Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission (“SEC”), paper
copies of the Fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the Fund’s reports from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made
available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take
any action. Please contact your financial intermediary to elect to receive shareholder reports and other Fund communications electronically.
You may elect to receive all future Fund reports in paper free of charge. Please contact your financial intermediary to inform them
that you wish to continue receiving paper copies of Fund shareholder reports and for details about whether your election to receive reports in paper will apply to all funds held with your financial intermediary.
Wahed FTSE USA Shariah ETF
Statement of Assets and Liabilities
|
November 30, 2019 (Unaudited)
|
|
Assets
|
|
|
|
|
Investments, at value (cost $19,950,760)
|
|
$
|
21,007,197
|
|
|
Cash
|
|
|
104,592
|
|
|
Dividend and interest receivable
|
|
|
52,776
|
|
|
Total Assets
|
|
|
21,164,565
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Payable to Adviser
|
|
|
8,117
|
|
|
Dividend withholding tax payable
|
|
|
158
|
|
|
Total liabilities
|
|
|
8,275
|
|
|
Net Assets
|
|
$
|
21,156,290
|
|
|
|
|
|
|
|
|
Net Assets Consists of:
|
|
|
|
|
|
Paid-in capital
|
|
$
|
20,016,085
|
|
|
Total distributable earnings
|
|
|
1,140,205
|
|
|
Net Assets
|
|
$
|
21,156,290
|
|
|
|
|
|
|
|
|
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)
|
|
|
800,000
|
|
|
Net Asset Value, redemption price and offering price per share
|
|
$
|
26.45
|
|
The accompanying notes are an integral part of the financial statements.
Wahed FTSE USA Shariah ETF
Statement of Operations
|
For the Period Ended November 30, 2019(1) (Unaudited)
|
|
Investment Income
|
|
|
|
|
Dividend income (net of withholding tax of $195)
|
|
$
|
148,291
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Investment advisory fees
|
|
|
30,679
|
|
|
Net investment income
|
|
|
117,612
|
|
|
|
|
|
|
|
|
Realized and Unrealized Gain on Investments
|
|
|
|
|
|
Net realized gain from investments
|
|
|
18,156
|
|
|
Net change in unrealized appreciation/depreciation on
investments
|
|
|
1,056,437
|
|
|
Net realized and unrealized gain on investments
|
|
|
1,074,593
|
|
|
Net increase in net assets from operations
|
|
$
|
1,192,205
|
|
|
(1)
|
Fund commenced operations on July 15, 2019. The information presented is for the period from July 15, 2019 to November 30, 2019.
|
The accompanying notes are an integral part of the financial statements.
Wahed FTSE USA Shariah ETF
Statement
of Changes in Net Assets
|
|
|
Period Ended November 30,
2019(1)
(Unaudited)
|
|
|
From Operations
|
|
|
|
|
|
Net investment income
|
|
$
|
117,612
|
|
|
Net realized gain on investments
|
|
|
18,156
|
|
|
Net change in unrealized appreciation/depreciation on investments
|
|
|
1,056,437
|
|
|
Net increase in net assets resulting from operations
|
|
|
1,192,205
|
|
|
|
|
|
|
|
|
From Distributions
|
|
|
|
|
|
Distributable earnings
|
|
|
(52,000
|
)
|
|
Total distributions
|
|
|
(52,000
|
)
|
|
|
|
|
|
|
|
From Capital Share Transactions
|
|
|
|
|
|
Proceeds from shares sold
|
|
|
20,016,085
|
|
|
Net increase in net assets resulting from capital share transactions
|
|
|
20,016,085
|
|
|
|
|
|
|
|
|
Total Increase in Net Assets
|
|
|
21,156,290
|
|
|
|
|
|
|
|
|
Net Assets
|
|
|
|
|
|
Beginning of period
|
|
|
—
|
|
|
End of period
|
|
$
|
21,156,290
|
|
|
|
|
|
|
|
|
Changes in Shares Outstanding
|
|
|
|
|
|
Shares outstanding, beginning of period
|
|
|
—
|
|
|
Shares sold
|
|
|
800,000
|
|
|
Shares outstanding, end of period
|
|
|
800,000
|
|
|
(1)
|
The Fund commenced operations on July 15, 2019. The information presented is for the period from July 15, 2019 to November 30, 2019.
|
The accompanying notes are an integral part of the financial statements.
