[Emerge ETFs
Logo]
Subject
to Completion July 29, 2022
The
information in this Prospectus is not complete and may be changed. We may not
sell these securities until
the
registration statement filed with the Securities and Exchange Commission is
effective. This Prospectus is not
an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer
or
sale is not permitted.
Prospectus
[
], 2022
EMERGE
ETF TRUST
|
Ticker: |
Exchange: |
Emerge EMPWR
Sustainable Dividend Equity ETF |
[
] |
[
] |
Emerge EMPWR
Sustainable Select Growth Equity ETF |
[
] |
[
] |
Emerge EMPWR
Sustainable Global Core Equity ETF |
[
] |
[
] |
Emerge EMPWR
Sustainable Emerging Markets Equity ETF |
[
] |
[
] |
Emerge EMPWR Unified
Sustainable Equity ETF |
[
] |
[
] |
The
U.S. Securities and Exchange Commission (SEC) has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
Contents |
|
Fund Summaries |
1 |
|
Emerge EMPWR Sustainable
Dividend Equity ETF |
1 |
|
Emerge EMPWR Sustainable
Select Growth Equity ETF |
6 |
|
Emerge EMPWR Sustainable
Global Core Equity ETF |
11 |
|
Emerge EMPWR Sustainable
Emerging Markets Equity ETF |
16 |
|
Emerge EMPWR Unified
Sustainable Equity ETF |
23 |
Fund Details |
29 |
|
Emerge EMPWR Sustainable
Dividend Equity ETF |
29 |
|
Emerge EMPWR Sustainable
Select Growth Equity ETF |
34 |
|
Emerge EMPWR Sustainable
Global Core Equity ETF |
39 |
|
Emerge EMPWR Sustainable
Emerging Markets Equity ETF |
45 |
|
Emerge EMPWR Unified
Sustainable Equity ETF |
53 |
Management |
60 |
Distributions and
Taxes |
64 |
Shareholder
Information |
67 |
|
Buying and Selling
Shares |
67 |
|
|
Book Entry |
67 |
|
Share Price |
68 |
|
|
Calculating NAV |
68 |
|
Creations and
Redemptions |
69 |
|
|
Premium/Discount
Information |
70 |
|
|
Portfolio
Holdings |
70
|
|
|
Delivery of Shareholder
Documents – Householding |
70
|
|
|
Distribution |
70 |
Financial
Highlights |
71 |
For More
Information |
72
|
Fund Summaries
Emerge EMPWR Sustainable Dividend
Equity ETF
Investment
Objective
The investment objective of
Emerge EMPWR Sustainable Dividend Equity ETF (the Fund) is to seek long-term
total return and current income.
Fees and
Expenses of the Fund
The following table
describes the fees and expenses that you will incur if you buy, hold and sell
shares of the Fund. You may also incur other fees, such as usual and customary
brokerage commissions and other fees to financial intermediaries, which are not
reflected in the table and the Example that follows.
Annual
Fund Operating Expenses
(expenses that you pay each
year as a percentage of the value of your investment)
Management fees |
[ ]% |
Distribution and/or service (12b-1) fees |
None |
Other expenses1 |
[ ]% |
Total annual Fund operating
expenses |
[ ]% |
1.
Other expenses are based on estimated amounts for the current fiscal year.
Example
This Example is intended to
help you compare the cost of investing in the Fund with the cost of investing in
other funds. The Example assumes that you invest $10,000 in the Fund for the
time periods indicated and then sell all of your shares at the end of the
period. The Example also assumes that your investment has a 5% return each year
and that the Fund’s operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs, whether you
redeem or hold your shares, would be:
Portfolio Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable
account. These costs, which are not reflected in annual Fund operating expenses
or in the Example, affect the Fund’s performance.
Principal
Investment Strategies
Under normal market
conditions, the Fund invests at least 80% of its net assets, plus borrowings for
investment purposes, if any, in dividend-paying equity securities that, at the
time of investment, meet the environmental, social, and governance (ESG)
criteria established by Emerge Capital Management Inc. (Emerge or the Advisor).
The Fund invests
predominantly in U.S. equity securities. Equity securities include common stock
(including real estate investment trusts), preferred stock, securities
convertible into common stock, American Depositary Receipts, or securities or
other instruments whose price is linked to the value of common stock.
The
Fund may invest in the securities of issuers of all capitalization sizes, but
intends to invest primarily in in securities of large capitalization
issuers.
The
Fund is non-diversified, which means it can invest a greater percentage of its
assets in a small group of issuers or any one issuer than a diversified fund
can.
In selecting companies,
Catherine Avery Investment Management LLC d/b/a CAIM LLC (CAIM LLC or the
Sub-Advisor) applies a “bottom-up” research process to seek to invest in equity
securities that the Sub-Advisor believes have the potential to increase
dividends in the future. The Sub-Advisor uses a proprietary screening process to
identify companies that the Sub-Advisor believes have favorable balance sheets
and above average levels of cash flow per share, and pay a dividend and
demonstrate the ability to increase that dividend over time. The Sub-Advisor
generally recommends buying securities that meet the above criteria when the
Sub-Advisor believes they are trading at a discount to their future value. The
Sub-Advisor may recommend selling securities for several reasons, including when
the Sub-Advisor believes the security is overvalued or management is unable to
achieve its goals.
Emerge considers ESG
factors within its securities selection process for each equity security for the
Fund. Emerge assesses whether a company meets the Fund’s ESG standards based on
its proprietary ESG framework. Emerge uses ESG research, ratings, and analytics
from independent third-party data providers to screen investments based on ESG
criteria determined by Emerge. The Fund may hold securities of issuers for which
third-party data is not available. Where an issuer has not been assigned a
rating by the third-party data provider, Emerge’s ESG analysis incorporates
publicly available data. Emerge has the right to change the third-party data
providers that support its ESG framework at any time. In determining whether an
issuer meets Emerge’s ESG investment criteria, Emerge considers: (i) negative
screening criteria to eliminate certain types of issuers in light of social and
environmental considerations; and (ii) governance-related risk ratings published
by third party data providers, including Sustainalytics, designed to measure the
degree to which a company’s economic value is at risk driven by the magnitude of
a company’s unmanaged ESG risks. [As of the date of this Prospectus,] Emerge
applies a negative screen to exclude companies for investment that derive 20% or
more of their revenues from biological and chemical weapons, thermal coal
extraction, gambling, adult entertainment, tobacco production, recreational
cannabis and alcoholic beverages. Emerge may modify the above list of negative
screens at any time, without prior shareholder approval or notice. ESG risk
ratings data compiled by third-party data providers forms the basis for Emerge’s
governance-related risk assessment and screening. Emerge may consider excluding,
reducing or eliminating exposure to issuers with high ESG risk ratings, as
determined by one or more third-party data providers.
The Fund is an actively
managed exchange-traded fund (ETF) that does not seek to replicate the
performance of a specified index.
Principal
Risks
You could lose money by
investing in the Fund. ETF shares are not deposits or obligations of, or
guaranteed or endorsed by, any bank, and are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency of the
U.S. government. The Fund is subject to the principal risks noted below, any of
which may adversely affect the Fund’s net asset value (NAV), trading price,
yield, total return and ability to meet its investment objective. Unlike many
ETFs, the Fund is not an index-based ETF.
Market Risk. The market values of securities or
other investments owned by the Fund will go up or down, sometimes rapidly or
unpredictably. The market value of a security or other investment may be
impacted by economic, market, political, and issuer-specific conditions. Market
risk may affect a single issuer, industry, or sector of the economy, or it may
affect the market as a whole. Stock prices tend to go up and down more
dramatically than those of debt securities. A slower-growth or recessionary
economic environment could have an adverse effect on the prices of the various
stocks held by the Fund.
Events such as war; acts of terrorism; social
unrest; natural, environmental, or humanmade disasters, and the spread of
infectious illness or other public health threats can cause significant economic
impacts, including market closures and dislocations, extreme volatility,
liquidity constraints, and increased trading costs, that can significantly
impact the Fund and its investments. The full impact such events, including the
COVID-19 pandemic, is unpredictable and may adversely affect the Fund’s
performance. The effects of COVID-19 have impacted global economic activity
across many industries and may heighten other pre-existing political, social and
economic risks, locally or globally.
Dividend Paying Stock Risk. Issuers that have
paid regular dividends or distributions to shareholders may not continue to do
so, or may not continue to do so at the same level, in the future. If the
dividends or distributions received by the Fund decreases, the Fund may have
less income to distribute to the Fund’s shareholders. Securities that pay
dividends, as a group, can fall out of favor with the market, causing such
securities to underperform securities that do not pay dividends. Depending upon
market conditions and political and legislative
responses to such
conditions, dividend-paying securities that meet the Fund’s investment criteria
may not be widely available and/or may be highly concentrated in only a few
market sectors. In addition, common stocks with higher dividend yields can be
sensitive to interest rate movements: when interest rates rise, the prices of
these stocks may tend to fall. Conversely, the prices of higher yielding stocks
may tend to rise when interest rates fall. Interest rate changes can be sudden
and unpredictable and are influenced by a number of factors including government
policy, monetary policy, inflation expectations, perceptions of risk, and supply
and demand of bonds.
Large Capitalization Company Risk. Large
capitalization companies may fall out of favor with investors based on market
and economic conditions. In addition, larger companies may not be able to attain
the high growth rates of successful smaller companies and may be less capable of
responding quickly to competitive challenges and industry changes.
Small- and Mid-Capitalization Companies Risk.
Securities issued by small- and mid-capitalization companies may be more
volatile in price and less liquid than those of larger companies and may involve
more risks. Such risks may include greater sensitivity to changing economic
conditions; less certain growth prospects and fewer funds for growth and development;
less experienced management; and limited or less developed product lines and
markets. Because small- and mid-capitalization companies typically reinvest a
high proportion of their earnings in their businesses, they may not pay
dividends for some time, particularly if they are newer companies.
ESG Risk. Because the Fund evaluates ESG
factors to assess and exclude certain investments for non-financial reasons, the
Fund may forego some market opportunities available to funds that do not use
these ESG factors. Information used by the Fund to evaluate ESG factors,
including data provided by third-party vendors, may not be readily available,
complete or accurate, and may vary across providers and issuers and within
industries, which could negatively impact the Fund’s ability to apply its
methodology and in turn could negatively impact the Fund’s performance.
Currently, there is a lack of common industry standards relating to the
development and application of ESG criteria which may make it difficult to
compare the Fund’s principal investment strategies with the investment
strategies of other funds that apply certain ESG criteria or that use a
different third-party vendor for ESG data. In addition, the Fund’s assessment of
a company may differ from that of other funds or an investor. As a result, the
companies deemed eligible for inclusion in the Fund’s portfolio may not reflect
the beliefs or values of any particular investor and may not be deemed to
exhibit positive or favorable ESG characteristics if different metrics were used
to evaluate them. Regulatory changes or interpretations regarding the
definitions and/or use of ESG criteria could have a material adverse effect on
the Fund’s ability to invest in accordance with its investment policies and/or
achieve its investment objective.
Non-Diversification Risk. The Fund is
non-diversified and can invest a greater portion of its assets in the
obligations or securities of a small number of issuers or any single issuer than
a diversified fund can. A change
in the value of one or a few issuers’
securities will therefore affect the value of the Fund more than if it was a
diversified fund.
Management Risk. The Fund is subject to
management risk because it is an actively managed ETF. The Fund’s Advisor and
Sub-Advisor apply investment techniques and risk analyses in making investment
decisions for the Fund, but there can be no guarantee that these decisions will
produce the desired results.
Market Trading Risk. The Fund faces numerous
market trading risks, including the potential lack of an active market for Fund
shares, losses from trading in secondary markets, periods of high volatility and
disruption in the creation/redemption process of the Fund. Any of these factors,
among others, may lead to the Fund’s shares trading at a premium or discount to
NAV. Thus, you may pay more (or less) than NAV when you buy shares of the Fund
in the secondary market, and you may receive less (or more) than NAV when you
sell those shares in the secondary market. The investment manager cannot predict
whether shares will trade above (premium), below (discount) or at NAV.
Authorized Participant Concentration Risk. Only
an authorized participant (Authorized Participant) may engage in creation or
redemption transactions directly with the Fund. The Fund has a limited number of
institutions that act as Authorized Participants. To the extent that these
institutions exit the business or are unable to proceed with creation and/or
redemption orders with respect to the Fund and no other Authorized Participant
is able to step forward to create or redeem Creation Units (as defined below),
Fund shares may trade at a discount to NAV and possibly face trading halts
and/or delisting. This risk may be more pronounced in volatile markets,
potentially where there are significant redemptions in ETFs generally.
New Fund Risk. The Fund is a new fund, with a
limited or no operating history and a small asset base. There can be no
assurance that the Fund will grow to or maintain a viable size. Due to the
Fund's small asset base, certain of
the Fund's expenses and its
portfolio transaction costs may be higher than those of a fund with a larger
asset base. To the extent that the Fund does not grow to or maintain a viable
size, it may be liquidated, and the expenses, timing and tax consequences of
such liquidation may not be favorable to some shareholders.
Small Fund Risk. When the Fund’s size is small,
the Fund may experience low trading volume and wide bid/ask spreads. In
addition, the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange.
Large Shareholder Risk. Certain shareholders,
including other funds or accounts advised by the Advisor or an affiliate of the
Advisor, may from time to time own a substantial amount of the Fund’s shares. In
addition, a third-party investor, the Advisor or an affiliate of the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Fund and hold its investment for a limited period of time solely to facilitate
commencement of the Fund or to facilitate the Fund’s achieving a specified size
or scale. There can be no assurance that any large shareholder would not redeem
its investment, that the size of the Fund would be maintained at such levels or
that the Fund would continue to meet applicable listing requirements.
Redemptions by large shareholders could have a significant negative impact on
the Fund. In addition, transactions by large shareholders may account for a
large percentage of the trading volume on the listing exchange and may,
therefore, have a material upward or downward effect on the market price of the
shares.
Performance
Because the Fund does not
have a full calendar year of performance, annual total return information is not
available and therefore is not presented. You can obtain updated performance
information at emergecm.com or by calling 1-877-8EMERGE. The Fund’s past
performance (before and after taxes) is not necessarily an indication of how the
Fund will perform in the future.
Investment
Manager
Emerge Capital Management
Inc.
Sub-Advisor
Catherine Avery Investment
Management LLC d/b/a CAIM LLC (CAIM LLC).
Portfolio
Managers
Catherine
Maniscalco Avery
Founder and President of
CAIM LLC and portfolio manager of the Fund since inception (2022).
Lisa
Lake Langley
Chief Executive Officer,
President, and Founder of Emerge and portfolio manager of the Fund since
inception (2022).
Ms. Avery provides
recommendations to Ms. Langley. Ms.
Langley is responsible for selecting brokers and placing the Fund’s trades, and
implementing the Fund’s ESG strategy.
Purchase
and Sale of Fund Shares
The Fund is an ETF. Fund
shares may only be purchased and sold on a national securities exchange through
a broker-dealer. The price of Fund shares is based on market price, and because
ETF shares trade at market prices rather than NAV, shares may trade at a price
greater than NAV (a premium) or less than NAV (a discount). [The Fund will
generally issue or redeem Creation Units in exchange for a basket of securities
(and an amount of cash) that the Fund specifies each day.]
An investor may incur costs
attributable to the difference between the highest price a buyer is willing to
pay to purchase shares of the Fund (bid) and the lowest price a seller is
willing to accept for shares of the Fund (ask) when buying or selling shares in
the secondary market (the “bid-ask spread”). Recent information, including
information on the Fund’s NAV, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at emergecm.com.
Taxes
The Fund’s distributions
are generally taxable to you as ordinary income, capital gains, or some
combination of both, unless you are investing through a tax- deferred
arrangement, such as a 401(k) plan or an individual
retirement account, in
which case your distributions would generally be taxed when withdrawn from the
tax-deferred account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of
the Fund through a broker-dealer or other financial intermediary (such as a
bank), the investment manager or other related companies may pay the
intermediary for certain Fund-related activities, including those that are
designed to make the intermediary more knowledgeable about exchange traded
products, such as the Fund, as well as for marketing, education or other
initiatives related to the sale or promotion of Fund shares. These payments may
create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
Emerge EMPWR Sustainable Select
Growth Equity ETF
Investment
Objective
The investment objective of
Emerge EMPWR Sustainable Select Growth Equity ETF (the Fund) is to seek
long-term growth of capital.
Fees and
Expenses of the Fund
The following table
describes the fees and expenses that you will incur if you buy, hold and sell
shares of the Fund. You may also incur other fees, such as usual and customary
brokerage commissions and other fees to financial intermediaries, which are not
reflected in the table and the Example that follows.
Annual
Fund Operating Expenses
(expenses that you pay each
year as a percentage of the value of your investment)
Management fees |
[ ]% |
Distribution and/or service (12b-1) fees |
None |
Other expenses1 |
[ ]% |
Total annual Fund operating
expenses |
[ ]% |
1.
