3:00 p.m. New York time on such third business day, the Fund’s DTC account has been credited with the Baskets to be
redeemed. If the Fund’s DTC account has not been credited with all of the Baskets to be redeemed by such time, the Redemption
distribution will be delivered to the extent whole Baskets received. Any remainder of the Redemption distribution will be delivered
on the next business day to the extent of remaining whole Baskets received if the Fund receives the fee applicable to the extension
of the Redemption distribution date which the Sponsor may from time to time, determine and the remaining Baskets to be redeemed
are credited to the Fund’s DTC account by 3:00 p.m. New York time on such next business day. Any further outstanding amount
of the Redemption order shall be cancelled. Pursuant to information from the Managing Owner, the Custodian will also be authorized
to deliver the redemption distribution notwithstanding that the Baskets to be redeemed are not credited to the Fund’s DTC
account by 3:00 p.m. New York time on the third business day following the Redemption order date if the Authorized Participant
has collateralized its obligation to deliver the Baskets through DTC’s book-entry system on such terms as the Sponsor may
from time to time determine.
The Trust and the Fund have evaluated the need for disclosures
and/or adjustments resulting from subsequent events through the date the financial statements were issued. This evaluation did
not result in any subsequent events that necessitated disclosures and/or adjustments.
Report of Independent Registered Public Accounting
Firm
To the Board of Trustees of ETF Managers Capital
LLC
We have audited the accompanying statement of
financial condition of ETF Managers Capital LLC (the “Company”) as of September 26, 2014 and the related statements
of changes in member’s capital and cash flows for the period from June 12, 2014 (inception) to September 26, 2014. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (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 includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statement referred
to above present fairly, in all material respects, the financial position of ETF Managers Capital LLC as of September 26, 2014
and changes in its member’s capital and its cash flows for the period June 12, 2014 (inception) to September 26, 2014, in
conformity with accounting principles generally accepted in the United States of America.
WithumSmith+Brown, P.C.
New York, NY
October 3, 2014
ETF MANAGERS CAPITAL LLC
Statement of Financial Condition
September 26, 2014
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
Investment in Sit Rising Rate ETF
|
|
|
1,000
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
2,000
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBER’S CAPITAL
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
$
|
—
|
|
|
|
|
|
|
|
|
MEMBER’S CAPITAL:
|
|
|
2,000
|
|
|
|
|
|
|
|
|
Total Member’s Capital
|
|
|
2,000
|
|
|
|
|
|
|
|
|
Total Liabilities and Member’s Capital
|
|
$
|
2,000
|
|
The accompanying notes are an integral part of these financial
statements.
ETF MANAGERS CAPITAL LLC
Statement of Changes in Member’s Capital
Period from June 12, 2014 (inception) to
September 26, 2014
|
Member’s Capital, June 12, 2014 (inception)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
Capital contribution from ETF Managers Group LLC
|
|
|
2,000
|
|
|
|
|
|
|
|
|
Member’s Capital, September 26, 2014
|
|
$
|
2,000
|
|
The accompanying notes are an integral part of these financial
statements.
ETF MANAGERS CAPITAL LLC
Statement of Cash Flows
Period from June 12, 2014 (inception) to
September 26, 2014
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Contribution for investment in Sit Rising Rate ETF
|
|
$
|
(1,000
|
)
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
$
|
(1,000
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Capital contribution from ETF Managers Group LLC
|
|
$
|
2,000
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
2,000
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
1,000
|
|
|
|
|
|
|
|
|
Cash at June 12, 2014 (inception)
|
|
|
—
|
|
|
|
|
|
|
|
|
Cash at September 26, 2014
|
|
$
|
1,000
|
|
The accompanying notes are an integral part of these financial
statements.
ETF MANAGERS CAPITAL LLC
Notes to Financial Statements
September 26, 2014
|
|
(1)
|
Organization and Basis of Presentation
|
ETF Managers Capital LLC (the “Company”),
a Delaware limited liability company, was formed on June 12, 2014 and is a wholly-owned subsidiary of Exchange Traded Managers
Group LLC (“ETFMG”). The Company has applied for registration with the Commodity Futures Trading Commission as a commodity
pool operator (“CPO”) and has applied for membership with the National Futures Association (“NFA”). The
Company serves as the Sponsor and Managing Owner of ETF Managers Group Commodity Trust I (the “Trust”) a Delaware series
trust, of which the Sit Rising Rate ETF (the “Fund”) is currently the sole series of the Trust. Sit Fixed Income Advisors
II, LLC (“Sit”) has applied for registration as a “commodity trading advisor” (“CTA”) and will
act as such for the Fund.
|
|
(2)
|
Summary of Significant Accounting Policies
|
The accompanying financial statements have been prepared
in conformity with accounting principles generally accepted in the United States of America. As the Company does not have any revenues
or expenses during the period from June 12, 2014 (inception) to September 26, 2014, a statement of operations is not presented
herein.
The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and revenues and expenses and disclosure of contingent assets and liabilities
during the reporting period of the financial statements. Actual results could differ from those estimates.
|
|
(c)
|
Cash and cash equivalents
|
The Company defines cash and cash equivalents to be
highly liquid investments, with original maturities of three months or less.
As the Company does not have any revenues or expenses
during the period from June 12, 2014 (inception) to September 26, 2014 no provision for United States federal or state income taxes
has been made. The Company is a single member limited liability company.
|
|
(e)
|
Related Party Transactions
|
The Fund will pay the Company a management fee, monthly
in arrears, in an amount equal to 0.50% per annum of the daily net asset value of the Fund (the “Management Fee”).
The Management Fee will be paid in consideration of the Company’s advisory services to the Fund. From the Management Fee,
The Company will be responsible for paying any license fee relating to the index tracked by the Fund.
The Company will contractually agree to waive the
Management Fee and/or reimburse the Fund for its Other Expenses (which term excludes brokerage fees, interest expense, and extraordinary
expenses) to cap Total Expenses at 1.50% per annum through February 1, 2016.
Expenses incurred in connection with organizing the
Fund and the offering of the Shares upon commencement of its trading operations will be paid by ETFMG, the parent and sole owner
of the Company. Expenses incurred in connection with the continuous offering of Shares of the Fund after the commencement of its
trading operations will be paid by the Fund.
The Company has subscribed for 40 Shares or Units
of the Fund in exchange for a capital contribution of $1,000 to the Fund. Units are a separate class of units of beneficial interest
of the Fund that are issued to the Sponsor in exchange for its capital contribution to the Fund and represent units of fractional
undivided beneficial interest in and ownership of the Fund.
The Company evaluated the need for disclosures and/or
adjustments resulting from subsequent events through the date the financial statements were available to be issued. This evaluation
did not result in any subsequent events that necessitated disclosures and/or adjustments.
PART II
Information Not Required in the Prospectus
|
Item 13.
|
Other Expenses of Issuance and Distribution
|
Set forth below is an estimate (except
as indicated) of the amount of fees and expenses (other than underwriting commissions and discounts) payable by the registrant
in connection with the issuance and distribution of the units pursuant to the prospectus contained in this registration statement.
|
|
|
Amount
|
|
|
SEC registration fee (actual)
|
|
$
|
58,100
|
|
|
NYSE Arca Listing Fee (actual initial)
|
|
$
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auditor’s fees and expenses
|
|
$
|
70,000
|
|
|
Legal fees and expenses
|
|
$
|
25,000
|
|
|
Printing expenses
|
|
$
|
20,000
|
|
|
Miscellaneous expenses
|
|
$
|
15,000
|
|
|
Total
|
|
$
|
195,600
|
|
|
|
|
|
|
|
|
Item 14.
|
Indemnification of Directors and Officers
|
The Trust’s Declaration of Trust and
Trust Agreement (the “Trust Agreement”) provides that the Sponsor shall be indemnified by the Trust (or, by a Fund
of the Trust separately to the extent the matter in question relates to a single fund or disproportionately affects a Fund in relation
to other Funds) against any losses, judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by
it in connection with its activities for the Trust, or any Fund as applicable, provided that (i) the Sponsor was acting on behalf
of or performing services for the Trust, or such Fund as applicable, and has determined, in good faith, that such course of conduct
was in the best interests of the Trust, or such Fund as applicable, and such liability or loss was not the result of gross negligence,
willful misconduct, or a breach of the Trust Agreement on the part of the Sponsor and (ii) any such indemnification will only be
recoverable from the Trust estate or the applicable estate of such Fund. All rights to indemnification permitted by
the Trust Agreement and payment of associated expenses shall not be affected by the dissolution or other cessation to exist of
the Sponsor, or the withdrawal, adjudication of bankruptcy or insolvency of the Sponsor, or the filing of a voluntary or involuntary
petition in bankruptcy under Title 11 of the Bankruptcy Code by or against the Sponsor.
Notwithstanding the foregoing, the Sponsor
shall not be indemnified for any losses, liabilities or expenses arising from or out of an alleged violation of U.S. federal or
state securities laws unless (i) there has been a successful adjudication on the merits of each count involving alleged securities
law violations as to the particular indemnitee and the court approves the indemnification of such expenses (including, without
limitation, litigation costs), (ii) such claims
have been dismissed with prejudice on the merits by a court
of competent jurisdiction as to the particular indemnitee and the court approves the indemnification of such expenses (including,
without limitation, litigation costs) or (iii) a court of competent jurisdiction approves a settlement of the claims against a
particular indemnitee and finds that indemnification of the settlement and related costs should be made.
The Trust and the Funds shall not incur
the cost of that portion of any insurance which insures any party against any liability, the indemnification of which is prohibited
by the Trust Agreement.
Expenses incurred in defending a threatened
or pending civil, administrative or criminal action suit or proceeding against the Sponsor shall be paid by the Trust in advance
of the final disposition of such action, suit or proceeding, if (i) the legal action relates to the performance of duties or services
by the Sponsor on behalf of the Trust or any Fund as applicable; (ii) the legal action is initiated by a party other than the Trust
or any Fund as applicable; and (iii) the Sponsor undertakes to repay the advanced funds with interest to the Trust, or any Fund
as applicable, in cases in which it is not entitled to indemnification under the Trust Agreement.
For purposes of the indemnification provisions
of the Trust Agreement, the term “Sponsor” includes, in addition to the Sponsor, any other covered person performing
services on behalf of the Trust, or any Fund as applicable, and acting within the scope of the Sponsor’s authority as set
forth in the Trust Agreement.
In the event the Trust, or any Fund as applicable,
is made a party to any claim, dispute, demand or litigation or otherwise incurs any loss, liability, damage, cost or expense as
a result of or in connection with any Shareholder’s (or assignee’s) obligations or liabilities unrelated to the business
of the Trust, or any Fund as applicable, such Shareholder (or assignees cumulatively) shall indemnify, defend, hold harmless, and
reimburse the Trust, or such Fund as applicable, for all such loss, liability, damage, cost and expense incurred, including attorneys’
and accountants’ fees.
The payment of any amount pursuant to the
Trust Agreement shall take into account the allocation of liabilities and other amounts, as appropriate, among the Funds.
|
Item 15.
|
Recent Sales of Unregistered Securities
|
On September 26, 2014 the Sponsor made
a $1,000.00 capital contribution to the Trust and acquired forty (40) shares of the Fund in connection therewith. Such
shares were sold in a private offering exempt from registration under Section 4(2) of the Securities Act of 1933, as amended.
|
Item 16.
|
Exhibits and Financial Statement Schedules
|
(a)
Exhibits
|
|
3.1
|
Amended and Restated Declaration of Trust and Trust Agreement of the Registrant. +
|
|
|
3.2
|
Certificate of Trust of the Registrant.
1
|
|
|
|
|
|
|
5.1
|
Opinion of Reed Smith LLP relating to the legality of the Shares. +
|
|
|
|
|
|
|
8.1
|
Opinion of Reed Smith LLP with respect to federal income tax consequences. +
|
|
|
|
|
|
|
10.1
|
Form of Authorized Participant Agreement.
1
|
|
|
|
|
|
|
10.2
|
Form of Distribution Services Agreement.
1
|
|
|
|
|
|
|
10.3
|
Licensing and Services Agreement. +
|
|
|
|
|
|
|
10.4
|
Custody Agreement. +
|
|
|
|
|
|
|
10.5
|
Fund Administration Servicing Agreement. +
|
|
|
|
|
|
|
10.6
|
Fund Accounting Servicing Agreement. +
|
|
|
|
|
|
|
10.7
|
Transfer Agent Servicing Agreement +
|
|
|
|
|
|
|
23.1
|
Consent of Reed Smith LLP. *
|
|
|
|
|
|
|
23.2
|
Consent of Independent Registered Public Accounting Firm. +
|
|
|
+
|
Filed herewith
|
|
|
|
|
|
|
1
|
Previously filed as like-numbered exhibit to Pre-Effective Amendment No. 1 to Registration Statement No. 333-199190,
filed on November 26, 2014.
|
|
|
|
|
|
|
*
|
Included in Exhibit 5.1.
|
(b)
Financial Statement Schedules
The financial statement schedules are either
not applicable or the required information is included in the financial statements and footnotes related thereto.
(a) Each undersigned registrant hereby
undertakes:
(1) To file, during any period in
which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required
by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus
any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would
not exceed that which was registered)
and any deviation from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth
in the “Calculation of Registration Fee” table in the effective registration statement.
(iii) To include any material information
with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining
any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
(3) To remove from registration by
means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining
liability under the Securities Act of 1933 to any purchaser:
(i) If the registrant is subject to
Rule 430C (§230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance
on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as
of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining
liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The
undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or
sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser
and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or
prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424
of this chapter);
(ii) Any free writing prospectus relating
to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free
writing prospectus relating to the offering containing material information about the undersigned registrant or its securities
provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that
is an offer in the offering made by the undersigned registrant to the purchaser.
(b) Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunder
duly authorized, in the city of Summit, state of New Jersey, on January 12, 2015.
|
|
By: ETF Managers Capital LLC, Sponsor
|
|
|
|
|
|
|
By:
|
/s/ Samuel R. Masucci
III
|
|
|
|
Samuel R. Masucci III
Principal Executive Officer
|
|
|
|
|
|
|
By:
|
/s/ John A. Flanagan
|
|
|
|
John A. Flanagan
Principal Financial Officer
Principal Accounting Officer
|
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
The document may be executed by signatories hereto on any number of counterparts, all of which shall constitute one and the same
instrument.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Samuel R. Masucci
III
|
|
|
|
|
|
Samuel R. Masucci III
|
|
Principal Executive Officer
|
|
January 12, 2015
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ John A. Flanagan
|
|
|
|
|
|
John A. Flanagan
|
|
Principal Financial Officer
Principal Accounting Officer
|
|
January 12, 2015
|
Exhibit 3.1
AMENDED AND RESTATED DECLARATION OF TRUST
AND TRUST AGREEMENT
OF
ETF MANAGERS GROUP COMMODITY TRUST I
Dated as of December 11, 2014
By and Between
ETF Managers Capital LLC
as Sponsor
and
WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee
TABLE OF CONTENTS
Article I DEFINITIONS
Section 1.1 Definitions
Article II GENERAL PROVISIONS
Section 2.1 Name
Section 2.2 Delaware Trustee; Business Offices
Section 2.3 Declaration of Trust
Section 2.4 Purposes and Powers
Section 2.5 Tax Matters
Section 2.6 General Liability of Unitholders
Section 2.7 Legal Title
Section 2.8 Series Trust
Section 2.9 Derivative Actions
Article III THE TRUSTEE
Section 3.1 Term; Resignation
Section 3.2 Powers
Section 3.3 Compensation and Expenses of the Trustee
Section 3.4 Indemnification
Section 3.5 Successor Trustee
Section 3.6 Liability of Trustee
Section 3.7 Reliance; Advice of Counsel
Section 3.8 Payments to the Trustee
Article IV UNITS; DEPOSITS
Section 4.1 General
Section 4.2 Establishment of Series, or Funds, of the
Trust
Section 4.3 Establishment of Classes and Sub-Classes
Section 4.4 Offer of Units
Section 4.5 Procedures for Creation and
Issuance of Creation Baskets
Section 4.6 Book-Entry-Only System, Global
Certificates
Section 4.7 Assets
Section 4.8 Liabilities of Funds
Section 4.9 Voting Rights
Section 4.10 Equality
Section 4.11 Record Dates
Article V THE SPONSOR
Section 5.1 Management of the Trust
Section 5.2 Authority of Sponsor
Section 5.3 Obligations of the Sponsor
Section 5.4 General Prohibitions
Section 5.5 Liability of Covered Persons
Section 5.6 Fiduciary Duty
Section 5.7 Indemnification of the Sponsor
Section 5.8 Expenses and Limitations Thereon
Section 5.9 Compensation to the Sponsor
Section 5.10 Other Business of Unitholders
Section 5.11 Merger, Consolidation, Incorporation
Section 5.12 Withdrawal of the Sponsor
Section 5.13 Authorization of Registration Statements
Section 5.14 Litigation
Article VI TRANSFERS OF UNITS
Section 6.1 Transfer of Units
Section 6.2 Transfer of Sponsor’s Units
Article VII CAPITAL ACCOUNTS, DISTRIBUTIONS AND ALLOCATIONS
Section 7.1 Capital Accounts
Section 7.2 Allocations for Capital Account Purposes
Section 7.3 Allocations for Tax Purposes
Section 7.4 Tax Conventions
Section 7.5 No Interest on Capital Account
Section 7.6 Valuation
Section 7.7 Distributions
Article VIII REDEMPTIONS
Section 8.1 Redemption of Redemption Baskets
Section 8.2 Other Redemption Procedures
Article IX UNITHOLDERS
Section 9.1 No Management or Control; Limited Liability;
Exercise of Rights through DTC
Section 9.2 Rights and Duties
Section 9.3 Limitation on Liability
Article X BOOKS OF ACCOUNT AND REPORTS
Section 10.1 Books of Account
Section 10.2 Reports to Unitholders
Section 10.3 Calculation of Net Asset Value
Section 10.4 Maintenance of Records
Article XI FISCAL YEAR
Section 11.1 Fiscal Year
Article XII AMENDMENT OF TRUST AGREEMENT; MEETINGS
Section 12.1 Amendments to the Trust Agreement
Section 12.2 Meetings of the Unitholders
Section 12.3 Action Without a Meeting
Article XIII TERM
Section 13.1 Term
Article XIV TERMINATION
Section 14.1 Events Requiring Dissolution of the Trust
or any Fund
Section 14.2 Distributions on Dissolution
Section 14.3 Termination; Certificate of Cancellation
Article XV POWER OF ATTORNEY
Section 15.1 Power of Attorney Executed Concurrently
Section 15.2 Effect of Power of Attorney
Section 15.3 Limitation on Power of Attorney
Article XVI MISCELLANEOUS
Section 16.1 Governing Law
Section 16.2 Provisions In Conflict With Law or Regulations
Section 16.3 Construction
Section 16.4 Notices
Section 16.5 Counterparts
Section 16.6 Binding Nature of Trust Agreement
Section 16.7 No Legal Title to Trust Estate
Section 16.8 Creditors
Section 16.9 Integration
Section 16.10 Goodwill; Use of Name
Exhibit A
Form of Global Certificate
Exhibit B
Form of Instrument Establishing Series or Class
Exhibit C
Series Funds
ETF MANAGERS GROUP COMMODITY TRUST I
AMENDED AND RESTATED DECLARATION OF TRUST
AND TRUST AGREEMENT
This AMENDED AND RESTATED DECLARATION OF TRUST AND TRUST AGREEMENT
of ETF MANAGERS GROUP COMMODITY TRUST I (the “Trust”) is made and entered into as of December 11, 2014, by and between
ETF Managers Capital LLC, a Delaware limited liability company, as Sponsor, and Wilmington Trust, National Association, a Delaware
national banking association, as Delaware trustee.
WHEREAS, the Sponsor and the Trustee desire to enter into an
Agreement which states those terms and conditions upon which the Trust shall be administered, as hereinafter provided; and
WHEREAS, the Sponsor and the Trustee desire to amend and restate
the Agreement to amend, clarify, and revise certain terms and conditions upon which the Trust is administered prior to launch of
the initial fund;
NOW, THEREFORE, in consideration of the agreements and obligations
set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each
party hereby agrees as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Trust Agreement, the
following terms shall have the following meanings unless the context otherwise requires:
“Adjusted Property” means any property the book
value of which has been adjusted as provided by Section 7.1(d).
“Administrator” means any Person from time to time
engaged to provide administrative services to the Trust pursuant to authority delegated by the Sponsor.
“Affiliate” means, when used with reference to a
specified Person, (i) any Person who directly or indirectly through one or more intermediaries controls or is controlled by or
is under common control with the specified Person or (ii) any Person that is an officer of, partner in, or trustee of, or serves
in a similar capacity with respect to, the specified Person or of which the specified Person is an officer, partner or trustee,
or with respect to which the specified Person serves in a similar capacity.
“Authorized Purchaser” means a Person that is a
DTC Participant (as defined in Section 4.6(c)) and has entered into an Authorized Purchaser Agreement that, at the relevant time,
is in full force and effect.
“Authorized Purchaser Agreement” means an agreement
between the Sponsor, the Trust and an Authorized Purchaser, as the same may be amended or supplemented from time to time in accordance
with its terms.
“Basket” means a Creation Basket or a Redemption
Basket, as the context may require.
“Book-Tax Disparity” means, with respect to any
property held by a Fund, as of any date of determination, the difference between the book value of such property (as initially
determined under Section 7.6 in the case of contributed property, and as adjusted from time to time in accordance with Section
7.1(d)) and the adjusted basis thereof for United States federal income tax purposes, as of such date of determination.
“Business Day” means any day other than a day on
which either the Exchange or the applicable Fund’s Futures Exchange is closed for regular trading.
“Capital Account” shall have the meaning assigned
to such term in Section 7.1(a).
“Capital Contribution” means, with respect to any
Unitholder of a Fund, the amount of money and the fair market value of any property (other than money) contributed to the Fund
by such Unitholder.
“CE Act” means the Commodity Exchange Act, as amended.
“Certificate of Trust” means that certain Certificate
of Trust of the Trust filed with the Secretary of State of the State of Delaware on July 23,2014, as may be amended from time to
time, pursuant to Section 3810 of the Delaware Trust Statute.
“CFTC” means the United States Commodity Futures
Trading Commission, and any successor thereto.
“Code” means the United States Internal Revenue
Code of 1986, as amended.
“Commodity” means a traded physical commodity.
“Commodity Contract” means a contract for the purchase
or sale of a Commodity or any other contract whose value is determined by reference to the value of a Commodity, one or more Commodities,
including a Commodity-based forward contract, futures contract, swap, option or other over the counter transaction.
“Covered Person” means the Trustee, the Sponsor
and their respective Affiliates.
“Creation Basket” means a basket of 25,000 Units
of a Fund, or such greater or lesser number of Units as the Sponsor may determine from time to time for each Fund.
“Creation Basket Deposit” of a Fund means the Deposit
made by an Authorized Purchaser in connection with a Purchase Order and the creation of a Creation Basket in an amount equal to
the product obtained by multiplying (i) the number of Creation Baskets set forth in the relevant Purchase Order by (ii) the Net
Asset Value Per Basket of such Fund calculated on the Purchase Order Date.
“Delaware Trust Statute” means the Delaware Statutory
Trust Act, Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. § 3801 et seq., as the same may be amended from time to
time.
“Deliver,” “Delivered” or “Delivery”
means, when used with respect to Units, either (A) one or more book-entry transfers of such Units to an account or accounts at
the Depository designated by the Person entitled to such delivery for further credit as specified by such Person or (B) if the
Depository ceases to make its book-entry settlement system available for the Units, execution and delivery at the Trust’s
principal office of one or more certificates evidencing those Units.
“Deposit” means the amount of cash or other property
contributed or agreed to be contributed to the Trust by any Authorized Purchaser or by the Sponsor, as applicable, in accordance
with Article IV hereof.
“Depository” or “DTC” means The Depository
Trust Company, New York, New York, or such other depository of Units as may be selected by the Sponsor as specified herein.
“Depository Agreement” means the Letter of Representations
relating to each Fund from the Sponsor to the Depository in connection with the initial issuance of Units of such Fund, as the
same may be amended or supplemented from time to time.
“Distributor” means Esposito Securities, LLC or
any Person from time to time engaged to provide distribution services or related services to the Trust pursuant to authority delegated
by the Sponsor.
“DTC Participants” shall have the meaning assigned
to such term in Section 4.6(c).
“Event of Withdrawal” means the filing of a certificate
of dissolution or cancellation of the Sponsor, the revocation of the Sponsor’s charter (and the expiration of 90 days after
the date of notice to the Sponsor of revocation without a reinstatement of its charter), or the provision of written notice by
the Sponsor of its withdrawal as Sponsor in accordance with Section 5.12(a) of this Trust Agreement.
“Exchange” means NYSE Arca, Inc. or, if the Units
of any Fund shall cease to be listed on such exchange and are listed on one or more other exchanges, the exchange on which the
Units of such Fund are principally traded, as determined by the Sponsor.
“Fiscal Year” shall have the meaning assigned to
such term in Article XI hereof.
“Fund” means a Fund established and designated as
a series of the Trust as provided in Section 4.2(a).