Wahed FTSE USA Shariah ETF
Financial Highlights
|
For a Share Outstanding Throughout the Period
|
|
|
|
Period Ended
November 30,
2019(1)
(Unaudited)
|
|
|
Net Asset Value, Beginning of Period
|
|
$
|
25.00
|
|
|
|
|
|
|
|
|
Income from investment operations:
|
|
|
|
|
|
Net investment income(2)
|
|
|
0.18
|
|
|
Net realized and unrealized gain on investments
|
|
|
1.35
|
|
|
Total from investment operations
|
|
|
1.53
|
|
|
|
|
|
|
|
|
Less distributions paid:
|
|
|
|
|
|
From net investment income
|
|
|
(0.08
|
)
|
|
Total distributions paid
|
|
|
(0.08
|
)
|
|
|
|
|
|
|
|
Net Asset Value, End of Period
|
|
$
|
26.45
|
|
|
|
|
|
|
|
|
Total return, at NAV(3)(4)
|
|
|
6.12
|
%
|
|
Total return, at Market(3)(4)
|
|
|
6.38
|
%
|
|
|
|
|
|
|
|
Supplemental Data and Ratios:
|
|
|
|
|
|
Net assets, end of period (000’s)
|
|
$
|
21,156
|
|
|
|
|
|
|
|
|
Ratio of expenses to average net assets(5)
|
|
|
0.50
|
%
|
|
|
|
|
|
|
|
Ratio of net investment income to average net assets(5)
|
|
|
1.92
|
%
|
|
|
|
|
|
|
|
Portfolio turnover rate(4)(6)
|
|
|
7.07
|
%
|
|
(1)
|
The Fund commenced investment operations on July 15, 2019.
|
|
(2)
|
Per share net investment income was calculated using average shares outstanding.
|
|
(3)
|
Total return in the table represents the rate that the investor would have earned or lost on an investment in the Fund, assuming reinvestment of dividends.
|
|
(4)
|
Not annualized for periods less than one year.
|
|
(5)
|
Annualized for periods less than one year.
|
|
(6)
|
Excludes in-kind transactions associated with creations and redemptions of the Fund.
|
The accompanying notes are an integral part of the financial
statements.
Wahed FTSE USA Shariah ETF
Notes to Financial Statements
|
November 30, 2019 (Unaudited)
|
Wahed FTSE USA Shariah ETF (the “Fund”) is a non-diversified series of Listed Funds Trust (the “Trust”), formerly Active
Weighting Funds ETF Trust. The Trust was organized as a Delaware statutory trust on August 26, 2016, amended on December 21, 2018, and is registered with the Securities and Exchange Commission (the “SEC”) as an open-end management investment
company under the Investment Company Act of 1940, as amended (the “1940 Act”).
The Fund’s objective is to track the total return performance, before fees and expenses, of the FTSE USA Shariah Index
(the “Index”). The Index is composed of common stocks of large and mid-capitalization U.S. companies the characteristics of which meet the requirements of the Shariah and are consistent with Islamic principles as interpreted by subject-matter
experts.
Cost incurred by the Fund in connection with the organization, registration and the initial public offering of shares were
paid by Wahed Invest LLC (“Wahed” or “Adviser”), the Fund’s investment Adviser.
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services — Investment Companies. The Fund prepares its financial statements in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) and follows the significant accounting policies described below.
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from these estimates.