Other expenses are based on estimated amounts for the current fiscal year.
Example
This Example is intended to
help you compare the cost of investing in the Fund with the cost of investing in
other funds. The Example assumes that you invest $10,000 in the Fund for the
time periods indicated and then sell all of your shares at the end of the
period. The Example also assumes that your investment has a 5% return each year
and that the Fund’s operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs, whether you
redeem or hold your shares, would be:
Portfolio Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable
account. These costs, which are not reflected in annual Fund operating expenses
or in the Example, affect the Fund’s performance.
Principal
Investment Strategies
Under normal market
conditions, the Fund invests at least 80% of its net assets, plus borrowings for
investment purposes, if any, in equity securities that, at the time of
investment, meet the environmental, social, and governance (ESG) criteria
established by Emerge Capital Management Inc. (Emerge or the Advisor).
The
Fund invests predominantly in equity securities. Equity securities include
common stock (including real estate investment trusts), preferred stock,
securities convertible into common stock, American Depositary Receipts, or
securities or other instruments whose price is linked to the value of common
stock. The Fund may invest in the
securities of issuers of all capitalization sizes.
The
Fund is non-diversified, which means it can invest a greater percentage of its
assets in a small group of issuers or any one issuer than a diversified fund
can.
In selecting companies,
Grace Capital (the Sub-Advisor) seeks to invest in equity securities that the
Sub-Advisor believes have the potential for earnings or revenue growth,
including companies the Sub-Advisor believes has an ability to pay high
dividends. The Sub-Advisor employs a “bottom-up” investment approach that seeks
to identify companies that the Sub-Advisor believes have long-term positive
fundamentals trading at a discount to fair value based on the Sub-Advisor’s
proprietary discounted cash flow valuation models. The Sub-Advisor’s
strategy
primarily focuses on
identifying issuers that they believe have histories of steady revenue growth,
consistent cash flow profitability, and earnings quality. The Sub-Advisor may
recommend selling securities for several reasons, including when the Sub-Advisor
believes the security is overvalued.
Emerge considers ESG
factors within its securities selection process for each equity security for the
Fund. Emerge assesses whether a company meets the Fund’s ESG standards based on
its proprietary ESG framework. Emerge uses ESG research, ratings, and analytics
from independent third-party data providers to screen investments based on ESG
criteria determined by Emerge. The Fund may hold securities of issuers for which
third-party data is not available. Where an issuer has not been assigned a
rating by the third-party data provider, Emerge’s ESG analysis
incorporates publicly available data. Emerge has the right to change the
third-party data providers that support its ESG framework at any time. In
determining whether an issuer meets Emerge’s ESG investment criteria, Emerge
considers: (i) negative screening criteria to eliminate certain types of issuers
in light of social and environmental considerations; and (ii) governance-related
risk ratings published by third party data providers, including Sustainalytics,
designed to measure the degree to which a company’s economic value is at risk
driven by the magnitude of a company’s unmanaged ESG risks. [As of the date of
this Prospectus,] Emerge applies a negative screen to exclude companies for
investment that derive 20% or more of their revenues from biological and
chemical weapons, thermal coal extraction, gambling, adult entertainment,
tobacco production, recreational cannabis and alcoholic beverages. Emerge may
modify the above list of negative screens at any time, without prior shareholder
approval or notice. ESG risk ratings data compiled by third-party data providers
forms the basis for Emerge’s governance-related risk assessment and screening.
Emerge may consider excluding, reducing or eliminating exposure to issuers with
high ESG risk ratings, as determined by one or more third-party data providers.
The Fund is an actively
managed exchange-traded fund (ETF) that does not seek to replicate the
performance of a specified index.
Principal
Risks
You could lose money by
investing in the Fund. ETF shares are not deposits or obligations of, or
guaranteed or endorsed by, any bank, and are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency of the
U.S. government. The Fund is subject to the principal risks noted below, any of
which may adversely affect the Fund’s net asset value (NAV), trading price,
yield, total return and ability to meet its investment objective. Unlike many
ETFs, the Fund is not an index-based ETF.
Market Risk. The market values of securities or
other investments owned by the Fund will go up or down, sometimes rapidly or
unpredictably. The market value of a security or other investment may be
impacted by economic, market, political, and issuer-specific conditions. Market
risk may affect a single issuer, industry, or sector of the economy, or it may
affect the market as a whole. Stock prices tend to go up and down more
dramatically than those of debt securities. A slower-growth or recessionary
economic environment could have an adverse effect on the prices of the various
stocks held by the Fund.
Events such as war; acts of
terrorism; social unrest; natural, environmental, or humanmade disasters, and
the spread of infectious illness or other public health threats can cause
significant economic impacts, including market closures and dislocations,
extreme volatility, liquidity constraints, and increased trading costs, that can
significantly impact the Fund and its investments. The full impact such events,
including the COVID-19 pandemic, is unpredictable and may adversely affect the
Fund’s performance. The effects of COVID-19 have impacted global economic
activity across many industries and may heighten other pre-existing political,
social and economic risks, locally or globally.
Large Capitalization Company Risk. Large
capitalization companies may fall out of favor with investors based on market
and economic conditions. In addition, larger companies may not be able to attain
the high growth rates of successful smaller companies and may be less capable of
responding quickly to competitive challenges and industry changes.
Small- and Mid-Capitalization Companies Risk.
Securities issued by small- and mid-capitalization companies may be more
volatile in price and less liquid than those of larger companies and may involve
more risks. Such risks may include greater sensitivity to changing economic
conditions; less certain growth prospects and fewer funds for growth and development;
less experienced management; and limited or less developed product lines and
markets. Because small- and mid-capitalization companies typically reinvest a
high proportion of their earnings in their businesses, they may not pay
dividends for some time, particularly if they are newer companies.
Growth Investing Risk. Growth stocks
typically trade at higher multiples of current earnings than other stocks
because of their growth potential, which may or may not be
realized. Investments in growth stocks may be more volatile than
other investments and/or the overall stock market because market prices of
growth stocks are highly sensitive to future earnings expectations. At times
when it appears that these expectations may not be met, prices of growth stocks
typically fall. Different investment styles (e.g., “growth” or “value” style
investing) tend to shift in and out of favor depending upon market and economic
conditions and investor sentiment. The Fund may outperform or underperform other
funds that invest in similar asset classes but employ different investment
styles.
Dividend Paying Stock Risk. Issuers that have
paid regular dividends or distributions to shareholders may not continue to do
so, or may not continue to do so at the same level, in the future. If the
dividends or distributions received by the Fund decreases, the Fund may have
less income to distribute to the Fund’s shareholders. Securities that pay
dividends, as a group, can fall out of favor with the market, causing such
securities to underperform securities that do not pay dividends. Depending upon
market conditions and political and legislative responses to such conditions,
dividend-paying securities that meet the Fund’s investment criteria may not be
widely available and/or may be highly concentrated in only a few market sectors.
In addition, common stocks with higher dividend yields can be sensitive to
interest rate movements: when interest rates rise, the prices of these stocks
may tend to fall. Conversely, the prices of higher yielding stocks may tend to
rise when interest rates fall. Interest rate changes can be sudden and
unpredictable and are influenced by a number of factors including government
policy, monetary policy, inflation expectations, perceptions of risk, and supply
and demand of bonds.
ESG Risk. Because the Fund evaluates ESG
factors to assess and exclude certain investments for non-financial reasons, the
Fund may forego some market opportunities available to funds that do not use
these ESG factors. Information used by the Fund to evaluate ESG factors,
including data provided by third-party vendors, may not be readily available,
complete or accurate, and may vary across providers and issuers and within
industries, which could negatively impact the Fund’s ability to apply its
methodology and in turn could negatively impact the Fund’s performance.
Currently, there is a lack of common industry standards relating to the
development and application of ESG criteria which may make it difficult to
compare the Fund’s principal investment strategies with the investment
strategies of other funds that apply certain ESG criteria or that use a
different third-party vendor for ESG data. In addition, the Fund’s assessment of
a company may differ from that of other funds or an investor. As a result, the
companies deemed eligible for inclusion in the Fund’s portfolio may not reflect
the beliefs or values of any particular investor and may not be deemed to
exhibit positive or favorable ESG characteristics if different metrics were used
to evaluate them. Regulatory changes or interpretations regarding the
definitions and/or use of ESG criteria could have a material adverse effect on
the Fund’s ability to invest in accordance with its investment policies and/or
achieve its investment objective.
Non-Diversification Risk. The Fund is
non-diversified and can invest a greater portion of its assets in the
obligations or securities of a small number of issuers or any single issuer than
a diversified fund can. A change
in the value of one or a few issuers’
securities will therefore affect the value of the Fund more than if it was a
diversified fund.
Management Risk. The Fund is subject to
management risk because it is an actively managed ETF. The Fund’s Advisor and
Sub-Advisor apply investment techniques and risk analyses in making investment
decisions for the Fund, but there can be no guarantee that these decisions will
produce the desired results.
Market Trading Risk. The Fund faces numerous
market trading risks, including the potential lack of an active market for Fund
shares, losses from trading in secondary markets, periods of high volatility and
disruption in the creation/redemption process of the Fund. Any of these factors,
among others, may lead to the Fund’s shares trading at a premium or discount to
NAV. Thus, you may pay more (or less) than NAV when you buy shares of the Fund
in the secondary market, and you may receive less (or more) than NAV when you
sell those shares in the secondary market. The investment manager cannot predict
whether shares will trade above (premium), below (discount) or at NAV.
Authorized Participant Concentration Risk. Only
an authorized participant (Authorized Participant) may engage in creation or
redemption transactions directly with the Fund. The Fund has a limited number of
institutions that act as Authorized Participants. To the extent that these
institutions exit the business or are unable to proceed with creation and/or
redemption orders with respect to the Fund and no other Authorized Participant
is able to step forward to create or redeem Creation Units (as defined below),
Fund shares may trade at a discount to
NAV and possibly face
trading halts and/or delisting. This risk may be more pronounced in volatile
markets, potentially where there are significant redemptions in ETFs
generally.
New Fund Risk. The Fund is a new fund, with a
limited or no operating history and a small asset base. There can be no
assurance that the Fund will grow to or maintain a viable size. Due to the
Fund's small asset base, certain of the Fund's expenses and its portfolio
transaction costs may be higher than those of a fund with a larger asset base.
To the extent that the Fund does not grow to or maintain a viable size, it may
be liquidated, and the expenses, timing and tax consequences of such liquidation
may not be favorable to some shareholders.
Small Fund Risk. When the Fund’s size is small,
the Fund may experience low trading volume and wide bid/ask spreads. In
addition, the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange.
Large Shareholder Risk. Certain shareholders,
including other funds or accounts advised by the Advisor or an affiliate of the
Advisor, may from time to time own a substantial amount of the Fund’s shares. In
addition, a third-party investor, the Advisor or an affiliate of the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Fund and hold its investment for a limited period of time solely to facilitate
commencement of the Fund or to facilitate the Fund’s achieving a specified size
or scale. There can be no assurance that any large shareholder would not redeem
its investment, that the size of the Fund would be maintained at such levels or
that the Fund would continue to meet applicable listing requirements.
Redemptions by large shareholders could have a significant negative impact on
the Fund. In addition, transactions by large shareholders may account for a
large percentage of the trading volume on the listing exchange and may,
therefore, have a material upward or downward effect on the market price of the
shares.
Performance
Because the Fund does not
have a full calendar year of performance, annual total return information is not
available and therefore is not presented. You can obtain updated performance
information at emergecm.com or by calling 1-877-8EMERGE. The Fund’s past
performance (before and after taxes) is not necessarily an indication of how the
Fund will perform in the future.
Investment
Manager
Emerge Capital Management
Inc.
Sub-Advisor
Grace Capital.
Portfolio
Managers
Catherine
Faddis
President and Chief
Executive Officer of Grace Capital and portfolio manager of the Fund since
inception (2022).
Lisa
Lake Langley
Chief Executive Officer,
President, and Founder of Emerge and portfolio manager of the Fund since
inception (2022).
Ms. Faddis provides
recommendations to Ms. Langley. Ms. Langley is responsible for selecting brokers
and placing the Fund’s trades, and implementing the Fund’s ESG strategy.
Purchase
and Sale of Fund Shares
The Fund is an ETF. Fund
shares may only be purchased and sold on a national securities exchange through
a broker-dealer. The price of Fund shares is based on market price, and because
ETF shares trade at market prices rather than NAV, shares may trade at a price
greater than NAV (a premium) or less than NAV (a discount). [The Fund will
generally issue or redeem Creation Units in exchange for a basket of securities
(and an amount of cash) that the Fund specifies each day.]
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). Recent
information, including information on the Fund’s NAV, market price, premiums and
discounts, and bid-ask spreads is available on the Fund’s website at
emergecm.com.
Taxes
The Fund’s distributions
are generally taxable to you as ordinary income, capital gains, or some
combination of both, unless you are investing through a tax- deferred
arrangement, such as a 401(k) plan or an individual retirement account, in which
case your distributions would generally be taxed when withdrawn from the
tax-deferred account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you
purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), the investment manager or other related companies
may pay the intermediary for certain Fund-related activities, including those
that are designed to make the intermediary more knowledgeable about exchange
traded products, such as the Fund, as well as for marketing, education or other
initiatives related to the sale or promotion of Fund shares. These payments may
create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
Emerge EMPWR Sustainable Global Core
Equity ETF
Investment
Objective
The investment objective of
Emerge EMPWR Sustainable Global Core Equity ETF (the Fund) is to seek long-term
growth of capital.
Fees and
Expenses of the Fund
The following table
describes the fees and expenses that you will incur if you buy, hold and sell
shares of the Fund. You may also incur other fees, such as usual and customary
brokerage commissions and other fees to financial intermediaries, which are not
reflected in the table and the Example that follows.
Annual
Fund Operating Expenses
(expenses that you pay each
year as a percentage of the value of your investment)
Management fees |
[ ]% |
Distribution and/or service (12b-1) fees |
None |
Other expenses1 |
[ ]% |
Total annual Fund operating
expenses |
[ ]% |
1.
Other expenses are based on estimated amounts for the current fiscal year.
Example
This Example is intended to
help you compare the cost of investing in the Fund with the cost of investing in
other funds. The Example assumes that you invest $10,000 in the Fund for the
time periods indicated and then sell all of your shares at the end of the
period. The Example also assumes that your investment has a 5% return each year
and that the Fund’s operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs, whether you
redeem or hold your shares, would be:
Portfolio
Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable
account. These costs, which are not reflected in annual Fund operating expenses
or in the Example, affect the Fund’s performance.
Principal
Investment Strategies
Under normal market
conditions, the Fund invests at least 80% of its net assets, plus borrowings for
investment purposes, if any, in equity securities that, at the time of
investment, meet the environmental, social, and governance (ESG) criteria
established by Emerge Capital Management Inc. (Emerge or the Advisor).
The Fund invests
predominantly in equity securities. Equity securities include common stock
(including real estate investment trusts), preferred stock, securities
convertible into common stock, depositary receipts, or securities or other
instruments whose price is linked to the value of common stock.
Under normal circumstances,
the Fund will provide exposure to investments that are economically tied to at
least three different countries, including the United States and at least 40%,
unless market conditions are not deemed favorable, in which case at least 30%,
of the Fund’s net assets will provide exposure to investments that are
economically tied to countries other than the United States. The Fund’s
investments may include securities of issuers located in emerging markets
countries.
The Fund may invest in the
securities of issuers of all capitalization sizes, but intends to invest
primarily in in securities of large capitalization issuers.
The
Fund is non-diversified, which means it can invest a greater percentage of its
assets in a small group of issuers or any one issuer than a diversified fund
can.
In selecting companies,
Zevin Asset Management, LLC (Zevin or the Sub-Advisor) employs a
multidisciplinary investment process that combines fundamental research and
global macro considerations to seek to identify securities that the Sub-Advisor
believes have potential to outperform and minimize significant losses in
declining markets. Because the Sub-Advisor seeks to invest in securities that
have the potential to outperform and
minimize significant losses in declining markets, the Fund may underperform the
broader market during periods of rising markets. The Sub-Advisor may recommend
selling securities for several reasons, including when there are more attractive
opportunities or where the original investment thesis for a company is no longer
valid.