“Futures Exchange” means the contract market or
derivatives transaction execution facility on which futures contracts or other investments relating to any underlying Commodities
that comprise a Fund’s principal investment focus are principally traded, including but not limited to the New York Mercantile
Exchange, ICE Futures, Chicago Board of Trade, Chicago Mercantile Exchange, London Metal Exchange, Commodity Exchange, Inc. or
on other foreign exchanges.
“Global Certificates” means the global certificate
or certificates for each Fund issued to the Depository as provided in the Depository Agreement, each of which shall be in substantially
the form attached hereto as Exhibit A.
“Indirect Participants” shall have the meaning assigned
to such term in Section 4.6 (c).
“Initial Contribution” shall have the meaning assigned
to such term in Section 7.1(a).
“Internal Revenue Service” or “IRS”
means the United States Internal Revenue Service or any successor thereto.
“Liquidating Trustee” shall have the meaning assigned
thereto in Section 14.2.
“Management Fee” means the management fee paid to
the Sponsor pursuant to this Agreement.
“Net Asset Value” at any time means the total assets
in the Trust Estate of a Fund as reasonably determined by the Sponsor or its designee including, but not limited to, all cash and
cash equivalents, other debt securities or other property, less total expenses and liabilities of such Fund, each determined on
the basis of generally accepted accounting principles in the United States, consistently applied under the accrual method of accounting.
The amount of any distribution made pursuant to Article VII hereof shall be a liability of such Fund from the day when the distribution
is declared until it is paid.
“Net Asset Value Per Basket” means the product obtained
by multiplying the Net Asset Value Per Unit of a Fund by the number of Units comprising a Basket at such time.
“Net Asset Value Per Unit” means the Net Asset Value
of a Fund divided by the number of Units of a Fund outstanding on the date of calculation.
“NFA” means the National Futures Association.
“Order Cut-Off Time” means such time as disclosed
in the Prospectus by which orders for creation or redemption of Baskets must be placed.
“Organization and Offering Expenses” shall have
the meaning assigned thereto in Section 5.8(a)(ii).
“Percentage Interest” means, as to each Unitholder,
the portion (expressed as a percentage) of the total outstanding Units held by such Unitholder.
“Person” means any natural person, or any partnership,
limited liability company, trust, estate, corporation, association or other legal entity, in its own or any representative capacity.
“Prospectus” means the final prospectus and disclosure
document of the Trust and any Fund, constituting a part of the Registration Statement for such Fund filed with the SEC and declared
effective thereby, as such prospectus may at any time and from time to time be supplemented.
“Purchase Order” shall have the meaning assigned
thereto in Section 4.5(a)(i).
“Purchase Order Date” shall have the meaning assigned
thereto in Section 4.5(a)(i).
“Reconstituted Trust” shall have the meaning assigned
thereto in Section 14.1(a).
“Redemption Basket” means the minimum number of
Units of a Fund that may be redeemed pursuant to Section 8.1, which shall be the number of Units of such Fund constituting a Creation
Basket on the relevant Redemption Order Date.
“Redemption Distribution” means the cash or the
combination of United States Treasury securities, cash and/or cash equivalents or other securities or property to be delivered
in satisfaction of a redemption of a Redemption Basket as specified in Section 8.1(c).
“Redemption Order” shall have the meaning assigned
thereto in Section 8.1(a).
“Redemption Order Date” shall have the meaning assigned
thereto in Section 8.1(b).
“Redemption Settlement Time” shall have the meaning
assigned thereto in Section 8.1(d).
“Registration Statement” means a registration statement
filed with the SEC under the Securities Act of 1933, the Securities Exchange Act of 1934 or any rules or regulations thereunder,
on Form S-1 or Form S-3 or any successor form or any other SEC registration statement form that the Trust may be permitted to use,
as any such form may be amended from time to time, pursuant to which the Trust registered Units, as such Registration Statement
may at any time and from time to time be amended.
“SEC” means the United States Securities and Exchange
Commission.
“Sponsor” means ETF Managers Capital LLC, a Delaware
limited liability company, which is registered as a Commodity Pool Operator and controls the investments and other decisions of
the Funds, and any successor thereto or any substitute therefore as provided herein.
“Sponsor’s Units” means the units issued by
a Fund to the Sponsor pursuant to Section 2.3, evidencing the Sponsor’s beneficial interests in the net assets of such Fund.
“Suspended Redemption Order” shall have the meaning
assigned thereto in Section 8.1(d).
“Tax Matters Partner” means the Sponsor or any successor
in its capacity as the “tax matters partner” designated to represent a Fund in certain federal income tax matters pursuant
to subchapter C of chapter 63 of the Code or under any comparable provisions of state or local law.
“Transaction Fee” shall have the meaning assigned
thereto in Section 4.5(d).
“Trust” means ETF Managers Group Commodity Trust
I, the Delaware statutory trust formed pursuant to the Certificate of Trust, the business and affairs of which are governed by
this Trust Agreement.
“Trust Agreement” means this Amended and Restated
Declaration of Trust and Trust Agreement dated December 11, 2014, as amended, restated or supplemented from time to time.
“Trustee” means Wilmington Trust, National Association,
or any successor thereto as provided herein, acting not in its individual capacity but solely as trustee of the Trust.
“Trust Estate” means, with respect to a Fund, all
property and cash held by such Fund.
“Unitholder” means, with respect to any Unit, the
Person who owns the ultimate economic beneficial interest in such Unit and does not hold the Unit as a mere nominee or custodian
for another Person.
“Units” means the units of fractional undivided
beneficial interest in a Fund.
“Unrealized Gain” attributable to any property of
a Fund means, as of any date of determination, the excess, if any, of the fair market value of such property (as determined for
purposes of Section 7.1(d)) as of such date of determination over the adjusted basis of such property as of such date of determination.
“Unrealized Loss” attributable to any property of
a Fund means, as of any date of determination, the excess, if any, of the adjusted basis of such property as of such date of determination
over the fair market value of such property (as determined for purposes of Section 7.1(d)) as of such date of determination.
ARTICLE II
GENERAL PROVISIONS
Section 2.1 Name. The name of the Trust shall be “ETF
Managers Group Commodity Trust I” in which name the Sponsor may engage in the business of the Trust, make and execute contracts
and other instruments on behalf of the Trust and sue and be sued on behalf of the Trust.
Section 2.2 Delaware Trustee; Business Offices.
(a) The sole Trustee of the Trust is Wilmington Trust, National
Association, a national banking association, with its principal place of business in the State of Delaware, which is located at
1100 North Market Street, Wilmington, Delaware 19890-0001 or at such other address in the State of Delaware as the Trustee may
designate in writing to the Sponsor. The Trustee shall receive service of process on the Trust in the State of Delaware at the
foregoing address.
(b) The principal office of the Trust, and such additional offices
as the Sponsor may establish, shall be located at such place or places inside or outside the State of Delaware as the Sponsor
may designate from time to time in writing to the Trustee and
the Unitholders. Initially, the principal office of the Trust shall be located at 35 Beechwood Road, Suite 2B, Summit, New Jersey
07901. The Trust may maintain such other offices at such other places as the Sponsor deems advisable.
Section 2.3 Declaration of Trust. The Sponsor contributed
the sum of $1,000 as an initial contribution to the capital of the Trust and as consideration for the Sponsor’s Units in
Sit Rising Rate ETF (the “Fund” or “RISE”) designated in Section 4.2 hereof, and shall also contribute
a sum of $1,000 as consideration for the Sponsor’s Units in each additional Fund designated in Section 4.2 hereof. The initial
contribution to the Fund is held, and any similar contributions to additional Funds shall be held, in bank accounts in the name
of the Trust controlled by the Sponsor, which amount shall constitute the initial trust estate. The trust estate shall be held
in trust for the Sponsor. The Sponsor agrees that upon the initial public offering of any additional Fund formed pursuant to this
Trust Agreement, the initial capital contribution made by it to a Fund upon such Fund’s formation shall be deemed payment
for the Sponsor’s Units in such Fund. The Sponsor declares that the Trust Estate of each Fund will be held in the name of
the Trust and each Fund, as applicable, for the benefit of such Fund’s Unitholders for the purposes of, and subject to the
terms and conditions set forth in, this Agreement. It is the intention of the Parties hereto to create a statutory trust under
the Delaware Trust Statute, organized in series or Funds, and that this Trust Agreement shall constitute the governing instrument
of the Trust. Nothing in this Trust Agreement shall be construed to make the Unitholders of any Fund members of a limited liability
company, joint stock association, corporation or, except for tax purposes as provided in Section 2.5, partners in a partnership.
Effective as of the date hereof, the Trustee and the Sponsor shall have all of the rights, powers and duties set forth herein and,
to the extent not inconsistent with this Trust Agreement, in the Delaware Trust Statute with respect to accomplishing the purposes
of the Trust. The Trust was formed on July 23, 2014, at which time the Trustee filed the Certificate of Trust required by Section
3810 of the Delaware Trust Statute in connection with the formation of the Trust under the Delaware Trust Statute.
Section 2.4 Purposes and Powers. The purpose and powers of
the Trust and each Fund shall be: (a) to implement the investment objective of each Fund as contemplated by the Prospectus; (b)
to enter into any lawful transaction and engage in any lawful activity in furtherance of or incidental to the foregoing purposes;
and (c) as determined from time to time by the Sponsor, to engage in any other lawful business or activity for which a statutory
trust may be organized under the Delaware Trust Statute. The Trust shall be empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes, business, protection
and benefit of the Trust and the Trust shall have all of the powers specified in this Section 2.4 hereof, including, without limitation,
all of the powers which may be exercised by a trustee or Sponsor on behalf of the Trust under this Trust Agreement. Except to the
extent expressly set forth in Section 2.2(a) and this Article II, the duty and authority to manage the business and affairs of
the Trust is hereby vested in the Sponsor, which duty and authority the Sponsor may delegate as provided herein, all pursuant to
Section 3806(b)(7) of the Delaware Trust Statute.
Section 2.5 Tax Matters.
(a) Subject to Section 4.9(b), the Sponsor, and each Unitholder
by virtue of its purchase of Units in a Fund, (i) express their intent that the Units of such Fund qualify under applicable tax
law as interests in a partnership, and (ii) agree to file U.S. federal, state and local income, franchise and other tax returns
in a manner that is consistent with the treatment of such Fund as a partnership in which each of the Unitholders thereof is a partner.
The Tax Matters Partner or the Unitholders (as appropriate) will make or refrain from making any tax elections to the extent necessary
to obtain treatment consistent with the foregoing. The Sponsor shall not be liable to any Person for the failure of any Fund to
qualify as a partnership under the Code or any comparable provision of the laws of any State or other jurisdiction where such treatment
is sought.
(b) The Sponsor shall obtain a separate federal taxpayer identification
number for each Fund prior to the commencement of the Fund’s operations. The Sponsor, at its expense, shall prepare or cause
to be prepared all federal, state, and local tax returns of a Fund for each year for which such returns are required to be filed
and shall timely file or cause to be timely filed such returns and timely pay or cause to be timely paid, out of the Trust Estate
of such Fund, any taxes, assessments or other governmental charges owing with respect to the Fund. The Trustee and the Administrator
shall promptly notify the Sponsor if it becomes aware that any tax, assessment or other governmental charge is due or claimed to
be due with respect to a Fund. Unless not required to be provided under applicable rules and regulations of the Code, the Sponsor
shall deliver or cause to be delivered to each Unitholder of a Fund and the broker or nominee through which a Unitholder owns its
Units an IRS Schedule K-1 and such other information, if any, with respect to the Fund as may be necessary for the preparation
of the federal income tax or information returns of such Unitholder, including a statement showing the Unitholder’s share
of the Fund’s items of income, gain, loss, expense, deduction and credit for the Fiscal Year for federal income tax purposes,
as soon as practicable after the last day of the Fiscal Year but not later than September 15 of the following year.
(c) Except as provided herein, the Tax Matters Partner may,
in its sole discretion, cause a Fund to make, or refrain from making, any tax elections that the Tax Matters Partner reasonably
deems necessary or advisable, including, but not limited to, an election pursuant to Section 754 of the Code.
(d) Each Unitholder of a Unit in a Fund, by its acceptance or
acquisition of a beneficial interest therein, agrees to furnish the Sponsor with such representations, forms, documents or other
information as may be necessary to enable such Fund to comply with its U.S. federal income tax reporting obligations in respect
of such Unit, including an Internal Revenue Service Form W-9 (or the substantial equivalent thereof) in the case of a Unitholder
that is a United States person within the meaning of the Code or an Internal Revenue Service Form W-8BEN or other applicable form
in the case of a Unitholder that is not a United States person. The Fund shall file any required forms with applicable jurisdictions
and, unless an exemption from withholding and backup withholding tax is properly established by a Unitholder, shall remit amounts
withheld with respect to the Unitholder to the applicable tax authorities. To the extent that the Sponsor reasonably believes that
the Fund is required to withhold and pay over any amounts (including taxes, interest, penalties, assessments or additions to tax)
to any tax authority with respect to distributions or allocations to any Unitholder, the Fund may withhold such amounts and treat
the
amounts withheld as distributions of cash to the Unitholder
in the amount of the withholding and reduce the amount of cash or other property otherwise distributable to such Unitholder. If
an amount required to be withheld was not withheld, the Fund may reduce subsequent distributions to such Unitholder by the amount
of such required withholding. In the event of any claimed over-withholding, Unitholders shall be limited to an action against the
applicable jurisdiction.
(e) By its acceptance of a beneficial interest in a Unit, a
Unitholder waives all confidentiality rights, including all confidentiality rights provided by Section 3406(f) of the Code and
Treasury Regulations Section 31.3406(f)-1, with respect to any representations, forms, documents or information, and any information
contained in such representations, forms or documents, that the Unitholder provides, or has previously provided, to any broker
or nominee through which it owns its Units, to the extent such representations, forms, documents or information may be necessary
to enable the Fund to comply with its withholding tax and backup withholding tax and information reporting obligations or to make
basis adjustments under Section 754 of the Code with respect to the Units. Furthermore, the parties hereto, and by its acceptance
or acquisition of a beneficial interest in a Unit, a Unitholder, acknowledge and agree that any broker or nominee through which
a Unitholder holds its Units shall be a third party beneficiary to this Trust Agreement for the purposes set forth in this Section
2.5.
(f) The Sponsor is specifically authorized to act as the “Tax
Matters Partner” under the Code for each Fund and in any similar capacity under state or local law. The Tax Matters Partner
shall have the authority without any further consent of Fund Unitholders being required (except as specifically required herein)
to make any and all elections for federal, state, local, and foreign tax purposes including any election, if permitted by applicable
law: (i) to make the election provided for in Code Section 6231(a)(1)(B)(ii); (ii) to adjust the basis of the Fund’s assets
pursuant to Code Sections 754, 734(b) and 743(b) or comparable provisions of state, local, or foreign law, in connection with transfers
of Units and distributions; (iii) to extend the statute of limitations for assessment of tax deficiencies against the Unitholders
with respect to adjustments to the Fund’s federal, state local, or foreign tax returns; and (iv) to the extent provided in
Code Sections 6221 through 6231 and similar provisions of federal, state, local, or foreign law, to represent the Fund and its
Unitholders before taxing authorities or courts of competent jurisdiction in tax matters affecting the Fund or the Unitholders
in their capacities as Unitholders and to file any tax returns and execute any agreements or other documents relating to or affecting
such tax matters, including agreements or other documents that bind the Unitholders with respect to such tax matters or otherwise
affect the rights of the Fund and its Unitholders.
(g) By its acceptance of a beneficial interest in a Unit of
a Fund, a Unitholder agrees to the designation of the Sponsor as the initial Tax Matters Partner of the Fund. Each Unitholder agrees
to take any further action as may be required by regulation or otherwise to effectuate such designation. The Tax Matters Partner
of a Fund shall be authorized to exercise all rights and responsibilities conferred upon a Tax Matters Partner under Sections 6221-6234
of the Code with respect to such Fund, including, without limitation: (i) handling all audits and other administrative proceedings
conducted by the IRS with respect to the Fund; (ii) extending the statute of limitations with respect to the Fund’s partnership
tax returns; (iii) entering into a settlement with the IRS with respect to the Fund’s partnership items on behalf of those
Limited Owners having less than a 1% interest in the Fund; and (iv) filing a petition or complaint with an appropriate U.S. federal
court for review of a final partnership administrative adjustment.
(h) The Sponsor shall maintain all books, records and supporting
documents that are necessary to comply with any and all aspects of its duties under this Trust Agreement.
Section 2.6 General Liability of Unitholders. Subject to
Sections 9.1 and 9.3 hereof, no Unitholder, other than the Sponsor to the extent set forth above, shall have any personal liability
for any liability or obligation of the Trust or any Fund.
Section 2.7 Legal Title. Legal title to all of the Trust
Estate of each Fund shall be vested in the Trust as a separate legal entity; provided, however, that where applicable law in any
jurisdiction requires any part of the Trust Estate to be vested otherwise, the Sponsor may cause legal title to the Trust Estate
or any portion thereof to be held by or in the name of the Sponsor or any other Person (other than a Unitholder) as nominee.
Section 2.8 Series Trust. The Trust is a series trust pursuant
to Sections 3804(a) and 3806(b)(2) of the Delaware Trust Statute. The Units of the Trust shall be divided into series, each a Fund,
as provided in Section 3806(b)(2) of the Delaware Trust Statute. Separate and distinct records shall be maintained for each Fund
and the assets associated with a Fund shall be held in such separate and distinct records (directly or indirectly, including a
nominee or otherwise) and accounted for in such separate and distinct records separately from the assets of any other Fund. The
use of the terms “Trust”, “Fund” or “series” in this Trust Agreement shall in no event alter
the intent of the parties hereto that the Trust receive the full benefit of the limitation on inter-series liability as set forth
in Section 3804 of the Delaware Trust Statute.
Section 2.9 Derivative Actions.
(a) No person who is not a Unitholder of a particular Fund shall
be entitled to bring any derivative action, suit or other proceeding on behalf of the Trust with respect to such Fund. No Unitholder
of a Fund may maintain a derivative action on behalf of the Trust with respect to such Fund unless holders of at least ten percent
(10%) of the outstanding Units of such Fund join in the bringing of such action.
(b) In addition to the requirements set forth in Section 3816
of the Act, a Unitholder may bring a derivative action on behalf of the Trust with respect to a Fund only if the following conditions
are met: (i) the Unitholder or Unitholders must make a pre-suit demand upon the Sponsor to bring the subject action unless an effort
to cause the Sponsor to bring such an action is not likely to succeed; and a demand on the Sponsor shall only be deemed not likely
to succeed and therefore excused if the Sponsor has a personal financial interest in the transaction at issue, and the Sponsor
shall not be deemed interested in a transaction or otherwise disqualified from ruling on the merits of a Unitholder demand by virtue
of the fact that the Sponsor receives remuneration for its service as the Sponsor or as a sponsor of one or more companies that
are under common management with or otherwise affiliated with the Trust; and (ii) unless a demand is not required under clause
(i) of this paragraph, the Sponsor must be afforded a reasonable amount of time to consider such Unitholder request and to investigate
the basis of such claim; and the Sponsor shall be entitled to retain counsel or other advisors in considering the merits of the
request and may require an undertaking by the Unitholders making such request to reimburse the Trust for the expense of any such
advisors in the event that the Sponsor determines not to bring such action.
ARTICLE III
THE TRUSTEE
Section 3.1 Term; Resignation.
(a) The Trust shall have only one trustee unless otherwise determined
by the Sponsor. Wilmington Trust, National Association has been appointed and hereby agrees to serve as the Trustee of the Trust.
The Sponsor is entitled to appoint additional Trustees and remove any Trustee without cause and appoint a successor Trustee in
accordance with the terms hereof at any time. The Trustee is appointed to serve as the trustee of the Trust in the State of Delaware
for the purpose of satisfying the requirement of Section 3807(a) of the Delaware Trust Statute that the Trust has at least one
trustee with a principal place of business in Delaware. It is understood and agreed by the parties hereto that the Trustee shall
have none of the duties or liabilities of the Sponsor and shall have no obligation to supervise or monitor the Sponsor or otherwise
manage the Trust.
(b) Any Trustee of the Trust, including the current Trustee,
may resign upon 60 days’ prior written notice to the Sponsor and the other Trustee(s), if any; provided, that such resignation
shall not become effective unless and until a successor Trustee shall have been appointed by the Sponsor in accordance with Section
3.5. If the Sponsor does not appoint a successor trustee within such 60 day period, the Trustee may, at the expense of the Trust,
petition a court to appoint a successor trustee. Any person into which the Trustee may be merged or with which it may be consolidated,
or any person resulting from any merger or consolidation to which the Trustee shall be a party, or any person which succeeds to
all or substantially all of the corporate trust business of the Trustee, shall be the successor Trustee under this Trust Agreement
without the execution, delivery or filing of any paper or instrument or further act to be done on the part of the parties hereto,
except as may be required by applicable law.
Section 3.2 Powers. Except to the extent expressly set forth
in Section 2.2(a) and this Article III, the duty and authority to manage the business and affairs of the Trust is hereby vested
in the Sponsor, which duty and authority the Sponsor may delegate as provided herein, all pursuant to Section 3806(b)(7) of the
Delaware Trust Statute. The duties of the Trustee shall be limited to (i) accepting legal process served on the Trust in the State
of Delaware, and (ii) the execution of any certificates required to be filed with the Secretary of State of the State of Delaware
which the Trustee is required to execute under Section 3811 of the Delaware Trust Statute, and (iii) any other duties expressly
allocated to the Trustee in the Trust Agreement. The Trustee shall provide prompt notice to the Sponsor of its performance of any
of the foregoing. The Trustee shall not have any implied duties (including fiduciary duties), obligations and liabilities with
respect to the business and affairs of the Trust or any Fund. The Sponsor shall reasonably keep the Trustee informed of any actions
taken by the Sponsor with respect to the Trust that would reasonably be expected to affect the rights, duties, obligations or liabilities
of the Trustee hereunder or under the Delaware Trust Statute.
Section 3.3 Compensation and Expenses of the Trustee. The
Trustee shall be entitled to receive from the Sponsor or an Affiliate of the Sponsor (including the Trust) reasonable compensation
for its services hereunder as set forth in a separate fee agreement and shall be
entitled to be reimbursed by the Sponsor or an Affiliate of
the Sponsor (including the Trust) for reasonable out-of-pocket expenses incurred by it in the performance of its duties hereunder,
including without limitation, the reasonable compensation, out-of-pocket expenses and disbursements of counsel and such other agents
as the Trustee may employ in connection with the exercise and performance of its rights and duties hereunder.
Section 3.4 Indemnification. The Sponsor agrees, whether
or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect,
defend, save and keep harmless, the Trustee (in its capacity as Trustee and individually) and its successors, assigns, legal representatives,
officers, directors, shareholders, employees, agents and servants (the “Indemnified Parties”) from and against any
and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Trustee on or measured
by any compensation received by the Trustee for its services hereunder or any indemnity payments received by the Trustee pursuant
to this Section), claims, actions, suits, costs, expenses or disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever (collectively, “Expenses”), which may be imposed on, incurred by or asserted against the
Indemnified Parties in any way relating to or arising out of the formation, operation or termination of the Trust, the execution,
delivery and performance of any other agreements to which the Trust is a party or the action or inaction of the Trustee hereunder
or thereunder, except for Expenses resulting from the gross negligence or willful misconduct of any of the Indemnified Parties.
The indemnities contained in this Section 3.4 shall survive the termination of this Trust Agreement, the termination of the Trust
or the removal or resignation of the Trustee.
Section 3.5 Successor Trustee. Upon the resignation or removal
of the Trustee, the Sponsor shall appoint a successor Trustee by delivering a written instrument to the outgoing Trustee. Any successor
Trustee must satisfy the requirements of Section 3807(a) of the Delaware Trust Statute. Any resignation or removal of the Trustee
and appointment of a successor Trustee shall not become effective until a written acceptance of appointment is delivered by the
successor Trustee to the outgoing Trustee and the Sponsor and any fees and expenses due to the outgoing Trustee are paid. Following
compliance with the preceding sentence, the successor Trustee shall become fully vested with all of the rights, powers, duties
and obligations of the outgoing Trustee under this Trust Agreement, with like effect as if originally named as Trustee, and the
outgoing Trustee shall be discharged of its duties and obligations under this Trust Agreement.
Section 3.6 Liability of Trustee. Except as otherwise provided
in this Article III, the Trustee acts solely as trustee hereunder and not in its individual capacity, and all Persons having any
claim against the Trustee by reason of the transactions contemplated by this Trust Agreement and any other agreement to which the
Trust or any Fund is a party shall look only to the appropriate Fund’s Trust Estate for payment or satisfaction thereof;
provided, however, that in no event is the foregoing intended to affect or limit the liability of the Sponsor as set forth in Section
2.6 hereof. The Trustee shall not be liable or accountable hereunder to the Trust or to any other person or under any other agreement
to which the Trust is a party, except for the Trustee’s own gross negligence or willful misconduct. In particular, but not
by way of limitation:
(a) The Trustee shall have no liability or responsibility for
the validity or sufficiency of this Trust Agreement, any agreement contemplated hereunder, or for the form, character, genuineness,
sufficiency, value or validity of any Trust Estate or any Units;
(b) The Trustee shall not be liable for any actions taken or
omitted to be taken by it in good faith in accordance with the instructions of the Sponsor;
(c) The Trustee shall not have any liability for the acts or
omissions of the Sponsor or its delegatees, any beneficial owners or any other person;
(d) The Trustee shall not have any duty or obligation to supervise
or monitor the performance of, or compliance with this Trust Agreement by, the Sponsor or its delegatees or any beneficial owner
of the Trust.
