The Fund is an actively-managed exchange-traded fund (“ETF”) that seeks to achieve its investment objective by utilizing a value investing strategy enhanced by the use of artificial intelligence, as described below. Under normal circumstances, the Fund invests at least 80% of its net assets (plus the amounts of any borrowings for investment purposes) in securities of U.S.-listed companies. The Fund generally will invest in U.S.-listed companies having a market capitalization of at least $1 billion at the time of purchase (the “Universe”). The Fund invests in the common stock of such companies. The Fund’s adviser, Exchange Traded Concepts, LLC (the “Adviser”), uses an investment process based on a proprietary artificial intelligence security selection process that extracts patterns from analyzing data, as discussed below, developed by QRAFT Technologies, Inc. (“Qraft”). Qraft is a South Korea-based provider of artificial intelligence investment systems and currently offers services to various financial institutions in Korea. Qraft has licensed its proprietary artificial intelligence security selection process to the Adviser for purposes of managing the Fund.

In pursuing the Fund’s investment objective, the Adviser consults a database generated by Qraft’s AI Quantitative Investment System (“QRAFT AI”). Qraft created QRAFT AI to automatically evaluate and filter data according to parameters supporting a particular investment thesis. For the Fund’s database, QRAFT AI applies its artificial intelligence to develop a portfolio of investments based on the theory that a value investing strategy that adjusts a company’s book value by taking into account future intangible assets (e.g., a company’s investment in research and development, marketing and advertising, and intellectual property) in addition to typical value factors (e.g., book value to market value ratio, earning to market value ratio, and EV to EBIDTA ratio (also known as enterprise multiple, which is a ratio used to determine the value of a company – enterprise value, or EV, divided by earnings before interest, taxes, depreciation, and amortization, or EBITDA)), may outperform more conventional value investing strategies that do not take such assets into account in comparing a company’s book value to its intrinsic value. QRAFT AI filters the securities in the Universe using a proprietary methodology that takes into account the value of a company’s future intangible assets to identify companies with an intrinsic value that is higher than their book value. QRAFT AI then estimates each stock’s relative superiority of price appreciation (i.e., increase in stock price) over the rest of the pool for the next four week investment period using deep learning technologies (i.e., exposure to and processing of large amounts of data) and the distribution of each stock’s relative superiority of price appreciation for the same period using deep learning architectures such as Bayesian neural networks that estimate the uncertainty of its forecast, and selects the top 100 stocks based on the average of the distribution of each stock’s relative superiority of price appreciation for inclusion in the database. The stocks included in the database are weighted pursuant to a methodology designed to maximize risk-adjusted return.

The Fund expects to hold 100 companies in its portfolio. While it is anticipated that the Adviser will purchase and sell securities based on recommendations by the QRAFT AI database, the Adviser has full discretion over investment decisions for the Fund. Therefore, the Adviser has full decision-making power not only if it identifies a potential technical issue or error with the QRAFT AI database, but also if it believes that the recommended portfolio does not further the Fund’s investment objective or fails to take into account company events such as corporate actions, mergers and spin-offs. Additionally, the Adviser has discretion over the amount of cash maintained in the Fund’s portfolio and the reinvestment of dividends in the Fund’s portfolio, subject to the Fund’s distribution requirements to maintain its classification as a RIC under Subchapter M of the Internal Revenue Code. See “Federal Income Taxes” in the Fund’s SAI for a more complete discussion. Notwithstanding the foregoing, the Fund limits the weighting of a single company to 10% and no more than 40% of the Fund’s assets may be invested in securities with a more than 5% weighting in the Fund’s portfolio. Because the QRAFT AI database is adjusted every four weeks, the Adviser expects that the Fund will frequently purchase and sell shares of securities.

While investing in a particular market sector is not a strategy of the Fund, its portfolio may be significantly invested in one or more sectors as a result of the security selection decisions made pursuant to its strategy. As of August 1, 2023, a significant portion of the Fund’s assets consisted of securities of companies in the Consumer Discretionary Sector, although this may change from time to time. The Fund is non-diversified and may invest a greater percentage of its assets in a particular issuer than a diversified fund.