Emerge
considers ESG factors within its securities selection process for each equity
security for the Fund. Emerge assesses whether a company meets the Fund’s ESG
standards based on its proprietary ESG framework. Emerge uses ESG research,
ratings, and analytics from independent third-party data providers to screen
investments based on ESG criteria determined by Emerge. The Fund may hold
securities of issuers for which third-party data is not available. Where an
issuer has not been assigned a rating by the third-party data provider, Emerge’s
ESG analysis incorporates publicly available data. Emerge has the right to
change the third-party data providers that support its ESG framework at any
time. In determining whether an issuer meets Emerge’s ESG investment criteria,
Emerge considers: (i) negative screening criteria to eliminate certain types of
issuers in light of social and environmental considerations; and (ii)
governance-related risk ratings published by third party data providers,
including Sustainalytics, designed to measure the degree to which a company’s
economic value is at risk driven by the magnitude of a company’s unmanaged ESG
risks. [As of the date of this Prospectus,] Emerge applies a negative screen to
exclude companies for investment that derive 20% or more of their revenues from
biological and chemical weapons, thermal coal extraction, gambling, adult
entertainment, tobacco production, recreational cannabis and alcoholic
beverages. Emerge may modify the above list of negative screens at any time,
without prior shareholder approval or notice. ESG risk ratings data compiled by
third-party data providers forms the basis for Emerge’s governance-related risk
assessment and screening. Emerge may consider excluding, reducing or eliminating
exposure to issuers with high ESG risk ratings, as determined by one or more
third-party data providers.
In
attempting to meet its investment objective, the Fund may engage in active and
frequent trading of portfolio securities.
The
Fund is an actively managed exchange-traded fund (ETF) that does not seek to
replicate the performance of a specified index.
Principal
Risks
You could lose money by
investing in the Fund. ETF shares are not deposits or obligations of, or
guaranteed or endorsed by, any bank, and are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency of the
U.S. government. The Fund is subject to the principal risks noted below, any of
which may adversely affect the Fund’s net asset value (NAV), trading price,
yield, total return and ability to meet its investment objective. Unlike many
ETFs, the Fund is not an index-based ETF.
Market Risk. The market values of securities or
other investments owned by the Fund will go up or down, sometimes rapidly or
unpredictably. The market value of a security or other investment may be
impacted by economic, market, political, and issuer-specific conditions. Market
risk may affect a single issuer, industry, or sector of the economy, or it may
affect the market as a whole. Stock prices tend to go up and down more
dramatically than those of debt securities. A slower-growth or recessionary
economic environment could have an adverse effect on the prices of the various
stocks held by the Fund.
Events such as war; acts of terrorism; social
unrest; natural, environmental, or humanmade disasters, and the spread of
infectious illness or other public health threats can cause significant economic
impacts, including market closures and dislocations, extreme volatility,
liquidity constraints, and increased trading costs, that can significantly
impact the Fund and its investments. The full impact such events, including the
COVID-19 pandemic, is unpredictable and may adversely affect the Fund’s
performance. The effects of COVID-19 have impacted global economic activity
across many industries and may heighten other pre-existing political, social and
economic risks, locally or globally.
Foreign Securities Risk. The Fund's foreign
investments may be adversely affected by political, economic, and social
instability and volatility, changes in economic or taxation policies; difficulty
in enforcing obligations; lack of or ineffective government supervision and
regulation of securities and currency markets, trading systems, and
brokers; decreased
liquidity and increased volatility; lack of or limited availability of
information, which can impede the Fund’s ability to evaluate such investments;
and trading restrictions and economic sanctions. The Fund’s foreign investments
may be subject to currency exchange rate fluctuations, which may cause the value
of securities denominated in such foreign currency (or other instruments through
which the Fund has exposure to foreign currencies) to decline in value. Foreign
investments also involve the risk of the possible seizure, nationalization or
expropriation of the issuer or foreign deposits (in which the Fund could lose
its entire investments in a certain market) and the possible adoption of foreign
governmental restrictions such as exchange controls. The risks of foreign
investments may be greater in developing or emerging market countries.
Emerging Markets Securities Risk. The Fund’s
investments in emerging markets are subject to the risks of foreign investing
generally, and have additional heightened risks due to a lack of established
legal, political, business, and social frameworks to support securities markets.
These risks include currency exchange rate volatility and increased potential
for currency devaluations; greater sensitivity to interest rate changes; higher
rates of inflation; lower trading volumes; pervasiveness of corruption and
fraud; less government supervision and regulation; and more governmental
limitations on foreign investment than more developed markets. Such countries’
economies may be more dependent on relatively few industries or investors that
may be highly vulnerable to local and global changes. Companies in emerging
market countries generally may be subject to less stringent regulatory,
disclosure, financial reporting, accounting, auditing and recordkeeping
standards than companies in more developed countries. As a result, information
about such companies may be less available and reliable, which can impede the
Fund’s ability to evaluate such companies. Securities law and the enforcement of
systems of taxation in many emerging market countries may change quickly and
unpredictably, and the ability to bring and enforce actions or to obtain
information needed to pursue or enforce such actions may be limited and
shareholder claims may be difficult or impossible to pursue. In addition, the
ability of foreign entities to participate in privatization programs of certain
developing or emerging market countries may be limited by local law. Investments
in emerging markets securities may be subject to additional transaction costs,
delays in settlement procedures, and unexpected market closures.
Large Capitalization Company Risk. Large
capitalization companies may fall out of favor with investors based on market
and economic conditions. In addition, larger companies may not be able to attain
the high growth rates of successful smaller companies and may be less capable of
responding quickly to competitive challenges and industry changes.
Small- and Mid-Capitalization Companies Risk.
Securities issued by small- and mid-capitalization companies may be more
volatile in price and less liquid than those of larger companies and may involve
more risks. Such risks may include greater sensitivity to changing economic
conditions; less certain growth prospects and fewer funds for growth and development;
less experienced management; and limited or less developed product lines and
markets. Because small- and mid-capitalization companies typically reinvest a
high proportion of their earnings in their businesses, they may not pay
dividends for some time, particularly if they are newer companies.
Geographic Focus Risk. The Fund may from time
to time have a substantial amount of its assets invested in securities of
issuers located in a single country or a limited number of countries. Adverse
economic, political or social conditions in those countries may therefore have a
significant negative impact on the Fund’s investment performance. This risk is
heightened if the Fund focuses its investments in emerging market countries or
developed countries prone to periods of instability.
Depositary Receipts Risk. Depositary receipts
are subject to many of the same risks as direct investments in the underlying
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Fund may therefore receive less timely information or have
less control than if it invested directly in the foreign issuer.
Active Trading Risk. Active trading of
portfolio securities may result in added expenses, a lower return and increased
tax liability.
ESG Risk. Because the Fund evaluates ESG
factors to assess and exclude certain investments for non-financial reasons, the
Fund may forego some market opportunities available to funds that do not use
these ESG factors. Information used by the Fund to evaluate ESG factors,
including data provided by third-party vendors, may not be readily available,
complete or accurate, and may vary across providers and issuers and within
industries, which could negatively impact the Fund’s ability to apply its
methodology and in turn could negatively impact the Fund’s performance.
Currently, there is a lack of common industry standards relating to the
development and
application of ESG criteria
which may make it difficult to compare the Fund’s principal investment
strategies with the investment strategies of other funds that apply certain ESG
criteria or that use a different third-party vendor for ESG data. In addition,
the Fund’s assessment of a company may differ from that of other funds or an
investor. As a result, the companies deemed eligible for inclusion in the Fund’s
portfolio may not reflect the beliefs or values of any particular investor and
may not be deemed to exhibit positive or favorable ESG characteristics if
different metrics were used to evaluate them. Regulatory changes or
interpretations regarding the definitions and/or use of ESG criteria could have
a material adverse effect on the Fund’s ability to invest in accordance with its
investment policies and/or achieve its investment objective.
Non-Diversification Risk. The Fund is
non-diversified and can invest a greater portion of its assets in the
obligations or securities of a small number of issuers or any single issuer than
a diversified fund can. A change
in the value of one or a few issuers’
securities will therefore affect the value of the Fund more than if it was a
diversified fund.
Management Risk. The Fund is subject to
management risk because it is an actively managed ETF. The Fund’s Advisor and
Sub-Advisor apply investment techniques and risk analyses in making investment
decisions for the Fund, but there can be no guarantee that these decisions will
produce the desired results.
Market Trading Risk. The Fund faces numerous
market trading risks, including the potential lack of an active market for Fund
shares, losses from trading in secondary markets, periods of high volatility and
disruption in the creation/redemption process of the Fund. Any of these factors,
among others, may lead to the Fund’s shares trading at a premium or discount to
NAV. Thus, you may pay more (or less) than NAV when you buy shares of the Fund
in the secondary market, and you may receive less (or more) than NAV when you
sell those shares in the secondary market. The investment manager cannot predict
whether shares will trade above (premium), below (discount) or at NAV.
International Closed Market Trading Risk. To
the extent that the underlying securities held by the Fund trade on an exchange
that is closed when the securities exchange on which the Fund shares list and
trade is open, there may be market uncertainty about the stale security pricing
(i.e., the last quote from its closed foreign market) resulting in premiums or
discounts to NAV that may be greater than those experienced by other ETFs.
Authorized Participant Concentration Risk. Only
an authorized participant (Authorized Participant) may engage in creation or
redemption transactions directly with the Fund. The Fund has a limited number of
institutions that act as Authorized Participants. To the extent that these
institutions exit the business or are unable to proceed with creation and/or
redemption orders with respect to the Fund and no other Authorized Participant
is able to step forward to create or redeem Creation Units (as defined below),
Fund shares may trade at a discount to NAV and possibly face trading halts
and/or delisting. This risk may be more pronounced in volatile markets,
potentially where there are significant redemptions in ETFs generally.
New Fund Risk. The Fund is a new fund, with a
limited or no operating history and a small asset base. There can be no
assurance that the Fund will grow to or maintain a viable size. Due to the
Fund's small asset base, certain of the Fund's expenses and its portfolio
transaction costs may be higher than those of a fund with a larger asset base.
To the extent that the Fund does not grow to or maintain a viable size, it may
be liquidated, and the expenses, timing and tax consequences of such liquidation
may not be favorable to some shareholders.
Small Fund Risk. When the Fund’s size is small,
the Fund may experience low trading volume and wide bid/ask spreads. In
addition, the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange.
Large Shareholder Risk. Certain shareholders,
including other funds or accounts advised by the Advisor or an affiliate of the
Advisor, may from time to time own a substantial amount of the Fund’s shares. In
addition, a third-party investor, the Advisor or an affiliate of the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Fund and hold its investment for a limited period of time solely to facilitate
commencement of the Fund or to facilitate the Fund’s achieving a specified size
or scale. There can be no assurance that any large shareholder would not redeem
its investment, that the size of the Fund would be maintained at such levels or
that the Fund would continue to meet applicable listing requirements.
Redemptions by large shareholders could have a significant negative impact on
the Fund. In addition, transactions by large shareholders may account for a
large percentage of the trading volume on the listing exchange and may,
therefore, have a material upward or downward effect on the market price of the
shares.
Performance
Because the Fund does not
have a full calendar year of performance, annual total return information is not
available and therefore is not presented. You can obtain updated performance
information at emergecm.com or by calling 1-877-8EMERGE. The Fund’s past
performance (before and after taxes) is not necessarily an indication of how the
Fund will perform in the future.
Investment
Manager
Emerge Capital Management
Inc.
Sub-Advisor
Zevin Asset Management,
LLC.
Portfolio
Managers
Jane
Lou Li
Portfolio Manager and
Senior Equity Analyst of Zevin and portfolio manager of the Fund since inception
(2022).
Lisa
Lake Langley
Chief Executive Officer,
President, and Founder of Emerge and portfolio manager of the Fund since
inception (2022).
Ms. Li provides
recommendations to Ms. Langley. Ms. Langley is responsible for selecting brokers
and placing the Fund’s trades, and implementing the Fund’s ESG strategy.
Purchase
and Sale of Fund Shares
The Fund is an ETF. Fund
shares may only be purchased and sold on a national securities exchange through
a broker-dealer. The price of Fund shares is based on market price, and because
ETF shares trade at market prices rather than NAV, shares may trade at a price
greater than NAV (a premium) or less than NAV (a discount). [The Fund will
generally issue or redeem Creation Units in exchange for a basket of securities
(and an amount of cash) that the Fund specifies each day.]
An investor may incur costs
attributable to the difference between the highest price a buyer is willing to
pay to purchase shares of the Fund (bid) and the lowest price a seller is
willing to accept for shares of the Fund (ask) when buying or selling shares in
the secondary market (the “bid-ask spread”). Recent information, including
information on the Fund’s NAV, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at emergecm.com.
Taxes
The Fund’s distributions
are generally taxable to you as ordinary income, capital gains, or some
combination of both, unless you are investing through a tax- deferred
arrangement, such as a 401(k) plan or an individual retirement account, in which
case your distributions would generally be taxed when withdrawn from the
tax-deferred account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you
purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), the investment manager or other related companies
may pay the intermediary for certain Fund-related activities, including those
that are designed to make the intermediary more knowledgeable about exchange
traded products, such as the Fund, as well as for marketing, education or other
initiatives related to the sale or promotion of Fund shares. These payments may
create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
Emerge EMPWR Sustainable Emerging
Markets Equity ETF
Investment
Objective
The investment objective of
Emerge EMPWR Sustainable Emerging Markets Equity ETF (the Fund) is to seek
long-term growth of capital.
Fees and
Expenses of the Fund
The following table
describes the fees and expenses that you will incur if you buy, hold and sell
shares of the Fund. You may also incur other fees, such as usual and customary
brokerage commissions and other fees to financial intermediaries, which are not
reflected in the table and the Example that follows.
Annual
Fund Operating Expenses
(expenses that you pay each
year as a percentage of the value of your investment)
Management fees |
[ ]% |
Distribution and/or service (12b-1) fees |
None |
Other expenses1 |
[ ]% |
Total annual Fund operating
expenses |
[ ]% |
1.
Other expenses are based on estimated amounts for the current fiscal year.
Example
This Example is intended to
help you compare the cost of investing in the Fund with the cost of investing in
other funds. The Example assumes that you invest $10,000 in the Fund for the
time periods indicated and then sell all of your shares at the end of the
period. The Example also assumes that your investment has a 5% return each year
and that the Fund’s operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs, whether you
redeem or hold your shares, would be:
Portfolio Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable
account. These costs, which are not reflected in annual Fund operating expenses
or in the Example, affect the Fund’s performance.
Principal
Investment Strategies
Under normal market
conditions, the Fund invests at least 80% of its net assets, plus borrowings for
investment purposes, if any, in equity securities of issuers located in emerging
markets countries that, at the time of investment, meet the environmental,
social, and governance (ESG) criteria established by Emerge Capital Management
Inc. (Emerge or the Advisor).
The Fund considers a
country's market to be an "emerging market" if it is defined as an emerging or
developing economy by any of the International Bank for Reconstruction and
Development (i.e., the World Bank), the International Finance Corporation or the
United Nations or its authorities. Additionally, the Fund, for purposes of its
investments, may consider a country included in JP Morgan, MSCI or FTSE emerging
markets indices to be an emerging market country. The Fund’s Sub-Advisor,
Channing Global Advisors, LLC (Channing Global or the Sub-Advisor) may consider
a company to be in an emerging market country if the company has been organized
under the laws of, has its principal offices in, or has its securities
principally traded in, an emerging market country, or if the company derives at
least 50% of revenues or net profits from, or has at least 50% of assets or
production capacities in, an emerging market country. The countries included in
this definition will change over time.
The Fund invests
predominantly in equity securities. Equity securities include common stock
(including real estate investment trusts), preferred stock, securities
convertible into common stock, depositary receipts, or securities or other
instruments whose price is linked to the value of common stock. The Fund may
invest in the securities of issuers of all capitalization sizes.
The Fund, from time to
time, may have significant investments in one or more countries, including
China. Investments in Chinese companies may be made through a special structure
known as a variable interest entity (VIE) that is designed to provide foreign
investors with exposure to Chinese companies that operate in certain sectors in
which China restricts or prohibits foreign investments. In a VIE structure,
instead of directly owning the equity interests in a Chinese company, the listed
company has contractual arrangements with the Chinese company.
The
Fund is non-diversified, which means it can invest a greater percentage of its
assets in a small group of issuers or any one issuer than a diversified fund
can.
In selecting companies,
Channing Global Advisors, LLC (Channing Global or the Sub-Advisor) uses
proprietary fundamental data screening and fundamental research to identify
companies that the Sub-Advisor’s believes present attractive growth
opportunities, based on certain characteristics that, in the Sub-Advisor’s view,
position the company to benefit from secular and tactical themes. In identifying
companies that offer attractive thematic growth opportunities, the Sub-Advisor
seeks to identify favorable secular and tactical themes resulting from country
and sector catalysts, such as changes in commodities pricing, interest rates,
exchange rates, or regulation. Through fundamental research, the Sub-Advisor
then seeks to identify what the Sub-Advisor believes are high quality growth
companies that, in the Sub-Advisor’s view, are undervalued relative to their
estimated earnings and cash-flow growth and poised to deliver excess returns.
For purposes of the Sub-Advisor’s selection process, “quality” includes
measurements such as trading volume, balance sheet, income statement, cash flow,
and sustainable growth; and “growth” includes measurements such as net income
and earnings before interest, taxes, depreciation, and amortization. The
Sub-Advisor may recommend selling securities for several reasons, including when
there are more attractive opportunities or where the original investment thesis
for a company is no longer valid.