(e) No provision of this Trust Agreement shall require the Trustee
to act or expend or risk its own funds or otherwise incur any financial liability in the performance of any of its rights or powers
hereunder if the Trustee shall have reasonable grounds for believing that such action, repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured or provided to it;
(f) Under no circumstances shall the Trustee be liable for indebtedness
evidenced by or other obligations of the Trust arising under this Trust Agreement or any Fund other agreements to which the Trust
or any Fund is a party; and
(g) Notwithstanding anything contained herein to the contrary,
the Trustee shall not be required to take any action in any jurisdiction other than in the State of Delaware if the taking of such
action will (i) require the consent or approval or authorization or order of or the giving of notice to, or the registration with
or taking of any action in respect of, any state or other governmental authority or agency of any jurisdiction other than the State
of Delaware, (ii) result in any fee, tax or other governmental charge under the laws of any jurisdiction or any political subdivision
thereof in existence as of the date hereof other than the State of Delaware becoming payable by the Trustee or (iii) subject the
Trustee to personal jurisdiction, other than in the State of Delaware, for causes of action arising from personal acts unrelated
to the consummation of the transactions by the Trustee, as the case may be, contemplated hereby.
Section 3.7 Reliance; Advice of Counsel.
(a) The Trustee is authorized to take such action or refrain
from taking such action under this Trust Agreement as it may be directed in writing by or on behalf of the Sponsor or an Affiliate
of the Sponsor from time to time; provided, however, that the Trustee shall not be required to take or refrain from taking any
such action if it shall have determined, or shall have been advised by counsel, that such performance is likely to involve the
Trustee in personal liability or is contrary to the terms of this Trust Agreement or of any document contemplated hereby to which
the Trust or the Trustee is a party or is otherwise contrary to law. If at any time the Trustee determines that it requires or
desires guidance regarding the application of any provision of this Trust Agreement or any other document, or regarding compliance
with any direction received by it hereunder, then the Trustee may deliver a notice to the Sponsor requesting written instructions
as to the course of action desired by the Sponsor, and such instructions by or on behalf of the Sponsor shall constitute full and
complete authorization and protection for actions taken and other performance by the Trustee in reliance thereon. Until the Trustee
has received such instructions after
delivering such notice, it may refrain from taking any action
with respect to the matters described in such notice.
(b) The Trustee shall incur no liability to anyone in acting
upon any document believed by it to be genuine and believed by it to be signed by the proper party or parties. The Trustee may
accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact
or matter the manner of ascertainment of which is not specifically prescribed herein, the Trustee may for all purposes hereof rely
on a certificate, signed by the Sponsor, as to such fact or matter, and such certificate shall constitute full protection to the
Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon.
(c) In the exercise or administration of the Trust hereunder
and in the performance of its duties and obligations under this Trust Agreement, the Trustee (i) may act directly or, at the expense
of the Trust, through agents or attorneys, and the Trustee shall not be liable for the default or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Trustee in good faith, and (ii) may, at the expense of the
Trust, consult with such counsel, accountants and other experts and it shall not be liable for anything done, suffered or omitted
in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other experts.
Section 3.8 Payments to the Trustee. Any amounts paid to the
Trustee pursuant to this Article III shall be deemed not to be a part of any Fund’s Trust Estate immediately after such payment.
Any amounts owing to the Trustee under this Trust Agreement shall constitute a claim against the applicable Fund’s Trust
Estate.
Each of the parties hereto hereby agrees and, as evidenced by
its acceptance of any benefits hereunder, any Unitholder agrees that the Trustee in any capacity (x) has not provided and will
not provide in the future, any advice, counsel or opinion regarding the tax, financial, investment, securities law or insurance
implications and consequences of the formation, funding and ongoing administration of the Trust, including, but not limited to,
income, gift and estate tax issues, insurable interest issues, and the initial and ongoing selection and monitoring of financing
arrangements, (y) has not made any investigation as to the accuracy of any representations, warranties or other obligations of
the Trust under any contract or other agreement and shall have no liability in connection therewith and (z) the Trustee has not
prepared or verified, and shall not be responsible or liable for, any information, disclosure or other statement in any disclosure
or offering document or in any other document issued or delivered in connection with the sale or transfer of the Units.
ARTICLE IV
UNITS; DEPOSITS
Section 4.1 General.
(a) The Sponsor shall have the power and authority, without
Unitholder approval, to establish and designate one or more series, or Funds, and to issue Units thereof, from time to time as
set forth in Section 4.2, as it deems necessary or desirable. Each Fund shall be separate from all other Funds created as series
of the Trust in respect of the assets and liabilities allocated to that Fund and shall represent a separate investment portfolio
of the Trust. The Sponsor shall have exclusive power to fix and determine the relative rights and preferences as between the Units
of the Funds as to right of redemption, special and relative rights as to dividends and other distributions and on liquidation,
conversion rights, and conditions under which the Funds shall have separate voting rights or no voting rights.
(b) The Sponsor may, without Unitholder approval, divide or
subdivide Units of any Fund into two or more classes or subclasses, Units of each such class or subclass having such preferences
and special or relative rights and privileges as the Sponsor may determine as provided in Section 4.3. The fact that a Fund shall
have been initially established and designated without any specific establishment or designation of classes or subclasses shall
not limit the authority of the Sponsor to divide a Fund and establish and designate separate classes or subclasses thereof.
(c) The number of Units authorized shall be unlimited, and the
Units so authorized may be represented in part by fractional Units, calculated to four decimal places. From time to time, the Sponsor
may divide or combine the Units of any Fund or class into a greater or lesser number without thereby changing the proportionate
beneficial interests in the Fund or class thereof. The Sponsor may issue Units of any Fund or class thereof for such consideration
and on such terms as it may determine (or for no consideration if pursuant to a Unit dividend, split or reverse split), all without
action or approval of the Unitholders of such Fund. All Units when so issued on the terms determined by the Sponsor shall be fully
paid and non-assessable. The Sponsor may classify or reclassify any unissued Units or any Units previously issued and reacquired
of any Fund or class thereof into one or more series or classes thereof that may be established and designated from time to time.
The Sponsor may hold as treasury Units, reissue for such consideration and on such terms as it may determine, or cancel, at its
discretion from time to time, any Units of any Fund or class thereof reacquired by the Trust. Unless otherwise determined by the
Sponsor, treasury Units shall not be deemed cancelled.
(d) The Units of each Fund shall initially be a single class.
(e) No certificates or other evidence of beneficial ownership
of the Units will be issued for Sponsor’s Units. Global Certificates will be issued in accordance with Section 4.5(e) of
this Agreement for all Units of a Fund other than the Sponsor’s Units of such Fund.
(f) Every Unitholder, by virtue of having purchased or otherwise
acquired a Unit, shall be deemed to have expressly consented and agreed to be bound by the terms of this Trust Agreement.
Section 4.2 Establishment of Series, or Funds, of the Trust.
(a) Without limiting the authority of the Sponsor set forth
in Section 4.2(b) to establish and designate any further series, the Sponsor has established and designated one initial series
or Fund, Sit Rising Rate ETF (“RISE”), and hereby establishes and designates additional series, or Funds, as shown
in Exhibit C, which may be amended from time to time.
The provisions of this Article IV shall be applicable to each
of the Funds shown in Exhibit C and any further Fund that may from time to time be established and designated by the Sponsor as
provided in Section 4.2(b); provided, however, that such provisions may be amended, varied or abrogated by the Sponsor with respect
to any Fund created after the initial formation of the Trust in this Agreement or any other written instrument creating such additional
Fund.
(b) The establishment and designation of any series, or Funds,
other than those set forth above shall be effective upon the execution by the Sponsor of an instrument in substantially the form
attached hereto as Exhibit B setting forth such establishment and designation and the relative rights and preferences of such series,
or Funds, or as otherwise provided in such instrument. At any time that there are no Units outstanding of any particular Fund previously
established and designated, the Sponsor may by an instrument executed by it abolish that Fund and the establishment and designation
thereof. Each instrument referred to in this paragraph shall have the status of an amendment to this Trust Agreement.
Section 4.3 Establishment of Classes and Sub-Classes. The
division of any series, or Funds, into two or more classes or sub-classes of Units thereof and the establishment and designation
of such classes or sub-classes of Units shall be effective upon the execution by the Sponsor of an instrument in substantially
the form attached hereto as Exhibit B setting forth such division, and the establishment, designation, and relative rights and
preferences of such classes of Units, or as otherwise provided in such instrument. The relative rights and preferences of the classes
or sub-classes of Units of any Fund may differ in such respects as the Sponsor may determine to be appropriate, provided that such
differences are set forth in the aforementioned instrument. At any time that there are no Units outstanding of any particular class
or sub-class of Units previously established and designated, the Sponsor may by an instrument executed by it abolish that class
or sub-class of Units and the establishment and designation thereof. Each instrument referred to in this paragraph shall have the
status of an amendment to this Trust Agreement.
Section 4.4 Offer of Units. With respect to each Fund, during
the period commencing with the initial effective date of the Prospectus of the Fund and ending no later than immediately prior
to the time Units of such Fund begin trading on an Exchange, such Fund shall offer Units to Authorized Purchasers in Creation Baskets
pursuant to SEC Rule 415, at an offering price as specified in the prospectus for each Fund. After such period, each Fund shall
continue to offer Units in Creation Baskets at the Net Asset Value Per Basket of such Fund. The Sponsor shall make such arrangements
for the sale of the Units as it deems appropriate. The offering for each Fund shall be made on the terms and conditions set forth
in the Prospectus for such Fund.
Section 4.5 Procedures for Creation and Issuance of Creation
Baskets.
(a) General. The following procedures, as supplemented by the
more detailed procedures specified in an attachment to the Authorized Purchaser Agreement for each Fund, which may be amended from
time to time in accordance with the provisions of the Authorized Purchaser Agreement (and any such amendment will not constitute
an amendment of this Trust Agreement), will govern the Trust with respect to the creation and issuance of Creation Baskets for
each Fund. Subject to the limitations upon and requirements for issuance of Creation Baskets stated herein and in such procedures,
the number of Creation Baskets, which may be issued by each Fund is unlimited.
(i) On any Business Day, an Authorized Purchaser may submit
to the Sponsor or its designee a purchase order to subscribe for and agree to purchase one or more Creation Baskets for the applicable
Fund (such request by an Authorized Purchaser, a “Purchase Order”) in the manner provided in the Authorized Purchaser
Agreement. Any Purchase Order must be received by the Order Cut-Off Time on a Business Day (the “Purchase Order Date”).
By placing a Purchase Order, an Authorized Purchaser agrees to deposit cash or a combination of United States Treasury securities,
cash and/or cash equivalents or other securities or property with the Trust. Failure to do so shall result in the cancellation
of the Purchase Order. The Sponsor or its designee will process Purchase Orders only from Authorized Purchasers with respect to
which the Authorized Purchaser Agreement for the Fund is in full force and effect. The Sponsor or its designee will maintain and
provide to Unitholders upon request a current list of the Authorized Purchasers for each Fund with respect to which the Authorized
Purchaser Agreement is in full force and effect.
(ii) Any Purchase Order is subject to rejection by the Sponsor
or its designee pursuant to Section 4.5(c). The Sponsor determines, in its sole discretion or in consultation with the Administrator,
the requirements for securities that may be included in Creation Basket Deposits and publishes, or its agent publishes on its behalf,
such requirements at the beginning of each Business Day.
(iii) After accepting an Authorized Purchaser’s Purchase
Order, the Sponsor or its designee will issue and deliver Creation Baskets to fill an Authorized Purchaser’s Purchase Order
on the third Business Day following the Purchase Order Date, but only if by such time the Sponsor or its designee has received
(A) for its own account, the Transaction Fee, and (B) for the account of the Trust, the Creation Basket Deposit due from the Authorized
Purchaser submitting the Purchase Order. The Sponsor determines, in its sole discretion or in consultation with the Administrator,
the requirements for Treasuries and/or the amount of cash, including the maximum permitted remaining maturity of a Treasury and
the proportions of Treasuries and cash, that may be included in Deposits to create Baskets and publishes, or its agent publishes
on its behalf, such requirements at the beginning of each Business Day. The Sponsor or its designee will obtain from each Authorized
Purchaser an acknowledgment that it has received a copy of the Prospectus prior to accepting any Purchase Order.
(b) Deposit with the Depository. Upon issuing a Creation Basket
for any Fund pursuant to a Purchase Order, the Sponsor will cause the Trust to deposit the Creation Basket with the Depository
in accordance with the Depository’s customary procedures, for credit to the account of the Authorized Purchaser that submitted
the Purchase Order.
(c) Rejection. For each Fund, the Sponsor or its designee shall
have the absolute right, but shall have no obligation, to reject any Purchase Order or Creation Basket Deposit: (i) determined
by the Sponsor or its designee not to be in proper form; (ii) determined by the Sponsor not to be in the best interest of the Unitholders;
(iii) that, due to position limits or otherwise, the Sponsor determines investment alternatives that will enable a Fund to meet
its investment objective are not available to such Fund at that time; (iv) the acceptance or receipt of which would have adverse
tax consequences to the Trust, the Fund or the Fund’s Unitholders; (v) the acceptance or receipt of which would, in the opinion
of counsel to the Sponsor, be unlawful; (vi) if circumstances outside the control of the Sponsor or its designee make it, for all
practical purposes, not feasible, as determined by the Sponsor in its sole discretion, to process creations of Creation Baskets;
or (vii) for any other reason set forth in the Authorized Purchaser Agreement entered into with that Authorized Purchaser. Neither
the Sponsor nor its designee shall be liable to any person by reason of the rejection of any Purchase Order or Creation Basket
Deposit.
(d) Transaction Fee. For each Fund, a non-refundable transaction
fee will be payable by an Authorized Purchaser to the Sponsor for its own account in connection with each Purchase Order pursuant
to this Section 4.5 and in connection with each Redemption Order of such Authorized Purchaser pursuant to Section 8.1 (each a “Transaction
Fee”). The Transaction Fee charged in connection with each such creation and redemption shall be initially $1,000, but may
be changed as provided below. Even though a single Purchase Order or Redemption Order may relate to multiple Creation Baskets or
Redemption Baskets, only a single Transaction Fee will be due for each Purchase Order or Redemption Order for a Fund. The Transaction
Fee may subsequently be waived, modified, reduced, increased or otherwise changed by the Sponsor.
(e) Global Certificate Only. Certificates for Creation Baskets
of a Fund will not be issued, other than the Global Certificates issued to the Depository. So long as the Depository Agreement
is in effect, Creation Baskets will be issued and redeemed and Units will be transferable solely through the book-entry systems
of the Depository and the DTC Participants and their Indirect Participants as more fully described in Section 4.6.
(f) Replacement of Depository. The Depository may determine
to discontinue providing its service with respect to Creation Baskets and Units of any Fund by giving notice to the Sponsor pursuant
to and in conformity with the provisions of the Depository Agreement and discharging its responsibilities with respect thereto
under applicable law. Under such circumstances, the Sponsor shall take action to find a replacement for the Depository to perform
its functions at a comparable cost and on terms acceptable to the Sponsor or, if such a replacement is unavailable, to either (i)
terminate the Trust or specific Funds, as applicable, or (ii) execute and deliver separate certificates evidencing Units registered
in the names of the Unitholders thereof, with such additions, deletions and modifications to this Trust Agreement and to the form
of certificate evidencing Units as the Sponsor deems necessary or appropriate.
Section 4.6 Book-Entry-Only System, Global Certificates.
(a) Global Certificates. The Trust and the Sponsor will enter
into the Depository Agreement pursuant to which the Depository will act as securities depository for Units of each Fund. Units
of each Fund will be represented by the Global Certificates (which may consist of one or more certificates as required by the Depository),
which will be registered, as the Depository shall
direct, in the name of Cede & Co., as nominee for the Depository
and deposited with, or on behalf of, the Depository. No other certificates evidencing Units will be issued. The Global Certificates
for each Fund shall be in the form attached hereto as Exhibit A or described therein and shall represent such Units as shall be
specified therein, and may provide that it shall represent the aggregate amount of outstanding Units of a Fund from time to time
endorsed thereon and that the aggregate amount of outstanding Units represented thereby may from time to time be increased or decreased
to reflect creations or redemptions of Baskets. Any endorsement of a Global Certificate to reflect the amount, or any increase
or decrease in the amount, of outstanding Units represented thereby shall be made in such manner and upon instructions given by
the Sponsor on behalf of the Trust as specified in the Depository Agreement.
(b) Legend. Any Global Certificate issued to The Depository
Trust Company or its nominee shall bear a legend substantially to the following effect: “Unless this certificate is presented
by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the Trust or its
agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co.,
or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co., or to
such other entity as is required by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.”
(c) The Depository. The Depository has advised the Trust and
the Sponsor as follows: The Depository is a limited-purpose trust company organized under the laws of the State of New York, a
member of the U.S. Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial
Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. The Depository 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 the Depository. Access to the Depository’s system is also available to others
such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant,
either directly or indirectly (“Indirect Participants”).
(d) Unitholders. As provided in the Depository Agreement, upon
the settlement date of any creation, transfer or redemption of Units of a Fund, the Depository will credit or debit, on its book-entry
registration and transfer system, the number of Units so created, transferred or redeemed to the accounts of the appropriate DTC
Participants. The accounts to be credited and charged shall be designated by the Sponsor on behalf of each Fund and each Authorized
Purchaser, in the case of a creation or redemption of Baskets. Ownership of beneficial interest in Units will be limited to DTC
Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Unitholders
will be shown on, and the transfer of Units will be effected only through, in the case of DTC Participants, the records maintained
by the Depository and, in the case of Indirect Participants and Unitholders holding
through a DTC Participant or an Indirect Participant, through
those records or the records of the relevant DTC Participants or Indirect Participants. Unitholders are expected to receive, from
or through the broker or bank that maintains the account through which the Unitholder has purchased Units, a written confirmation
relating to their purchase of Units.
(e) Reliance on Procedures. Unitholders will not be entitled
to have Units registered in their names, will not receive or be entitled to receive physical delivery of certificates in definitive
form. Accordingly, to exercise any rights of a holder of Units under the Trust Agreement, a Unitholder must rely on the procedures
of the Depository and, if such Unitholder is not a DTC Participant, on the procedures of each DTC Participant or Indirect Participant
through which such Unitholder holds its interests. The Trust and the Sponsor understand that under existing industry practice,
if the Trust or any Fund requests any action of a Unitholder, or a Unitholder desires to take any action that the Depository or
its nominee, as the record owner of all outstanding Units of each Fund, is entitled to take, (1) in the case of a Trust request,
the Depository will notify the DTC Participants regarding such request, such DTC Participants will in turn notify each Indirect
Participant holding Units through it, with each successive Indirect Participant continuing to notify each person holding Units
through it until the request has reached the Unitholder, and (2) in the case of a request or authorization to act being sought
or given by a Unitholder, such request or authorization is given by such Unitholder and relayed back to the Trust or such Fund
through each Indirect Participant and DTC Participant through which the Unitholder’s interest in the Units is held.
(f) Communication between the Trust and the Unitholders. As
described above, the Trust and the Funds will recognize the Depository or its nominee as the owner of all Units for all purposes
except as expressly set forth in this Trust Agreement. Conveyance of all notices, statements and other communications to Unitholders
will be effected as follows. Pursuant to the Depository Agreement, the Depository is required to make available to the Funds upon
request and for a fee to be charged to the Funds a listing of the Unit holdings of each DTC Participant. The Trust or the Funds
shall inquire of each such DTC Participant as to the number of Unitholders holding Units of a Fund, directly or indirectly, through
such DTC Participant. The Trust or the Funds shall provide each such DTC Participant with sufficient 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 Unitholders. In
addition, the Funds shall pay to each such DTC Participant an amount as reimbursement for the expenses attendant to such transmittal,
all subject to applicable statutory and regulatory requirements.
(g) Distributions. Any distributions on Units pursuant to Section
7.8 shall be made to the Depository or its nominee, Cede & Co., as the registered owner of all Units. The Trust and the Sponsor
expect that the Depository or its nominee, upon receipt of any payment of distributions in respect of Units, shall credit immediately
DTC Participants’ accounts with payments in amounts proportionate to their respective beneficial interests in Units as shown
on the records of the Depository or its nominee. The Trust and the Sponsor also expect that payments by DTC Participants to Indirect
Participants and Unitholders holding Units through such DTC Participants and Indirect 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 and Indirect
Participants. None of the Trust, the Funds, the Trustee or the
Sponsor will have any responsibility or liability for any aspects of the records relating to or notices to Unitholders, or payments
made on account of beneficial ownership interests in Units, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests or for any other aspect of the relationship between the Depository and the DTC Participants
or the relationship between such DTC Participants and the Indirect Participants and Unitholders owning through such DTC Participants
or Indirect Participants or between or among the Depository, any Unitholder and any person by or through which such Unitholder
is considered to own Units.
(h) Limitation of Liability. Each Global Certificate to be issued
hereunder is executed and delivered solely on behalf of the Trust by the Sponsor, as Sponsor, in the exercise of the powers and
authority conferred and vested in it by this Trust Agreement. The representations, undertakings and agreements made on the part
of the Trust in each Global Certificate are made and intended not as personal representations, undertakings and agreements by the
Sponsor or the Trustee, but are made and intended for the purpose of binding only the Trust. Nothing in the Global Certificate
shall be construed as creating any liability on the Sponsor or the Trustee, individually or personally, to fulfill any representation,
undertaking or agreement other than as provided in this Trust Agreement.
(i) Successor Depository. If a successor to The Depository Trust
Company shall be employed as Depository hereunder, the Trust and the Sponsor shall establish procedures acceptable to such successor
with respect to the matters addressed in this Section 4.6.
Section 4.7 Assets. All consideration received by a Fund
for the issue or sale of Units together with such Fund’s Trust Estate in which such consideration is invested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets,
shall belong to each Fund for all purposes, subject only to the rights of creditors of such Fund and except as may otherwise be
required by applicable tax laws, and shall be so recorded upon the books of account of such Fund.
Section 4.8 Liabilities of Funds.
(a) The Trust Estate belonging to each particular Fund shall
be charged with the liabilities of the Trust in respect of that Fund and only that Fund, and all expenses, costs, charges, indemnities
and reserves attributable to that Fund. Any general liabilities, expenses, costs, charges, indemnities or reserves of the Trust
which are not readily identifiable as belonging to any particular Fund shall be allocated and charged by the Sponsor to and among
any one or more of the Funds established and designated from time to time in such manner and on such basis as the Sponsor in its
sole discretion deems fair and equitable. Each allocation of liabilities, expenses, costs, charges and reserves by the Sponsor
shall be conclusive and binding upon all Unitholders for all purposes. The Sponsor shall have full discretion, to the extent not
inconsistent with applicable law, to determine which items shall be treated as income and which items as capital, and each such
determination and allocation shall be conclusive and binding upon the Unitholders. Every written agreement, instrument or other
undertaking made or issued by or on behalf of a particular Fund shall include a recitation limiting the obligation or claim represented
thereby to that Fund and its assets.
(b) Without limiting the foregoing provisions of this Section
4.8, but subject to the right of the Sponsor in its discretion to allocate general liabilities, expenses, costs, charges or reserves
as herein provided, the debts, liabilities, obligations and expenses (“Claims”) incurred, contracted for or otherwise
existing with respect to a particular Fund shall be enforceable against the assets of such Fund only, and not against the assets
of the Trust generally or of any other Fund. Notice of this limitation on inter-series liabilities is set forth in the Certificate
of Trust of the Trust as filed in the Office of the Secretary of State of the State of Delaware pursuant to the Delaware Trust
Statute, and upon the giving of such notice in the Certificate of Trust, the statutory provisions of Section 3804 of the Delaware
Trust Statute relating to limitations on inter-series liabilities (and the statutory effect under Section 3804 of setting forth
such notice in the Certificate of Trust) became applicable to the Trust and each Fund. Every Unit, note, bond, contract, instrument,
certificate or other undertaking made or issued by or on behalf of a particular Fund shall include a recitation limiting the obligation
on the Units represented thereby to that Fund and its assets, but the absence of such a provision shall not be construed as creating
recourse to any other Fund or any other person.
(c) Any agreement entered into by the Trust, any Fund, or the
Sponsor, on behalf of the Trust generally or any Fund, including, without limitation, the Purchase Order entered into with each
Authorized Purchaser, will include language substantially similar to the language set forth in Section 4.8(b).
Section 4.9 Voting Rights. The Unitholders shall have the
limited voting rights as set forth in this Agreement.
(a) Unless approved by at least a majority of the Unitholders
of the applicable Fund, the Sponsor shall not take any action or refuse to take any reasonable action the effect of which, if taken
or not taken, as the case may be, would be to cause the Fund, to the extent it would materially and adversely affect such Fund’s
Unitholders, to be taxable other than as a partnership for federal income tax purposes.
