Premium Opportunities ETF (KPO)

Risk Definitions

Key principal investment risks include, but are not limited to:

• Management Risk: Reliance on proprietary investment processes and subjective asset evaluations may result in decisions that do not achieve intended outcomes.
• Equity Securities Risk: Equity securities can experience sudden, unpredictable drops or prolonged declines in value. This may result from general market factors or specific issues affecting industries, sectors, geographic markets, or individual companies.
• Derivatives Risk: Derivatives may involve leverage and imperfect market correlation, leading to losses that exceed initial investment. They carry risks related to liquidity, valuation, counterparty default, and market volatility. Specific instruments—such as futures, credit default swaps, and options—introduce additional complexities, including speculative exposure, margin requirements, and limited payout conditions.
• Options Risk: Options give the holder the right, but not the obligation, to buy (call) or sell (put) an asset at a specified price. Investments in options are speculative and can result in the loss of the premium paid. Writing options exposes the writer to significant risks, including potential losses up to the exercise price for puts and unlimited losses for uncovered calls.
• Leverage Risk: Derivative instruments provide the economic effect of financial leverage by creating additional investment exposure to the underlying asset, as well as the potential for greater loss. Leverage has the risk that losses may exceed the net assets of the Fund. The net asset value of the Fund while employing leverage will be more volatile and sensitive to market movements.
• Technology Sector Risk: Information technology companies are particularly vulnerable to rapid changes in product cycles, obsolescence, government regulation, and domestic and foreign competition, including from competitors with lower production costs. These companies are heavily dependent on patent and intellectual property protections, the loss of which may hurt profitability, and their stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
• Large-Capitalization Companies Risk: Large-capitalization companies may be relatively mature compared to smaller companies and therefore subject to slower growth during periods of economic expansion. These companies may also be slower to respond to new competitive challenges, such as changes in technology and consumer preferences.
• In-Kind Seeding Risk: In-kind contributions of securities intended to qualify as tax-deferred transactions under Section 351 of the Internal Revenue Code may fail to meet the requirements for such treatment. In that case, a carryover tax basis would not apply to the contributed securities, potentially resulting in the misstatement of gain or loss reported to shareholders upon a later disposition of those securities. Additionally, a period of outsized, concentrated exposure to one or more contributed securities may occur around a fund’s seed date, which can dramatically increase volatility and lead to substantial losses if those securities decline in value.
• ETF Risks: Shares may trade at prices that differ from NAV, especially during market volatility or when liquidity is limited. A small number of authorized participants and market makers support ETF operations, and their exit could lead to significant discounts or even delisting. Cash redemptions may trigger taxable gains and higher capital gain distributions. Investors also face trading costs, including commissions and bid-ask spreads, which can be substantial for small or frequent trades.
• Market Risk: Investment market risks, influenced by economic growth, market conditions, interest rates, and political events, affect asset values. Unexpected events like war, terrorism, financial disruptions, natural disasters, pandemics, and recessions can significantly impact investments and market liquidity, causing investor fear and economic instability.
• Limited History of Operations Risk: Limited operational history makes it difficult for investors to evaluate its performance. Additionally, the Fund may struggle to attract enough assets to operate efficiently.
• Non-Diversification Risk: Non-diversified investments may allocate more than 5% of total assets to one or more issuers, including non-diversified underlying funds. This can make performance more sensitive to single economic, business, political, or regulatory events compared to diversified investments.
• Turnover Risk: A higher portfolio turnover may result in higher transactional and brokerage costs associated with the turnover which may reduce return unless the securities traded can be bought and sold without corresponding commission costs.
• Money Market Instrument Risk: Money market instruments, including money market funds, carry investment advisory fees and other expenses that reduce returns for investors holding them for cash management purposes.
• Underlying Funds Risk: Investing in underlying funds may result in duplicated fees and added expenses. Each fund carries its own strategy-specific risks, and managers may not execute effectively. ETF shares may trade at premiums or discounts to NAV, and market liquidity or trading costs may impact performance and timing of liquidations.
• U.S. Treasury Securities Risk: Securities backed by the U.S. Treasury or the full faith and credit of the United States are guaranteed only as to the timely payment of principal and interest when held to maturity; their market prices are not guaranteed and will fluctuate. These securities may offer relatively lower returns and differ from other securities in interest rates, maturities, and other characteristics. A decline in the U.S. government’s financial condition or credit rating, or an increase in interest rates, may cause the value of these securities to decline.

For a complete list of potential investment risks associated with this Fund, please refer to its Prospectus.