Emerge considers ESG
factors within its securities selection process for each equity security for the
Fund. Emerge assesses whether a company meets the Fund’s ESG standards based on
its proprietary ESG framework. Emerge uses ESG research, ratings, and analytics
from independent third-party data providers to screen investments based on ESG
criteria determined by Emerge. The Fund may hold securities of issuers for which
third-party data is not available. Where an issuer has not been assigned a
rating by the third-party data provider, Emerge’s ESG analysis
incorporates publicly available data. Emerge has the right to change the
third-party data providers that support its ESG framework at any time. In
determining whether an issuer meets Emerge’s ESG investment criteria, Emerge
considers: (i) negative screening criteria to eliminate certain types of issuers
in light of social and environmental considerations; and (ii) governance-related
risk ratings published by third party data providers, including Sustainalytics,
designed to measure the degree to which a company’s economic value is at risk
driven by the magnitude of a company’s unmanaged ESG risks. [As of the date of
this Prospectus,] Emerge applies a negative screen to exclude companies for
investment that derive 20% or more of their revenues from biological and
chemical weapons, thermal coal extraction, gambling, adult entertainment,
tobacco production, recreational cannabis and alcoholic beverages. Emerge may
modify the above list of negative screens at any time, without prior shareholder
approval or notice. ESG risk ratings data compiled by third-party data providers
forms the basis for Emerge’s governance-related risk assessment and screening.
Emerge may consider excluding, reducing or eliminating exposure to issuers with
high ESG risk ratings, as determined by one or more third-party data providers.
The Fund is an actively
managed exchange-traded fund (ETF) that does not seek to replicate the
performance of a specified index.
Principal
Risks
You could lose money by
investing in the Fund. ETF shares are not deposits or obligations of, or
guaranteed or endorsed by, any bank, and are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency of the
U.S. government. The Fund is subject to the principal risks noted below, any of
which may adversely affect the Fund’s net asset value (NAV), trading price,
yield, total return and ability to meet its investment objective. Unlike many
ETFs, the Fund is not an index-based ETF.
Market Risk. The market values of securities or
other investments owned by the Fund will go up or down, sometimes rapidly or
unpredictably. The market value of a security or other investment may be
impacted by economic, market, political, and issuer-specific conditions. Market
risk may affect a single issuer, industry, or sector of the economy, or it may
affect the market as a whole. Stock prices tend to go up and down more
dramatically than those of debt securities. A slower-growth or recessionary
economic environment could have an adverse effect on the prices of the various
stocks held by the Fund.
Events such as war; acts of
terrorism; social unrest; natural, environmental, or humanmade disasters, and
the spread of infectious illness or other public health threats can cause
significant economic impacts, including market closures and dislocations,
extreme volatility, liquidity constraints, and increased trading costs, that can
significantly impact the Fund and its investments. The full impact such events,
including the COVID-19 pandemic, is unpredictable and may adversely affect the
Fund’s performance. The effects of COVID-19 have impacted global economic
activity across many industries and may heighten other pre-existing political,
social and economic risks, locally or globally.
Foreign Securities Risk. The Fund's foreign
investments may be adversely affected by political, economic, and social
instability and volatility, changes in economic or taxation policies; difficulty
in enforcing obligations; lack of or ineffective government supervision and
regulation of securities and currency markets, trading systems, and brokers;
decreased liquidity and increased volatility; lack of or limited availability of
information, which can impede the Fund’s ability to evaluate such investments;
and trading restrictions and economic sanctions. The Fund’s foreign investments
may be subject to currency exchange rate fluctuations, which may cause the value
of securities denominated in such foreign currency (or other instruments through
which the Fund has exposure to foreign currencies) to decline in value. Foreign
investments also involve the risk of the possible seizure, nationalization or
expropriation of the issuer or foreign deposits (in which the Fund could lose
its entire investments in a certain market) and the possible adoption of foreign
governmental restrictions such as exchange controls. The risks of foreign
investments may be greater in developing or emerging market countries.
Emerging Markets Securities Risk. The Fund’s
investments in emerging markets are subject to the risks of foreign investing
generally, and have additional heightened risks due to a lack of established
legal, political, business, and social frameworks to support securities markets.
These risks include currency exchange rate volatility and increased potential
for currency devaluations; greater sensitivity to interest rate changes; higher
rates of inflation; lower trading volumes; pervasiveness of corruption and
fraud; less government supervision and regulation; and more governmental
limitations on foreign investment than more developed markets. Such countries’
economies may be more dependent on relatively few industries or investors that
may be highly vulnerable to local and global changes. Companies in emerging
market countries generally may be subject to less stringent regulatory,
disclosure, financial reporting, accounting, auditing and recordkeeping
standards than companies in more developed countries. As a result, information
about such companies may be less available and reliable, which can impede the
Fund’s ability to evaluate such companies. Securities law and the enforcement of
systems of taxation in many emerging market countries may change quickly and
unpredictably, and the ability to bring and enforce actions or to obtain
information needed to pursue or enforce such actions may be limited and
shareholder claims may be difficult or impossible to pursue. In addition, the
ability of foreign entities to participate in privatization programs of certain
developing or emerging market countries may be limited by local law. Investments
in emerging markets securities may be subject to additional transaction costs,
delays in settlement procedures, and unexpected market closures.
China Investing Risk. The Fund’s investments in
China (including Chinese companies listed on US and Hong Kong exchanges), Hong
Kong and Taiwan, are subject to the risks of emerging markets investing
generally, and have heightened risks such as greater government control over the
economy, exposure to currency fluctuations, less liquidity, expropriation,
confiscatory taxation, nationalization, difficulty in obtaining information
necessary for investigations into and/or litigation against Chinese companies as
well as in obtaining and/or enforcing judgments, limited legal remedies for
shareholders, and exchange control regulations (including currency blockage).
Inflation and rapid fluctuations in inflation and interest rates have had, and
may continue to have, negative effects on the economy and securities markets of
China, Hong Kong and Taiwan. In addition, investments in Taiwan and Hong Kong
could be adversely affected by their respective political and economic
relationship with China. Additionally, the inability of the Public Company
Accounting Oversight Board (PCAOB) to inspect audit work papers and practices of
PCAOB-registered accounting firms in China with respect to their audit work of
U.S. reporting companies may impose significant additional risks associated with
investments in
China. In addition, the
standards for environmental, social and corporate governance matters in China,
Hong Kong and Taiwan tend to be lower than such standards in more developed
economies.
Certain securities issued
by companies located or operating in China, such as China A-shares, are subject
to trading restrictions, quota limitations and less market liquidity. For
investments using a VIE structure, all or most of the value of such an
investment depends on the enforceability of the contracts between the listed
company and the China-based VIE. Currently, the Chinese government has never
approved VIE structures. Investments through a VIE structure are subject to the
risk that the VIE will breach its contracts with the listed company that holds
such contractual rights; that any breach of such contracts will likely be
subject to Chinese law and jurisdiction; and that Chinese law may be interpreted
or change in a way that affects the enforceability of the VIE's arrangements, or
contracts between the VIE and the listed company may otherwise not be
enforceable under Chinese law. As a result, the market value of the Fund's
associated holdings would likely be significantly negatively impacted, which may
result in significant losses with little or no recourse available.
Additionally, the Chinese
economy is highly dependent on the property sector and exportation of products
and services, and could experience a significant slowdown or otherwise be
adversely impacted due to a slowdown in the housing construction and development
markets, a reduction in global demand for Chinese exports, contraction in
spending on domestic goods by Chinese consumers, a downturn in any of the economies of
China’s key trading partners, the institution of tariffs or other trade
barriers, trade or political disputes with China’s major trading partners,
natural disasters, or public health threats.
Additionally, changes in
applicable Chinese tax law could reduce the after-tax profits of the Fund,
directly or indirectly, including by reducing the after-tax profits of companies
in China in which the Fund invests. Uncertainties in Chinese tax rules could
result in unexpected tax liabilities for the Fund.
Thematic Investing Risk. The Fund’s investment
strategies incorporate the identification of thematic investment opportunities
and the Fund’s performance may be negatively impacted if the Sub-Advisor does
not correctly identify such opportunities or if the theme develops in an
unexpected manner. Sales growth and acceleration for a particular economic theme
may not continue, and the business models employed by the companies focused on a
particular economic theme may not prove to be successful. Securities selected
pursuant to an investment theme may be impacted by factors unrelated to the
theme, particularly with respect to companies that may have multiple lines of
business, and may underperform. Adverse developments and risks unrelated to the
investment theme affecting companies in which the Fund invests may negatively
impact the Fund’s performance. The customers and/or suppliers of thematic
companies may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on thematic companies.
The Fund’s thematic
investments will also subject the Fund to growth style investing risks. Growth
stock prices reflect projections of future earnings or revenues, and can,
therefore, fall dramatically if the company fails to meet those projections.
Growth stocks may be more expensive relative to their current earnings or assets
compared to value or other stocks, and if earnings growth expectations moderate,
their valuations may return to more typical norms, causing their stock prices to
fall. Prices of these companies’ securities may be more volatile than other
securities, particularly over the short term.
Small- and Mid-Capitalization Companies Risk.
Securities issued by small- and mid-capitalization companies may be more
volatile in price and less liquid than those of larger companies and may involve
more risks. Such risks may include greater sensitivity to changing economic
conditions; less certain growth prospects and fewer funds for growth and development;
less experienced management; and limited or less developed product lines and
markets. Because small- and mid-capitalization companies typically reinvest a
high proportion of their earnings in their businesses, they may not pay
dividends for some time, particularly if they are newer companies.
Geographic Focus Risk. The Fund may from time
to time have a substantial amount of its assets invested in securities of
issuers located in a single country or a limited number of countries. Adverse
economic, political or social conditions in those countries may therefore have a
significant negative impact on the Fund’s investment performance. This risk is
heightened if the Fund focuses its investments in emerging market countries or
developed countries prone to periods of instability.
Sector Focus Risk. To the extent that the Fund
focuses on particular industries, sectors or types of investment from time to
time, the Fund may be subject to greater risks of adverse developments in such
areas of focus than a fund that invests in a wider variety of industries,
sectors or investments.
Depositary Receipts Risk. Depositary receipts
are subject to many of the same risks as direct investments in the underlying
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Fund may therefore receive less timely information or have
less control than if it invested directly in the foreign issuer.
ESG Risk. Because the Fund evaluates ESG
factors to assess and exclude certain investments for non-financial reasons, the
Fund may forego some market opportunities available to funds that do not use
these ESG factors. Information used by the Fund to evaluate ESG factors,
including data provided by third-party vendors, may not be readily available,
complete or accurate, and may vary across providers and issuers and within
industries, which could negatively impact the Fund’s ability to apply its
methodology and in turn could negatively impact the Fund’s performance.
Currently, there is a lack of common industry standards relating to the
development and application of ESG criteria which may make it difficult to
compare the Fund’s principal investment strategies with the investment
strategies of other funds that apply certain ESG criteria or that use a
different third-party vendor for ESG data. In addition, the Fund’s assessment of
a company may differ from that of other funds or an investor. As a result, the
companies deemed eligible for inclusion in the Fund’s portfolio may not reflect
the beliefs or values of any particular investor and may not be deemed to
exhibit positive or favorable ESG characteristics if different metrics were used
to evaluate them. Regulatory changes or interpretations regarding the
definitions and/or use of ESG criteria could have a material adverse effect on
the Fund’s ability to invest in accordance with its investment policies and/or
achieve its investment objective.
Non-Diversification Risk. The Fund is
non-diversified and can invest a greater portion of its assets in the
obligations or securities of a small number of issuers or any single issuer than
a diversified fund can. A change
in the value of one or a few issuers’
securities will therefore affect the value of the Fund more than if it was a
diversified fund.
Management Risk. The Fund is subject to
management risk because it is an actively managed ETF. The Fund’s Advisor and
Sub-Advisor apply investment techniques and risk analyses in making investment
decisions for the Fund, but there can be no guarantee that these decisions will
produce the desired results.
Market Trading Risk. The Fund faces numerous
market trading risks, including the potential lack of an active market for Fund
shares, losses from trading in secondary markets, periods of high volatility and
disruption in the creation/redemption process of the Fund. Any of these factors,
among others, may lead to the Fund’s shares trading at a premium or discount to
NAV. Thus, you may pay more (or less) than NAV when you buy shares of the Fund
in the secondary market, and you may receive less (or more) than NAV when you
sell those shares in the secondary market. The investment manager cannot predict
whether shares will trade above (premium), below (discount) or at NAV.
International Closed Market Trading Risk. To
the extent that the underlying securities held by the Fund trade on an exchange
that is closed when the securities exchange on which the Fund shares list and
trade is open, there may be market uncertainty about the stale security pricing
(i.e., the last quote from its closed foreign market) resulting in premiums or
discounts to NAV that may be greater than those experienced by other ETFs.
Authorized Participant Concentration Risk. Only
an authorized participant (Authorized Participant) may engage in creation or
redemption transactions directly with the Fund. The Fund has a limited number of
institutions that act as Authorized Participants. To the extent that these
institutions exit the business or are unable to proceed with creation and/or
redemption orders with respect to the Fund and no other Authorized Participant
is able to step forward to create or redeem Creation Units (as defined below),
Fund shares may trade at a discount to NAV and possibly face trading halts
and/or delisting. This risk may be more pronounced in volatile markets,
potentially where there are significant redemptions in ETFs generally.
New Fund Risk. The Fund is a new fund, with a
limited or no operating history and a small asset base. There can be no
assurance that the Fund will grow to or maintain a viable size. Due to the
Fund's small asset base, certain of the Fund's expenses and its portfolio
transaction costs may be higher than those of a fund with a larger asset base.
To the extent that the Fund does not grow to or maintain a viable size, it may
be liquidated, and the expenses, timing and tax consequences of such liquidation
may not be favorable to some shareholders.
Small Fund Risk. When the Fund’s size is small,
the Fund may experience low trading volume and wide bid/ask spreads. In
addition, the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange.
Large Shareholder Risk. Certain shareholders,
including other funds or accounts advised by the Advisor or an affiliate of the
Advisor, may from time to time own a substantial amount of the Fund’s shares. In
addition, a third-party investor, the Advisor or an affiliate of the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Fund and hold its investment for a limited period of time solely to facilitate
commencement of the Fund or to facilitate the Fund’s achieving a specified size
or scale. There can be no assurance that any large shareholder would not redeem
its investment, that the size of the Fund would be maintained at such levels or
that the Fund would continue to meet applicable listing requirements.
Redemptions by large shareholders could have a significant negative impact on
the Fund. In addition, transactions by large shareholders may account for a
large percentage of the trading volume on the listing exchange and may,
therefore, have a material upward or downward effect on the market price of the
shares.
Performance
Because the Fund does not
have a full calendar year of performance, annual total return information is not
available and therefore is not presented. You can obtain updated performance
information at emergecm.com or by calling 1-877-8EMERGE. The Fund’s past
performance (before and after taxes) is not necessarily an indication of how the
Fund will perform in the future.
Investment
Manager
Emerge Capital Management
Inc.
Sub-Advisor
Channing Global Advisors,
LLC
Portfolio
Managers
Joséphine Jiménez
Chief Investment Officer,
Portfolio Manager, Analyst, and Founder of Channing Global and portfolio manager
of the Fund since inception (2022).
Lisa
Lake Langley
Chief Executive Officer,
President, and Founder of Emerge and portfolio manager of the Fund since
inception (2022).
Ms. Jiménez provides
recommendations to Ms. Langley. Ms. Langley is responsible for selecting brokers
and placing the Fund’s trades, and implementing the Fund’s ESG strategy.
Purchase
and Sale of Fund Shares
The Fund is an ETF. Fund
shares may only be purchased and sold on a national securities exchange through
a broker-dealer. The price of Fund shares is based on market price, and because
ETF shares trade at market prices rather than NAV, shares may trade at a price
greater than NAV (a premium) or less than NAV (a discount). [The Fund will
generally issue or redeem Creation Units in exchange for a basket of securities
(and an amount of cash) that the Fund specifies each day.]
An investor may incur costs
attributable to the difference between the highest price a buyer is willing to
pay to purchase shares of the Fund (bid) and the lowest price a seller is
willing to accept for shares of the Fund (ask) when buying or selling shares in
the secondary market (the “bid-ask spread”). Recent information, including
information on the Fund’s NAV, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at emergecm.com.
Taxes
The
Fund’s distributions are generally taxable to you as ordinary income, capital
gains, or some combination of both, unless you are investing through a tax-
deferred arrangement, such as a 401(k) plan or an individual retirement account,
in which case your distributions would generally be taxed when withdrawn from
the tax-deferred account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you
purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), the investment manager or other related companies
may pay the intermediary for certain Fund-related activities,
including
those that are designed to make the intermediary more knowledgeable about
exchange traded products, such as the Fund, as well as for marketing, education
or other initiatives related to the sale or promotion of Fund shares. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment. Ask your salesperson or visit your financial intermediary’s website
for more information.