Shares Transactions
The Fund issues and redeems shares on a continuous basis at net asset value (“NAV”) only in large blocks of shares called
“Creation Units.” A Creation Unit consists of 25,000 shares. The NAV is determined as of the close of trading (generally, 4:00 PM Eastern Time) on each day the New York Stock Exchange (“NYSE”) is open for trading. The NAV of the shares of the
Fund will be equal to the Fund’s total assets minus the Fund’s total liabilities divided by the total number of shares outstanding. The NAV that is published will be rounded to the nearest cent; however, for purposes of determining the price of
Creation Units, the NAV will be calculated to five decimal places.
Fair Value Measurement
In calculating the NAV, the Fund’s exchange-traded equity securities will be valued at fair value, which will generally be
determined using the last reported official closing or last trading price on the exchange or market on which the security is primarily traded at the time of valuation. Such valuations are typically categorized as Level 1 in the fair value
hierarchy described below.
Securities listed on the NASDAQ Stock Market, Inc. are generally valued at the NASDAQ official closing price.
If market quotations are not readily available, or if it is determined that a quotation of a security does not represent
fair value, then the security is valued at fair value as determined in good faith by the Adviser using procedures adopted by the Board of Trustees of the Trust (the “Board”). The circumstances in which a security may be fair valued include, among
others: the occurrence of events that are significant to a particular issuer, such as mergers, restructurings or defaults; the occurrence of events that are significant to an entire market, such as natural disasters in a particular region or
government actions; trading restrictions on securities; thinly traded securities; and market events such as trading halts and early market closings. Due to the inherent uncertainty of valuations, fair values may differ significantly from the
values that would have been used had an active market existed. Fair valuation could result in a different NAV than a NAV determined by using market quotations. Such valuations are typically categorized as Level 2 or Level 3 in the fair value
hierarchy described below.
Wahed FTSE USA Shariah ETF
Notes to Financial Statements
|
November 30, 2019 (Unaudited) (Continued)
|
Money market funds are valued at NAV. If NAV is not readily available the securities will be valued at fair value.
FASB Accounting Standards Codification, Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) defines
fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and requires disclosure about fair value measurements. It also provides guidance on determining when there has been a significant decrease in the volume
and level of activity for an asset or liability, when a transaction is not orderly, and how that information must be incorporated into fair value measurements. Under ASC 820, various inputs are used in determining the value of the Fund’s
investments. These inputs are summarized in the following hierarchy:
|
●
|
Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
|
|
●
|
Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or
indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
|
|
●
|
Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Fund’s own
assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.
|
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets
or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors,
including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models
or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
Debt securities, including short-term debt instruments having a maturity of less than 60 days, are generally valued using
the last available bid prices or current market quotations provided by dealers or prices (including evaluated prices) supplied by approved independent third-party pricing services. Pricing services may use matrix pricing or valuation models that
utilize certain inputs and assumptions to derive values. Due to the inherent uncertainty of valuations, fair values may differ significantly from the values that would have been used had an active market existed.
All other securities and investments for which market values are not readily available, including restricted securities,
and those securities for which it is inappropriate to determine prices in accordance with the aforementioned procedures, are valued at fair value as determined in good faith under procedures adopted by the Board, although the actual calculations
may be done by others. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of
the issuer’s financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with
investing in those securities. The hierarchy classification of inputs used to value the Fund’s investments at November 30, 2019 are as follows:
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stocks*
|
|
$
|
21,007,197
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,007,197
|
|
|
Total Investments in Securities
|
|
$
|
21,007,197
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,007,197
|
|
* See the Schedule of Investments for industry classifications.
Wahed FTSE USA Shariah ETF
Notes to Financial Statements
|
November 30, 2019 (Unaudited) (Continued)
|
Security Transactions
Investment transactions are recorded as of the date that the securities are purchased or sold (trade date). Realized gains
and losses from the sale or disposition of securities are calculated based on the specific identified cost-method.
Investment Income
Dividend income is recognized on the ex-dividend date. Interest income is accrued daily. An amortized cost method of
valuation may be used with respect to debt obligations with sixty days or less remaining to maturity, unless the Adviser determines in good faith that such method does not represent fair value. The Fund distributes substantially all net
investment income to shareholders in the form of dividends.