(b) Notwithstanding any other provision hereof, on each matter
submitted to a vote of the Unitholders, each Unitholder shall be entitled to a proportionate vote based upon the number of Units,
or fraction thereof, standing in its name on the books of the applicable Fund.
Section 4.10 Equality. Except as provided herein or in an instrument
establishing a Fund, all Units of a Fund shall represent an equal proportionate beneficial interest in the assets of the Fund subject
to the liabilities of the Fund, and each Unit shall be equal to each other Unit. The Sponsor may from time to time divide or combine
the Units into a greater or lesser number of Units without thereby changing the proportionate beneficial interest in the assets
of the Fund or in any way affecting the rights of Unitholders.
Section 4.11 Record Dates. Whenever any distribution will be
made, or whenever for any reason there is a split, reverse split or other change in the outstanding Units, or whenever the Sponsor
shall find it necessary or convenient in respect of any matter, the Sponsor in its sole discretion shall fix a record date for
the determination of the Unitholders who shall be entitled to receive such distribution or the net proceeds of the sale thereof,
or entitled to act in respect of any other matter for which the record date was set.
ARTICLE V
THE SPONSOR
Section 5.1 Management of the Trust. Pursuant to Section
3806(b)(7) of the Delaware Trust Statute, the Trust shall be managed by the Sponsor as an agent of the Trust and the conduct of
the Trust’s business shall be controlled and conducted solely by the Sponsor in accordance with this Trust Agreement.
Section 5.2 Authority of Sponsor. In addition to and not
in limitation of any rights and powers conferred by law or other provisions of this Trust Agreement, and except as limited, restricted
or prohibited by the express provisions of this Trust Agreement or the Delaware Trust Statute, the Sponsor shall have and may exercise
on behalf of the Trust, all powers and rights necessary, proper, convenient or advisable to effectuate and carry out the purposes,
business and objectives of the Trust, which shall include, without limitation, the following:
(a) To enter into, execute, deliver and maintain, and to cause
the Trust to perform its obligations under, contracts, agreements and any or all other documents and instruments, and to do and
perform all such things as may be in furtherance of Trust purposes or necessary or appropriate for the offer and sale of the Units
and the conduct of Trust activities;
(b) To establish, maintain, deposit into, sign checks and/or
otherwise draw upon accounts on behalf of the Trust with appropriate banking and savings institutions, and execute and/or accept
any instrument or agreement incidental to the Trust’s business and in furtherance of its purposes, any such instrument or
agreement so executed or accepted by the Sponsor in the Sponsor’s name shall be deemed executed and accepted on behalf of
the Trust by the Sponsor;
(c) To deposit, withdraw, pay, retain and distribute each Fund’s
Trust Estate or any portion thereof in any manner consistent with the provisions of this Trust Agreement;
(d) To supervise the preparation and filing of any Registration
Statement and supplements and amendments thereto;
(e) To adopt, implement or amend, from time to time, such disclosure
and financial reporting information gathering and control policies and procedures as are necessary or desirable to ensure compliance
with applicable disclosure and financial reporting obligations under any applicable securities laws;
(f) To make any necessary determination or decision in connection
with the preparation of the Trust’s financial statements and amendments thereto, and any Prospectus;
(g) To prepare, file and distribute, if applicable, any periodic
reports or updates that may be required under the Securities Exchange Act of 1934, the CE Act, or the rules and regulations thereunder;
(h) To pay or authorize the payment of distributions to the
Unitholders and expenses of each Fund;
(i) Subject to section 2.5(a), to make any elections on behalf
of the Trust under the Code, or any other applicable U.S. federal or state tax law, as the Sponsor shall determine to be in the
best interests of the Trust; and
(j) In the sole discretion of the Sponsor, to admit an Affiliate
or Affiliates of the Sponsor as additional Sponsors.
Section 5.3 Obligations of the Sponsor. In addition to the obligations
expressly provided by the Delaware Trust Statute or this Trust Agreement, the Sponsor shall:
(a) Devote such of its time to the business and affairs of the
Trust as it shall, in its discretion exercised in good faith, determine to be necessary to conduct the business and affairs of
the Trust for the benefit of the Trust and the Unitholders;
(b) Execute, file, record and/or publish all certificates, statements
and other documents and do any and all other things as may be appropriate for the formation, qualification and operation of the
Trust and for the conduct of its business in all appropriate jurisdictions;
(c) Appoint and remove independent public accountants to audit
the accounts of the Trust;
(d) Employ attorneys to represent the Trust;
(e) Use its best efforts to maintain the status of the Trust
as a “statutory trust” for state law purpose and as a “partnership” for U.S. federal income tax purposes;
(f) Invest, reinvest, hold uninvested, sell, exchange, write
options on, lease, lend and, subject to Section 5.4(b), pledge, mortgage and hypothecate the Trust Estate of each Fund in accordance
with the purposes of the Trust and the Registration Statement.
(g) Have fiduciary responsibility for the safekeeping and use
of the Trust Estate, whether or not in the Sponsor’s immediate possession or control;
(h) Enter into an Authorized Purchaser Agreement with each Authorized
Purchaser and discharge the duties and responsibilities of the Trust and the Sponsor thereunder;
(i) For each Fund, receive from Authorized Purchasers and process,
or cause the Distributor to process, properly submitted Purchase Orders, as described in Section 4.5(a)(i);
(j) For each Fund, in connection with Purchase Order, receive
Creation Basket Deposits from Authorized Purchasers;
(k) For each Fund, in connection with Purchase Order, deliver
or cause the delivery of Creation Baskets to the Depository for the account of the Authorized Purchaser submitting a Purchase Order
for which the Sponsor has received the requisite Transaction Fee and the Trust has received the requisite Deposit, as described
in Section 4.5(d);
(l) For each Fund, receive from Authorized Purchasers and process,
or cause the Distributor to process, properly submitted Redemption Orders, as described in Section 8.1(a), or as may from time
to time be permitted by Section 8.2;
(m) For each Fund, in connection with Redemption Orders, receive
from the redeeming Authorized Purchaser through the Depository, and thereupon cancel or cause to be cancelled, Units corresponding
to the Redemption Baskets to be redeemed as described in Section 8.1, or as may from time to time be permitted by Section 8.2;
(n) Interact with the Depository as required; and
(o) Delegate those of its duties hereunder as it shall determine
from time to time to one or more Administrators or commodity trading or other advisors.
Section 5.4 General Prohibitions. The Trust and each Fund,
as applicable, shall not:
(a) Borrow money from or loan money to any Unitholder (including
the Sponsor);
(b) Create, incur, assume or suffer to exist any lien, mortgage,
pledge, conditional sale or other title retention agreement, charge, security interest or encumbrance, except (i) liens for taxes
not delinquent or being contested in good faith and by appropriate proceedings and for which appropriate reserves have been established,
(ii) deposits or pledges to secure obligations under workmen’s compensation, social security or similar laws or under unemployment
insurance, (iii) deposits or pledges to secure contracts (other than contracts for the payment of money), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising in the ordinary course of business, (iv) mechanic’s,
warehousemen’s, carrier’s, workmen’s, materialmen’s or other like liens arising in the ordinary course
of business with respect to obligations which are not due or which are being contested in good faith, and for which appropriate
reserves have been established if required by generally accepted accounting principles, and liens arising under ERISA, or (v) the
deposit of margin or collateral with respect to the initiation and maintenance of Commodity Contract positions; or
(c) Operate the Trust or a Fund in any manner so as to contravene
the requirements to preserve the limitation on inter-series liability set forth in Section 3804 of the Delaware Trust Statute.
Section 5.5 Liability of Covered Persons. A Covered Person
shall have no liability to the Trust, any Fund, or to any Unitholder or other Covered Person for any loss suffered by the Trust
or any Fund which arises out of any action or inaction of such Covered Person if such Covered Person, in good faith, determined
that such course of conduct was in the best interest of the Trust or the applicable Fund and such course of conduct did not constitute
gross negligence or willful misconduct of such Covered Person. Subject to the foregoing, neither the Sponsor nor any other Covered
Person shall be personally liable for the return or repayment of all or any portion of the capital or profits of any Unitholder
or assignee thereof, it being expressly agreed that any such return of capital or profits made pursuant to this Trust Agreement
shall be made solely from the assets of the applicable Fund without any rights of contribution from the Sponsor or any other Covered
Person. A Covered Person shall not be liable for the conduct or willful misconduct of any Administrator or other delegatee selected
by the Sponsor with reasonable care, provided, however, that the Trustee and its Affiliates shall not under any circumstances be
liable for the
conduct or willful misconduct of any Administrator or other
delegatee or any other Person selected by the Sponsor to provide services to the Trust.
Section 5.6 Fiduciary Duty.
(a) To the extent that, at law (common or statutory) or in equity,
the Sponsor has duties (including fiduciary duties) and liabilities relating thereto to the Trust, the Funds, the Unitholders or
to any other Person, the Sponsor acting under this Trust Agreement shall not be liable to the Trust, the Funds, the Unitholders
or to any other Person for its good faith reliance on the provisions of this Trust Agreement subject to the standard of care set
forth in Section 5.5 herein. For the avoidance of doubt, to the fullest extent permitted by law, no person other than the Sponsor
and the Trustee shall have any duties (including fiduciary duties) or liabilities at law or in equity to the Trust, any Fund, any
Unitholder or any other person. The provisions of this Trust Agreement, to the extent that they restrict or eliminate the duties
and liabilities of the Sponsor or the Trustee otherwise existing at law or in equity, are agreed by the parties hereto to replace
such other duties and liabilities of the Sponsor or the Trustee.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between
the Sponsor or any of its Affiliates, on the one hand, and the Trust, any Fund or any Unitholder or any other Person, on the other
hand; or
(ii) whenever this Trust Agreement or any other agreement contemplated
herein or therein provides that the Sponsor shall act in a manner that is, or provides terms that are, fair and reasonable to the
Trust, any Fund, any Unitholder or any other Person, the Sponsor shall (i) resolve such conflict of interest, or (ii) take such
action or provide for such terms as are fair and reasonable to the Trust, any Fund, any Unitholder or any other Person, as applicable,
considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction
or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad faith by the Sponsor, the resolution, action or terms
so made, taken or provided by the Sponsor shall not constitute a breach of this Trust Agreement or any other agreement contemplated
herein or of any duty or obligation of the Sponsor at law or in equity or otherwise.
(c) The Sponsor and any Affiliate of the Sponsor may engage
in or possess an interest in other profit-seeking or business ventures of any nature or description, independently or with others,
whether or not such ventures are competitive with the Trust or any Fund, as applicable, and the doctrine of corporate opportunity,
or any analogous doctrine, shall not apply to the Sponsor. If the Sponsor acquires knowledge of a potential transaction, agreement,
arrangement or other matter that may be an opportunity for the Trust or any Fund, as applicable, it shall have no duty to communicate
or offer such opportunity to the Trust or any Fund, as applicable, and the Sponsor shall not be liable to the Trust, any Fund,
or to the Unitholders for breach of any fiduciary or other duty by reason of the fact that the Sponsor pursues or acquires for,
or directs such opportunity to, another Person or does not communicate such opportunity or information to the Trust or any Fund.
The Trust, the Funds and the Unitholders shall not have any rights or
obligations by virtue of this Agreement or the trust relationship
created hereby in or to such independent ventures or the income or profits or losses derived therefrom. The pursuit of such ventures,
even if competitive with the activities of the Trust or any Fund, shall not be deemed wrongful or improper. Except to the extent
expressly provided herein, the Sponsor may engage or be interested in any financial or other transaction with the Trust, the Funds,
the Unitholders or any Affiliate of the Trust or the Unitholders.
Section 5.7 Indemnification of the Sponsor.
(a) The Sponsor shall be indemnified by the Trust (or, in furtherance
of Section 4.8, by a Fund separately to the extent the matter in question relates to a single Fund or disproportionately affects
a specific Fund in relation to other Funds) against any losses, judgments, liabilities, expenses and amounts paid in settlement
of any claims sustained by it in connection with its activities for the Trust or any Fund, as applicable, provided that (i) the
Sponsor was acting on behalf of or performing services for the Trust or such Fund, as applicable, and has determined, in good faith,
that such course of conduct was in the best interests of the Trust or such Fund, as applicable, and such liability or loss was
not the result of gross negligence, willful misconduct, or a breach of this Trust Agreement on the part of the Sponsor, and (ii)
any such indemnification will only be recoverable from the Trust estate or the applicable estate of such Fund. All rights to indemnification
permitted herein and payment of associated expenses shall not be affected by the dissolution or other cessation to exist of the
Sponsor, or the withdrawal, adjudication of bankruptcy or insolvency of the Sponsor, or the filing of a voluntary or involuntary
petition in bankruptcy under Title 11 of the Bankruptcy Code by or against the Sponsor.
(b) Notwithstanding the provisions of this Section 5.7(a) above,
the Sponsor shall not be indemnified for any losses, liabilities or expenses arising from or out of an alleged violation of U.S.
federal or state securities laws unless (i) there has been a successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee and the court approves the indemnification of such expenses (including,
without limitation, litigation costs), (ii) such claims have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee and the court approves the indemnification of such expenses (including, without limitation,
litigation costs) or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee
and finds that indemnification of the settlement and related costs should be made.
(c) The Trust and the Funds shall not incur the cost of that
portion of any insurance which insures any party against any liability, the indemnification of which is herein prohibited.
(d) Expenses incurred in defending a threatened or pending civil,
administrative or criminal action suit or proceeding against the Sponsor shall be paid by the Trust in advance of the final disposition
of such action, suit or proceeding, if (i) the legal action relates to the performance of duties or services by the Sponsor on
behalf of the Trust or any Fund, as applicable; (ii) the legal action is initiated by a party other than the Trust or any Fund,
as applicable; and (iii) the Sponsor undertakes to repay the advanced funds with interest to the Trust or any Fund, as applicable,
in cases in which it is not entitled to indemnification under this Section 5.7.
(e) The term “Sponsor” as used only in this Section
5.7 shall include, in addition to the Sponsor, any other Covered Person performing services on behalf of the Trust or any Fund,
as applicable, and acting within the scope of the Sponsor’s authority as set forth in this Trust Agreement.
(f) In the event the Trust or any Fund, as applicable, is made
a party to any claim, dispute, demand or litigation or otherwise incurs any loss, liability, damage, cost or expense as a result
of or in connection with any Unitholder’s (or assignee’s) obligations or liabilities unrelated to the business of the
Trust or any Fund, as applicable, such Unitholder (or assignees cumulatively) shall indemnify, defend, hold harmless, and reimburse
the Trust or such Fund, as applicable, for all such loss, liability, damage, cost and expense incurred, including attorneys’
and accountants’ fees.
(g) The payment of any amount by the Trust pursuant to this
Section 5.7 shall be subject to Section 4.8 with respect to the allocation of liabilities and other amounts, as appropriate, among
the Funds.
Section 5.8 Expenses and Limitations Thereon.
(a) The Sponsor or an Affiliate of the Sponsor shall be responsible
for the payment of all Sponsor Expenses incurred in connection with the Trust or any Fund and the initial issuance of the Units
of any Fund.
“Sponsor Expenses” shall mean those expenses incurred
in connection with the formation, qualification and registration of the Trust, any Fund and the Units under applicable U.S. federal
and state law, and any other expenses actually incurred and, directly or indirectly, related to the organization of the Trust or
any Fund or the offering of a Fund’s Units prior to the time such Units begin trading on an Exchange, including, but not
limited to, expenses such as: (i) initial registration fees, prepaid licensing fees, filing fees, escrow fees and taxes, (ii) costs
of preparing, printing (including typesetting), amending, supplementing, mailing and distributing the Registration Statement, the
Exhibits thereto and the Prospectus for a Fund, (iii) the costs of qualifying, printing, (including typesetting), amending, supplementing,
mailing and distributing sales materials used in connection with the offering and issuance of the Units of a Fund, (iv) travel,
telephone and other expenses in connection with the offering and issuance of the Units of a Fund, (v) accounting, auditing and
legal fees (including disbursements related thereto) incurred in connection therewith, (vi) the routine expenses associated with
preparation of monthly, quarterly, annual and other reports required by applicable U.S. federal and state regulatory authorities,
and (vii) payment for fees associated with custody and transfer agency services, whether performed by an outside service provider
or by Affiliates of the Sponsor.
(b) Except as set forth in Article III and Sections 5.8(a),
all ongoing charges, costs and expenses of each Fund’s operation shall be billed to and paid by the applicable Fund. Such
costs and expenses shall include, without limitation: (i) the Sponsor’s fee in accordance with Section 5.9; (ii) brokerage
and other fees and commissions incurred in connection with the trading activities of the Funds; (iii) expenses incurred in connection
with registering additional Units of a Fund or offering Units of a Fund after the time any Units of such Fund have begun trading
on an Exchange; (iv) the routine expenses associated with distribution, including printing and mailing, of any monthly, annual
and other reports to Unitholders required by applicable U.S. federal and
state regulatory authorities; (v) fees and expenses associated
with compensation to the directors; (vi) payment for routine services of the Trustee, legal counsel and independent accountants;
(vii) payment for fees associated with tax accounting and reporting, routine accounting, bookkeeping, whether performed by an outside
service provider or by Affiliates of the Sponsor; (viii) postage and insurance, including directors and officers’ liability
insurance; (ix) costs and expenses associated with client relations and services; (x) the payment of any distributions related
to redemption of Units; (xi) payment of all federal, state, local or foreign taxes payable on the income, assets or operations
of the Fund and the preparation of all tax returns related thereto; and (xii) extraordinary expenses (including, but not limited
to, indemnification of any Person against liabilities and obligations to the extent permitted by law and required under this Agreement
and the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation and the incurring
of legal expense and the settlement of claims and litigation).
Section 5.9 Compensation to the Sponsor. The Sponsor shall
be entitled to receive a management fee as compensation for the management and administrative services rendered by Sponsor to the
Trust and each Fund (the “Management Fee”). Each Fund shall pay the Sponsor (or such other person or entity designated
by the Sponsor) the Management Fee as set forth in such Fund’s current Prospectus. The Sponsor may, in its sole discretion,
waive all or part of the Management Fee.
Section 5.10 Other Business of Unitholders. Except as otherwise
specifically provided herein, any of the Unitholders and any unitholder, officer, director, member, manager, employee or other
person holding a legal or beneficial interest in an entity which is a Unitholder, may engage in or possess an interest in other
business ventures of every nature and description, independently or with others, and the pursuit of such ventures, even if competitive
with the business of the Trust, shall not be deemed wrongful or improper.
Section 5.11 Merger, Consolidation, Incorporation.
(a) Notwithstanding anything else herein, the Sponsor may, without
Unitholder approval, (i) cause the Trust to convert into or merge, reorganize or consolidate with or into one or more trusts, partnerships,
limited liability companies, associations, corporations or other business entities (or a series of any of the foregoing to the
extent permitted by law) (including trusts, partnerships, limited liability companies, associations, corporations or other business
entities created by the Sponsor to accomplish such conversion, merger or consolidation), (ii) cause the Units to be exchanged under
or pursuant to any state or federal statute to the extent permitted by law, (iii) cause the Trust to incorporate under the laws
of a state, commonwealth, possession or colony of the United States, (iv) sell or convey all or substantially all of the assets
of the Trust or any Fund to another Fund of the Trust or to another trust, partnership, limited liability company, association,
corporation or other business entity (or a series of any of the foregoing to the extent permitted by law) (including a trust, partnership,
limited liability company, association, corporation or other business entity created by the Sponsor to accomplish such sale and
conveyance), organized under the laws of the United States or of any state, commonwealth, possession or colony of the United States,
for adequate consideration as determined by the Sponsor which may include the assumption of all outstanding obligations, taxes
and other liabilities, accrued or contingent of the Trust or any affected Fund, and which may include Units of such other Fund
of the Trust or shares of beneficial interest, stock or other ownership interest
of such trust, partnership, limited liability company, association,
corporation or other business entity (or series thereof) or (v) at any time sell or convert into money all or any part of the assets
of the Trust or any Fund thereof.
(b) Pursuant to and in accordance with the provisions of Section
3815(f) of the Delaware Trust Statute and notwithstanding anything to the contrary contained in this Trust Agreement, an agreement
of merger or consolidation approved by the Sponsor in accordance with this Section 5.11 may effect any amendment to the Trust Agreement
(other than an amendment adverse to the Trustee without its consent) or effect the adoption of a new trust agreement of the Trust
or change the name of the Trust if the Trust is the surviving or resulting entity in the merger or consolidation.
(c) Notwithstanding anything else herein, the Sponsor may, without
Unitholder approval, create one or more statutory or business trusts to which all or any part of the assets, liabilities, profits
or losses of the Trust or any Fund thereof may be transferred and may provide for the conversion of Units in the Trust or any Fund
thereof into beneficial interests in any such newly created trust or trusts or any series or classes thereof.
Section 5.12 Withdrawal of the Sponsor.
(a) The Sponsor may withdraw voluntarily as the Sponsor of the
Trust only upon ninety (90) days’ prior notice to all Unitholders and the Trustee. If the Sponsor withdraws and a successor
Sponsor is selected in accordance with Section 14.1(a)(ii), the withdrawing Sponsor shall pay all expenses as a result of its withdrawal.
(b) The Sponsor will not cease to be a Sponsor of the Trust
merely upon the occurrence of its making an assignment for the benefit of creditors, filing a voluntary petition in bankruptcy,
filing a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, filing an answer or other pleading admitting or failing to contest material
allegations of a petition filed against it in any proceeding of this nature or seeking, consenting to or acquiescing in the appointment
of a trustee, receiver or liquidator for itself or of all or any substantial part of its properties.
(c) In connection with any Event of Withdrawal, the Sponsor
shall not cease to be a Sponsor of the Trust, or to have the power to exercise any rights or powers as a Sponsor, or to have liability
for the obligations of the Trust under Section 2.6 hereof, until a substitute Sponsor, which shall carry on the business of the
Trust, has been admitted to the Trust or until the Trust has been terminated in accordance with Section 14.1.
(d) To the full extent permitted by law, nothing in this Trust
Agreement shall be deemed to prevent the merger of the Sponsor with another corporation or other entity, the reorganization of
the Sponsor into or with any other corporation or other entity, the transfer of all the capital stock of the Sponsor or the assumption
of the rights, duties and liabilities of the Sponsor by, in the case of a merger, reorganization or consolidation, the surviving
corporation or other entity by operation of law or the transfer of the Sponsor’s Units to an Affiliate of the Sponsor. Without
limiting the foregoing, none of the transactions referenced in the preceding sentence shall be
deemed to be a voluntary withdrawal for purposes of Section
5.12(a) or an Event of Withdrawal or assignment of Units for purposes of Section 6.2(a).
(e) The Sponsor may be removed as Sponsor of the Trust only
if such removal is approved by the Unitholders holding at least 66 2/3% of the outstanding Units (excluding for this purpose any
Units held by the Sponsor and its Affiliates). Any such action by such holders for removal of the Sponsor of the Trust must also
provide for the election of a successor Sponsor of the Trust by the Unitholders holding a majority of the outstanding Units (excluding
for this purpose any Units held by the Sponsor and its Affiliates). Such removal shall be effective immediately following the admission
of a successor Sponsor of the Trust.
Section 5.13 Authorization of Registration Statements. Each
Unitholder (or any permitted assignee thereof) hereby agrees that the Sponsor, the Trust, and the Trustee are authorized to execute,
deliver and perform the agreements, acts, transactions and matters contemplated hereby or described in or contemplated by any Registration
Statement on behalf of the Trust without any further act, approval or vote of the Unitholders of the Funds, notwithstanding any
other provision of this Trust Agreement, the Delaware Trust Statute or any applicable law, rule or regulation.
Section 5.14 Litigation. The Sponsor is hereby authorized to
prosecute, defend, settle or compromise actions or claims at law or in equity as may be necessary or proper to enforce or protect
the interests of the Trust or any Fund, as applicable. The Sponsor shall satisfy any judgment, decree or decision of any court,
board or authority having jurisdiction or any settlement of any suit or claim prior to judgment or final decision thereon, first,
out of any insurance proceeds available therefor, next, out of the assets of the applicable Fund, or with respect to the Trust,
out of the Funds’ assets on a pro rata basis and, thereafter, out of the assets (to the extent that it is permitted to do
so under the various other provisions of this Trust Agreement) of the Sponsor.
ARTICLE VI
TRANSFERS OF UNITS
Section 6.1 Transfer of Units. To the fullest extent permitted
by law, a Unitholder may not transfer his Units or any part of his right, title and interest in the capital or profits in any Fund
except as permitted in this Article VI and any act in violation of this Article VI shall not be binding upon or recognized by the
Trust (regardless of whether the Sponsor shall have knowledge thereof), unless approved in writing by the Sponsor. Unitholders
that are not DTC Participants may transfer Units by instructing the DTC Participant or Indirect Participant holding the Units for
such Unitholder in accordance with standard securities industry practice. Unitholders that are DTC Participants may transfer Units
by instructing the Depository in accordance with the rules of the Depository and standard securities industry practice.