Emerge EMPWR Unified Sustainable
Equity ETF
Investment
Objective
The investment objective of
Emerge EMPWR Unified Sustainable Equity ETF (the Fund) is to seek long-term
growth of capital.
Fees and
Expenses of the Fund
The following table
describes the fees and expenses that you will incur if you buy, hold and sell
shares of the Fund. You may also incur other fees, such as usual and customary
brokerage commissions and other fees to financial intermediaries, which are not
reflected in the table and the Example that follows.
Annual
Fund Operating Expenses
(expenses that you pay each
year as a percentage of the value of your investment)
Management fees |
[ ]% |
Distribution and/or service (12b-1) fees |
None |
Other expenses1 |
[ ]% |
Total annual Fund operating
expenses |
[ ]% |
1.
Other expenses are based on estimated amounts for the current fiscal year.
Example
This Example is intended to
help you compare the cost of investing in the Fund with the cost of investing in
other funds. The Example assumes that you invest $10,000 in the Fund for the
time periods indicated and then sell all of your shares at the end of the
period. The Example also assumes that your investment has a 5% return each year
and that the Fund’s operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs, whether you
redeem or hold your shares, would be:
Portfolio Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable
account. These costs, which are not reflected in annual Fund operating expenses
or in the Example, affect the Fund’s performance.
Principal
Investment Strategies
Under normal market
conditions, the Fund invests at least 80% of its net assets, plus borrowings for
investment purposes, if any, in equity securities that, at the time of
investment, meet the environmental, social, and governance (ESG) criteria
established by Emerge Capital Management Inc. (Emerge or the Advisor).
Equity
securities include common stock (including real estate investment trusts),
preferred stock, securities convertible into common stock, depositary receipts,
or securities or other instruments whose price is linked to the value of common
stock.
The
Fund’s investments may include securities of U.S. and non-U.S. issuers,
including issuers located in emerging markets countries.
The
Fund may invest in the securities of issuers of all capitalization sizes.
The
Fund is non-diversified, which means it can invest a greater percentage of its
assets in a small group of issuers or any one issuer than a diversified fund
can.
The Fund is structured as a
multi-manager fund (meaning the Fund's assets are managed by multiple
sub-advisors) and the Fund’s investment manager, Emerge, has overall
responsibility for the Fund’s investments. The Fund’s
multi-manager structure
combines a select set of Emerge’s EMPWR equity investment managers to produce a
portfolio consisting of the securities of the following individual strategies
employed by each sub-advisor: dividend yield, equity growth, global core, and
emerging markets.
The Advisor is responsible
for allocating and re-allocating the Fund’s assets among the sub-advisors and/or
any investment funds in which the Fund may invest and for cash management, and
for monitoring and assessing the performance of each sub-advisor. The Advisor
uses asset allocation and macro-economic factors to determine the optimal
combination of strategies. Each sub-advisor acts independently from the others
and uses its own distinct investment style and investment process in
recommending securities to buy and sell.
Emerge
considers ESG factors within its securities selection process for each equity
security for the Fund. Emerge assesses whether a company meets the Fund’s ESG
standards based on its proprietary ESG framework. Emerge uses ESG research,
ratings, and analytics from independent third-party data providers to screen
investments based on ESG criteria determined by Emerge. The Fund may hold
securities of issuers for which third-party data is not available. Where an
issuer has not been assigned a rating by the third-party data provider, Emerge’s
ESG analysis incorporates publicly available data. Emerge has the right to
change the third-party data providers that support its ESG framework at any
time. In determining whether an issuer meets Emerge’s ESG investment criteria,
Emerge considers: (i) negative screening criteria to eliminate certain types of
issuers in light of social and environmental considerations; and (ii)
governance-related risk ratings published by third party data providers,
including Sustainalytics, designed to measure the degree to which a company’s
economic value is at risk driven by the magnitude of a company’s unmanaged ESG
risks. [As of the date of this Prospectus,] Emerge applies a negative screen to
exclude companies for investment that derive 20% or more of their revenues from
biological and chemical weapons, thermal coal extraction, gambling, adult
entertainment, tobacco production, recreational cannabis and alcoholic
beverages. Emerge may modify the above list of negative screens at any time,
without prior shareholder approval or notice. ESG risk ratings data compiled by
third-party data providers forms the basis for Emerge’s governance-related risk
assessment and screening. Emerge may consider excluding, reducing or eliminating
exposure to issuers with high ESG risk ratings, as determined by one or more
third-party data providers.
In
attempting to meet its investment objective, the Fund may engage in active and
frequent trading of portfolio securities.
The Fund is an actively
managed exchange-traded fund (ETF) that does not seek to replicate the
performance of a specified index.
Principal
Risks
You could lose money by
investing in the Fund. ETF shares are not deposits or obligations of, or
guaranteed or endorsed by, any bank, and are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency of the
U.S. government. The Fund is subject to the principal risks noted below, any of
which may adversely affect the Fund’s net asset value (NAV), trading price,
yield, total return and ability to meet its investment objective. Unlike many
ETFs, the Fund is not an index-based ETF.
Market Risk. The market values of securities or
other investments owned by the Fund will go up or down, sometimes rapidly or
unpredictably. The market value of a security or other investment may be
impacted by economic, market, political, and issuer-specific conditions. Market
risk may affect a single issuer, industry, or sector of the economy, or it may
affect the market as a whole. Stock prices tend to go up and down more
dramatically than those of debt securities. A slower-growth or recessionary
economic environment could have an adverse effect on the prices of the various
stocks held by the Fund.
Events such as war; acts of terrorism; social
unrest; natural, environmental, or humanmade disasters, and the spread of
infectious illness or other public health threats can cause significant economic
impacts, including market closures and dislocations, extreme volatility,
liquidity constraints, and increased trading costs, that can significantly
impact the Fund and its investments. The full impact such events, including the
COVID-19 pandemic, is unpredictable and may adversely affect the Fund’s
performance. The effects of COVID-19 have impacted global economic activity
across many industries and may heighten other pre-existing political, social and
economic risks, locally or globally.
Multi-Manager
Risk. The Fund’s performance depends on the skill of the Advisor in
selecting, overseeing, and allocating Fund assets to the sub-advisors. The
sub-advisors’ investment styles may not always be complementary and the
sub-advisors may make decisions that conflict with each other. As a result, the
Fund's exposure to a given security, industry, sector or market capitalization
could be smaller or larger than if the Fund were managed by a
single adviser, which could adversely affect
the Fund's performance depending on the performance of those securities and the
overall market environment.
Foreign Securities Risk. The Fund's foreign
investments may be adversely affected by political, economic, and social
instability and volatility, changes in economic or taxation policies; difficulty
in enforcing obligations; lack of or ineffective government supervision and
regulation of securities and currency markets, trading systems, and brokers;
decreased liquidity and increased volatility; lack of or limited availability of
information, which can impede the Fund’s ability to evaluate such investments;
and trading restrictions and economic sanctions. The Fund’s foreign investments
may be subject to currency exchange rate fluctuations, which may cause the value
of securities denominated in such foreign currency (or other instruments through
which the Fund has exposure to foreign currencies) to decline in value. Foreign
investments also involve the risk of the possible seizure, nationalization or
expropriation of the issuer or foreign deposits (in which the Fund could lose
its entire investments in a certain market) and the possible adoption of foreign
governmental restrictions such as exchange controls. The risks of foreign
investments may be greater in developing or emerging market countries.
Emerging Markets Securities Risk. The Fund’s
investments in emerging markets are subject to the risks of foreign investing
generally, and have additional heightened risks due to a lack of established
legal, political, business, and social frameworks to support securities markets.
These risks include currency exchange rate volatility and increased potential
for currency devaluations; greater sensitivity to interest rate changes; higher
rates of inflation; lower trading volumes; pervasiveness of corruption and
fraud; less government supervision and regulation; and more governmental
limitations on foreign investment than more developed markets. Such countries’
economies may be more dependent on relatively few industries or investors that
may be highly vulnerable to local and global changes. Companies in emerging
market countries generally may be subject to less stringent regulatory,
disclosure, financial reporting, accounting, auditing and recordkeeping
standards than companies in more developed countries. As a result, information
about such companies may be less available and reliable, which can impede the
Fund’s ability to evaluate such companies. Securities law and the enforcement of
systems of taxation in many emerging market countries may change quickly and
unpredictably, and the ability to bring and enforce actions or to obtain
information needed to pursue or enforce such actions may be limited and
shareholder claims may be difficult or impossible to pursue. In addition, the
ability of foreign entities to participate in privatization programs of certain
developing or emerging market countries may be limited by local law. Investments
in emerging markets securities may be subject to additional transaction costs,
delays in settlement procedures, and unexpected market closures.
Large Capitalization Company Risk. Large
capitalization companies may fall out of favor with investors based on market
and economic conditions. In addition, larger companies may not be able to attain
the high growth rates of successful smaller companies and may be less capable of
responding quickly to competitive challenges and industry changes.
Small- and Mid-Capitalization Companies Risk.
Securities issued by small- and mid-capitalization companies may be more
volatile in price and less liquid than those of larger companies and may involve
more risks. Such risks may include greater sensitivity to changing economic
conditions; less certain growth prospects and fewer funds for growth and development;
less experienced management; and limited or less developed product lines and
markets. Because small- and mid-capitalization companies typically reinvest a
high proportion of their earnings in their businesses, they may not pay
dividends for some time, particularly if they are newer companies.
Dividend Paying Stock Risk. Issuers that have
paid regular dividends or distributions to shareholders may not continue to do
so, or may not continue to do so at the same level, in the future. If the
dividends or distributions received by the Fund decreases, the Fund may have
less income to distribute to the Fund’s shareholders. Securities that pay
dividends, as a group, can fall out of favor with the market, causing such
securities to underperform securities that do not pay dividends. Depending upon
market conditions and political and legislative responses to such conditions,
dividend-paying securities that meet the Fund’s investment criteria may not be
widely available and/or may be highly concentrated in only a few market sectors.
In addition, common stocks with higher dividend yields can be sensitive to
interest rate movements: when interest rates rise, the prices of these stocks
may tend to fall. Conversely, the prices of higher yielding stocks may tend to
rise when interest rates fall. Interest rate changes can be sudden and
unpredictable and are influenced by a number of factors including government
policy, monetary policy, inflation expectations, perceptions of risk, and supply
and demand of bonds.
Geographic Focus Risk. The Fund may from time
to time have a substantial amount of its assets invested in securities of
issuers located in a single country or a limited number of countries. Adverse
economic, political or
social conditions in those
countries may therefore have a significant negative impact on the Fund’s
investment performance. This risk is heightened if the Fund focuses its
investments in emerging market countries or developed countries prone to periods
of instability.
Sector Focus Risk To the extent that the Fund
focuses on particular industries, sectors or types of investment from time to
time, the Fund may be subject to greater risks of adverse developments in such
areas of focus than a fund that invests in a wider variety of industries,
sectors or investments.
Depositary Receipts Risk. Depositary receipts
are subject to many of the same risks as direct investments in the underlying
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Fund may therefore receive less timely information or have
less control than if it invested directly in the foreign issuer.
Thematic Investing Risk. The Fund’s investment
strategies incorporate the identification of thematic investment opportunities
and the Fund’s performance may be negatively impacted if a sub-advisor does not
correctly identify such opportunities or if the theme develops in an unexpected
manner. Sales growth and acceleration for a particular economic theme may not
continue, and the business models employed by the companies focused on a
particular economic theme may not prove to be successful. Securities selected
pursuant to an investment theme may be impacted by factors unrelated to the
theme, particularly with respect to companies that may have multiple lines of
business, and may underperform. Adverse developments and risks unrelated to the
investment theme affecting companies in which the Fund invests may negatively
impact the Fund’s performance. The customers and/or suppliers of thematic
companies may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on thematic companies.
The Fund’s thematic
investments will also subject the Fund to growth style investing risks. Growth
stock prices reflect projections of future earnings or revenues, and can,
therefore, fall dramatically if the company fails to meet those projections.
Growth stocks may be more expensive relative to their current earnings or assets
compared to value or other stocks, and if earnings growth expectations moderate,
their valuations may return to more typical norms, causing their stock prices to
fall. Prices of these companies’ securities may be more volatile than other
securities, particularly over the short term.
Active Trading Risk. Active trading of
portfolio securities may result in added expenses, a lower return and increased
tax liability.
ESG Risk. Because the Fund evaluates ESG
factors to assess and exclude certain investments for non-financial reasons, the
Fund may forego some market opportunities available to funds that do not use
these ESG factors. Information used by the Fund to evaluate ESG factors,
including data provided by third-party vendors, may not be readily available,
complete or accurate, and may vary across providers and issuers and within
industries, which could negatively impact the Fund’s ability to apply its
methodology and in turn could negatively impact the Fund’s performance.
Currently, there is a lack of common industry standards relating to the
development and application of ESG criteria which may make it difficult to
compare the Fund’s principal investment strategies with the investment
strategies of other funds that apply certain ESG criteria or that use a
different third-party vendor for ESG data. In addition, the Fund’s assessment of
a company may differ from that of other funds or an investor. As a result, the
companies deemed eligible for inclusion in the Fund’s portfolio may not reflect
the beliefs or values of any particular investor and may not be deemed to
exhibit positive or favorable ESG characteristics if different metrics were used
to evaluate them. Regulatory changes or interpretations regarding the
definitions and/or use of ESG criteria could have a material adverse effect on
the Fund’s ability to invest in accordance with its investment policies and/or
achieve its investment objective.
Non-Diversification Risk. The Fund is
non-diversified and can invest a greater portion of its assets in the
obligations or securities of a small number of issuers or any single issuer than
a diversified fund can. A change
in the value of one or a few issuers’
securities will therefore affect the value of the Fund more than if it was a
diversified fund.
Management Risk. The Fund is subject to
management risk because it is an actively managed ETF. The Fund’s Advisor and
sub-advisors apply investment techniques and risk analyses in making investment
decisions for the Fund, but there can be no guarantee that these decisions will
produce the desired results.
Market Trading Risk. The Fund faces numerous
market trading risks, including the potential lack of an active market for Fund
shares, losses from trading in secondary markets, periods of high volatility and
disruption in the creation/redemption process of the Fund. Any of these factors,
among others, may lead to the Fund’s shares trading at a premium or discount to
NAV. Thus, you may pay more (or less) than NAV when you buy shares of the Fund
in the secondary market, and you may receive less (or more) than NAV when you
sell those shares in the secondary market. The investment manager cannot predict
whether shares will trade above (premium), below (discount) or at NAV.
International Closed Market Trading Risk. To
the extent that the underlying securities held by the Fund trade on an exchange
that is closed when the securities exchange on which the Fund shares list and
trade is open, there may be market uncertainty about the stale security pricing
(i.e., the last quote from its closed foreign market) resulting in premiums or
discounts to NAV that may be greater than those experienced by other ETFs.
Authorized Participant Concentration Risk. Only
an authorized participant (Authorized Participant) may engage in creation or
redemption transactions directly with the Fund. The Fund has a limited number of
institutions that act as Authorized Participants. To the extent that these
institutions exit the business or are unable to proceed with creation and/or
redemption orders with respect to the Fund and no other Authorized Participant
is able to step forward to create or redeem Creation Units (as defined below),
Fund shares may trade at a discount to NAV and possibly face trading halts
and/or delisting. This risk may be more pronounced in volatile markets,
potentially where there are significant redemptions in ETFs generally.
New Fund Risk. The Fund is a new fund, with a
limited or no operating history and a small asset base. There can be no
assurance that the Fund will grow to or maintain a viable size. Due to the
Fund's small asset base, certain of the Fund's expenses and its portfolio
transaction costs may be higher than those of a fund with a larger asset base.
To the extent that the Fund does not grow to or maintain a viable size, it may
be liquidated, and the expenses, timing and tax consequences of such liquidation
may not be favorable to some shareholders.
Small Fund Risk. When the Fund’s size is small,
the Fund may experience low trading volume and wide bid/ask spreads. In
addition, the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange.
Large Shareholder Risk. Certain shareholders,
including other funds or accounts advised by the Advisor or an affiliate of the
Advisor, may from time to time own a substantial amount of the Fund’s shares. In
addition, a third-party investor, the Advisor or an affiliate of the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Fund and hold its investment for a limited period of time solely to facilitate
commencement of the Fund or to facilitate the Fund’s achieving a specified size
or scale. There can be no assurance that any large shareholder would not redeem
its investment, that the size of the Fund would be maintained at such levels or
that the Fund would continue to meet applicable listing requirements.
Redemptions by large shareholders could have a significant negative impact on
the Fund. In addition, transactions by large shareholders may account for a
large percentage of the trading volume on the listing exchange and may,
therefore, have a material upward or downward effect on the market price of the
shares.