Tax Information, Dividends and Distributions to Shareholders and Uncertain Tax Positions
The Fund is treated as a separate entity for Federal income tax purposes. The Fund intends to qualify as a regulated
investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). To qualify and remain eligible for the special tax treatment accorded to RICs, the Fund must meet certain annual income
and quarterly asset diversification requirements and must distribute annually at least 90% of the sum of (i) its investment company taxable income (which includes dividends, interest and net short-term capital gains) and (ii) certain net
tax-exempt income, if any. If so qualified, the Fund will not be subject to Federal income tax to the extent it distributes substantially all of its net investment income and capital gains to shareholders.
Distributions to shareholders are recorded on the ex-dividend date. The Fund generally pays out dividends from its net
investment income, if any, at least annually, and distributes its net capital gains, if any, to shareholders at least annually. The amount of dividends and distributions from net investment income and net realized capital gains are determined in
accordance with Federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are
reclassified within the components of net assets based on their Federal tax basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed earnings and profit for tax purposes are reported as a
tax return of capital.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition
threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain
tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Interest and penalties related to income taxes would be recorded as income tax expense. The Fund’s Federal
income tax returns are subject to examination by the Internal Revenue Service (the “IRS”) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending
on the jurisdiction.
The Fund commenced operations on July 15, 2019.
Indemnification
In the normal course of business, the Fund expects to enter into contracts that contain a variety of representations and
warranties and which provide general indemnifications. The Fund’s maximum exposure under these anticipated arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, the
Adviser expects the risk of loss to be remote.
|
3.
|
INVESTMENT ADVISORY AND OTHER AGREEMENTS
|
Investment Advisory Agreement
The Trust has entered into an Investment Advisory Agreement (the “Advisory Agreement”) with the Adviser. Under the
Advisory Agreement, the Adviser provides a continuous investment program for the Fund’s assets in accordance with its investment objectives, policies and limitations, and oversees the day-to-day operations of the Fund subject to the supervision
of the Board, including the Trustees who are not “interested persons” of the Trust as defined in the 1940 Act (the “Independent Trustees”).
Wahed FTSE USA Shariah ETF
Notes to Financial Statements
|
November 30, 2019 (Unaudited) (Continued)
|
Pursuant to the Advisory Agreement between the Trust, on behalf of the Fund, and Wahed, the Fund pays a unified management
fee to the Adviser, which is calculated daily and paid monthly, at an annual rate of 0.50%, of the Fund’s average daily net assets. Wahed has agreed to pay all expenses of the Fund except the fee paid to Wahed under the Advisory Agreement,
interest charges on any borrowings, dividends and other expenses on securities sold short, taxes, brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments,
acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, and distribution (12b-1) fees and expenses (if any).
Distribution Agreement and 12b-1 Plan
Quasar Distributors, LLC (the “Distributor”) serves as the Fund’s distributor pursuant to a Distribution Services
Agreement. The Distributor receives compensation for the statutory underwriting services it provides to the Fund. The Distributor enters into agreements with certain broker-dealers and others that will allow those parties to be “Authorized
Participants” and to subscribe for and redeem shares of the Fund. The Distributor will not distribute shares in less than whole Creation Units and does not maintain a secondary market in shares.
The Board has adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act (“Rule 12b-1 Plan”). In
accordance with the Rule 12b-1 Plan, the Fund is authorized to pay an amount up to 0.25% of the Fund’s average daily net assets each year for certain distribution-related activities. As authorized by the Board, no Rule 12b-1 fees are currently
paid by the Fund and there are no plans to impose these fees. However, in the event Rule 12b-1 fees are charged in the future, they will be paid out of the Fund’s assets. The Adviser and its affiliates may, out of their own resources, pay amounts
to third parties for distribution or marketing services on behalf of the Fund.