Section 6.2 Transfer of Sponsor’s Units. Upon the Sponsor
ceasing to serve as Sponsor of the Trust, the Sponsor’s Units shall be purchased by the Trust for a purchase price in cash
equal to the Net Asset Value thereof.
ARTICLE VII
CAPITAL ACCOUNTS, DISTRIBUTIONS AND ALLOCATIONS
Section 7.1 Capital Accounts.
(a) There shall be established on the books and records of each
Fund for each Unitholder a separate account (a “Capital Account”), which shall be determined in accordance with the
following provisions:
(i) A Unitholder’s Capital Account shall be increased
by such Unitholder’s Capital Contributions to the Fund and by any income or gain (including income and gain exempt from tax)
computed in accordance with Section 7.1(b) and allocated to such Unitholder pursuant to Section 7.2.
(ii) A Unitholder’s Capital Account shall be decreased
by the amount of cash distributed to such Unitholder pursuant to any provision of this Agreement and by any expenses, deductions
or losses computed in accordance with section 7.1(b) and allocated to such Unitholder pursuant to Section 7.2.
(b) For purposes of computing the amount of any item of income,
gain, deduction, expense or loss to be reflected in a Unitholder’s Capital Account, the determination, recognition and classification
of any such item shall be the same as its determination, recognition and classification for federal income tax purposes pursuant
to Code section 703(a); provided, that:
(i) Items described in Section 705(a)(2)(B) of the Code shall
be treated as items of deduction. All fees and other expenses incurred by the Fund to promote the sale of (or to sell) a Unit that
can neither be deducted nor amortized under section 709 of the Code shall, for purposes of Capital Account maintenance, be treated
as an item described in Section 705(a)(2)(B) of the Code.
(ii) Except as otherwise provided in Treasury Regulations section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election
under Section 754 of the Code.
(iii) In computing income, gain, deduction, expense or loss
for Capital Account purposes, the amount of such item shall be determined taking into account the book value of the Fund’s
property, as adjusted pursuant to Section 7.1(c) .
(c) Consistent with the provisions of Treasury Regulations section
1.704-1(b)(2)(iv)(f), upon an issuance or redemption of Units, in connection with the dissolution, liquidation or termination of
a Fund, or otherwise as appropriate pursuant to generally accepted industry accounting practices, the Capital Accounts of all Unitholders
may, immediately prior to such issuance, redemption, dissolution, liquidation, termination, or otherwise, be adjusted (consistent
with the provisions hereof) upwards or downwards to reflect any Unrealized Gain or Unrealized Loss attributable to Fund property,
as if such Unrealized Gain or Unrealized Loss had been recognized upon an actual sale of such property, immediately prior to such
issuance, redemption, dissolution, liquidation, termination, or otherwise, and had been allocated to the Unitholders at such time
pursuant to Section 7.2. Pursuant to Treasury Regulations section 1.704-1(b)(2)(iv)(g), appropriate adjustments shall be made to
the book value of a Fund’s property with Unrealized
Gain or Unrealized Loss. Proper adjustment shall be made to
the amount of any Capital Account adjustment under this Section 7.1(c) to take into account any prior Capital Account adjustment
under this Section.
(d) In the event a Unit (or beneficial interest therein) is
transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor
to the extent it relates to the transferred Unit.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with section 1.704-1(b) of the Treasury regulations, and
shall be interpreted and applied in a manner consistent with such regulations. In the event the Sponsor shall determine that it
is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto are computed in order to comply
with such regulations, it may make such modification. The Sponsor also shall (i) make any adjustments that are necessary or appropriate
to maintain equality between the aggregate Capital Accounts of the Unitholders and the amount of capital reflected on a Fund’s
balance sheet, as computed for book purposes, in accordance with Treasury Regulations section 1.704-1(b)(2)(iv)(q) and (ii) make
any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Treasury
Regulations section 1.704-1(b).
Section 7.2 Allocations for Capital Account Purposes.
(a) For purposes of maintaining Capital Accounts and in determining
the rights of the Unitholders among themselves, except as otherwise provided in this Section 7.2 each item of income, gain, loss,
expense and deduction (computed in accordance with Section 7.1(b)) shall be allocated to the Unitholders in accordance with their
respective Percentage Interests.
(b) Pursuant to Treasury Regulations section 1.704-1(b)(2)(iv)(g),
items of depreciation, depletion, amortization and gain or loss attributable to Adjusted Property that has a Book-Tax Disparity
shall be allocated among the Unitholders in accordance with Treasury Regulations section 1.704-1(b)(2)(iv)(g)(3).
(c) If any Unitholder unexpectedly receives any adjustments,
allocations or distributions described in Treasury Regulations section 1.704-1(b)(2)(ii)(d)(5) or 1.704- 1(b)(2)(ii)(d)(6), items
of a Fund’s income and gain shall be specially allocated to such Unitholder in an amount and manner sufficient to eliminate
a deficit balance in its Capital Account (after decreasing such Unitholder’s Capital Account balance by the items described
in Treasury Regulations section 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6)) created by such adjustments, allocations or
distributions as quickly as possible. This Section 7.2(c) is intended to constitute a “qualified income offset” within
the meaning of Treasury Regulations section 1.704-1(b)(2)(ii)(d).
Section 7.3 Allocations for Tax Purposes.
(a) For U.S. federal income tax purposes, except as otherwise
provided in this Section 7.3, each item of income, gain, loss, deduction and credit of a Fund shall be allocated among the Unitholders
in accordance with their respective Percentage Interests.
(b) In an attempt to eliminate Book-Tax Disparities attributable
to Adjusted Property, items of income, gain, or loss shall be allocated for U.S. federal income tax purposes among the Unitholders
under the principles of the remedial method of Treasury Regulations section 1.704-3(d).
(c) If any Unitholder unexpectedly receives any adjustments,
allocations or distributions described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d), items of income and gain shall be
specially allocated to such Unitholder in an amount and manner consistent with the allocations of income and gain pursuant to Section
7.2(c).
(d) The provisions of this Article VII and the other provisions
of this Trust Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations section
1.704-1(b) and shall be interpreted and applied in a manner consistent with such Regulations. The Sponsor or Administrator shall
be authorized to make appropriate amendments to the allocations of items pursuant to this Section 7.3 if necessary in order to
comply with Section 704 of the Code or applicable Treasury Regulations thereunder.
Section 7.4 Tax Conventions.
(a) For purposes of Sections 7.1, 7.2, and 7.3, the Sponsor
or Administrator shall adopt such conventions as may be necessary, appropriate or advisable in the Sponsor’s reasonable discretion
in order to comply with applicable law, including Section 706 of the Code and the Treasury Regulations or rulings promulgated thereunder.
The Sponsor may revise, alter or otherwise modify such conventions in accordance with the standard established in the previous
sentence.
(b) Unless the Sponsor determines that another convention is
necessary or appropriate in the Sponsor’s reasonable discretion in order to comply with applicable law, each Fund shall use
the monthly convention described in this section 7.4(b).
(i) All issuances, redemptions and transfers of Units or beneficial
interests therein shall be deemed to take place at a price (the “single monthly price”) equal to the value of such
Unit or beneficial interest therein at the end of the Business Day during the month in which the issuance, redemption or transfer
takes place on which the value of a Unit is lowest. Accordingly, in determining Unrealized Gain or Unrealized Loss and in making
the adjustments provided for by Section 7.1(c), the fair market value of all Fund property immediately prior to the issuance, redemption
or transfer of Units shall be deemed to be equal to the lowest value of such property (as determined under Section 7.6) during
the month in which such Units are issued or redeemed. In the event that a Fund makes an election under Section 754 of the Code,
adjustments to be made under Sections 734(b) and 743(b) of the Code will be made using the same monthly convention, including by
reference to the single monthly price.
(ii) All property contributed to a Fund shall be deemed to have
a value equal to the value of such property (determined under principles similar to those described in Section 7.6) on the date
of such contribution. All purchases and sales of property, however, shall be treated as taking place at a price equal to the purchase
or sale price of the property, respectively.
(iii) In general, each item of a Fund’s income, gain,
expense, loss, deduction and credit shall, for U.S. federal income tax purposes, be determined for each calendar month during a
taxable period based on an interim closing of the books and shall be allocated solely to the Unitholders recognized as unitholders
of a Fund as of the close of business on the last trading day of the preceding calendar month. For this purpose, any transfer of
a Unit during a calendar month shall be treated as being effective immediately prior to the close of business on the last trading
day of a calendar month. Notwithstanding the foregoing, unless the Sponsor determines that another method is necessary or appropriate
in the Sponsor’s reasonable discretion, gain or loss on a sale or other disposition of all or a substantial portion of the
assets of a Fund (or, in the Sponsor’s sole discretion, other sales or dispositions of assets if appropriate to more accurately
allocate such gain and loss to Unitholders in a manner that corresponds to their economic gain and loss) shall be allocated to
the Unitholders who own Units as of the close of the day in which such gain or loss is recognized for federal income tax purposes.
Investors who hold a Unit on the last trading day of the first month of a Fund’s operation will be allocated the tax items
for that month, as well as the tax items for the following month, attributable to the Unit.
(c) The allocations pursuant to Section 7.4(b) are intended
to constitute a reasonable method of allocation in accordance with Treasury Regulations section 1.706-1(c)(2)(ii) and to take into
account a Unitholder’s or Unitholders’ varying Units during the taxable year of any issuance, redemption or transfer
of Units or beneficial interests therein. Any person who is the transferee of Units shall be deemed to consent to the methods of
determination and allocation set forth in Section 7.4(b), and in any other provision of this Article VII, as a condition of receiving
such Units.
Section 7.5 No Interest on Capital Account. No Unitholder
shall be entitled to interest on its Capital Account.
Section 7.6 Valuation.
(a) For purposes of determining the Net Asset Value of a Fund,
the Trust will value all property at (A) its current market value, if quotations for such property are readily available or (B)
its fair value, as reasonably determined by the Sponsor, if the current market value cannot be determined.
(b) The Sponsor may (but is not required to) employ the services
of, and rely upon the reports of, a recognized pricing service. If the Sponsor determines that the procedures in this Section are
an inappropriate basis for the valuation of the Trust’s assets, it shall determine an alternative basis to be employed. The
Sponsor shall not be liable to any Person for any determination as to the alternative basis for evaluation, provided that such
determination is made in good faith.
Section 7.7 Distributions.
(a) Distributions on Units of a Fund may be paid with such frequency
as the Sponsor may determine, which may be daily or otherwise, to the Unitholders in accordance with Section 4.6(g) from such of
the income and capital gains, accrued or realized, from each Trust Estate, after providing for actual and accrued liabilities.
Such distributions shall be made in cash or, at the sole discretion of the Sponsor, in property.
(b) Distributions from a Fund upon the occurrence of a redemption
or upon dissolution, liquidation or termination pursuant to Sections 8.1 and 14.2 of this Trust Agreement will be in the form of
property and/or cash as determined by such sections, as applicable; provided that amounts received by Unitholders in the case of
distributions upon dissolution, liquidation or termination shall be in accordance with Capital Accounts as provided in Treasury
Regulations section 1.704-1(b)(2)(ii)(b).
(c) Notwithstanding any provision to the contrary contained
in this Trust Agreement, a Fund shall not be required to make a distribution with respect to Units if such distribution would violate
the Delaware Trust Statute or any other applicable law. A determination that a distribution is not prohibited under this Section
7.8 or the Delaware Trust Statute shall be made by the Trust and, to the fullest extent permitted by applicable law, may be based
either on financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances
or on a fair valuation or any other method that is reasonable under the circumstances. Unless otherwise agreed to by the Unitholders,
a Unitholder shall be entitled only to the distributions expressly provided for in this Trust Agreement.
(d) Notwithstanding anything to the contrary contained in this
Trust Agreement, the Unitholders understand and acknowledge that a Unitholder (or its agent) may be compelled to accept a distribution
of any asset in kind from a Fund despite the fact that the percentage of the asset distributed to such Unitholder (or its agent)
exceeds the percentage of that asset which is equal to the percentage in which such Unitholder receives distributions from the
Trust.
ARTICLE VIII
REDEMPTIONS
Section 8.1 Redemption of Redemption Baskets. The following
procedures, as supplemented by the more detailed procedures specified in the attachment to the applicable Authorized Purchaser
Agreement, which may be amended from time to time in accordance with the provisions of such Authorized Purchaser Agreement (and
any such amendment will not constitute an amendment of this Trust Agreement), will govern the Trust and the Funds with respect
to the redemption of Redemption Baskets.
(a) On any Business Day, an Authorized Purchaser with respect
to which an Authorized Purchaser Agreement is in full force and effect (as reflected on the list maintained by the Sponsor pursuant
to Section 4.5(a)(i)) may redeem one or more Redemption Baskets standing to the credit of the Authorized Purchaser on the records
of the Depository by delivering a request for redemption to the Sponsor or its designee (such request, a “Redemption Order”)
in the manner specified in the procedures described in the attachment to the Authorized Purchaser Agreement, as amended from time
to time in accordance with the provisions of the Authorized Purchaser Agreement (and any such amendment will not constitute an
amendment of this Trust Agreement).
(b) To be effective, a Redemption Order must be submitted on
a Business Day by the Order Cut-Off Time in form satisfactory to the Sponsor (the Business Day on which the Redemption Order is
so submitted, the “Redemption Order Date”). The Sponsor acting by itself or through the Marketing Agent may, in its
sole discretion, reject any Redemption Order (i) the Sponsor determines that the Redemption Order is not in proper form (ii) the
fulfillment of which its counsel advises may be illegal under applicable laws and regulations, or (iii) if circumstances outside
the control of the Sponsor, the Marketing Agent or the Custodian make it for all practical purposes not feasible for the Units
to be delivered under the Redemption Order. The Sponsor may also reject a redemption order if the number of units being redeemed
would reduce the remaining outstanding units to 100,000 units (i.e., two baskets) or less, unless the Sponsor has reason to believe
that the placer of the redemption order does in fact possess all the outstanding units and can deliver them.
(c) The redemption distribution (“Redemption Distribution”)
shall consist of cash or a combination of United States Treasury securities, cash and/or cash equivalents. The Sponsor determines,
in its sole discretion or in consultation with the Administrator, the requirements for securities and/or property that may be included
in Redemption Distributions and publishes, or its agent publishes on its behalf, such requirements at the beginning of each Business
Day.
(d) By 3:00 PM New York time on the third Business Day following
the Redemption Order Date (the “Redemption Settlement Time”), if the Distributor’s account at the Depository
has by the Redemption Settlement Time been credited with the Redemption Baskets being tendered for redemption and the Sponsor has
by such time received the Transaction Fee, the Sponsor shall deliver the Redemption Distribution through the Depository to the
account of the Authorized Purchaser as recorded on the book entry system of the Depository. If the Fund’s DTC account has
not been credited with all of the Redemption Baskets by such time, the redemption distribution is delivered to the extent of whole
Redemption Baskets received. Any remainder of the redemption distribution is delivered on the next Business Day to the extent of
remaining whole Redemption Baskets received if the Fund receives the fee applicable to the extension of the Redemption Distribution
Date which the Sponsor may, from time to time, determine and the remaining Redemption Baskets are credited to the Fund’s
DTC account by 3:00 PM New York time on such next Business Day. Any further remaining amount of the Redemption Order shall be cancelled
and the Authorized Purchaser will indemnify the Trust for any losses, if any, due to such cancellation, including but not limited
to the difference in the price of investments sold as a result of the Redemption Order and investments made to reflect that such
Redemption Order has been cancelled.
(e) The Sponsor may, in its discretion, suspend the right of
redemption or postpone the Redemption Settlement Date for a Fund (i) for any period during which the Exchange or the Fund’s
Futures Exchange is closed other than customary weekend or holiday closings, or trading on the Exchange or the Fund’s Futures
Exchange is suspended or restricted; (ii) for any period during which an emergency exists as a result of which delivery of Redemption
Distributions is not reasonably practicable; or (iii) for such other period as the Sponsor determines to be necessary for the protection
of Unitholders. Neither the Sponsor nor its designees will be liable to any person or in any way for any loss or damages that may
result from any such suspension or postponement.
(f) Redemption Baskets effectively redeemed pursuant to the
provisions of this Section 8.1 shall be cancelled by the Trust or the applicable Fund in accordance with the Depository’s
procedures, and no longer be deemed outstanding for purposes of this Trust Agreement and the Delaware Trust Statute.
Section 8.2 Other Redemption Procedures. The Sponsor from
time to time may, but shall have no obligation to, establish procedures with respect to redemption of Units in (i) lot sizes smaller
than the Redemption Basket, (ii) permitting the Redemption Distribution to be in a form, and delivered in a manner, other than
that specified in Section 8.1, and (iii) for redemptions deemed necessary, in the Sponsor’s sole discretion, to comply with
applicable law, rule, regulation or policy.
ARTICLE IX
UNITHOLDERS
Section 9.1 No Management or Control; Limited Liability;
Exercise of Rights through DTC. The Unitholders of a Fund shall not participate in the management or control of the Trust or the
applicable Fund or the applicable Fund’s business, shall not transact any business for the Trust or any Fund and shall not
have the power to sign for or bind the Trust or any Fund, said power being vested solely and exclusively in the Sponsor. Except
as provided in Section 9.3 hereof, no Unitholder of any Fund shall be bound by, or be personally liable for, the expenses, liabilities
or obligations of the Trust, the applicable Fund or any other series of the Trust except to the extent of such Unitholder’s
proportionate share of the applicable Fund’s Trust Estate. Except as provided in Section 9.3 hereof, each Unit shall be fully
paid and no assessment shall be made against any Unitholder. No salary shall be paid to any Unitholder in its capacity as such,
nor shall any Unitholder have a drawing account or earn interest on its share of a Fund’s Trust Estate. By the purchase and
acceptance or other lawful delivery and acceptance of Units, each Unitholder shall be deemed to be a beneficiary of the applicable
Fund and vested with beneficial undivided interest in such Fund to the extent of the Units owned beneficially by such Unitholder,
subject to the terms and conditions of this Trust Agreement. The rights under this Trust Agreement of any Unitholder that is not
a DTC Participant must be exercised by a DTC Participant acting on behalf of such Unitholder in accordance with the rules and procedures
of the Depository, as provided in Section 4.6.
Section 9.2 Rights and Duties. The Unitholders shall have
the following rights, powers, privileges, duties and liabilities:
(a) The Unitholders shall have the right to obtain from the
Sponsor the reports and information as are set forth in Article X and the list of Authorized Purchasers contemplated by Section
4.5(a)(i). The foregoing rights are in addition to, and do not limit, other remedies available to Unitholders under U.S. federal
or state law.
(b) The Unitholders shall receive the share of the distributions
provided for in this Trust Agreement in the manner and at the times provided for in this Trust Agreement.
(c) Except for the Unitholders’ redemption rights set
forth in Article VIII hereof, Unitholders of a Fund shall have the right to demand the return of their capital only upon the dissolution
and winding up of the applicable Fund or the Trust and only to the extent of funds available therefore. In no event shall a Unitholder
of a Fund be entitled to demand property other than cash unless the Sponsor, as determined in its sole discretion, has specified
property for distribution to all Unitholders of such Fund, or the Trust, as applicable. No Unitholder of any Fund shall have priority
over any other Unitholder of such Fund either as to the return of capital or as to profits, losses or distributions. No Unitholder
of any Fund shall have the right to bring an action for partition against the Trust or a Fund.
(d) Unitholders, voting together as a single class, or, if the
proposed change affects only certain Funds, of each affected Fund voting separately as a class, may vote to (i) approve the items
set forth in 4.9(a), (ii) remove the Sponsor and elect a successor Sponsor as set forth in Section 5.12(e), (iii) approve amendments
to this Trust Agreement as set forth in Section 12.1, (iv) continue the Trust as provided in Section 14.1(a), (v) terminate the
Trust as provided in Section 14.1(e), and (vi) in the event there is no Sponsor, elect the Liquidating Trustee as set forth in
Section 14.2. Unless otherwise specified in the relevant section of this Trust Agreement or in federal law or regulations of rules
on any exchange, any matter upon which the Unitholders vote shall be approved by the affirmative vote of Unitholders holding Units
representing at least 66 2/3% of the outstanding Units of the Trust or the applicable Fund, as the case may be. Except as expressly
provided in this Trust Agreement, the Unitholders shall have no voting or other rights with respect to the Trust or any Fund.
Section 9.3 Limitation on Liability.
(a) Except as provided in Section 5.7(f) hereof, and as otherwise
provided under Delaware law, the Unitholders shall be entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the general corporation law of the State of Delaware and no Unitholder shall
be liable for claims against, or debts of the Trust or the applicable Fund in excess of its Deposit or share of the applicable
Fund’s Trust Estate and undistributed profits. In addition, and subject to the exceptions set forth in the immediately preceding
sentence, the Trust or the applicable Fund shall not make a claim against a Unitholder with respect to amounts distributed to such
Unitholder or amounts received by such Unitholder upon redemption unless, under Delaware law, such Unitholder is liable to repay
such amount.
(b) The Trust or the applicable Fund indemnifies to the full
extent permitted by law and the other provisions of this Trust Agreement, and to the extent of the applicable Fund’s Trust
Estate, each Unitholder and its agent or nominee against any claims of liability asserted against such Unitholder solely based
on its status as a Unitholder of one or more Units (other than for taxes for which such Unitholder is liable under Section 7.2
hereof).
(c) Every written note, bond, contract, instrument, certificate
or undertaking made or issued by the Sponsor on behalf of the Trust or a Fund shall give notice to the effect that the same was
executed or made by or on behalf of the Trust or the applicable Fund and that the obligations of such instrument are not binding
upon the Unitholders individually but are binding only upon the assets and property of the applicable Fund, and no resort shall
be had to the Unitholders’ personal property for satisfaction of any obligation or claim thereunder, and appropriate
references may be made to this Trust Agreement and may contain
any further recital which the Sponsor deems appropriate, but the omission thereof shall not operate to bind the Unitholders individually
or otherwise invalidate any such note, bond, contract, instrument, certificate or undertaking. Nothing contained in this Section
9.3 shall diminish the limitation on the liability of the Trust to the extent set forth in Section 4.7 and 4.8 hereof.
ARTICLE X
BOOKS OF ACCOUNT AND REPORTS
Section 10.1 Books of Account. Proper books of account for
each Fund shall be kept and shall be audited annually by an independent certified public accounting firm selected by the Sponsor
in its sole discretion, and there shall be entered therein all transactions, matters and things relating to each Fund’s business
as are required by the CE Act and regulations promulgated thereunder, and all other applicable rules and regulations, and as are
usually entered into books of account kept by Persons engaged in a business of like character. The books of account shall be kept
at the principal office of the Trust and, subject to Section 9.2(a), each Unitholder (or any duly constituted designee of a Unitholder)
shall have, at all times during normal business hours, upon reasonable advance written notice, access to and the right to inspect
and copy the same (at such Unitholder’s own cost) to the extent such access is required under CFTC rules and regulations.
Such books of account shall be kept in accordance with, and the Trust shall report its profits and losses on, the accrual method
of accounting for financial accounting purposes on a Fiscal Year basis as described in Article XI.
Section 10.2 Reports to Unitholders. The Trust will furnish
to DTC Participants for distribution to each Fund’s Unitholders monthly and annual (as of the end of each fiscal year) reports
(in such detail) as are required to be provided to Unitholders by the CFTC and the NFA. Monthly reports will contain certain unaudited
financial information regarding a Fund, including the Fund’s NAV, and annual reports will contain financial statements prepared
by the Sponsor and audited by an independent registered public accounting firm designated by the Sponsor. The Sponsor will furnish
to Fund Unitholders any other reports or information which the Sponsor, in its discretion, determines to be necessary or appropriate.
In addition, it is expected that the Trust will be required under SEC rules to file quarterly and annual reports with the SEC,
which need not be sent to Fund Unitholders directly but will be publicly available through the SEC. The Trust will post the same
information that would otherwise be provided in the Trust’s CFTC, NFA and SEC reports on the Trust’s website.
Section 10.3 Calculation of Net Asset Value. Net Asset Value
of a Fund shall be calculated once each Business Day at such time as the Sponsor shall determine from time to time.
Section 10.4 Maintenance of Records. The Sponsor shall maintain:
(a) for a period of at least six Fiscal Years all books of account required by Section 10.1 hereof, a list of the names and last
known address of, and number of Units owned by, all Unitholders of each Fund, a copy of the Certificate of Trust and all certificates
of amendment thereto, together with executed copies of any powers of attorney pursuant to which any certificate has been executed,
and copies of the
Trust’s and Funds’ federal, state and local income
tax returns and reports, if any; and (b) for a period of at least six Fiscal Years, copies of any effective written trust agreements,
subscription agreements and any financial statements of the Trust and the Funds. The Sponsor may keep and maintain the books and
records of the Trust and the Funds in paper, magnetic, electronic or other format as the Sponsor may determine in its sole discretion,
provided the Sponsor uses reasonable care to prevent the loss or destruction of such records.
ARTICLE XI
FISCAL YEAR
Section 11.1 Fiscal Year. The Fiscal Year of the Trust shall
be July 1 to June 30. The first Fiscal Year of the Trust shall commence on the date of filing of the Certificate of Trust and end
on the thirtieth day of June, 2015. The Fiscal Year in which the Trust shall terminate shall end on the date of termination.