Performance
Because the Fund does not
have a full calendar year of performance, annual total return information is not
available and therefore is not presented. You can obtain updated performance
information at emergecm.com or by calling 1-877-8EMERGE. The Fund’s past
performance (before and after taxes) is not necessarily an indication of how the
Fund will perform in the future.
Investment
Manager
Emerge Capital Management
Inc.
Sub-Advisors
Catherine Avery Investment Management LLC d/b/a
CAIM LLC (CAIM LLC)
Channing Global Advisors,
LLC (Channing Global)
Grace Capital
Zevin Asset Management, LLC
(Zevin)
Portfolio
Managers
Catherine Maniscalco
Avery
Founder and President of CAIM LLC and portfolio manager
of the Fund since inception (2022).
Catherine
Faddis
President and Chief
Executive Officer of Grace Capital and portfolio manager of the Fund since
inception (2022).
Joséphine
Jiménez
Chief Investment Officer,
Portfolio Manager, Analyst, and Founder of Channing Global and portfolio manager
of the Fund since inception (2022).
Jane
Lou Li
Portfolio Manager and
Senior Equity Analyst of Zevin and portfolio manager of the Fund since inception
(2022).
Lisa
Lake Langley
Chief Executive Officer,
President, and Founder of Emerge and portfolio manager of the Fund since
inception (2022).
Mses. Avery, Faddis,
Jimenez, and Li provide recommendations to Ms. Langley with respect to their
allocated portion of the Fund. Ms. Langley is responsible for selecting brokers
and placing the Fund’s trades, and implementing the Fund’s ESG strategy.
Purchase
and Sale of Fund Shares
The Fund is an ETF. Fund
shares may only be purchased and sold on a national securities exchange through
a broker-dealer. The price of Fund shares is based on market price, and because
ETF shares trade at market prices rather than NAV, shares may trade at a price
greater than NAV (a premium) or less than NAV (a discount). [The Fund will
generally issue or redeem Creation Units in exchange for a basket of securities
(and an amount of cash) that the Fund specifies each day.]
An investor may incur costs
attributable to the difference between the highest price a buyer is willing to
pay to purchase shares of the Fund (bid) and the lowest price a seller is
willing to accept for shares of the Fund (ask) when buying or selling shares in
the secondary market (the “bid-ask spread”). Recent information, including
information on the Fund’s NAV, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at emergecm.com.
Taxes
The Fund’s distributions
are generally taxable to you as ordinary income, capital gains, or some
combination of both, unless you are investing through a tax- deferred
arrangement, such as a 401(k) plan or an individual retirement account, in which
case your distributions would generally be taxed when withdrawn from the
tax-deferred account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you
purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), the investment manager or other related companies
may pay the intermediary for certain Fund-related activities, including those
that are designed to make the intermediary more knowledgeable about exchange
traded products, such as the Fund, as well as for marketing, education or other
initiatives related to the sale or promotion of Fund shares. These payments may
create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
Fund Details
Emerge EMPWR Sustainable Dividend
Equity ETF
Investment
Objective
The Fund’s investment
objective is to seek long-term total return and current income. The Fund’s
investment objective is non-fundamental, which means it may be changed by the
board of trustees without shareholder approval. Shareholders will be given at
least 60 days’ advance notice of any change to the Fund’s investment
objective.
Principal
Investment Policies and Practices
Under normal market
conditions, the Fund invests at least 80% of its net assets, plus borrowings for
investment purposes, if any, in dividend-paying equity securities that, at the
time of investment, meet the ESG criteria established by Emerge Capital
Management Inc. (Emerge or the Advisor). Shareholders will be given at least 60
days’ advance notice of any change to the Fund’s 80% policy.
The Fund invests
predominantly in U.S. equity securities An equity security, or stock, represents
a proportionate share, or the right to acquire a proportionate share, of the
ownership of a company; an equity security’s value is based on the success of
the company’s business and the value of its assets, as well as general market
conditions. Equity securities include common stock (including real estate
investment trusts), preferred stock, securities convertible into common stock,
American Depositary Receipts, or securities or other instruments whose price is
linked to the value of common stock. Depositary receipts are certificates
typically issued by a bank or trust company that give their holders the right to
receive securities issued by a foreign or domestic company.
The
Fund may invest in the securities of issuers of all capitalization sizes, but
intends to invest primarily in in securities of large capitalization
issuers.
The
Fund is non-diversified, which means it can invest a greater percentage of its
assets in a small group of issuers or any one issuer than a diversified fund
can.
In selecting companies,
Catherine Avery Investment Management LLC d/b/a CAIM LLC (CAIM LLC or the
Sub-Advisor) applies a “bottom-up” research process to seek to invest in equity
securities that the Sub-Advisor believes have the potential to increase
dividends in the future. The Sub-Advisor uses a proprietary screening process to
identify companies that the Sub-Advisor believes have favorable balance sheets
and above average levels of cash flow per share, and pay a dividend and
demonstrate the ability to increase that dividend over time. The Sub-Advisor
generally recommends buying securities that meet the above criteria when the
Sub-Advisor believes they are trading at a discount to their future value. The
Sub-Advisor may recommend selling securities for several reasons, including when
the Sub-Advisor believes the security is overvalued or management is unable to
achieve its goals.
Emerge
considers ESG factors within its securities selection process for each equity
security for the Fund. Emerge assesses whether a company meets the Fund’s ESG
standards based on its proprietary ESG framework. Emerge uses ESG research,
ratings, and analytics from independent third-party data providers to screen
investments based on ESG criteria determined by Emerge. The Fund may hold
securities of issuers for which third-party data is not available. Where an
issuer has not been assigned a rating by the third-party data provider, Emerge’s
ESG analysis incorporates publicly available data. Emerge has the right to
change the third-party data providers that support its ESG framework at any
time. In determining whether an issuer meets Emerge’s ESG investment criteria,
Emerge considers: (i) negative screening criteria to eliminate certain types of
issuers in light of social and environmental considerations; and (ii)
governance-related risk ratings published by third party data providers,
including Sustainalytics, designed to measure the degree to which a company’s
economic value is at risk driven by the magnitude of a company’s unmanaged ESG
risks. [As of the date of this Prospectus,] Emerge applies a negative screen to
exclude companies for investment that derive 20% or more of their revenues from
biological and chemical weapons, thermal coal extraction, gambling, adult
entertainment, tobacco production, recreational cannabis and alcoholic
beverages. Emerge may modify the above list of negative screens at any time,
without prior shareholder approval or notice. ESG risk ratings data compiled by
third-party data providers forms the basis for Emerge’s governance-related risk
assessment and screening. Emerge may consider excluding, reducing or
eliminating
exposure to issuers with high ESG risk ratings, as determined by one or more
third-party data providers.
The
Fund is an actively managed ETF and, thus, does not seek to replicate the
performance of a specified index. Accordingly, the Advisor has discretion on a
daily basis to manage the Fund’s portfolio in accordance with the Fund’s
investment objective.
When
the Advisor or Sub-Advisor believes market or economic conditions are
unfavorable for investors, the Advisor may invest up to 100% of the Fund’s
assets in a temporary defensive manner by holding all or a substantial portion
of its assets in cash, cash equivalents or other high quality short-term
investments. Temporary defensive investments generally may include short-term
U.S. government securities, high grade commercial paper, bank obligations,
repurchase agreements, money market fund shares (including shares of an
affiliated money market fund), and other money market instruments. The Fund also
may invest in these types of securities or hold cash while looking for suitable
investment opportunities, to maintain liquidity. In these circumstances, the
Fund may be unable to achieve its investment goal.
The
Fund may invest securities of other investment companies, including ETFs.
The
Fund’s investments in the types of securities and other investments described in
this prospectus vary from time to time, and, at any time, the Fund may not be
invested in all of the types of securities and other investments described in
this prospectus. The Fund may also invest in securities and other investments
not described in this prospectus. More detailed information about the Fund and
its policies and risks can be found in the Fund’s SAI.
Principal
Risks
Market Risk. The market values of securities or
other investments owned by the Fund will go up or down, sometimes rapidly or
unpredictably. The Fund’s investments may decline in value due to factors
affecting individual issuers (such as the results of supply and demand), or
sectors within the securities markets. The value of a security or other
investment also may go up or down due to general market conditions that are not
specifically related to a particular issuer, such as real or perceived adverse
economic conditions, changes in interest rates or exchange rates, or adverse
investor sentiment generally. Global economies and financial markets are
becoming increasingly interconnected, and conditions and events in one country,
region or financial market may adversely impact issuers in a different country,
region or financial market. These risks may be magnified if certain events or
developments adversely interrupt the global supply chain, and could affect
companies worldwide.
During a general downturn in
the securities markets, multiple asset classes may decline in value. When
markets perform well, there can be no assurance that securities or other
investments held by the Fund will participate in or otherwise benefit from the
advance. Stock prices tend to go up and down more dramatically than those of
debt securities. A slower-growth or recessionary economic environment could have
an adverse effect on the prices of the various stocks held by the Fund.
Events such as war; acts of
terrorism; social unrest; natural, environmental, or humanmade disasters, and
the spread of infectious illness or other public health threats can cause
significant economic impacts, including market closures and dislocations,
extreme volatility, liquidity constraints, and increased trading costs, that can
significantly impact the Fund and its investments. The full impact such events,
including the COVID-19 pandemic, is unpredictable, may result in a high degree of
uncertainty for potentially extended periods of time, and may adversely affect
the Fund’s performance. Efforts to contain the spread of COVID-19 have resulted
in global travel restrictions and disruptions of healthcare systems, business
operations and supply chains, layoffs, reduced consumer demand, defaults and
credit ratings downgrades, and other significant economic impacts. The effects
of COVID-19 have impacted global economic activity across many industries and
may heighten other pre-existing political, social and economic risks, locally or
globally.
Dividend Paying Stock Risk. Issuers that have
paid regular dividends or distributions to shareholders may not continue to do
so, or may not continue to do so at the same level, in the future. If the
dividends or distributions received by the Fund decreases, the Fund may have
less income to distribute to the Fund’s shareholders. Securities that pay
dividends, as a group, can fall out of favor with the market, causing such
securities to underperform securities that do not pay dividends. Depending upon
market conditions and political and legislative responses to such conditions,
dividend-paying securities that meet the Fund’s investment criteria may not be
widely available and/or may be highly concentrated in only a few market sectors.
In addition, common stocks with higher dividend yields can be sensitive to
interest rate movements: when interest rates rise, the prices of these stocks
may tend to fall. Conversely, the prices of higher yielding stocks may tend to
rise when interest rates fall.
Interest rate changes can
be sudden and unpredictable and are influenced by a number of factors including
government policy, monetary policy, inflation expectations, perceptions of risk,
and supply and demand of bonds.
Large Capitalization Company Risk. Large
capitalization companies may fall out of favor with investors based on market
and economic conditions. In addition, larger companies may not be able to attain
the high growth rates of successful smaller companies and may be less capable of
responding quickly to competitive challenges and industry changes.
Small- and Mid-Capitalization Companies Risk.
Securities issued by small- and mid-capitalization companies may be more
volatile in price and less liquid than those of larger companies and may involve
more risks. Such risks may include greater sensitivity to changing economic
conditions; less certain growth prospects and fewer funds for growth and development;
less experienced management; and limited or less developed product lines and
markets. Because small- and mid-capitalization companies typically reinvest a
high proportion of their earnings in their businesses, they may not pay
dividends for some time, particularly if they are newer companies.
ESG Risk. Because the Fund evaluates ESG
factors to assess and exclude certain investments for non-financial reasons, the
Fund may forego some market opportunities available to funds that do not use
these ESG factors. Information used by the Fund to evaluate ESG factors,
including data provided by third-party vendors, may not be readily available,
complete or accurate, and may vary across providers and issuers and within
industries, which could negatively impact the Fund’s ability to apply its
methodology and in turn could negatively impact the Fund’s performance.
Currently, there is a lack of common industry standards relating to the
development and application of ESG criteria which may make it difficult to
compare the Fund’s principal investment strategies with the investment
strategies of other funds that apply certain ESG criteria or that use a
different third-party vendor for ESG data. In addition, the Fund’s assessment of
a company may differ from that of other funds or an investor. As a result, the
companies deemed eligible for inclusion in the Fund’s portfolio may not reflect
the beliefs or values of any particular investor and may not be deemed to
exhibit positive or favorable ESG characteristics if different metrics were used
to evaluate them. Regulatory changes or interpretations regarding the
definitions and/or use of ESG criteria could have a material adverse effect on
the Fund’s ability to invest in accordance with its investment policies and/or
achieve its investment objective.
Investments in Underlying Funds Risk. To the
extent the Fund invests in shares of other investment companies, including
mutual funds and ETFs, the Fund bears its proportionate share of the underlying
fund’s fees and expenses, such as investment advisory fees and other operating
expenses that are separate from those of the Fund. The Fund is also subject to
the risks associated with the securities in which the underlying fund
invests.
Non-Diversification Risk. The Fund is
non-diversified and can invest a greater portion of its assets in the
obligations or securities of a small number of issuers or any single issuer than
a diversified fund can. A change in the value of one or a few issuers’
securities will therefore affect the value of the Fund more than if it was a
diversified fund.
Management Risk. The Fund is actively
managed and could experience losses if the Advisor and Sub-Advisor’s judgment
about markets, interest rates or the attractiveness, relative values, liquidity,
or potential appreciation of particular investments made for the Fund’s
portfolio prove to be incorrect. There can be no guarantee that these techniques
or the Advisor and Sub-Advisor’s investment decisions will produce the desired
results. Additionally, legislative, regulatory, or tax developments may affect
the investment techniques available to the Advisor or Sub-Advisor in connection
with managing the Fund and may also adversely affect the ability of the Fund to
achieve its investment goal.
Market
Trading Risks.
Absence of active market. Although shares of
the Fund are listed for trading on one or more stock exchanges, there can be no
assurance that an active trading market for such shares will develop or be
maintained. There are no obligations of market makers to make a market in the
Fund’s shares or of an Authorized Participant to submit purchase or redemption
orders for Creation Units. Decisions by market makers or Authorized Participants
to reduce their role or step away from these activities in times of market
stress could inhibit the effectiveness of the arbitrage process in maintaining
the relationship between the underlying value of the Fund’s portfolio securities
and the Fund’s market price. Additionally, in stressed market conditions, the
market for the Fund’s shares may become less liquid in response to deteriorating
liquidity in the markets for the Fund’s portfolio holdings, which may cause a
significant variance in the market price of the Fund’s shares and their
underlying value. The absence of an
active market for the
Fund’s shares may contribute
to the Fund’s shares trading at a premium or discount to its NAV and may
contribute to greater than normal intraday bid/ask spreads.
Secondary listings. The Fund’s shares may be
listed or traded on U.S. and non-U.S. stock exchanges other than the U.S. stock
exchange where the Fund’s primary listing is maintained, and may otherwise be
made available to non-U.S. investors through funds or structured investment
vehicles similar to depositary receipts.
The Fund’s shares may be less
actively traded in certain markets than in others, and investors are subject to
the execution and settlement risks and market standards of the market where they
or their broker direct their trades for execution. Certain information available
to investors who trade Fund shares on a U.S. stock exchange during regular U.S.
market hours may not be available to investors who trade in other markets, which
may result in secondary market prices in such markets being less
efficient.
Secondary market trading. Shares of the Fund
may trade in the secondary market at times when the Fund does not accept orders
to purchase or redeem shares. At such times, shares may trade in the secondary
market with more significant premiums or discounts than might be experienced at
times when the Fund accepts purchase and redemption orders.
There can be no assurance
that the Fund’s shares will continue to trade on a stock exchange or in any
market or that the Fund’s shares will continue to meet the requirements for
listing or trading on any exchange or in any market, or that such requirements
will remain unchanged. Secondary market trading in Fund shares may be halted by
a stock exchange because of market conditions or other reasons. In addition,
trading in Fund shares on a stock exchange or in any market may be subject to
trading halts caused by extraordinary market volatility pursuant to “circuit
breaker” rules on the stock exchange or market.
During a “flash crash,” the
market prices of the Fund’s shares may decline suddenly and significantly. Such
a decline may not reflect the performance of the portfolio securities held by
the Fund. Flash crashes may cause Authorized Participants and other market
makers to limit or cease trading in the Fund’s shares for temporary or longer
periods. Shareholders could suffer significant losses to the extent that they
sell shares at these temporarily low market prices.
Shares of the Fund, similar
to shares of other issuers listed on a stock exchange, may be sold short and are
therefore subject to the risk of increased volatility associated with short
selling.
Premium/Discount. Shares of the Fund may trade
at prices other than NAV. Shares of the Fund trade on stock exchanges at prices
at, above or below their most recent NAV. The NAV of the Fund is calculated at
the end of each business day and fluctuates with changes in the market value of
the Fund’s holdings since the most recent calculation. The trading prices of the
Fund’s shares fluctuate continuously throughout trading hours based on market
supply and demand rather than NAV. As a result, the trading prices of the Fund’s
shares may deviate significantly from NAV during periods of market
volatility.