Administrator, Custodian and Transfer Agent
U.S. Bancorp Fund Services LLC, doing business as U.S. Bank Global Fund Services (“Fund Services” or “Administrator”)
serves as administrator, transfer agent and fund accounting agent of the Fund pursuant to a Fund Servicing Agreement. U.S. Bank N.A., an affiliate of Fund Services, serves as the Fund’s custodian pursuant to a Custody Agreement. Under the terms
of these agreements, the Adviser pays the Fund’s administrative, custody and transfer agency fees.
A Trustee and all officers of the Trust are affiliated with the Administrator and Custodian.
|
4.
|
CREATION AND REDEMPTION TRANSACTIONS
|
Shares of the Fund are listed and traded on the NASDAQ Stock Market LLC, (the “Exchange”). Market prices for the shares
may be different from their NAV. The Fund issues and redeems shares on a continuous basis at NAV only in large blocks of shares, typically 25,000 shares, called “Creation Units.” Creation Units are to be issued and redeemed principally in kind
for a basket of securities and a balancing cash amount. Shares generally will trade in the secondary market in amounts less than a Creation Unit at market prices that change throughout the day.
Creation Transaction Fee
Authorized Participants will be required to pay to the Custodian a fixed transaction fee (the “Creation Transaction Fee”)
in connection with the issuance of Creation Units. The standard Creation Transaction Fee will be the same regardless of the number of Creation Units purchased by an investor on the applicable Business Day. The Creation Transaction Fee charged by
the Fund for each creation order is $500.
An additional variable fee of up to a maximum of 2% of the value of the Creation Units subject to the transaction imposed
by cash purchases, non-standard orders, or partial cash purchases of Creation Units. The variable charge is primarily designed to cover additional costs (e.g., brokerage taxes) involved with buying the securities with cash. The Fund may determine
to not charge a variable fee on certain orders when the Adviser has determined that doing so is in the best interests of Fund shareholders.
Wahed FTSE USA Shariah ETF
Notes to Financial Statements
|
November 30, 2019 (Unaudited) (Continued)
|
Only “Authorized Participants” may purchase or redeem shares directly from the Fund. An Authorized Participant is either
(i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of National Securities Clearing Corporation or (ii) a DTC participant and, in each case, must have executed a Participant Agreement with
the Distributor. Most retail investors will not qualify as Authorized Participants or have the resources to buy and sell whole Creation Units. Therefore, they will be unable to purchase or redeem the shares directly from the Fund. Rather, most
retail investors will purchase shares in the secondary market with the assistance of a broker and will be subject to customary brokerage commissions or fees. Securities received or delivered in connection with in-kind creates and redeems are
valued as of the close of business on the effective date of the creation or redemption.
|
5.
|
INVESTMENT TRANSACTIONS
|
Purchases and sales of investments (excluding short-term investments), creations in-kind and redemptions in-kind for the
period ended November 30, 2019 were as follows:
|
Purchases
|
|
Sales
|
|
Creations
In-Kind
|
|
Redemptions
In-Kind
|
|
$
|
1,780,888
|
|
|
$
|
1,207,428
|
|
|
$
|
19,359,215
|
|
|
$
|
—
|
|
As with all exchange traded funds (‘’ETFs’’), shareholders of the Fund are subject to the risk that their investment could
lose money. The Fund is subject to the principal risks, any of which may adversely affect the Fund’s NAV, trading price, yield, total return and ability to meet its investment objective. A description of the principal risks is included in the
prospectus under the heading “Principal Investments Risks.”
On November 25, 2019, U.S. Bancorp, the parent company of Quasar Distributors, LLC, the Fund’s distributor, announced that
it had signed a purchase agreement to sell Quasar to Foreside Financial Group, LLC such that Quasar will become a wholly-owned broker-dealer subsidiary of Foreside. The transaction is expected to close by the end of March 2020. Quasar will remain
the Fund’s distributor at the close of the transaction.