ARTICLE XII
AMENDMENT OF TRUST AGREEMENT; MEETINGS
Section 12.1 Amendments to the Trust Agreement.
(a) The Sponsor may, without the approval of the Unitholders,
amend or supplement this Trust Agreement; provided, however, that the Unitholders shall have the right to vote on any amendment
(i) if expressly required under federal law or regulations or rules of any exchange, or (ii) submitted to them by the Sponsor in
its sole discretion. The Sponsor shall provide to the Unitholders notice of any amendment on which the Unitholders have a right
to vote setting forth the substance of the amendment and its effective date.
(b) Upon amendment of this Trust Agreement, the Certificate
of Trust shall also be amended, if required by the Delaware Trust Statute, to reflect such change.
(c) No amendment shall be made to this Trust Agreement without
the consent of the Trustee if it reasonably believes that such amendment adversely affects any of the rights, duties or liabilities
of the Trustee. At the expense of the Sponsor, the Trustee shall execute and file any amendment to the Certificate of Trust if
so directed by the Sponsor or if such amendment is required in the opinion of the Trustee.
(d) The Trustee shall be under no obligation to execute any
amendment to the Trust Agreement or any agreement to which the Trust is a party until it has received an instruction letter from
the Sponsor, in form and substance reasonably satisfactory to the Trustee (i) directing the Trustee to execute such amendment,
(ii) representing and warranting to the Trustee that such execution is authorized and permitted by the terms of the Trust Agreement
and (if applicable) such other agreement to which the Trust is a party and does not conflict with or violate any other agreement
to which the Trust is a party and (iii) confirming that such
execution and acts related thereto are covered by the indemnity provisions of the Trust Agreement in favor of the Trustee and do
not adversely affect the Trustee.
(e) No provision of this Trust Agreement may be amended, waived
or otherwise modified orally but only by a written instrument adopted in accordance with this Section.
Section 12.2 Meetings of the Unitholders. Meetings of the
Unitholders may be called by the Sponsor and the Sponsor may, but is not required to, call a meeting upon the written request of
Unitholders holding at least 50% of the outstanding Units of all Funds or any Fund, as applicable. The Sponsor shall deposit in
the United States mail or electronically transmit written notice to all Unitholders of the applicable Fund of the meeting and the
purpose of the meeting, which shall be held on a date, not less than 30 nor more than 60 days after the date of mailing of said
notice, at a reasonable time and place. Where the meeting is being called upon the written request of Unitholders as set forth
in this Section 12.2, such written notice shall be mailed or transmitted not more than forty-five (45) days after such written
request for a meeting was received by the Sponsor. Any notice of meeting shall be accompanied by a brief description of the purpose
of the meeting. Unitholders may vote in person or by proxy at any such meeting. The Sponsor shall be entitled to establish voting
and quorum requirements and other reasonable procedures for Unitholder voting.
Section 12.3 Action Without a Meeting. Any action required
or permitted to be taken by Unitholders by vote may be taken without a meeting by written consent setting forth the actions so
taken. Such written consents shall be treated for all purposes as votes at a meeting. If the vote or consent of any Unitholder
to any action of the Trust, any Fund or any Unitholder, as contemplated by this Trust Agreement, is solicited by the Sponsor, the
solicitation shall be effected by notice to each Unitholder given in the manner provided in Section 16.4. Any vote or consent that
has been cast by a Unitholder so solicited shall be deemed conclusively to have been cast or granted as requested in the notice
of solicitation, whether or not the notice of solicitation is actually received by that Unitholder, unless the Unitholder expresses
written objection to the vote or consent by notice given in the manner provided in Section 16.4 below and actually received by
the Trust within twenty (20) days after the notice of solicitation is effected. The Sponsor and all persons dealing with the Trust
shall be entitled to act in reliance on any vote or consent which is deemed cast or granted pursuant to this Section 12.3 and shall
be fully indemnified by the Trust in so doing. Any action taken or omitted in reliance on any such deemed vote or consent of one
or more Unitholders shall not be void or voidable by reason of timely communication made by or on behalf of all or any of such
Unitholders in any manner other than as expressly provided in Section 16.4.
ARTICLE XIII
TERM
Section 13.1 Term. The term for which the Trust is to exist
shall commence on the date of the filing of the Certificate of Trust, and the Trust and any Fund shall exist in perpetuity, unless
earlier terminated in accordance with the provisions of Article
XIV hereof or as otherwise provided by law.
ARTICLE XIV
TERMINATION
Section 14.1 Events Requiring Dissolution of the Trust or
any Fund. The Trust or, as the case may be, any Fund shall dissolve at any time upon the happening of any of the following events:
(a) The occurrence of an Event of Withdrawal, unless (i) at
the time there is at least one remaining Sponsor and that remaining Sponsor carries on the business of the Trust or (ii) within
ninety (90) days of such Event of Withdrawal, the affirmative vote or written consent of Unitholders in accordance with Section
9.2(d) or Section 12.3 of this Trust Agreement is obtained to continue the business of the Trust and to select, effective as of
the date of such selection, one or more successor Sponsors.
(b) The occurrence of any event which would make unlawful the
continued existence of the Trust or any Fund, as the case may be.
(c) In the event of the suspension, revocation or termination
of the Sponsor’s registration as a commodity pool operator under the CE Act, or membership as a commodity pool operator with
the NFA (if, in either case, such registration is required under the CE Act or the rules promulgated thereunder) unless at the
time there is at least one remaining Sponsor whose registration or membership has not been suspended, revoked or terminated.
(d) The Trust or any Fund, as the case may be, becomes insolvent
or bankrupt.
(e) Unitholders owning at least seventy-five percent (75%) of
the outstanding Units held in all Funds, voting together as a single class, vote to dissolve the Trust, upon notice to the Sponsor
of not less than ninety (90) Business Days prior to the effective date of termination.
(f) Upon written notice to the Trustee and the Unitholders by
the Sponsor of its determination, in the Sponsor’s sole discretion, that the Trust’s or a Fund’s aggregate net
assets in relation to the operating expenses of the Trust or such Fund make it unreasonable or imprudent to continue the business
of the Trust or such Fund.
(g) The Trust is required to be registered as an investment
company under the Investment Company Act of 1940, as amended.
(h) DTC is unable or unwilling to continue to perform its functions,
and a comparable replacement is unavailable. The death, legal disability, bankruptcy, insolvency, dissolution, or withdrawal of
any Unitholder (as long as such Unitholder is not the sole Unitholder of the Trust) shall not result in the termination of the
Trust or any Fund, and such Unitholder, his estate, custodian or personal representative shall have no right to withdraw or value
such Unitholder’s Units. Each Unitholder (and any assignee thereof) expressly agrees that in the event of his death,
he waives on behalf of himself and his estate, and he directs
the legal representative of his estate and any person interested therein to waive the furnishing of any inventory, accounting or
appraisal of the assets of the applicable Fund and any right to an audit or examination of the books of the applicable Fund, except
for such rights as are set forth in Article X hereof relating to the books of account and reports of the applicable Fund.
Section 14.2 Distributions on Dissolution. Upon the dissolution
of the Trust or any Fund, the Sponsor (or in the event there is no Sponsor, such person (the “Liquidating Trustee”)
as the majority in interest of the Unitholders may propose and approve) shall take full charge of the Trust Estate. Any Liquidating
Trustee so appointed shall have and may exercise, without further authorization or approval of any of the parties hereto, all of
the powers conferred upon the Sponsor under the terms of this Trust Agreement, subject to all of the applicable limitations, contractual
and otherwise, upon the exercise of such powers, and provided that the Liquidating Trustee shall not have general liability for
the acts, omissions, obligations and expenses of the Trust or the Funds. Thereafter, in accordance with Section 3808(e) or (g),
as applicable, of the Delaware Trust Statute, the business and affairs of the Trust or any Fund shall be wound up and all assets
shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom shall be applied
and distributed in the following order of priority: (a) to the expenses of liquidation and termination and to creditors, including
Unitholders who are creditors, to the extent otherwise permitted by law, in satisfaction of liabilities of the Trust or the Funds
(whether by payment or the making of reasonable provision for payment thereof) other than liabilities for distributions to Unitholders,
and (b) to the Unitholders in accordance with their positive book Capital Account balances, after giving effect to all contributions,
distributions and allocations for all periods.
Section 14.3 Termination; Certificate of Cancellation. Following
the dissolution and distribution of the assets of all Funds, the Trust shall terminate and the Sponsor or the Liquidating Trustee,
as the case may be, shall instruct the Trustee to execute and cause such certificate of cancellation of the Certificate of Trust
pursuant to Section 3810(d) to be filed in accordance with the Delaware Trust Statute at the expense of the Sponsor. Notwithstanding
anything to the contrary contained in this Trust Agreement, the existence of the Trust as a separate legal entity shall continue
until the filing of such certificate of cancellation.
ARTICLE XV
POWER OF ATTORNEY
Section 15.1 Power of Attorney Executed Concurrently. Each
Unitholder, by virtue of its purchase of Units in a Fund, irrevocably constitutes and appoints the Sponsor with full power of substitution,
as the true and lawful attorney-in-fact and agent for such Unitholder with full power and authority to act in his name and on his
behalf in the execution, acknowledgment, filing and publishing of Trust documents, including, but not limited to, the following:
(a) Any certificates and other instruments, including but not
limited to, any applications for authority to do business and amendments thereto, which the Sponsor deems appropriate to
qualify or continue the Trust as a business or statutory trust
in the jurisdictions in which the Trust may conduct business, so long as such qualifications and continuations are in accordance
with the terms of this Trust Agreement or any amendment hereto, or which may be required to be filed by the Trust or the Unitholders
under the laws of any jurisdiction;
(b) Any instrument which may be required to be filed by the
Trust under the laws of any state or by any governmental agency, or which the Sponsor deems advisable to file; and
(c) This Trust Agreement and any documents which may be required
to effect an amendment to this Trust Agreement approved under the terms of the Trust Agreement, and the continuation of the Trust,
the increase or decrease of the Global Certificates pursuant to Section 4.6, or the termination of the Trust, provided such continuation,
increase, decrease or termination is in accordance with the terms of this Trust Agreement.
Section 15.2 Effect of Power of Attorney. The Power of Attorney
granted by each Unitholder to the Sponsor:
(a) Is a special, irrevocable Power of Attorney coupled with
an interest, and shall survive and not be affected by the death, disability, dissolution, liquidation, termination or incapacity
of the Unitholder;
(b) May be exercised by the Sponsor for each Unitholder by facsimile
signature and/or by a single signature of one of its officers acting as attorney-in-fact for all of them; and
(c) Shall survive the delivery of an assignment by a Unitholder
of the whole or any portion of his Units, as applicable, except that where the records of a Direct Participant or Indirect Participant
reflect a transfer by a Unitholder of its Units that has otherwise been effectuated in accordance with the provisions of this Trust
Agreement, the Depository’s procedures and the procedures of such Direct Participant or Indirect Participant, as applicable,
the Power of Attorney of the assignor shall survive the delivery of such assignment for the sole purpose of enabling the Sponsor
to execute, acknowledge and file any instrument necessary to effect such transfer. Each Unitholder agrees to be bound by any representations
made by the Sponsor and by any successor thereto, determined to be acting in good faith pursuant to such Power of Attorney and
not constituting gross negligence or willful misconduct.
Section 15.3 Limitation on Power of Attorney. The Power of Attorney
granted by each Unitholder to the Sponsor shall not authorize the Sponsor to act on behalf of Unitholders in any situation in which
this Trust Agreement requires the approval of Unitholders unless such approval has been obtained as required by this Trust Agreement.
In the event of any conflict between this Trust Agreement and any instruments filed by the Sponsor or any new Sponsor pursuant
to this Power of Attorney, this Trust Agreement shall control.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 Governing Law. The validity and construction
of this Trust Agreement and all amendments hereto shall be governed by the laws of the State of Delaware, and the rights of all
parties hereto and the effect of every provision hereof shall be subject to and construed according to the laws of the State of
Delaware without regard to the conflict of laws provisions thereof; provided, however, that the parties hereto intend that the
provisions hereof shall control over any contrary or limiting statutory or common law of the State of Delaware (other than the
Delaware Trust Statute) and that, to the maximum extent permitted by applicable law, there shall not be applicable to the Trust,
the Funds, the Trustee, the Sponsor, the Unitholders or this Trust Agreement any provision of the laws (statutory or common) of
the State of Delaware (other than the Delaware Trust Statute) pertaining to trusts which relate to or regulate in a manner inconsistent
with the terms hereof: (a) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee
fees and charges, (b) affirmative requirements to post bonds for trustees, officers, agents, or employees of a trust, (c) the necessity
for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property,
(d) fees or other sums payable to trustees, officers, agents or employees of a trust, (e) the allocation of receipts and expenditures
to income or principal, (f) restrictions or limitations on the permissible nature, amount or concentration of trust investments
or requirements relating to the titling, storage or other manner of holding or investing of trust assets, or (g) the establishment
of fiduciary or other standards or responsibilities or limitations on the acts or powers of trustees or managers that are inconsistent
with the limitations on liability or authorities and powers of the Trustee or the Sponsor set forth or referenced in this Trust
Agreement. The Trust shall be of the type commonly called a “statutory trust,” and without limiting the provisions
hereof, as determined from time to time by the Sponsor, the Trust may exercise all powers that are ordinarily exercised by such
a trust under Delaware law. The Trust specifically reserves the right to exercise any of the powers or privileges afforded to statutory
trusts and the absence of a specific reference herein to any such power, privilege or action shall not imply that the Trust may
not exercise such power or privilege or take such actions.
Section 16.2 Provisions In Conflict With Law or Regulations.
(a) The provisions of this Trust Agreement are severable, and
if the Sponsor shall determine, with the advice of counsel, that any one or more of such provisions (the “Conflicting Provisions”)
are in conflict with the Code, the Delaware Trust Statute or other applicable U.S. federal or state laws, the Conflicting Provisions
shall be deemed never to have constituted a part of this Trust Agreement, even without any amendment of this Trust Agreement pursuant
to this Trust Agreement; provided, however, that such determination by the Sponsor shall not affect or impair any of the remaining
provisions of this Trust Agreement or render invalid or improper any action taken or omitted prior to such determination. No Sponsor
or Trustee shall be liable for making or failing to make such a determination.
(b) If any provision of this Trust Agreement shall be held invalid
or unenforceable in any jurisdiction, such holding shall not in any manner affect or render invalid or unenforceable such
provision in any other jurisdiction or any other provision of
this Trust Agreement in any jurisdiction.
Section 16.3 Construction. In this Trust Agreement, unless
the context otherwise requires, words used in the singular or in the plural include both the plural and singular and words denoting
any gender include all genders. The title and headings of different parts are inserted for convenience and shall not affect the
meaning, construction or effect of this Trust Agreement.
Section 16.4 Notices. All notices or communications under
this Trust Agreement (other than requests for redemption of Units, notices of assignment, transfer, pledge or encumbrance of Units,
and reports and notices by the Sponsor to the Unitholders) shall be in writing and shall be effective upon personal delivery, or
if sent by mail, postage prepaid or by overnight courier, or if sent electronically, by facsimile; and addressed, in each such
case, to the address set forth in the books and records of the Trust or the applicable Fund or such other address as may be specified
in writing, of the party to whom such notice is to be given, and shall be effective upon the deposit of such notice in the United
States mail, upon deposit with a representative of an overnight courier, or upon transmission and electronic confirmation thereof,
as the case may be. Notices of assignment, transfer, pledge or encumbrance of Units shall be effective upon timely receipt by the
Sponsor in writing. Requests for redemption of Units shall be effected in accordance with the provisions of Article VIII of this
Trust Agreement.
Section 16.5 Counterparts. This Trust Agreement may be executed
in several counterparts, and all so executed shall constitute one agreement, binding upon all of the parties hereto, notwithstanding
that all the parties are not signatories to the original or the same counterpart.
Section 16.6 Binding Nature of Trust Agreement. The terms
and provisions of this Trust Agreement shall be binding upon and inure to the benefit of the heirs, custodians, executors, estates,
administrators, personal representatives, successors and permitted assigns of the respective Unitholders. For purposes of determining
the rights of any Unitholder or assignee hereunder, the Trust and the Sponsor may rely upon the Trust and Fund records as to who
are Unitholders and permitted assignees, and all Unitholders and assignees agree that the Trust, each Fund and the Sponsor, in
determining such rights, shall rely on such records and that Unitholders and assignees shall be bound by such determination.
Section 16.7 No Legal Title to Trust Estate. Subject to the
provisions of Section 2.7 in the case of the Sponsor, the Unitholders shall not have legal title to any part of the applicable
Fund’s Trust Estate.
Section 16.8 Creditors. No creditors of any Unitholders shall
have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to the applicable Fund’s
Trust Estate.
Section 16.9 Integration. This Trust Agreement constitutes
the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings
pertaining thereto.
Section 16.10 Goodwill; Use of Name. No value shall be placed
on the name or goodwill of the Trust, which shall belong exclusively to ETF Managers Group Commodity Trust I.
IN WITNESS WHEREOF, the undersigned have duly executed this
Amended and Restated Declaration of Trust and Trust Agreement as of the day and year first above written.
WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee
Name:
Yvette L. Howell
Title:
Assistant Vice President
ETF MANAGERS CAPITAL LLC, as Sponsor
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By:
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/s/ Samuel Masucci, III
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Name:
Samuel Masucci, III
Title:
CEO
ACCEPTED AND AGREED BY:
EXCHANGE TRADED MANAGERS GROUP LLC
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By:
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/s/ Samuel Masucci, III
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Name:
Samuel Masucci, III
Title:
CEO
EXHIBIT A
FORM OF GLOBAL CERTIFICATE
1
CERTIFICATE OF BENEFICIAL INTEREST
-Evidencing-
All Units
-in-
ETF MANAGERS GROUP COMMODITY TRUST I
WITH RESPECT TO ONE OF ITS SERIES
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST WITH RESPECT TO THE FUND OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUIRED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
This is to certify that Cede & Co., is the owner and registered
holder of this Certificate evidencing the ownership of all issued and outstanding Units (“Units”), each of which represents
a fractional undivided Unit of beneficial interest in _______________ (the “Fund”), established and designated as a
series of the ETF Managers Group Commodity Trust I (the “Trust”), a Delaware statutory trust formed under the Delaware
Statutory Trust Act (12 Del. C. § 3801 et seq.) pursuant to a Certificate of Trust, dated as of and filed in the offices of
the Secretary of State of the State of Delaware on July 23, 2014, and the Amended and Restated Declaration of Trust and Trust Agreement,
dated as of December 11, 2014, by and between ETF Managers Capital LLC, a Delaware limited liability company, as Sponsor, and Wilmington
Trust, National
1
Forms of Global
Certificates of Beneficial Interest for each of the Trust’s Funds shall be, except for the names of the Funds, substantially
identical to this Form of Global Certificate.
Association, a Delaware national banking association, as Trustee
(hereinafter called the “Trust Agreement”), copies of which are available at the principal offices of the Trust.
At any given time this Certificate shall represent all units
of beneficial interest in the Fund, which shall be the total number of Units that are outstanding at such time. The Trust Agreement
provides for the deposit of cash or a combination of United States Treasury Securities, cash and/or cash equivalents or other securities
or property with the Fund from time to time and the issuance by the Trust, with respect to the Fund, of additional Creation Baskets
representing the undivided units of beneficial interest in the assets of the Trust. At the request of the registered holder this
Certificate may be exchanged for one or more Certificates issued to the registered holder in such denominations as the registered
holder may request, provided, however, that, in the aggregate, the Certificates issued to the registered holder hereof shall represent
all Units outstanding at any given time.
Each Authorized Purchaser hereby grants and conveys all of its
rights, title and interest in and to the Fund to the extent of the undivided interest represented hereby to the registered holder
of this Certificate subject to and in pursuance of the Trust Agreement, all the terms, conditions and covenants of which are incorporated
herein as if fully set forth at length.
The registered holder of this Certificate is entitled at any
time upon tender of this Certificate to the Fund, endorsed in blank or accompanied by all necessary instruments of assignment and
transfer in proper form, at its principal office in the State of New York and, upon payment of any tax or other governmental charges,
to receive at the time and in the manner provided in the Trust Agreement, such holder’s ratable portion of the assets of
the Fund for each Redemption Basket tendered and evidenced by this Certificate.
The holder of this Certificate, by virtue of the purchase and
acceptance hereof, assents to and shall be bound by the terms of the Trust Agreement, copies of which are on file and available
for inspection at reasonable times during business hours at the principal office of the Trust, to which reference is made for all
the terms, conditions and covenants thereof.
The Fund may deem and treat the person in whose name this Certificate
is registered upon the books of the Fund as the owner hereof for all purposes and the Fund shall not be affected by any notice
to the contrary.
The Trust Agreement permits the Sponsor, without the approval
of the Unitholders, to amend or supplement the Trust Agreement; provided, however, that the affirmative vote or written consent
of Unitholders holding Units equal to at least a majority of the Trust’s outstanding Units or, if the proposed amendment
affects only certain Funds, of each affected Fund’s outstanding Units, or such higher percentage as may be required by applicable
law, is required to approve any amendment (i) if expressly required under Delaware or federal law or regulations or rules of any
exchange, or (ii) submitted to them by the Sponsor in its sole discretion. The Sponsor shall provide notice of any amendment to
the Trust Agreement to the Unitholders setting forth the substance of the amendment and its effective date. Any such vote, consent
or waiver by the holder of Units shall be conclusive and binding upon such holder of Units and upon all future holders of Units,
and shall be binding upon any Units, whether evidenced by a Certificate or held in uncertificated form, issued upon the registration
or transfer hereof whether or not notation of
such consent or waiver is made upon this Certificate and whether
or not the Units evidenced hereby are at such time in uncertificated form.
In accordance with Section 4.8 of the Trust Agreement, the holder
of this Certificate agrees and consents (the “Consent”) to look solely to the assets (the “Fund Assets”)
of the Fund and to the Sponsor and its assets for payment in respect of any claim against or obligation of the Fund. The Fund Assets
include only those funds and other assets that are paid, held or distributed to the Trust on account of and for the benefit of
the Fund, including, without limitation, funds delivered to the Trust for the purchase of Units in the Fund.
The Trust Agreement, and this Certificate, are executed and
delivered by ETF Managers Capital LLC, as Sponsor, in the exercise of the powers and authority conferred and vested in it by the
Trust Agreement. The representations, undertakings and agreements made on the part of the Trust in the Trust Agreement or the Fund
in this Certificate are made and intended not as personal representations, undertakings and agreements by ETF Managers Capital
LLC, but are made and intended for the purpose of binding only the Trust. Nothing in the Agreement or this Certificate shall be
construed as creating any liability on ETF Managers Capital LLC, individually or personally, to fulfill any representation, undertaking
or agreement other than as provided in the Trust Agreement or this Certificate.
This Certificate shall not become valid or binding for any purpose
until properly executed by the Sponsor pursuant to the Trust Agreement.
Terms not defined herein have the same meaning as in the Trust
Agreement.
IN WITNESS WHEREOF, ETF Managers Capital LLC, as Sponsor, has
caused this Certificate to be executed in its name by the manual or facsimile signature of one of its Authorized Officers.
ETF Managers
Capital LLC, as Sponsor
Authorized Officer
EXHIBIT B
FORM OF INSTRUMENT ESTABLISHING SERIES OR
CLASS
EXHIBIT C
SERIES FUNDS
Initial Fund: Sit Rising Rate ETF (“RISE”)
Additional Series:
Exhibit 10.4
CUSTODY AGREEMENT
THIS AGREEMENT is made and entered into as
of this 2
nd
day of January, 2015, by and between
ETF MANAGERS GROUP COMMODITY TRUST I
, a Delaware statutory trust
(the “Trust”), for itself and on behalf of each of its series listed on
Exhibit A
to this Agreement (as
amended from time to time) (each a “Fund” ),
ETF MANAGERS CAPITAL LLC,
the sponsor of the Funds (“Sponsor”)
and
U.S. BANK NATIONAL ASSOCIATION
, a national banking association organized and existing under the laws of the United States
of America (the “Custodian”).
WHEREAS, each Fund is operated as a commodity
pool under the Commodity Exchange Act (“CEA”) and is registered with the U.S. Securities and Exchange Commission (“SEC”)
by means of a registration statement on Form S-1 or Form S-3, as applicable (each a “Registration Statement”) under
the Securities Act of 1933, as amended (“1933 Act”); and
WHEREAS, the Sponsor has exclusive responsibility
for the management and control of the business and affairs of the Trust and each Fund; and
WHEREAS, the Trust and Sponsor desire to
retain the Custodian to act as custodian of the assets of each Fund, and to provide related services as provided herein, and the
Custodian is willing to accept the obligations and duties related to that role; and
NOW, THEREFORE, in consideration of the promises
and mutual covenants herein contained, and other good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto, intending to be legally bound, do hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Whenever used in this Agreement, the following
words and phrases shall have the meanings set forth below unless the context otherwise requires:
1.01
“Authorized Person”
means any Officer or person who has been designated as such by written notice and named in
Exhibit B
and delivered
to the Custodian by the Trust or Sponsor, or if the Trust or Sponsor has notified the Custodian in writing that it has an authorized
investment manager or other agent, delivered to the Custodian by the Sponsor or other agent of the Trust. Such Officer or person
shall continue to be an Authorized Person until such time as the Custodian receives Written Instructions from the Trust, or the
Sponsor or other agent of the Trust that any such person is no longer an Authorized Person.
