drop in the stock market may
depress the price of most or all of the common stocks that the Trust holds. In addition, equity risk includes the risk that investor sentiment toward one or more industries will
become negative, resulting in those investors exiting their investments in those industries, which could cause a reduction in the value of companies in those industries more
broadly. The value of a company’s common stock may fall solely because of factors, such as an increase in production costs, that negatively impact other companies in the same region, industry or sector of the market. A company’s common stock also may decline significantly in price over a short period of time due to factors specific to that company, including decisions made by its management or lower demand for the company’s products or services. For example, an adverse event, such as an
unfavorable earnings report or the failure to make anticipated dividend payments, may depress the value of common stock.
Index Risk.
Unlike many investment companies, the Trust does not utilize an investing strategy that seeks returns in excess of its Underlying Index. Therefore, the Trust would not necessarily
buy or sell a security unless that security is added or removed, respectively, from its Underlying Index, even if that security generally is underperforming.
Market Risk.
Securities in the Underlying Index are subject to market fluctuations. You should anticipate that the value of the Shares will decline, more or less, in correlation with any
decline in value of the securities in the Underlying Index. Additionally, natural or environmental disasters, widespread disease or other public health issues, war, military
conflicts, acts of terrorism, economic crises or other events could result in increased premiums or discounts to the Trust’s NAV.
Non-Correlation
Risk. The Trust’s return may not match the return of its Underlying Index for a number of reasons. For
example, the Trust incurs operating expenses not applicable to its Underlying Index, and incurs costs in buying and selling securities, especially when rebalancing the Trust’s securities holdings to reflect changes in the composition of its Underlying Index. In addition, the performance of the Trust and its Underlying Index may vary due to asset valuation differences and
differences between the Trust’s portfolio and its Underlying Index resulting from legal restrictions, costs or liquidity constraints.
NOTE 3—Agreements with the Trustee, Licensor and Sponsor
The Trust accrues daily and pays monthly the expenses of its operations, including Trustee
fees, reimbursement to the Sponsor for expenses relating to the marketing of the Trust and fees to the Nasdaq, Inc. (the "Licensor") for a license to use the Underlying Index as a basis for determining the composition and weighting of securities held by the Trust.
The Sponsor entered into a license agreement with the Licensor (the “License Agreement”). Under the License Agreement, the license fee payable by the Trust is at an annual rate equal to the sum of (i) the product of (A) that portion of the average net assets of the Trust and other Nasdaq-related products of the Sponsor and its affiliates, on an aggregate basis, up to and including $25,000,000,000 and (B) 0.09%, and (ii) the product of (A) an amount equal to that portion of the average net assets of the
Trust and other Nasdaq-related products of the Sponsor and its affiliates, on an aggregate basis, in excess of $25,000,000,000 and (B) 0.08%, with such sum multiplied by the percentage of the aggregate average net assets attributable to the Trust. The
license fee, under no circumstances, will exceed 0.09% of the aggregate average net assets, but may be lower in the future based on the aggregate average net assets. The License Agreement may be amended by the parties thereto without the consent of any
of the beneficial owners of Trust shares and the License Agreement has no expressed termination date.
In accordance with the Trust Agreement, the Trustee maintains the Trust’s accounting records, acts as custodian and transfer agent to the Trust, and provides administrative services, including filing of all required regulatory reports. The Trustee is also responsible for determining the composition of the portfolio of securities, which must be delivered in exchange for the issuance of Creation Units of the Trust, and for adjusting the composition of the Trust’s portfolio from time to time to conform to changes in the compositions and/or weighting structure of the Underlying Index.
For these services, the Trustee receives a fee at the following annual rates:
| |
Fee as Percentage of
Net Assets |
| |
|
$500,000,000-$2,499,999,999* |
|
$2,500,000,000-$24,999,999,999* |
|
$25,000,000,000-$49,999,999,999* |
|
$50,000,000,000 and above* |
|
*
The fee indicated applies to that portion of the net assets of the Trust that falls in the size category indicated and is computed each business day on the basis of the net assets of the Trust on such day.
The minimum annual fee, which shall be paid to the Trustee, is $180,000. To the extent that the amount of the Trustee’s compensation is less than such minimum annual fee, the Sponsor has agreed to pay the amount of such shortfall.
Marketing expenses for the years ended September 30, 2024, 2023 and 2022, represent expenses incurred by
the Sponsor, if any, on behalf of the Trust and charged to the Trust, subject to the reimbursement provisions below. Marketing expenses are paid by the Sponsor on behalf of the Trust for invoices received directly by the Sponsor during the year.