On December 29, 2019, the Fund declared a distribution to shareholders of record on December 31, 2019, as follows:
|
Ordinary
Income Rate
|
|
Short-term
Capital Gains
Rate
|
|
$
|
0.09619765
|
|
|
$
|
0.02304
|
|
Other than as disclosed, there were no other subsequent events requiring recognition or disclosure through the date the
financial statements were issued.
Wahed FTSE USA Shariah ETF
Board Consideration and Approval of Advisory Agreement
|
November 30, 2019 (Unaudited)
|
At an in-person meeting held on March 19, 2019 (the “Meeting”), the Board of Trustees (the “Board”) of Listed Funds Trust
(the “Trust”), including those trustees who are not “interested persons” of the Trust, as defined in the Investment Company Act of 1940 (the “1940 Act”) (the “Independent Trustees”), considered the approval of an advisory agreement (the “Advisory
Agreement”) between Wahed Invest, LLC (the “Adviser”) and the Trust, on behalf of the Wahed FTSE USA Shariah ETF (the “Fund”).
Pursuant to Section 15 of the 1940 Act, the Advisory Agreement must be approved by: (i) the vote of the Trustees or a vote
of the shareholders of the Fund; and (ii) the vote of a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval. In connection with its consideration of such approval, the Board must
request and evaluate, and the Adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the Advisory Agreement. In addition, rules under the 1940 Act require an investment company to disclose in its
shareholder reports the material factors and the conclusions with respect thereto that formed the basis for the Board’s approval of an investment advisory agreement.
Consistent with those responsibilities, prior to the Meeting, the Board reviewed written materials from the Adviser and,
during the Meeting, representatives from the Adviser presented additional oral and written information to help the Board evaluate the Advisory Agreement. Among other things, representatives from the Adviser provided overviews of their advisory
businesses, including information on investment personnel, financial resources, experience, investment processes, and compliance program. The representatives discussed the services to be provided by the Adviser, as well as the rationale for
launching the Fund, the Fund’s proposed fees, and the operational aspects of the Fund. During the Meeting, the Board discussed the materials it received, including memoranda from legal counsel to the Trust on the responsibilities of the Trustees
in considering the approval of investment advisory agreements under the 1940 Act, considered the written materials that it received before the Meeting and the oral presentations, and deliberated on the approval of the Advisory Agreement in light
of this information. Throughout the process, the Trustees were afforded the opportunity to ask questions of and request additional materials from the Adviser. The Independent Trustees also met in executive session with counsel to the Trust to
further discuss the proposed advisory arrangements and the Trustees’ responsibilities relating thereto. The consideration of the Advisory Agreement was conducted by both the full Board and the Independent Trustees, who also voted separately.
At the Meeting, the Board and the Independent Trustees evaluated a number of factors, including, among other things: (i)
the nature, extent, and quality of the services to be provided by the Adviser to the Fund; (ii) Fund expenses and performance (iii) the cost of the services to be provided and profits to be realized by the Adviser from the relationship with the
Trust; (iii) comparative fee and expense data for the Fund and other investment companies with similar investment objectives; (iv) the extent to which economies of scale would be realized as the Fund grows and whether the overall advisory fee for
the Fund would enable investors to share in the benefits of economies of scale; (v) any benefits to be derived by the Adviser from the relationship with the Trust, including any fall-out benefits enjoyed by the Adviser; and (vi) other factors the
Board deemed relevant. In its deliberations, the Board did not identify any single piece of information that was paramount or controlling and the individual Trustees may have attributed different weights to various factors.
Nature, Extent, and Quality of Services to be Provided. The Trustees considered the scope of services to be
provided under the Advisory Agreement, noting that these services include, among other things, furnishing a continuous investment program for the Fund, including arranging for, or implementing, the purchase and sale of portfolio securities, the
provision of related services such as portfolio management compliance services, and the preparation and filing of certain reports on behalf of the Trust. The Trustees reviewed the extensive responsibilities that the Adviser will have as
investment adviser to the Fund, including the oversight of the activities and operations of other service providers, oversight of general fund compliance with federal and state laws, and the implementation of Board directives as they relate to
the Fund. The Board also considered, among other things, the professional experience and qualifications of the senior management and key professional personnel of the Adviser including those individuals responsible for portfolio management. The
Board also considered the Adviser’s operational capabilities and resources and their experience in managing investment portfolios. The Board concluded that, within the context of its full deliberations, it was satisfied with the nature, extent
and quality of the services to be provided to the Fund by the Adviser.