1.02
“Book-Entry System”
shall mean a federal book-entry system as provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part 350, or in such book-entry regulations of federal agencies as are substantially in the form of such Subpart O.
1.03
“Business Day”
shall mean any day recognized as a settlement day by The New York Stock Exchange, Inc. and any other day for which the Trust computes
the net asset value of Shares of the Fund.
1.04
“CFTC”
shall mean the Commodity Futures Trading Commission.
1.05
“Foreign Securities”
means any of the Trust’s investments (including foreign currencies) for which the primary market is outside the United States
and such cash and cash equivalents as are reasonably necessary to effect the Trust’s transactions in such investments.
1.06
“Fund Custody Account”
shall mean any of the accounts in the name of the Trust, which is provided for in Section 3.2 below.
1.07
“IRS”
shall mean the Internal Revenue Service.
1.08
“FINRA”
shall mean the Financial Industry Regulatory Authority, Inc.
1.09
“NFA”
shall mean the National Futures Association.
1.10
“Officer”
shall mean the Principal Executive Officer, the President, any Vice President, any Assistant Vice President, the Secretary, any
Assistant Secretary, the Principal Financial Officer, the Treasurer, or any Assistant Treasurer of the Trust.
1.11
“Proper Instructions”
shall mean Written Instructions.
1.12
“Securities”
shall include, without limitation, common and preferred stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers’ acceptances, mortgage-backed securities or other obligations, and any certificates, receipts, warrants
or other instruments or documents representing rights to receive, purchase or subscribe for the same, or evidencing or representing
any other rights or interests therein, or any similar property or assets that the Custodian or its agents have the facilities to
clear and service.
1.13
“Securities Depository”
shall mean The Depository Trust Company and any other clearing agency registered with the SEC under Section 17A of the Securities
Exchange Act of 1934, as amended (the “1934 Act”), which acts as a system for the central handling of Securities where
all Securities of any particular class or series of an issuer deposited within the system are treated as fungible and may be transferred
or pledged by bookkeeping entry without physical delivery of the Securities.
1.14
“Shares”
shall mean, with respect to a Fund, the units of beneficial interest issued by the Trust on account of the Fund.
1.15
“Sub-Custodian”
shall mean a bank or other financial institution (other than a Securities Depository) having a contract with the Custodian, which
the Custodian has determined will provide reasonable care of assets of the Fund based on the standards specified in Section 3.03
below. Such contract shall be in writing and shall include provisions that provide: (i) for indemnification or insurance arrangements
(or any combination of the foregoing) such that the Fund will be adequately protected against the risk of loss of assets held in
accordance with such contract; (ii) that the Foreign Securities will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the Sub-Custodian or its creditors except a claim of payment for their safe custody or administration,
in the case of cash deposits, liens
or rights in favor of creditors of the Sub-Custodian arising under bankruptcy, insolvency, or similar laws; (iii) that beneficial
ownership for the Foreign Securities will be freely transferable without the payment of money or value other than for safe custody
or administration; (iv) that adequate records will be maintained identifying the assets as belonging to the Fund or as being held
by a third party for the benefit of the Fund; (v) that the Fund’s independent public accountants will be given access to
those records or confirmation of the contents of those records; and (vi) that the Fund will receive periodic reports with respect
to the safekeeping of the Fund’s assets, including, but not limited to, notification of any transfer to or from a Fund’s
account or a third party account containing assets held for the benefit of the Fund. Such contract may contain, in lieu of any
or all of the provisions specified in (i)-(vi) above, such other provisions that the Custodian determines will provide, in their
entirety, the same or a greater level of care and protection for Fund assets as the specified provisions.
1.16
“Written Instructions”
shall mean (i) written communications actually received by the Custodian and signed by an Authorized Person, (ii) communications
by facsimile or Internet electronic e-mail or any other such system from one or more persons reasonably believed by the Custodian
to be an Authorized Person.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
2.01
Appointment
. The Trust
and Sponsor hereby appoint the Custodian as custodian of all Securities and cash owned by or in the possession of the Fund at any
time during the period of this Agreement, on the terms and conditions set forth in this Agreement, and the Custodian hereby accepts
such appointment and agrees to perform the services and duties set forth in this Agreement. The services and duties of the Custodian
shall be confined to those matters expressly set forth herein, and no implied duties are assumed by or may be asserted against
the Custodian hereunder.
2.02
Documents to be Furnished
.
The following documents, including any amendments thereto, will be provided contemporaneously with the execution of the Agreement
to the Custodian by the Trust:
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(a)
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A copy of the Trust’s declaration of trust, certified by the Secretary;
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(b)
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A copy of the Trust’s bylaws, certified by the Secretary;
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(c)
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A copy of the current prospectuses of the Funds (the “Prospectus”);
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(d)
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A certification of the President and the Secretary of the Trust setting forth the names and signatures of the current Officers
of the Trust and other Authorized Persons; and
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(e)
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An executed authorization required by the Shareholder Communications Act of 1985, attached hereto as
Exhibit D
.
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2.03
Notice of Appointment
of Transfer Agent
. The Trust agrees to notify the Custodian in writing of the appointment, termination or change in appointment
of any transfer agent of the Fund.
ARTICLE III.
CUSTODY OF CASH AND
SECURITIES
3.01
Segregation
. All Securities
and non-cash property held by the Custodian for the account of a Fund (other than Securities maintained in a Securities Depository
or Book-Entry System) shall be physically segregated from other Securities and non-cash property in the possession of the Custodian
(including the Securities and non-cash property of the other series of the Trust, if applicable) and shall be identified as subject
to this Agreement.
3.02
Fund Custody Accounts
.
As to each Fund, the Custodian shall open and maintain in its trust department a custody account in the name of the Trust coupled
with the name of the Fund, subject only to draft or order of the Custodian, in which the Custodian shall enter and carry all Securities,
cash and other assets of such Fund which are delivered to it.
3.03 Appointment of Agents.
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(a)
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In its discretion, the Custodian may appoint one or more Sub-Custodians to establish and maintain arrangements with (i) any
Securities Depository or (ii) Sub-Custodian or member of a Sub-Custodian’s network to hold Securities and cash of the Fund
and to carry out such other provisions of this Agreement as it may determine; provided, however, that the appointment of any such
agents and maintenance of any Securities and cash of the Fund shall be at the Custodian’s expense and shall not relieve the
Custodian of any of its obligations or liabilities under this Agreement. The Custodian shall be liable for the actions of any Sub-Custodians
(regardless of whether assets are maintained in the custody of a Sub-Custodian or a member of its network) appointed by it as if
such actions had been done by the Custodian.
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(b)
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If, after the initial appointment of Sub-Custodians by the Trust, on behalf of its series, in connection with this Agreement,
the Custodian wishes to appoint other Sub-Custodians to hold property of the Fund, it will so notify the Trust and make the necessary
determinations as to any such new Sub-Custodian’s eligibility as a custodian under applicable rules and regulations.
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(c)
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In performing its delegated responsibilities as foreign custody manager to place or maintain the Fund’s assets with a
Sub-Custodian, the Custodian will determine that the Fund’s assets will be subject to reasonable care, based on the standards
applicable to custodians in the country in which the Fund’s assets will be held by that Sub-Custodian, after considering
all factors relevant to safekeeping of such assets.
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(d)
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At the end of each calendar quarter, the Custodian shall provide written reports notifying the Sponsor and the Trust of the
withdrawal or placement of the Securities and cash of the Fund with a Sub-Custodian and of any material changes in the Fund’s
arrangements.
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Such reports shall include
an analysis of the custody risks associated with maintaining assets with any Securities Depository.
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(e)
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With respect to its responsibilities under this Section 3.03, the Custodian hereby warrants to the Trust that it agrees to
exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of property of the
Fund. The Custodian further warrants that the Fund’s assets will be subject to reasonable care if maintained with a Sub-Custodian,
after considering all factors relevant to the safekeeping of such assets, including, without limitation: (i) the Sub-Custodian’s
practices, procedures, and internal controls for certificated securities (if applicable), its method of keeping custodial records,
and its security and data protection practices; (ii) whether the Sub-Custodian has the requisite financial strength to provide
reasonable care for Fund assets; (iii) the Sub-Custodian’s general reputation and standing and, in the case of a Securities
Depository, the Securities Depository’s operating history and number of participants; and (iv) whether the Fund will have
jurisdiction over and be able to enforce judgments against the Sub-Custodian, such as by virtue of the existence of any offices
of the Sub-Custodian in the United States or the Sub-Custodian’s consent to service of process in the United States.
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(f)
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The Custodian shall establish a system or ensure that its Sub-Custodian has established a system to monitor on a continuing
basis (i) the appropriateness of maintaining the Fund’s assets with a Sub-Custodian who is a member of a Sub-Custodian’s
network; (ii) the performance of the contract governing the Fund’s arrangements with such Sub-Custodian or members of a Sub-Custodian’s
network; and (iii) the custody risks of maintaining assets with a Securities Depository. The Custodian must promptly notify the
Fund or Sponsor of any material change in these risks.
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(g)
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The Custodian shall use commercially reasonable efforts to collect all income and other payments with respect to Foreign Securities
to which the Fund shall be entitled and shall credit such income, as collected, to the Trust. In the event that extraordinary measures
are required to collect such income, the Trust and Custodian shall consult as to the measures and as to the compensation and expenses
of the Custodian relating to such measures.
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3.04
Delivery of Assets to
Custodian
. The Trust or Sponsor shall deliver, or cause to be delivered, to the Custodian all Fund Securities, cash and other
investment assets, including (i) all payments of income, payments of principal and capital distributions received by a Fund with
respect to such Securities, cash or other assets owned by a Fund at any time during the period of this Agreement, and (ii) all
cash received by a Fund for the issuance of Shares. The Custodian shall not be responsible for such Securities, cash or other assets
until actually received by it.
3.05
Securities Depositories
and Book-Entry Systems
. The Custodian may deposit and/or maintain Securities of a Fund in a Securities Depository or in a Book-Entry
System, subject to the following provisions:
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(a)
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The Custodian, on an on-going basis, shall deposit in a Securities Depository or Book-Entry System all Securities eligible
for deposit therein and shall make use of such Securities Depository or Book-Entry System to the extent possible and practical
in
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connection with its performance
hereunder, including, without limitation, in connection with settlements of purchases and sales of Securities, loans of Securities,
and deliveries and returns of collateral consisting of Securities.
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(b)
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Securities of the Funds kept in a Book-Entry System or Securities Depository shall be kept in an account (“Depository
Account”) of the Custodian in such Book-Entry System or Securities Depository which includes only assets held by the Custodian
as a fiduciary, custodian or otherwise for customers.
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(c)
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The records of the Custodian with respect to Securities of the Funds maintained in a Book-Entry System or Securities Depository
shall, by book-entry, identify such Securities as belonging to the Funds.
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(d)
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If Securities purchased by a Fund are to be held in a Book-Entry System or Securities Depository, the Custodian shall pay for
such Securities upon (i) receipt of advice from the Book-Entry System or Securities Depository that such Securities have been transferred
to the Depository Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer
for the account of the Fund. If Securities sold by a Fund are held in a Book-Entry System or Securities Depository, the Custodian
shall transfer such Securities upon (i) receipt of advice from the Book-Entry System or Securities Depository that payment for
such Securities has been transferred to the Depository Account, and (ii) the making of an entry on the records of the Custodian
to reflect such transfer and payment for the account of the Fund.
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(e)
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The Custodian shall provide the Trust with copies of any report (obtained by the Custodian from a Book-Entry System or Securities
Depository in which Securities of the Funds are kept) on the internal accounting controls and procedures for safeguarding Securities
deposited in such Book-Entry System or Securities Depository.
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(f)
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Notwithstanding anything to the contrary in this Agreement, the Custodian shall be liable to the Trust for any loss or damage
to the Fund resulting from (i) the use of a Book-Entry System or Securities Depository by reason of any negligence or willful misconduct
on the part of the Custodian or any Sub-Custodian, or (ii) failure of the Custodian or any Sub-Custodian to enforce effectively
such rights as it may have against a Book-Entry System or Securities Depository. At its election, the Trust shall be subrogated
to the rights of the Custodian with respect to any claim against a Book-Entry System or Securities Depository or any other person
from any loss or damage to the Fund arising from the use of such Book-Entry System or Securities Depository, if and to the extent
that the Fund has not been made whole for any such loss or damage.
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(g)
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With respect to its responsibilities under this Section 3.05, the Custodian hereby warrants to the Trust that it agrees to
(i) exercise due care in accordance with reasonable commercial standards in discharging its duty as a securities intermediary to
obtain and thereafter maintain such assets, (ii) provide, promptly upon request by the Trust or Sponsor, such reports as are available
concerning the Custodian’s internal accounting controls and financial strength, and (iii) require any Sub-Custodian to exercise
due care in accordance with reasonable commercial standards in discharging its duty as a securities
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intermediary to obtain and
thereafter maintain assets corresponding to the security entitlements of its entitlement holders.
3.06
Disbursement of Moneys
from Fund Custody Account
. Upon receipt of Proper Instructions, the Custodian shall disburse moneys from a Fund Custody Account
but only in the following cases:
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(a)
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For the purchase of Securities for a Fund but only in accordance with Section 4.01 of this Agreement and only (i) in the case
of Securities (other than options on Securities, futures contracts and options on futures contracts), against the delivery to the
Custodian (or any Sub-Custodian) of such Securities registered as provided in Section 3.09 below or in proper form for transfer,
or if the purchase of such Securities is effected through a Book-Entry System or Securities Depository, in accordance with the
conditions set forth in Section 3.05 above; (ii) in the case of options on Securities, against delivery to the Custodian (or any
Sub-Custodian) of such receipts as are required by the customs prevailing among dealers in such options; (iii) in the case of futures
contracts and options on futures contracts, against delivery to the Custodian (or any Sub-Custodian) of evidence of title thereto
in favor of the Fund or any nominee referred to in Section 3.09 below; and (iv) in the case of repurchase or reverse repurchase
agreements entered into between the Trust and a bank which is a member of the Federal Reserve System or between the Trust and a
primary dealer in U.S. Government securities, against delivery of the purchased Securities either in certificate form or through
an entry crediting the Custodian’s account at a Book-Entry System or Securities Depository with such Securities;
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(b)
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In connection with the conversion, exchange or surrender, as set forth in Section 3.07(f) below, of Securities owned by the
Fund;
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(c)
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For the payment of any dividends or capital gain distributions declared by the Fund;
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(d)
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In payment of the redemption price of Shares as provided in Section 5.01 below;
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(e)
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For the payment of any expense or liability incurred by the Fund, including, but not limited to, the following payments for
the account of the Fund: interest; taxes; administration, investment advisory, accounting, auditing, transfer agent, custodian
and legal fees; and other operating expenses of the Fund; in all cases, whether or not such expenses are to be in whole or in part
capitalized or treated as deferred expenses;
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(f)
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For transfer in accordance with the provisions of any agreement among the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a member of FINRA, relating to compliance with rules of the Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization or organizations) regarding escrow or other arrangements in connection
with transactions by the Fund;
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(g)
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For transfer in accordance with the provisions of any agreement among the Trust, the Custodian and a futures commission merchant
registered under the Commodity Exchange Act, relating to compliance with the rules of the CFTC and/or any contract market (or any
similar organization or organizations) regarding account deposits in connection with transactions by the Fund;
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(h)
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For the funding of any uncertificated time deposit or other interest-bearing account with any banking institution (including
the Custodian), which deposit or account has a term of one year or less; and
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(i)
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For any other proper purpose, but only upon receipt of Proper Instructions, specifying the amount and purpose of such payment,
declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom such payment is to be made.
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3.07
Delivery of Securities
from Fund Custody Account
. Upon receipt of Proper Instructions, the Custodian shall release and deliver, or cause the Sub-Custodian
to release and deliver, Securities from a Fund Custody Account but only in the following cases:
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(a)
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Upon the sale of Securities for the account of the Fund but only against receipt of payment therefor in cash, by certified
or cashiers check or bank credit;
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(b)
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In the case of a sale effected through a Book-Entry System or Securities Depository, in accordance with the provisions of Section
3.05 above;
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(c)
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To an offeror’s depository agent in connection with tender or other similar offers for Securities of the Fund; provided
that, in any such case, the cash or other consideration is to be delivered to the Custodian;
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(d)
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To the issuer thereof or its agent (i) for transfer into the name of the Fund, the Custodian or any Sub-Custodian, or any nominee
or nominees of any of the foregoing, or (ii) for exchange for a different number of certificates or other evidence representing
the same aggregate face amount or number of units; provided that, in any such case, the new Securities are to be delivered to the
Custodian;
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(e)
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To the broker selling the Securities, for examination in accordance with the “street delivery” custom;
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(f)
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For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment
of the issuer of such Securities, or pursuant to provisions for conversion contained in such Securities, or pursuant to any deposit
agreement, including surrender or receipt of underlying Securities in connection with the issuance or cancellation of depository
receipts; provided that, in any such case, the new Securities and cash, if any, are to be delivered to the Custodian;
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(g)
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Upon receipt of payment therefor pursuant to any repurchase or reverse repurchase agreement entered into by the Fund;
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(h)
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In the case of warrants, rights or similar Securities, upon the exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the Custodian;
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(i)
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For delivery in connection with any loans of Securities of the Fund, but only against receipt of such collateral as the Trust
shall have specified to the Custodian in Proper Instructions;
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(j)
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For delivery as security in connection with any borrowings by the Fund requiring a pledge of assets by the Trust, but only
against receipt by the Custodian of the amounts borrowed;
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(k)
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Pursuant to any authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Trust;
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(l)
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For delivery in accordance with the provisions of any agreement among the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a member of FINRA, relating to compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange (or of any similar organization or organizations) regarding escrow or other arrangements
in connection with transactions by the Fund;
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(m)
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For delivery in accordance with the provisions of any agreement among the Trust, the Custodian and a futures commission merchant
registered under the Commodity Exchange Act, relating to compliance with the rules of the CFTC and/or any contract market (or any
similar organization or organizations) regarding account deposits in connection with transactions by the Fund;
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(n)
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For any other proper corporate purpose, but only upon receipt of Proper Instructions, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming
the person or persons to whom delivery of such Securities shall be made; or
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(o)
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To brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided
that in any such case the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities
prior to receiving payment for such securities except as may arise from the Custodian’s own negligence or willful misconduct.
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3.08
Actions Not Requiring
Proper Instructions
. Unless otherwise instructed by the Trust or Sponsor, the Custodian shall with respect to all Securities
held for the Funds:
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(a)
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Subject to Section 9.04 below, collect on a timely basis all income and other payments to which a Fund is entitled either by
law or pursuant to custom in the securities business;
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(b)
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Present for payment and, subject to Section 9.04 below, collect on a timely basis the amount payable upon all Securities which
may mature or be called, redeemed, or retired, or otherwise become payable;
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(c)
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Endorse for collection, in the name of a Fund, checks, drafts and other negotiable instruments;
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(d)
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Surrender interim receipts or Securities in temporary form for Securities in definitive form;
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(e)
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Execute, as custodian, any necessary declarations or certificates of ownership under the federal income tax laws or the laws
or regulations of any other taxing authority now or
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hereafter in effect, and prepare
and submit reports to the IRS and the Trust at such time, in such manner and containing such information as is prescribed by the
IRS;
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(f)
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Hold for a Fund, either directly or, with respect to Securities held therein, through a Book-Entry System or Securities Depository,
all rights and similar Securities issued with respect to Securities of the Fund; and
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(g)
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In general, and except as otherwise directed in Proper Instructions, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings with Securities and other assets of a Fund.
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3.09
Registration and Transfer
of Securities
. All Securities held for the Funds that are issued or issuable only in bearer form shall be held by the Custodian
in that form, provided that any such Securities shall be held in a Book-Entry System if eligible therefor. All other Securities
held for the Funds may be registered in the name of a Fund, the Custodian, a Sub-Custodian or any nominee thereof, or in the name
of a Book-Entry System, Securities Depository or any nominee of either thereof. The records of the Custodian with respect to foreign
securities of a Fund that are maintained with a Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers shall identify those securities as belonging to the Fund. The Trust shall furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in proper form for transfer, or to register in the name of any
of the nominees referred to above or in the name of a Book-Entry System or Securities Depository, any Securities registered in
the name of the Fund.
3.10
Records
.
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(a)
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The Custodian shall maintain complete and accurate records with respect to Securities, cash or other property held for the
Funds, including (i) journals or other records of original entry containing an itemized daily record in detail of all receipts
and deliveries of Securities and all receipts and disbursements of cash; (ii) ledgers (or other records) reflecting (A) Securities
in transfer, (B) Securities in physical possession, (C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral), (D) dividends and interest received, and (E) dividends
receivable and interest receivable; (iii) canceled checks and bank records related thereto; and (iv) all records relating to its
activities and obligations under this Agreement. The Custodian shall keep such other books and records of the Fund as the Trust
shall reasonably request and as shall reasonably assist the Trust in satisfying relevant rules and regulations of the CFTC, NFA,
the 1934 Act or the 1933 Act.
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(b)
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All such books and records maintained by the Custodian shall (i) be maintained in a form reasonably acceptable to the Trust
for compliance with the rules and regulations of the CFTC, NFA and SEC, and (ii) be the property of the Trust and at all times
during the regular business hours of the Custodian be made available upon request for inspection by duly authorized officers, employees
or agents of the Trust and employees or agents of the CFTC, NFA or the SEC, as required by law or as instructed by the Trust.
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3.11
Fund Reports by Custodian
.
The Custodian shall furnish the Trust and Sponsor with a daily activity statement and a summary of all transfers to or from each
Fund Custody Account on the day following such transfers. At least monthly, the Custodian shall furnish the Trust and Sponsor with
a detailed statement of the Securities and moneys held by the Custodian and the Sub-Custodians for the Fund under this Agreement.
3.12
Other Reports by Custodian
.
As the Trust may reasonably request from time to time, the Custodian shall provide the Trust with reports on the internal accounting
controls and procedures for safeguarding Securities which are employed by the Custodian or any Sub-Custodian.
3.13
Proxies and Other Materials
.
The Custodian shall cause all proxies relating to Securities which are not registered in the name of a Fund to be promptly executed
by the registered holder of such Securities, without indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Trust such proxies, all proxy soliciting materials and all notices relating to such Securities. With respect
to the foreign Securities, the Custodian will use reasonable commercial efforts to facilitate the exercise of voting and other
shareholder rights, subject to the laws, regulations and practical constraints that may exist in the country where such securities
are issued. The Trust acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of
notice and other factors may have the effect of severely limiting the ability of the Trust to exercise shareholder rights.
3.14
Information on Corporate
Actions
. The Custodian shall promptly deliver to the Trust all information received by the Custodian and pertaining to Securities
being held by the Fund with respect to optional tender or exchange offers, calls for redemption or purchase, or expiration of rights.
If the Trust desires to take action with respect to any tender offer, exchange offer or other similar transaction, the Trust shall
notify the Custodian at least three Business Days prior to the date on which the Custodian is to take such action. The Trust will
provide or cause to be provided to the Custodian all relevant information for any Security which has unique put/option provisions
at least three Business Days prior to the beginning date of the tender period.
ARTICLE IV.
PURCHASE AND SALE OF
INVESTMENTS OF THE FUND
4.01
Purchase
of Securities
. Promptly upon each purchase of Securities for a Fund, Written Instructions shall be delivered to the Custodian,
specifying (i) the name of the issuer or writer of such Securities, and the title or other description thereof, (ii) the number
of shares, principal amount (and accrued interest, if any) or other units purchased, (iii) the date of purchase and settlement,
(iv) the purchase price per unit, (v) the total amount payable upon such purchase, and (vi) the name of the person to whom such
amount is payable. The Custodian shall upon receipt of such Securities purchased by a Fund pay out of the moneys held for the account
of the Fund the total amount specified in such Written Instructions to the person named therein. The Custodian shall not be under
any obligation to pay out moneys to
cover the cost of a purchase of Securities
for a Fund, if in the Fund Custody Account there is insufficient cash available to the Fund for which such purchase was made.
4.02
Liability for Payment
in Advance of Receipt of Securities Purchased
. In any and every case where payment for the purchase of Securities for a Fund
is made by the Custodian in advance of receipt of the Securities purchased and in the absence of specified Written Instructions
to so pay in advance, the Custodian shall be liable to the Fund for such payment.
4.03
Sale of Securities
.
Promptly upon each sale of Securities by a Fund, Written Instructions shall be delivered to the Custodian, specifying (i) the name
of the issuer or writer of such Securities, and the title or other description thereof, (ii) the number of shares, principal amount
(and accrued interest, if any), or other units sold, (iii) the date of sale and settlement, (iv) the sale price per unit, (v) the
total amount payable upon such sale, and (vi) the person to whom such Securities are to be delivered. Upon receipt of the total
amount payable to a Fund as specified in such Written Instructions, the Custodian shall deliver such Securities to the person specified
in such Written Instructions. Subject to the foregoing, the Custodian may accept payment in such form as shall be satisfactory
to it, and may deliver Securities and arrange for payment in accordance with the customs prevailing among dealers in Securities.
