Investing involves risk, including the possible loss of principal. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Investments in securities of MLPs involve risk that differ from investments in common stock including risks related to limited control and limited rights to vote on matters affecting the MLP. MLP common units and other equity securities can be affected by macro-economic and other factors affecting the stock market in general, expectations of interest rates, investor sentiment towards MLPs or the energy sector, changes in a particular issuer’s financial condition, or unfavorable or unanticipated poor performance of a particular issuer (in the case of MLPs, generally measured in terms of distributable cash flow). MLP funds may invest in the energy industry, which entails significant risk and volatility. In addition, the funds may be non-diversified, which represents a heightened risk to investors. Furthermore, the funds may invest in small and mid-capitalization companies, which pose greater risks than large companies.
Due to the nature of some MLP funds’ investments, the fund will be subject to taxation on its taxable income. The NAV of shares will also be reduced by the accrual of any deferred tax liabilities. The Underlying Index however is calculated without any deductions for taxes. As a result, the fund’s after tax performance could differ significantly from the Underlying Index even if the pretax performance of the fund and the performance of the Underlying Index are closely correlated.
MLP funds may be taxed as a regular corporation for federal income tax purposes. The amount of taxes currently paid by the fund will vary depending on the amount of income and gains derived from MLP interests and such taxes will reduce an investor’s return from an investment in the fund. The potential tax benefits from the fund’s investment in MLPs depends largely on the MLPs being treated as partnerships for federal income tax purposes. As a partnership, an MLP has no federal income tax liability at the entity level. Therefore, treatment of one or more MLPs as a corporation for federal income tax purposes could affect the fund’s ability to meet its investment objective and would reduce the amount of cash available to pay or distribute to you. There is no guarantee distributions will be made and dividends may be reduced or eliminated at any time. Furthermore, certain distributions are expected to be treated as a return of capital for tax purposes rather than from net profits and shareholders should not assume that the source of distributions is from the net profits of the fund.
This information is not intended to be individual or personalized investment or tax advice. Please consult a financial advisor or tax professional for more information regarding your tax situation.
Securities mentioned, comments made, or charts included also are not recommendations to buy or sell any security. All expressions of opinion reflect judgement as of the date set forth above and are subject to change. Sources utilized for this information are believed to be accurate but no warranties are made to their accuracy or timeliness of reporting. Global X Management accepts no responsibility for the conclusions and decisions clients make utilizing this information.
Carefully consider MLPA and MLPX’s investment objectives, risks, and charges and expenses. This and other information can be found in the fund’s summary and full prospectuses. This and additional information can be found in the Funds’ summary and full prospectuses, which may be obtained by calling 1-888-GX-FUND-1 (1.888.493.8631), or by visiting www.globalxfunds.com. Please read the prospectus carefully before investing.
Global X Management Company LLC serves as an advisor to the Global X Funds. MLPX and MLPA are distributed by SEI Investments Distribution Co., which is not affiliated with Global X Management Company or any of its affiliates. Solactive Indexes have been licensed by Solactive AG for use by Global X Management Company LLC. Global X Funds are not sponsored, endorsed, issued, sold, or promoted by Solactive AG nor does this company make any representations regarding the advisability of investing in the Global X Funds.
Concentration Risk: Because MLPX and MLPA’s investments are concentrated in the energy sector, the Funds will be susceptible to loss due to adverse occurrences affecting this sector or industry. To the extent that the Underlying Indexes concentrate in the securities of issuers in a particular sector or industry, the Funds will also concentrate its investments to approximately the same extent. By concentrating its investments in a sector or industry, the Funds face more risks than if it were diversified broadly over numerous sectors or industries. Such sector-based risks, any of which may adversely affect the companies in which the Funds invest, may include, but are not limited to, the following: general economic conditions or cyclical market patterns that could negatively affect supply and demand in a particular sector or industry; competition for resources, adverse labor relations, political or world events; obsolescence of technologies; and increased competition or new product introductions that may affect the profitability or viability of companies in a sector or industry. In addition, at times, such sector or industry may be out of favor and underperform other sectors or industries or the market as a whole.
Non-Diversification Risk: MLPX and MLPA are classified as a “non-diversified” investment companies under the 1940 Act. As a result, the Funds are subject to the risk that they will be more volatile than a diversified fund because the Funds may invest their assets in a smaller number of issuers or may invest a larger proportion of its assets in a single issuer. As a result, the gains and losses on a single investment may have a greater impact on the Funds’ NAVs and may make the Funds more volatile than more diversified funds.