Fund Expenses and Performance. Because the Fund had not yet commenced operations, the Board noted that there were
no historical performance records to consider. The Board also noted that the Fund is designed to track the performance of an index. The Board was presented with information about the Fund’s investment strategies and expected break-even expense
analyses.
Wahed FTSE USA Shariah ETF
Board Consideration and Approval of Advisory Agreement
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November 30, 2019 (Unaudited) (Continued)
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The Board also reviewed information regarding the Fund’s proposed advisory fees, including advisory fees and total expense
ratios of those funds that might be considered peers of the Fund. With regard to the latter point, the Board considered the lack of other exchange-traded funds that pursue investment strategies similar to those of the Fund. Based on this review,
the Board concluded that the investment advisory fees and expense ratios appeared to be competitive and otherwise satisfactory for the purposes of approving the Advisory Agreement.
Cost of Services to be Provided and Profitability. The Board considered the cost of the services to be provided by
the Adviser, the proposed advisory fees, and the estimated profitability projected by the Adviser, including the methodology underlying such projection. The Board also reviewed information regarding the estimated break-even point for the Fund
taking into consideration potential direct and ancillary revenue received by the Adviser in connection with the services to be provided to the Fund. The Board took into consideration that the advisory fee for the Fund is a “unified fee,” meaning
the Fund would pay no expenses other than the advisory fee and certain other costs such as interest, brokerage and extraordinary expenses and, to the extent it is implemented, fees pursuant to a Distribution and/or Shareholder Servicing (12b-1)
Plan. The Board noted that the Adviser would be responsible for compensating the Trust’s other service providers, and paying the Fund’s other expenses out of its own fee and resources.
Economies of Scale. The Board discussed whether economies of scale would be realized by the Fund at higher asset
levels. The Board also assessed whether certain of the Adviser’s costs would increase if asset levels rise. The Board noted that since the Fund had not yet launched, it was difficult to estimate whether economies of scale might be realized in the
future. The Board also noted, however, that any economies would, to some degree, be shared with Fund shareholders through the Fund’s unitary fee structure. In the event there were to be significant asset growth in the Fund, the Board determined
to reassess whether the advisory fees appropriately took into account any economies of scale that had been realized as a result of that growth.
Other Benefits to the Adviser. In addition to evaluating the services provided by the Adviser, the Board also
considered the extent to which the Adviser may realize other benefits from its relationship to the Fund. While the Board acknowledged that the Adviser may experience reputational success if the Fund performs well in the future, it did not
identify any other potential benefits at this early stage and agreed to reassess potential benefits at a future meeting. Based on its review, the Board concluded that any ancillary benefits would not be disadvantageous to the Fund’s shareholders.
Conclusion. Based on a consideration of all the factors in their totality, the Board, including a majority of the
Independent Trustees separately, unanimously: (i) concluded that the terms of the Advisory Agreement are fair and reasonable; (ii) concluded that the proposed advisory fees were fair and reasonable in light of the services to be provided; and
(iii) determined that the approval of the Advisory Agreement for an initial term of two years was in the best interests of the Fund and its future shareholders.
Wahed FTSE USA Shariah ETF
Shareholder Expense Example
As a shareholder of a Fund you incur two types of costs: (1) transaction costs for purchasing and selling shares; and (2)
ongoing costs, including management fees and other fund expenses. The following example is intended to help you understand your ongoing costs (in dollars and cents) of investing in a Fund and to compare these costs with the ongoing costs of
investing in other funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held throughout the entire period (July 15, 2019 to November 30, 2019), except as noted in footnotes below.