Any of these factors, among
others, may lead to the Fund’s shares trading at a premium or discount to NAV.
Thus, you may pay more (or less) than NAV when you buy shares of the Fund in the
secondary market, and you may receive less (or more) than NAV when you sell
those shares in the secondary market. The investment manager cannot predict
whether shares will trade above (premium), below (discount) or at NAV. Because
shares can be created and redeemed in Creation Units at NAV, the investment
manager believes that large discounts or premiums to the NAV of the Fund are not
likely to be sustained over the long-term. While the creation/redemption feature
is designed to make it likely that the Fund’s shares normally will trade on
stock exchanges at prices close to the Fund’s next calculated NAV, exchange
prices are not expected to correlate exactly with the Fund’s NAV due to timing
reasons as well as market supply and demand factors. In addition, disruptions to
creations and redemptions or extreme market volatility may result in trading
prices for shares of the Fund that differ significantly from its NAV.
Cost of buying or selling Fund shares. Buying
or selling Fund shares on an exchange involves two types of costs that apply to
all securities transactions. When buying or selling shares of the Fund through a
broker, you will likely incur a brokerage commission or other charges imposed by
brokers as determined by that broker. In addition, you may incur the cost of the
“spread,” that is, the difference between what investors are willing to pay for
Fund shares (the “bid” price) and the price at which they are willing to sell
Fund shares (the “ask” price). Because of the costs inherent in buying or
selling Fund shares, frequent
trading may detract
significantly from investment results and an investment in Fund shares may not
be advisable for investors who anticipate regularly making small
investments.
Authorized Participant Concentration Risk. Only
an Authorized Participant may engage in creation or redemption transactions
directly with the Fund. The Fund has a limited number of institutions that act
as Authorized Participants. To the extent that these institutions exit the
business or are unable to proceed with creation and/or redemption orders with
respect to the Fund and no other Authorized Participant is able to step forward
to create or redeem Creation Units (as defined below), Fund shares may trade at
a discount to NAV and possibly face trading halts and/or delisting. This risk
may be more pronounced in volatile markets, potentially where there are
significant redemptions in ETFs generally.
New Fund Risk. The Fund is a new fund, with a
limited or no operating history and a small asset base. There can be no
assurance that the Fund will grow to or maintain a viable size. Due to the
Fund's small asset base, certain of the Fund's expenses and its portfolio
transaction costs may be higher than those of a fund with a larger asset base.
To the extent that the Fund does not grow to or maintain a viable size, it may
be liquidated, and the expenses, timing and tax consequences of such liquidation
may not be favorable to some shareholders.
Small Fund Risk. When the Fund’s size is
small, the Fund may experience low trading volume and wide bid/ask spreads. In
addition, the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. If the Fund were to be required to
delist from the listing exchange, the value of the Fund may rapidly decline and
performance may be negatively impacted. In addition, any resulting liquidation
of the Fund could cause the Fund to incur elevated transaction costs for the
Fund and negative tax consequences for its shareholders.
Large Shareholder Risk. Certain large
shareholders, including other funds or accounts advised by the Advisor or an
affiliate of the Advisor, may from time to time own a substantial amount of the
Fund’s shares. In addition, a third party investor, the Advisor or an affiliate
of the Advisor, an authorized participant, a lead market maker, or another
entity may invest in the Fund and hold its investment for a limited period of
time solely to facilitate commencement of the Fund or to facilitate the Fund’s
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment. Dispositions of a large number of
shares by these shareholders may adversely affect the Fund’s liquidity and net
assets to the extent such transactions are executed directly with the Fund in
the form of redemptions through an authorized participant, rather than executed
in the secondary market. These redemptions may also force the Fund to sell
portfolio securities when it might not otherwise do so, which may negatively
impact the Fund’s NAV and increase the Fund’s brokerage costs. To the extent
these large shareholders transact in shares on the secondary market, such
transactions may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Emerge EMPWR Sustainable Select
Growth Equity ETF
Investment
Objective
The Fund’s investment
objective is to seek long-term growth of capital. The Fund’s investment
objective is non-fundamental, which means it may be changed by the board of
trustees without shareholder approval. Shareholders will be given at least 60
days’ advance notice of any change to the Fund’s investment objective.
Principal
Investment Strategies
Under normal market
conditions, the Fund invests at least 80% of its net assets, plus borrowings for
investment purposes, if any, in equity securities that, at the time of
investment, meet the ESG criteria established by Emerge Capital Management Inc.
(Emerge or the Advisor). Shareholders will be given at least 60 days’ advance
notice of any change to the Fund’s 80% policy.
The
Fund invests predominantly in equity securities. An equity security, or stock,
represents a proportionate share, or the right to acquire a proportionate share,
of the ownership of a company; an equity security’s value is based on the
success of the company’s business and the value of its assets, as well as
general market conditions. Equity securities include common stock (including
real estate investment trusts), preferred stock, securities convertible into
common stock, American Depositary Receipts, or securities or other instruments
whose price is linked to the value of common stock. Depositary receipts are
certificates typically issued by a bank or trust company that give their holders
the right to receive securities issued by a foreign or domestic company. The
Fund may invest in the securities of issuers of all capitalization sizes.
The
Fund is non-diversified, which means it can invest a greater percentage of its
assets in a small group of issuers or any one issuer than a diversified fund
can.
In selecting companies,
Grace Capital (the Sub-Advisor) seeks to invest in equity securities that the
Sub-Advisor believes have the potential for earnings or revenue growth,
including companies the Sub-Advisor believes has an ability to pay high
dividends. The Sub-Advisor employs a “bottom-up” investment approach that seeks
to identify companies that the Sub-Advisor believes have long-term positive
fundamentals trading at a discount to fair value based on the Sub-Advisor’s
proprietary discounted cash flow valuation models. The Sub-Advisor’s strategy
primarily focuses on identifying issuers that they believe have histories of
steady revenue growth, consistent cash flow profitability, and earnings quality.
The Sub-Advisor may recommend selling securities for several reasons, including
when the Sub-Advisor believes the security is overvalued.
Emerge considers ESG
factors within its securities selection process for each equity security for the
Fund. Emerge assesses whether a company meets the Fund’s ESG standards based on
its proprietary ESG framework. Emerge uses ESG research, ratings, and analytics
from independent third-party data providers to screen investments based on ESG
criteria determined by Emerge. The Fund may hold securities of issuers for which
third-party data is not available. Where an issuer has not been assigned a
rating by the third-party data provider, Emerge’s ESG analysis incorporates
publicly available data. Emerge has the right to change the third-party data
providers that support its ESG framework at any time. In determining whether an
issuer meets Emerge’s ESG investment criteria, Emerge considers: (i) negative
screening criteria to eliminate certain types of issuers in light of social and
environmental considerations; and (ii) governance-related risk ratings published
by third party data providers, including Sustainalytics, designed to measure the
degree to which a company’s economic value is at risk driven by the magnitude of
a company’s unmanaged ESG risks. [As of the date of this Prospectus,] Emerge
applies a negative screen to exclude companies for investment that derive 20% or
more of their revenues from biological and chemical weapons, thermal coal
extraction, gambling, adult entertainment, tobacco production, recreational
cannabis and alcoholic beverages. Emerge may modify the above list of negative
screens at any time, without prior shareholder approval or notice. ESG risk
ratings data compiled by third-party data providers forms the basis for Emerge’s
governance-related risk assessment and screening. Emerge may consider excluding,
reducing or eliminating exposure to issuers with high ESG risk ratings, as
determined by one or more third-party data providers.
The Fund is an actively
managed exchange-traded fund (ETF) that does not seek to replicate the
performance of a specified index. Accordingly, the Advisor has discretion on
a daily basis to manage the Fund’s portfolio in accordance with the Fund’s
investment goal.
When the Advisor or
Sub-Advisor believes market or economic conditions are unfavorable for
investors, the Advisor may invest up to 100% of the Fund’s assets in a temporary
defensive manner by holding all or a
substantial portion of its
assets in cash, cash equivalents or other high quality short-term investments.
Temporary defensive investments generally may include short-term U.S. government
securities, high grade commercial paper, bank obligations, repurchase
agreements, money market fund shares (including shares of an affiliated money
market fund), and other money market instruments. The Fund also may invest in
these types of securities or hold cash while looking for suitable investment
opportunities, to maintain liquidity. In these circumstances, the Fund may be
unable to achieve its investment goal.
The Fund may invest
securities of other investment companies, including ETFs.
The Fund’s investments in
the types of securities and other investments described in this prospectus vary
from time to time, and, at any time, the Fund may not be invested in all of the
types of securities and other investments described in this prospectus. The Fund
may also invest in securities and other investments not described in this
prospectus. More detailed information about the Fund and its policies and risks
can be found in the Fund’s SAI.
Principal
Risks
Market Risk. The market values of securities or
other investments owned by the Fund will go up or down, sometimes rapidly or
unpredictably. The Fund’s investments may decline in value due to factors
affecting individual issuers (such as the results of supply and demand), or
sectors within the securities markets. The value of a security or other
investment also may go up or down due to general market conditions that are not
specifically related to a particular issuer, such as real or perceived adverse
economic conditions, changes in interest rates or exchange rates, or adverse
investor sentiment generally. Global economies and financial markets are
becoming increasingly interconnected, and conditions and events in one country,
region or financial market may adversely impact issuers in a different country,
region or financial market. These risks may be magnified if certain events or
developments adversely interrupt the global supply chain, and could affect
companies worldwide.
During a general downturn
in the securities markets, multiple asset classes may decline in value. When
markets perform well, there can be no assurance that securities or other
investments held by the Fund will participate in or otherwise benefit from the
advance. Stock prices tend to go up and down more dramatically than those of
debt securities. A slower-growth or recessionary economic environment could have
an adverse effect on the prices of the various stocks held by the Fund.
Events such as war; acts of
terrorism; social unrest; natural, environmental, or humanmade disasters, and
the spread of infectious illness or other public health threats can cause
significant economic impacts, including market closures and dislocations,
extreme volatility, liquidity constraints, and increased trading costs, that can
significantly impact the Fund and its investments. The full impact such events,
including the COVID-19 pandemic, is unpredictable, may result in a high degree of
uncertainty for potentially extended periods of time, and may adversely affect
the Fund’s performance. Efforts to contain the spread of COVID-19 have resulted
in global travel restrictions and disruptions of healthcare systems, business
operations and supply chains, layoffs, reduced consumer demand, defaults and
credit ratings downgrades, and other significant economic impacts. The effects
of COVID-19 have impacted global economic activity across many industries and
may heighten other pre-existing political, social and economic risks, locally or
globally.
Growth Investing Risk. Growth stocks
typically trade at higher multiples of current earnings than other stocks
because of their growth potential, which may or may not be
realized. Investments in growth stocks may be more volatile than
other investments and/or the overall stock market because market prices of
growth stocks are highly sensitive to future earnings expectations. At times
when it appears that these expectations may not be met, prices of growth stocks
typically fall. Different investment styles (e.g., “growth” or “value” style
investing) tend to shift in and out of favor depending upon market and economic
conditions and investor sentiment. The Fund may outperform or underperform other
funds that invest in similar asset classes but employ different investment
styles.
Dividend Paying Stock Risk. Issuers that have
paid regular dividends or distributions to shareholders may not continue to do
so, or may not continue to do so at the same level, in the future. If the
dividends or distributions received by the Fund decreases, the Fund may have
less income to distribute to the Fund’s shareholders. Securities that pay
dividends, as a group, can fall out of favor with the market, causing such
securities to underperform securities that do not pay dividends. Depending upon
market conditions and political and legislative responses to such conditions,
dividend-paying securities that meet the Fund’s investment criteria may not be
widely available and/or may be highly concentrated in only a few market sectors.
In addition, common stocks with higher dividend yields can be sensitive to
interest rate movements: when interest rates rise, the prices of these stocks
may tend to fall. Conversely, the prices of higher yielding stocks may tend to
rise when interest rates fall.
Interest rate changes can
be sudden and unpredictable and are influenced by a number of factors including
government policy, monetary policy, inflation expectations, perceptions of risk,
and supply and demand of bonds.
Large Capitalization Company Risk. Large
capitalization companies may fall out of favor with investors based on market
and economic conditions. In addition, larger companies may not be able to attain
the high growth rates of successful smaller companies and may be less capable of
responding quickly to competitive challenges and industry changes.
Small- and Mid-Capitalization Companies Risk.
Securities issued by small- and mid-capitalization companies may be more
volatile in price and less liquid than those of larger companies and may involve
more risks. Such risks may include greater sensitivity to changing economic
conditions, including interest rate increases as small- and mid-capitalization
companies may find it more difficult to borrow money to continue or expand
operations, or may have difficulty in repaying any loans; less certain growth
prospects and fewer funds for growth
and development; less experienced management; and limited or less developed
product lines and markets. Because small- and mid-capitalization companies
typically reinvest a high proportion of their earnings in their businesses, they
may not pay dividends for some time, particularly if they are newer
companies. Smaller companies’
securities often trade in lower volumes and in many instances, are traded
over-the-counter or on a regional securities exchange, where the frequency and
volume of trading is substantially less than is typical for securities of larger
companies traded on national securities exchanges. Therefore, the securities of
smaller companies may be subject to wider price fluctuations and it might be
harder for the Fund to dispose of its holdings at an acceptable price when it
wants to sell them.
ESG Risk. Because the Fund evaluates ESG
factors to assess and exclude certain investments for non-financial reasons, the
Fund may forego some market opportunities available to funds that do not use
these ESG factors. Information used by the Fund to evaluate ESG factors,
including data provided by third-party vendors, may not be readily available,
complete or accurate, and may vary across providers and issuers and within
industries, which could negatively impact the Fund’s ability to apply its
methodology and in turn could negatively impact the Fund’s performance.
Currently, there is a lack of common industry standards relating to the
development and application of ESG criteria which may make it difficult to
compare the Fund’s principal investment strategies with the investment
strategies of other funds that apply certain ESG criteria or that use a
different third-party vendor for ESG data. In addition, the Fund’s assessment of
a company may differ from that of other funds or an investor. As a result, the
companies deemed eligible for inclusion in the Fund’s portfolio may not reflect
the beliefs or values of any particular investor and may not be deemed to
exhibit positive or favorable ESG characteristics if different metrics were used
to evaluate them. Regulatory changes or interpretations regarding the
definitions and/or use of ESG criteria could have a material adverse effect on
the Fund’s ability to invest in accordance with its investment policies and/or
achieve its investment objective.
Investments in Underlying Funds Risk. To the
extent the Fund invests in shares of other investment companies, including
mutual funds and ETFs, the Fund bears its proportionate share of the underlying
fund’s fees and expenses, such as investment advisory fees and other operating
expenses that are separate from those of the Fund. The Fund is also subject to
the risks associated with the securities in which the underlying fund
invests.
Non-Diversification Risk. The Fund is
non-diversified and can invest a greater portion of its assets in the
obligations or securities of a small number of issuers or any single issuer than
a diversified fund can. A change
in the value of one or a few issuers’
securities will therefore affect the value of the Fund more than if it was a
diversified fund.
Management Risk. The Fund is actively
managed and could experience losses if the Advisor or Sub-Advisor’s judgment
about markets, interest rates or the attractiveness, relative values, liquidity,
or potential appreciation of particular investments made for the Fund’s
portfolio prove to be incorrect. There can be no guarantee that these techniques
or the Advisor or Sub-Advisor’s investment decisions will produce the desired
results. Additionally, legislative, regulatory, or tax developments may affect
the investment techniques available to the Advisor or Sub-Advisor in connection
with managing the Fund and may also adversely affect the ability of the Fund to
achieve its investment goal.
Market
Trading Risks.
Absence of active market. Although shares of
the Fund are listed for trading on one or more stock exchanges, there can be no
assurance that an active trading market for such shares will develop or be
maintained. There are no obligations of market makers to make a market in the
Fund’s shares or of an Authorized Participant to submit purchase or redemption
orders for Creation Units. Decisions by market
makers or Authorized
Participants to reduce their role or step away from these activities in times of
market stress could inhibit the effectiveness of the arbitrage process in
maintaining the relationship between the underlying value of the Fund’s
portfolio securities and the Fund’s market price. Additionally, in stressed
market conditions, the market for the Fund’s shares may become less liquid in
response to deteriorating liquidity in the markets for the Fund’s portfolio
holdings, which may cause a significant variance in the market price of the
Fund’s shares and their underlying value. The absence of an active market for the
Fund’s shares may contribute to the Fund’s shares trading at a premium or
discount to its NAV and may contribute to greater than normal intraday bid/ask
spreads.
Secondary listings. The Fund’s shares may be
listed or traded on U.S. and non-U.S. stock exchanges other than the U.S. stock
exchange where the Fund’s primary listing is maintained, and may otherwise be
made available to non-U.S. investors through funds or structured investment
vehicles similar to depositary receipts.