4.04
Delivery of Securities
Sold
. Notwithstanding Section 4.03 above or any other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally accepted market practice, to deliver such Securities
prior to actual receipt of final payment therefor. In any such case, the Fund shall bear the risk that final payment for such Securities
may not be made or that such Securities may be returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any for the foregoing.
4.05
Payment for Securities
Sold
. In its sole discretion and from time to time, the Custodian may credit the Fund Custody Account, prior to actual receipt
of final payment thereof, with (i) proceeds from the sale of Securities which it has been instructed to deliver against payment,
(ii) proceeds from the redemption of Securities or other assets of the Fund, and (iii) income from cash, Securities or other assets
of the Fund. Any such credit shall be conditional upon actual receipt by Custodian of final payment and may be reversed if final
payment is not actually received in full. The Custodian may, in its sole discretion and from time to time, permit the Fund to use
funds so credited to the Fund Custody Account in anticipation of actual receipt of final payment. Any such funds shall be repayable
immediately upon demand made by the Custodian at any time prior to the actual receipt of all final payments in anticipation of
which funds were credited to the Fund Custody Account.
4.06
Advances by Custodian
for Settlement
. The Custodian may, in its sole discretion and from time to time, advance funds to the Trust to facilitate the
settlement of a Fund’s transactions in the Fund Custody Account. Any such advance shall be repayable immediately upon demand
made by Custodian.
ARTICLE V.
SALE AND REDEMPTION
OF FUND SHARES
5.01
Transfer of Fund Assets
.
From such funds or other property as may be available for the purpose in the relevant Fund Custody Account, the Custodian shall,
upon receipt of Proper Instructions specifying that the funds or securities are required to redeem one or more creation units of
the Fund, deliver the funds or securities specified in such Proper Instructions for payment to or through such bank or broker-dealer
as the Proper Instructions may designate. The Fund’s transfer agent, as known to the Custodian in pursuant to Section 2.03,
shall be an Authorized Person for purposes of this Section 5.01. ,
5.02
No Duty Regarding Paying
Banks
. Once the Custodian has wired amounts to a bank or broker-dealer pursuant to Section 5.01 above, the Custodian shall
not be under any obligation to effect any further payment or distribution by such bank or broker-dealer.
ARTICLE VI.
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian
shall establish and maintain a segregated account or accounts for and on behalf of a Fund, into which account or accounts may be
transferred cash and/or Securities, including Securities maintained in a Depository Account:
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(a)
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in accordance with the provisions of any agreement
among the Trust, the Sponsor, the Custodian
and a broker-dealer registered under the 1934 Act and a member of FINRA (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of the Options Clearing Corporation and of any registered national
securities exchange (or the CFTC or any registered contract market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Fund;
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(b)
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for purposes of segregating cash or Securities in connection with securities options purchased or written by the Fund or in
connection with financial futures contracts (or options thereon) purchased or sold by the Fund;
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(c)
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which constitute collateral for loans of Securities made by the Fund;
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(d)
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for other proper corporate purposes, but only upon receipt of Proper Instructions, setting forth the purpose or purposes of
such segregated account and declaring such purposes to be proper corporate purposes.
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Each segregated account established under
this Article VI shall be established and maintained for the Fund only. All Proper Instructions relating to a segregated account
shall specify the Fund.
ARTICLE VII.
COMPENSATION OF CUSTODIAN
7.01
Compensation
. The
Custodian shall be compensated for providing the services set forth in this Agreement in accordance with the fee schedule set forth
on
Exhibit C
hereto (as amended from time to time). The Custodian shall also be compensated for such out-of-pocket expenses
(e.g., telecommunication charges, postage and delivery charges, and reproduction charges) as are reasonably incurred by the Custodian
in performing its duties hereunder. The Trust shall pay all such fees and reimbursable expenses within 30 calendar days following
receipt of the billing notice, except for any fee or expense subject to a good faith dispute. The Trust shall notify the Custodian
in writing within 30 calendar days following receipt of each invoice if the Trust is disputing any amounts in good faith. The Trust
shall pay such disputed amounts within 10 calendar days of the day on which the parties agree to the amount to be paid. With the
exception of any fee or expense the Trust is disputing in good faith as set forth above, unpaid invoices shall accrue a finance
charge of 1½% per month after the due date. Notwithstanding anything to the contrary, amounts owed by the Trust to the Custodian
shall only be paid out of the assets and property of the particular Fund involved.
7.02
Overdrafts
. The Trust
is responsible for maintaining an appropriate level of short term cash investments to accommodate cash outflows. The Trust may
obtain a formal line of credit for potential overdrafts of its custody account. In the event of an overdraft or in the event the
line of credit is insufficient to cover an overdraft, the overdraft amount or the overdraft amount that exceeds the line of credit
will be charged in accordance with the fee schedule set forth on
Exhibit C
hereto (as amended from time to time)
ARTICLE VIII.
REPRESENTATIONS AND
WARRANTIES
8.01
Representations and Warranties
of the Trust and Sponsor
. The Trust and Sponsor each hereby represents and warrants to the Custodian, which representations
and warranties shall be deemed to be continuing throughout the term of this Agreement, that:
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(a)
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It is duly organized and existing under the laws of the jurisdiction of its organization, with full power to carry on its business
as now conducted, to enter into this Agreement and to perform its obligations hereunder;
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(b)
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This Agreement has been duly authorized, executed and delivered by the Trust and Sponsor in accordance with all requisite action
and constitutes a valid and legally binding obligation of the Trust, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and
secured parties; and
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(c)
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It is conducting its business in compliance in all material respects with all applicable laws and regulations, both state and
federal, and has obtained all regulatory approvals necessary to carry on its business as now conducted; there is no statute, rule,
regulation,
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order or judgment binding on
it and no provision of its charter, bylaws or any contract binding it or affecting its property which would prohibit its execution
or performance of this Agreement.
8.02
Representations and Warranties
of the Custodian
. The Custodian hereby represents and warrants to the Trust, which representations and warranties shall be
deemed to be continuing throughout the term of this Agreement, that:
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(a)
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It is duly organized and existing under the laws of the jurisdiction of its organization, with full power to carry on its business
as now conducted, to enter into this Agreement and to perform its obligations hereunder;
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(b)
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This Agreement has been duly authorized, executed and delivered by the Custodian in accordance with all requisite action and
constitutes a valid and legally binding obligation of the Custodian, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and
secured parties; and
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(c)
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It is conducting its business in compliance in all material respects with all applicable laws and regulations, both state and
federal, and has obtained all regulatory approvals necessary to carry on its business as now conducted; there is no statute, rule,
regulation, order or judgment binding on it and no provision of its charter, bylaws or any contract binding it or affecting its
property which would prohibit its execution or performance of this Agreement.
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ARTICLE IX.
CONCERNING THE CUSTODIAN
9.01
Standard of Care
.
The Custodian shall exercise commercially reasonable efforts of care in the performance of its duties under this Agreement. The
Custodian shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with
its duties under this Agreement, except a loss arising out of or relating to the Custodian’s (or a Sub-Custodian’s)
refusal or failure to comply with the terms of this Agreement (or any sub-custody agreement) or from its (or a Sub-Custodian’s)
bad faith, negligence or willful misconduct in the performance of its duties under this Agreement (or any sub-custody agreement).
The Custodian shall be entitled to rely on and may act upon advice of counsel on all matters, and shall be without liability for
any action reasonably taken or omitted pursuant to such advice. The Custodian shall promptly notify the Trust and Sponsor of any
action taken or omitted by the Custodian pursuant to advice of counsel.
9.02
Actual Collection Required
.
The Custodian shall not be liable for, or considered to be the custodian of, any cash belonging to a Fund or any money represented
by a check, draft or other instrument for the payment of money, until the Custodian or its agents actually receive such cash or
collect on such instrument.
9.03
No Responsibility for
Title, etc.
So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or
genuineness of any property or evidence
of title thereto received or delivered by it pursuant to this Agreement.
9.04
Limitation on Duty to
Collect
. Custodian shall not be required to enforce collection, by legal means or otherwise, of any money or property due and
payable with respect to Securities held for the Fund if such Securities are in default or payment is not made after due demand
or presentation.
9.05
Reliance Upon Documents
and Instructions
. The Custodian shall be entitled to rely upon any certificate, notice or other instrument in writing received
by it and reasonably believed by it to be genuine. The Custodian shall be entitled to rely upon any Written Instructions actually
received by it pursuant to this Agreement.
9.06
Cooperation
. The Custodian
shall cooperate with and supply necessary information to the entity or entities appointed by the Trust or Sponsor to keep the books
of account of the Funds and/or compute the value of the assets of the Funds. The Custodian shall take all such reasonable actions
as the Trust or Sponsor may from time to time request to enable the Trust to obtain, from year to year, favorable opinions from
the Trust’s independent accountants with respect to the Custodian’s activities hereunder in connection with (i) the
preparation of the Trust’s annual reports and any other reports required by the CFTC, NFA and SEC, and (ii) the fulfillment
by the Trust of any other requirements of the CFTC, NFA and SEC.
ARTICLE X.
INDEMNIFICATION
10.01
Indemnification by Trust
.
The Trust shall indemnify and hold harmless the Custodian, any Sub-Custodian and any nominee thereof (each, an “Indemnified
Party” and collectively, the “Indemnified Parties”) from and against any and all claims, demands, losses, expenses
and liabilities of any and every nature (including reasonable attorneys’ fees) that an Indemnified Party may sustain or incur
or that may be asserted against an Indemnified Party by any person arising directly or indirectly (i) from the fact that Securities
are registered in the name of any such nominee, (ii) from any action taken or omitted to be taken by the Custodian or such Sub-Custodian
(a) at the request or direction of or in reliance on the advice of the Trust or Sponsor, or (b) upon Proper Instructions, or (iii)
from the performance of its obligations under this Agreement or any sub-custody agreement, provided that neither the Custodian
nor any such Sub-Custodian shall be indemnified and held harmless from and against any such claim, demand, loss, expense or liability
arising out of or relating to its refusal or failure to comply with the terms of this Agreement (or any sub-custody agreement),
or from its bad faith, negligence or willful misconduct in the performance of its duties under this Agreement (or any sub-custody
agreement). This indemnity shall be a continuing obligation of the Trust, its successors and assigns, notwithstanding the termination
of this Agreement. As used in this paragraph, the terms “Custodian” and “Sub-Custodian” shall include their
respective directors, officers and employees.
10.02
Indemnification by Custodian
.
The Custodian shall indemnify and hold harmless the Trust and Sponsor from and against any and all claims, demands, losses, expenses,
and liabilities of any and every nature (including reasonable attorneys’ fees) that the Trust may sustain or incur or that
may be asserted against the Trust by any person arising directly or indirectly out of any action taken or omitted to be taken by
an Indemnified Party as a result of the Indemnified Party’s refusal or failure to comply with the terms of this Agreement
(or any sub-custody agreement), or from its bad faith, negligence or willful misconduct in the performance of its duties under
this Agreement (or any sub-custody agreement). This indemnity shall be a continuing obligation of the Custodian, its successors
and assigns, notwithstanding the termination of this Agreement. As used in this paragraph, the term “Trust” shall include
the Trust’s officers and employees and the term “Sponsor” shall include the Sponsor’s officers and employees.
10.03
Security
. If the
Custodian advances cash or Securities to a Fund for any purpose, either at the Trust’s request or as otherwise contemplated
in this Agreement, or in the event that the Custodian or its nominee incurs, in connection with its performance under this Agreement,
any claim, demand, loss, expense or liability (including reasonable attorneys’ fees) (except such as may arise from its or
its nominee’s bad faith, negligence or willful misconduct), then, in any such event, any property at any time held for the
account of a Fund shall be security therefor, and should a Fund fail promptly to repay or indemnify the Custodian, the Custodian
shall be entitled to utilize available cash of such Fund and to dispose of other assets of such Fund to the extent necessary to
obtain reimbursement or indemnification.
10.04
Miscellaneous.
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(a)
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Neither party to this Agreement shall be liable to another party for consequential, special or punitive damages under any provision
of this Agreement.
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(b)
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The indemnity provisions of this Article shall indefinitely survive the termination and/or assignment of this Agreement.
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(c)
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In order that the indemnification provisions contained in this Article X shall apply, it is understood that if in any case
the indemnitor may be asked to indemnify or hold the indemnitee harmless, the indemnitor shall be fully and promptly advised of
all pertinent facts concerning the situation in question, and it is further understood that the indemnitee will use all reasonable
care to notify the indemnitor promptly concerning any situation that presents or appears likely to present the probability of a
claim for indemnification. The indemnitor shall have the option to defend the indemnitee against any claim that may be the subject
of this indemnification. In the event that the indemnitor so elects, it will so notify the indemnitee and thereupon the indemnitor
shall take over complete defense of the claim, and the indemnitee shall in such situation initiate no further legal or other expenses
for which it shall seek indemnification under this Article X. The indemnitee shall in no case confess any claim or make any compromise
in any case in which the indemnitor will be asked to indemnify the indemnitee except with the indemnitor’s prior written
consent.
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ARTICLE XI.
FORCE MAJEURE
Neither the Custodian, the Sponsor nor the
Trust shall be liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes;
fires; floods; wars; civil or military disturbances; acts of terrorism; sabotage; strikes; epidemics; riots; power failures; computer
failure and any such circumstances beyond its reasonable control as may cause interruption, loss or malfunction of utility, transportation,
computer (hardware or software) or telephone communication service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or transportation; provided, however, that in the event
of a failure or delay, the Custodian (i) shall not discriminate against a Fund in favor of any other customer of the Custodian
in making computer time and personnel available to input or process the transactions contemplated by this Agreement, and (ii) shall
use its best efforts to ameliorate the effects of any such failure or delay.
ARTICLE XII.
PROPRIETARY
AND CONFIDENTIAL INFORMATION
12.01 The Custodian agrees on
behalf of itself and its directors, officers, and employees to treat confidentially and as proprietary information of the Trust
and Sponsor, all records and other information relative to the Trust and prior, present, or potential shareholders of the Funds
(and clients of said shareholders), and not to use such records and information for any purpose other than the performance of its
responsibilities and duties hereunder, except (i) after prior notification to and approval in writing by the Trust or Sponsor,
which approval shall not be unreasonably withheld and may not be withheld where the Custodian may be exposed to civil or criminal
contempt proceedings for failure to comply, (ii) when requested to divulge such information by duly constituted authorities although
the Custodian will promptly report such disclosure to the Trust and Sponsor if disclosure is permitted by applicable law and regulation,
or (iii) when so requested by the Trust or Sponsor. Records and other information which have become known to the public through
no wrongful act of the Custodian or any of its employees, agents or representatives, and information that was already in the possession
of the Custodian prior to receipt thereof from the Trust, Sponsor or its agent, shall not be subject to this paragraph.
12.02 Further, the Custodian will
adhere to the privacy policies adopted by the Trust pursuant to Title V of the Gramm-Leach-Bliley Act, as may be modified from
time to time. In this regard, the Custodian shall have in place and maintain physical, electronic and procedural safeguards reasonably
designed to protect the security, confidentiality and integrity of, and to prevent unauthorized access to or use of, records and
information relating to the Trust and its shareholders.
ARTICLE XIII.
EFFECTIVE PERIOD;
TERMINATION
13.01
Effective Period
.
This Agreement shall become effective as of the date first written above and will continue in effect for a period of three (3)
years.
13.02
Termination
. This
Agreement may be terminated by any party upon giving 90 days prior written notice to the other parties or such shorter period as
is mutually agreed upon by the parties. Notwithstanding the foregoing, this Agreement may be terminated by any party upon the breach
of any other party of any material term of this Agreement if such breach is not cured within 15 days of notice of such breach to
the breaching party. In addition, the Trust may, at any time, immediately terminate this Agreement in the event of the appointment
of a conservator or receiver for the Custodian by regulatory authorities or upon the happening of a like event at the direction
of an appropriate regulatory agency or court of competent jurisdiction.
13.03
Early
Termination
.
In the absence of any material breach of this Agreement, should the Trust or Sponsor
elect to terminate this Agreement prior to the end of the three year term, the Trust or Sponsor agrees to pay the following fees:
a) all monthly fees through the life
of the Agreement, including the repayment of any negotiated discounts;
b) all fees associated with converting
services to successor custodian;
c) all fees associated with any record
retention and/or tax reporting obligations that may not be eliminated due to the conversion to a successor service provider;
d) all out-of-pocket costs associated
with to a) to c) above.
13.04
Appointment of Successor
Custodian
. If a successor custodian shall have been appointed by the Sponsor, the Custodian shall, upon receipt of a notice
of acceptance by the successor custodian, on such specified date of termination (i) deliver directly to the successor custodian
all Securities (other than Securities held in a Book-Entry System or Securities Depository) and cash then owned by the Fund and
held by the Custodian as custodian, and (ii) transfer any Securities held in a Book-Entry System or Securities Depository to an
account of or for the benefit of the Fund at the successor custodian, provided that the Trust or Sponsor shall have paid to the
Custodian all fees, expenses and other amounts to the payment or reimbursement of which it shall then be entitled. In addition,
the Custodian shall, at the expense of the Trust, transfer to such successor all relevant books, records, correspondence, and other
data established or maintained by the Custodian under this Agreement in a form reasonably acceptable to the Trust (if such form
differs from the form in which the Custodian has maintained the same, the Trust shall pay any expenses associated with transferring
the data to such form), and will cooperate in the transfer of such duties and responsibilities, including provision for assistance
from the Custodian’s personnel in the establishment of books, records, and other data by such successor. Upon such delivery
and transfer, the Custodian shall be relieved of all obligations under this Agreement.
13.05
Failure
to Appoint Successor Custodian
. If a successor custodian is not designated by the Trust on or before the date of termination
of this Agreement, then the Custodian shall have the right to deliver to a bank or trust company of its own selection cash and
other property held by Custodian under this Agreement and to transfer to an account of or for the Fund at such bank or trust company
all Securities of the Funds held in a Book-Entry System or Securities Depository. Upon such delivery and transfer, such bank or
trust company shall be the successor custodian under this Agreement and the Custodian shall be relieved of all obligations under
this Agreement. In addition, under these circumstances, all books, records and other data of the Trust shall be returned to the
Trust.
ARTICLE XIV.
CLASS ACTIONS
The Custodian shall use its best efforts to identify and file
claims for the Fund(s) involving any class action litigation that impacts any security the Fund(s) may have held during the class
period. The Trust agrees that the Custodian may file such claims on its behalf and understands that it may be waiving and/or releasing
certain rights to make claims or otherwise pursue class action defendants who settle their claims. Further, the Trust acknowledges
that there is no guarantee these claims will result in any payment or partial payment of potential class action proceeds and that
the timing of such payment, if any, is uncertain.
However, the Trust or Sponsor may instruct the Custodian to
distribute class action notices and other relevant documentation to the Fund(s) or its designee and, if it so elects, will relieve
the Custodian from any and all liability and responsibility for filing class action claims on behalf of the Fund(s).
In the event the Fund(s) are closed, the Custodian shall only
file the class action claims upon written instructions by an authorized representative of the closed Fund(s). Any expenses associated
with such filing will be assessed against the proceeds received of any class action settlement.
ARTICLE XV.
MISCELLANEOUS
15.01
Compliance with Laws
. The
Trust and Sponsor have and retain primary responsibility for all compliance matters relating to the Fund, including but not limited
to compliance with the 1933 Act, the CEA, the Internal Revenue Code of 1986, the Sarbanes-Oxley Act of 2002, the USA Patriot Act
of 2001 and the policies and limitations of the Fund relating to its portfolio investments as set forth in its Prospectus and statement
of additional information. The Custodian’s services hereunder shall not relieve the Trust of its responsibilities for assuring
such compliance or the Sponsor’s oversight responsibility with respect thereto.
15.02
Amendment
. This Agreement may
not be amended or modified in any manner except by written agreement executed by the Custodian, Trust and Sponsor.
15.03
Assignment
. This Agreement
shall extend to and be binding upon the parties hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Trust without the written consent of the Custodian, or by the Custodian without the written
consent of the Trust accompanied by the authorization or approval of the Sponsor.
15.04
Governing Law
. This Agreement
shall be governed by and construed in accordance with the laws of the State of Minnesota, without regard to conflicts of law principles.
To the extent that the applicable laws of the State of Minnesota, or any of the provisions herein, conflict with the applicable
provisions of the CEA or 1933 Act, the latter shall control, and nothing herein shall be construed in a manner inconsistent with
the CEA, 1933 Act or any rule or order of the CFTC, NFA or SEC thereunder.
15.05
No Agency Relationship
. Nothing
herein contained shall be deemed to authorize or empower either party to act as agent for the other party to this Agreement, or
to conduct business in the name, or for the account, of the other party to this Agreement.
15.06
Services Not Exclusive
. Nothing
in this Agreement shall limit or restrict the Custodian from providing services to other parties that are similar or identical
to some or all of the services provided hereunder.
15.07
Invalidity.
Any provision of this Agreement which may be determined by competent authority to be prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. In such case, the parties shall in good faith modify or substitute such
provision consistent with the original intent of the parties.
15.08
Notices
.
Any notice required or permitted to be given by either party to the other shall be in writing and shall be deemed to have
been given on the date delivered personally or by courier service, or three days after sent by registered or certified mail, postage
prepaid, return receipt requested, or on the date sent and confirmed received by facsimile transmission to the other party’s
address set forth below:
Notice to the Custodian shall
be sent to:
U.S Bank, N.A.
1555 N. Rivercenter Dr., MK-WI-S302
Milwaukee, WI 53212
Attn: Tom Fuller
Phone: 414-905-6118
Fax: 866-350-5066
Notice to the
Trust Sponsor shall be sent to:
ETF Managers Capital LLC
35 Beechwood Road, Suite 2B
Summit, NJ
07901
Attn: Samuel Masucci
Phone: 908-897-0510
and Notice to the Trust shall
be sent to:
ETF Managers Group Commodity Trust
I
c/o ETF Managers Capital LLC
35 Beechwood Road, Suite 2B
Summit, NJ 07901
15.09
Multiple Originals
. This Agreement
may be executed on two or more counterparts, each of which when so executed shall be deemed an original, but such counterparts
shall together constitute but one and the same instrument.
15.10
No Waiver
. No failure by either
party hereto to exercise, and no delay by such party in exercising, any right hereunder shall operate as a waiver thereof. The
exercise by either party hereto of any right hereunder shall not preclude the exercise of any other right, and the remedies provided
herein are cumulative and not exclusive of any remedies provided at law or in equity.
15.11
References to Custodian
. The
Trust or Sponsor shall not circulate any printed matter which contains any reference to Custodian without the prior written approval
of Custodian, excepting printed matter contained in the Prospectus or statement of additional information for a Fund and such other
printed matter as merely identifies Custodian as custodian for a Fund. The Trust or Sponsor shall submit printed matter requiring
approval to Custodian in draft form, allowing sufficient time for review by Custodian and its counsel prior to any deadline for
printing.
[SIGNATURES ON THE
FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by a duly authorized officer on one or more counterparts as of the date first above written.
ETF MANAGERS GROUP COMMODITY TRUST I
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By:
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/s/ Samuel Masucci III
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Name: Samuel Masucci III
Title: Principle Executive Officer
U.S. BANK, N.A.
Name: Michael R. McVoy
Title: Senior Vice President
ETF MANAGERS CAPITAL LLC
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By:
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/s/ Samuel Masucci III
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Name: Samuel Masucci III
Title: Chief Executive Officer and President
EXHIBIT A
to the Custody Agreement
Separate Series of ETF Managers Group Commodity
Trust I
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N
ame
of Series
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Symbol
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Sit Rising Rate ETF
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RISE (NYSE Arca)
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EXHIBIT B
AUTHORIZED PERSONS
Set forth below are
the names and specimen signatures of the persons authorized by ETF Managers Group Commodity Trust I to administer the Fund Custody
Accounts.
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Name
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Telephone/Fax Number
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Signature
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David H. Weissman
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John A. Flanagan
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Samuel Masucci
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EXHIBIT C
to the Custody Agreement – ETF Managers
Group Commodity Trust
EXHIBIT D
SHAREHOLDER COMMUNICATIONS ACT AUTHORIZATION
ETF MANAGERS GROUP COMMODITY TRUST I
The Shareholder Communications Act of 1985 requires banks and
trust companies to make an effort to permit direct communication between a company which issues securities and the shareholder
who votes those securities.
Unless you specifically require us to NOT release your name
and address to requesting companies, we are required by law to disclose your name and address.
Your “yes” or “no” to disclosure will
apply to all securities U.S. Bank holds for you now and in the future, unless you change your mind and notify us in writing.
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______ YES
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U.S. Bank is authorized to provide the Trust’s name, address and security position to requesting companies whose stock is owned by the Trust.
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______ NO
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U.S. Bank is NOT authorized to provide the Trust’s name, address and security position to requesting companies whose stock is owned by the Trust.
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ETF MANAGERS GROUP COMMODITY TRUST I
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By:
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Title:
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Chief Compliance Officer
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Date:
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