ACTUAL EXPENSES
The first line under the Fund in the table below provides information about actual account values and actual expenses. You
may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line for your Fund under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the table provides information about hypothetical account values and hypothetical expenses based on the
Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder
reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of Fund shares.
Therefore, the second line in the table is useful in comparing ongoing Fund costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would
have been higher.
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Hypothetical
Account Value
6/1/19
|
|
Beginning
Account Value
7/15/19^
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Ending
Account Value
11/30/19
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|
Annualized
Expense
Ratios
|
|
Expenses
Paid During
the Period
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|
Wahed FTSE USA Shariah ETF
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Actual
|
|
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N/A
|
|
|
$
|
1,000.00
|
|
|
$
|
1,061.20
|
|
|
|
0.50
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%
|
|
$
|
1.96
|
(1)
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|
Hypothetical (5% return before expenses)
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|
$
|
1,000.00
|
|
|
|
N/A
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|
|
$
|
1,022.50
|
|
|
|
0.50
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%
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|
$
|
2.53
|
(2)
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|
(^)
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Fund commenced operations on July 15, 2019.
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(1)
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Actual expenses are calculated using the Fund’s annualized expense ratio multiplied by the average account value during the period, multiplied by the number of days in
the most recent inception period, 139 days, and divided by the number of days in the most recent twelve-month period, 366 days.
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(2)
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Hypothetical expenses are calculated using the Fund’s annualized expense ratio multiplied by the average account value during the period, multiplied by the number of
days in the most recent six-month period, 183 days, and divided by the number of days in the most recent twelve-month period, 366 days.
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Wahed FTSE USA Shariah ETF
Supplemental Information
Investors should consider the investment objective and policies, risk considerations, charges and ongoing expenses of an
investment carefully before investing. The prospectus contains this and other information relevant to an investment in the Fund. Please read the prospectus carefully before investing. A copy of the Prospectus for the Fund may be obtained without
charge by writing to the Fund, c/o U.S. Bank Global Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701, by calling 1-855-976-4747, or by visiting the Fund’s website at www.funds.wahedinvest.com
QUARTERLY PORTFOLIO HOLDING INFORMATION
The Fund files its complete schedule of portfolio holdings for its first and third fiscal quarters with the Securities and
Exchange Commission (“SEC”) on Form N-Q. The Fund’s Form N-Q is available without charge, upon request, by calling toll-free at 1-855-976-4747. Furthermore, you may obtain the Form N-Q on the SEC’s website at www.sec.gov.
PROXY VOTING INFORMATION
The Fund is required to file a Form N-PX, with the Fund’s complete proxy voting record for the 12 months ended June 30, no
later than August 31 of each year. The Fund’s proxy voting record will be available without charge, upon request, by calling toll- free 1-855-976-4747 and on the SEC’s website at www.sec.gov.
FREQUENCY DISTRIBUTION OF PREMIUMS AND DISCOUNTS
Information regarding how often shares of the Fund trade on an exchange at a price above (i.e., at a premium) or below
(i.e., at a discount) the NAV of the Fund is available without charge, on the Fund’s website at www.funds.wahedinvest.com
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Investment Adviser:
Wahed Invest LLC
12 East 49th Street, 11th Floor
New York, New York 10017
Legal Counsel:
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Independent Registered Public Accounting Firm:
Cohen & Company, Ltd.
1350 Euclid Avenue, Suite 800
Cleveland, OH 44115
Distributor:
Quasar Distributors, LLC
777 East Wisconsin Ave., 6th Floor
Milwaukee, WI 53202
Administrator, Fund Accountant & Transfer Agent:
U.S. Bancorp Fund Services, LLC
d/b/a U.S. Bank Global Fund Services
615 E. Michigan St.
Milwaukee, WI 53202
Custodian:
U.S. Bank N.A.
1555 North RiverCenter Drive, Suite 302
Milwaukee, WI 53212
This information must be preceded or accompanied by a current prospectus for the Fund.