The Fund’s shares may be less
actively traded in certain markets than in others, and investors are subject to
the execution and settlement risks and market standards of the market where they
or their broker direct their trades for execution. Certain information available
to investors who trade Fund shares on a U.S. stock exchange during regular U.S.
market hours may not be available to investors who trade in other markets, which
may result in secondary market prices in such markets being less
efficient.
Secondary market trading. Shares of the Fund
may trade in the secondary market at times when the Fund does not accept orders
to purchase or redeem shares. At such times, shares may trade in the secondary
market with more significant premiums or discounts than might be experienced at
times when the Fund accepts purchase and redemption orders.
There can be no assurance
that the Fund’s shares will continue to trade on a stock exchange or in any
market or that the Fund’s shares will continue to meet the requirements for
listing or trading on any exchange or in any market, or that such requirements
will remain unchanged. Secondary market trading in Fund shares may be halted by
a stock exchange because of market conditions or other reasons. In addition,
trading in Fund shares on a stock exchange or in any market may be subject to
trading halts caused by extraordinary market volatility pursuant to “circuit
breaker” rules on the stock exchange or market.
During a “flash crash,” the
market prices of the Fund’s shares may decline suddenly and significantly. Such
a decline may not reflect the performance of the portfolio securities held by
the Fund. Flash crashes may cause Authorized Participants and other market
makers to limit or cease trading in the Fund’s shares for temporary or longer
periods. Shareholders could suffer significant losses to the extent that they
sell shares at these temporarily low market prices.
Shares of the Fund, similar
to shares of other issuers listed on a stock exchange, may be sold short and are
therefore subject to the risk of increased volatility associated with short
selling.
Premium/Discount. Shares of the Fund may trade
at prices other than NAV. Shares of the Fund trade on stock exchanges at prices
at, above or below their most recent NAV. The NAV of the Fund is calculated at
the end of each business day and fluctuates with changes in the market value of
the Fund’s holdings since the most recent calculation. The trading prices of the
Fund’s shares fluctuate continuously throughout trading hours based on market
supply and demand rather than NAV. As a result, the trading prices of the Fund’s
shares may deviate significantly from NAV during periods of market
volatility.
Any of these factors, among
others, may lead to the Fund’s shares trading at a premium or discount to NAV.
Thus, you may pay more (or less) than NAV when you buy shares of the Fund in the
secondary market, and you may receive less (or more) than NAV when you sell
those shares in the secondary market. The investment manager cannot predict
whether shares will trade above (premium), below (discount) or at NAV. Because
shares can be created and redeemed in Creation Units at NAV, the investment
manager believes that large discounts or premiums to the NAV of the Fund are not
likely to be sustained over the long-term. While the creation/redemption feature
is designed to make it likely that the Fund’s shares normally will trade on
stock exchanges at prices close to the Fund’s next calculated NAV, exchange
prices are not expected to correlate exactly with the Fund’s NAV due to timing
reasons as well as market supply and demand factors. In addition, disruptions to
creations and redemptions or extreme market volatility may result in trading
prices for shares of the Fund that differ significantly from its NAV.
Cost of buying or selling Fund shares. Buying
or selling Fund shares on an exchange involves two types of costs that apply to
all securities transactions. When buying or selling shares of the Fund through a
broker, you will likely incur a brokerage commission or other charges imposed by
brokers as determined by that broker. In addition, you may incur the cost of the
“spread,” that is, the difference between what investors are willing to pay for
Fund shares (the “bid” price) and the price at which they are willing to sell
Fund shares (the “ask” price). Because of the costs inherent in buying or
selling Fund shares, frequent trading may detract significantly from investment
results and an investment in Fund shares may not be advisable for investors who
anticipate regularly making small investments.
Authorized Participant Concentration Risk. Only
an Authorized Participant may engage in creation or redemption transactions
directly with the Fund. The Fund has a limited number of institutions that act
as Authorized Participants. To the extent that these institutions exit the
business or are unable to proceed with creation and/or redemption orders with
respect to the Fund and no other Authorized Participant is able to step forward
to create or redeem Creation Units (as defined below), Fund shares may trade at
a discount to NAV and possibly face trading halts and/or delisting. This risk
may be more pronounced in volatile markets, potentially where there are
significant redemptions in ETFs generally.
New Fund Risk. The Fund is a new fund, with a
limited or no operating history and a small asset base. There can be no
assurance that the Fund will grow to or maintain a viable size. Due to the
Fund's small asset base, certain of the Fund's expenses and its portfolio
transaction costs may be higher than those of a fund with a larger asset base.
To the extent that the Fund does not grow to or maintain a viable size, it may
be liquidated, and the expenses, timing and tax consequences of such liquidation
may not be favorable to some shareholders.
Small Fund Risk. When the Fund’s size is
small, the Fund may experience low trading volume and wide bid/ask spreads. In
addition, the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. If the Fund were to be required to
delist from the listing exchange, the value of the Fund may rapidly decline and
performance may be negatively impacted. In addition, any resulting liquidation
of the Fund could cause the Fund to incur elevated transaction costs for the
Fund and negative tax consequences for its shareholders.
Large Shareholder Risk. Certain large
shareholders, including other funds or accounts advised by the Advisor or an
affiliate of the Advisor, may from time to time own a substantial amount of the
Fund’s shares. In addition, a third party investor, the Advisor or an affiliate
of the Advisor, an authorized participant, a lead market maker, or another
entity may invest in the Fund and hold its investment for a limited period of
time solely to facilitate commencement of the Fund or to facilitate the Fund’s
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment. Dispositions of a large number of
shares by these shareholders may adversely affect the Fund’s liquidity and net
assets to the extent such transactions are executed directly with the Fund in
the form of redemptions through an authorized participant, rather than executed
in the secondary market. These redemptions may also force the Fund to sell
portfolio securities when it might not otherwise do so, which may negatively
impact the Fund’s NAV and increase the Fund’s brokerage costs. To the extent
these large shareholders transact in shares on the secondary market, such
transactions may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Emerge EMPWR Sustainable Global Core
Equity ETF
Investment
Objective
The Fund’s investment
objective is to seek long-term growth of capital. The Fund’s investment
objective is non-fundamental, which means it may be changed by the board of
trustees without shareholder approval. Shareholders will be given at least 60
days’ advance notice of any change to the Fund’s investment objective.
Principal
Investment Strategies
Under normal market
conditions, the Fund invests at least 80% of its net assets, plus borrowings for
investment purposes, if any, in equity securities that, at the time of
investment, meet ESG criteria established by Emerge Capital Management Inc.
(Emerge or the Advisor). Shareholders will be given at least 60 days’ advance
notice of any change to the Fund’s 80% policy.
The Fund invests
predominantly in equity securities. An equity security, or stock, represents a
proportionate share, or the right to acquire a proportionate share, of the
ownership of a company; an equity security’s value is based on the success of
the company’s business and the value of its assets, as well as general market
conditions. Equity securities include common stock (including real estate
investment trusts), preferred stock, securities convertible into common stock,
depositary receipts, or securities or other instruments whose price is linked to
the value of common stock. Depositary receipts are certificates typically issued
by a bank or trust company that give their holders the right to receive
securities issued by a foreign or domestic company.
Under normal circumstances,
the Fund will provide exposure to investments that are economically tied to at
least three different countries, including the United States and at least 40%,
unless market conditions are not deemed favorable, in which case at least 30%,
of the Fund’s net assets will provide exposure to investments that are
economically tied to countries other than the United States. The Fund’s
investments may include securities of issuers located in emerging markets
countries.
The
Fund may invest in the securities of issuers of all capitalization sizes, but
intends to invest primarily in in securities of large capitalization
issuers.
The
Fund is non-diversified, which means it can invest a greater percentage of its
assets in a small group of issuers or any one issuer than a diversified fund
can.
In selecting companies,
Zevin Asset Management, LLC (Zevin or the Sub-Advisor) employs a
multidisciplinary investment process that combines fundamental research and
global macro considerations to seek to identify securities that the Sub-Advisor
believes have potential to outperform and minimize significant losses in
declining markets. Because the Sub-Advisor seeks to invest in securities that
have the potential to outperform and
minimize significant losses in declining markets, the Fund may underperform the
broader market during periods of rising markets. The Sub-Advisor may recommend
selling securities for several reasons, including when there are more attractive
opportunities or where the original investment thesis for a company is no longer
valid.
Emerge considers ESG
factors within its securities selection process for each equity security for the
Fund. Emerge assesses whether a company meets the Fund’s ESG standards based on
its proprietary ESG framework. Emerge uses ESG research, ratings, and analytics
from independent third-party data providers to screen investments based on ESG
criteria determined by Emerge. The Fund may hold securities of issuers for which
third-party data is not available. Where an issuer has not been assigned a
rating by the third-party data provider, Emerge’s ESG analysis incorporates
publicly available data. Emerge has the right to change the third-party data
providers that support its ESG framework at any time. In determining whether an
issuer meets Emerge’s ESG investment criteria, Emerge considers: (i) negative
screening criteria to eliminate certain types of issuers in light of social and
environmental considerations; and (ii) governance-related risk ratings published
by third party data providers, including Sustainalytics, designed to measure the
degree to which a company’s economic value is at risk driven by the magnitude of
a company’s unmanaged ESG risks. [As of the date of this Prospectus,] Emerge
applies a negative screen to exclude companies for investment that derive 20% or
more of their revenues from biological and chemical weapons, thermal coal
extraction, gambling, adult entertainment, tobacco production, recreational
cannabis and alcoholic beverages. Emerge may modify the above list of negative
screens at any time, without prior shareholder approval or notice. ESG risk
ratings data compiled by third-party data providers forms the basis for Emerge’s
governance-related risk assessment and screening. Emerge may consider excluding,
reducing or eliminating exposure to issuers with high ESG risk ratings, as
determined by one or more third-party data providers.
In
attempting to meet its investment objective, the Fund may engage in active and
frequent trading of portfolio securities.
The Fund is an actively
managed ETF and, thus, does not seek to replicate the performance of a specified
index. Accordingly, the Advisor has discretion on a daily basis to manage the
Fund’s portfolio in accordance with the Fund’s investment objective.
When the Advisor or
Sub-Advisor believes market or economic conditions are unfavorable for
investors, the Advisor may invest up to 100% of the Fund’s assets in a temporary
defensive manner by holding all or a substantial portion of its assets in cash,
cash equivalents or other high quality short-term investments. Temporary
defensive investments generally may include short-term U.S. government
securities, high grade commercial paper, bank obligations, repurchase
agreements, money market fund shares (including shares of an affiliated money
market fund), and other money market instruments. The Fund also may invest in
these types of securities or hold cash while looking for suitable investment
opportunities, to maintain liquidity. In these circumstances, the Fund may be
unable to achieve its investment goal.
The Fund may invest
securities of other investment companies, including ETFs.
The Fund’s investments in
the types of securities and other investments described in this prospectus vary
from time to time, and, at any time, the Fund may not be invested in all of the
types of securities and other investments described in this prospectus. The Fund
may also invest in securities and other investments not described in this
prospectus. More detailed information about the Fund and its policies and risks
can be found in the Fund’s SAI.
Principal
Risks
Market Risk. The market values of securities or
other investments owned by the Fund will go up or down, sometimes rapidly or
unpredictably. The Fund’s investments may decline in value due to factors
affecting individual issuers (such as the results of supply and demand), or
sectors within the securities markets. The value of a security or other
investment also may go up or down due to general market conditions that are not
specifically related to a particular issuer, such as real or perceived adverse
economic conditions, changes in interest rates or exchange rates, or adverse
investor sentiment generally. Global economies and financial markets are
becoming increasingly interconnected, and conditions and events in one country,
region or financial market may adversely impact issuers in a different country,
region or financial market. These risks may be magnified if certain events or
developments adversely interrupt the global supply chain, and could affect
companies worldwide.
During a general downturn
in the securities markets, multiple asset classes may decline in value. When
markets perform well, there can be no assurance that securities or other
investments held by the Fund will participate in or otherwise benefit from the
advance. Stock prices tend to go up and down more dramatically than those of
debt securities. A slower-growth or recessionary economic environment could have
an adverse effect on the prices of the various stocks held by the Fund.
Events such as war; acts of
terrorism; social unrest; natural, environmental, or humanmade disasters, and
the spread of infectious illness or other public health threats can cause
significant economic impacts, including market closures and dislocations,
extreme volatility, liquidity constraints, and increased trading costs, that can
significantly impact the Fund and its investments. The full impact such events,
including the COVID-19 pandemic, is unpredictable, may result in a high degree of
uncertainty for potentially extended periods of time, and may adversely affect
the Fund’s performance. Efforts to contain the spread of COVID-19 have resulted
in global travel restrictions and disruptions of healthcare systems, business
operations and supply chains, layoffs, reduced consumer demand, defaults and
credit ratings downgrades, and other significant economic impacts. The effects
of COVID-19 have impacted global economic activity across many industries and
may heighten other pre-existing political, social and economic risks, locally or
globally.
Foreign Securities Risk. The Fund's foreign
investments may be adversely affected by political, economic, and social
instability and volatility, changes in economic or taxation policies; difficulty
in enforcing obligations; lack of or ineffective government supervision and
regulation of securities and currency markets, trading systems, and brokers;
decreased liquidity and increased volatility; lack of or limited availability of
information, which can impede the Fund’s ability to evaluate such investments;
and trading restrictions and economic sanctions. Foreign companies generally may
be subject to less stringent regulations than U.S. companies, including
financial reporting requirements and auditing and accounting controls, and may
therefore be more susceptible to fraud or corruption. The Fund’s foreign
investments may be subject to currency exchange rate fluctuations, which may
cause the value of securities denominated in such foreign currency (or other
instruments through which the Fund
has exposure to foreign
currencies) to decline in value. Foreign investments also involve the risk of
the possible seizure, nationalization or expropriation of the issuer or foreign
deposits (in which the Fund could lose its entire investments in a certain
market) and the possible adoption of foreign governmental restrictions such as
exchange controls. The risks of foreign investments may be greater in developing
or emerging market countries.
Emerging Markets Securities Risk. The Fund’s
investments in emerging markets are subject to the risks of foreign investing
generally, and have additional heightened risks due to a lack of established
legal, political, business, and social frameworks to support securities markets.
These risks include currency exchange rate volatility and increased potential
for currency devaluations; greater sensitivity to interest rate changes; higher
rates of inflation; lower trading volumes; pervasiveness of corruption and
fraud; less government supervision and regulation; and more governmental
limitations on foreign investment than more developed markets. Such countries’
economies may be more dependent on relatively few industries or investors that
may be highly vulnerable to local and global changes. Companies in emerging
market countries generally may be subject to less stringent regulatory,
disclosure, financial reporting, accounting, auditing and recordkeeping
standards than companies in more developed countries. As a result, information
about such companies may be less available and reliable, which can impede the
Fund’s ability to evaluate such companies. In addition, certain emerging market
countries have material limitations on Public Company Accounting Oversight Board
(PCAOB) inspection, investigation and enforcement capabilities which hinder the
ability to engage in independent oversight or inspection of accounting firms
located in or operating in certain emerging markets; therefore, there is no
guarantee that the quality of financial reporting or the audits conducted by
audit firms of emerging market issuers meet PCAOB standards. The financial
institutions and issuers with which the Fund transacts in emerging markets
countries may possess less financial sophistication, creditworthiness and/or
resources possessed than those in developed countries. Securities law in many
emerging market countries may be relatively new and unsettled and change quickly
and unpredictably. The ability to bring and enforce actions (including
bankruptcy, confiscatory taxation, expropriation, nationalization of a company’s
assets, restrictions on foreign ownership of local companies, restrictions on
withdrawing assets from the country, protectionist measures and practices such
as share blocking), or to obtain information needed to pursue or enforce such
actions, may be limited and shareholder claims may be difficult or impossible to
pursue. Taxation systems at the federal, regional, and local levels may be less
transparent and inconsistent enforced, and subject to sudden change, as compared
to developed countries. In addition, the ability of foreign entities to
participate in privatization programs of certain developing or emerging market
countries may be limited by local law. Investments in emerging markets
securities may be subject to additional transaction costs, delays in settlement
procedures, and unexpected market closures.
Large Capitalization Company Risk. Large
capitalization companies may fall out of favor with investors based on market
and economic conditions. In addition, larger companies may not be able to attain
the high growth rates of successful smaller companies and may be less capable of
responding quickly to competitive challenges and industry changes.
Small- and Mid-Capitalization Companies Risk.
Securities issued by small- and mid-capitalization companies may be more
volatile in price and less liquid than those of larger companies and may involve
more risks. Such risks may include greater sensitivity to changing economic
conditions, including interest rate increases as small- and mid-capitalization
companies may find it more difficult to borrow money to continue or expand
operations, or may have difficulty in repaying any loans; less certain growth
prospects and fewer funds for growth
and development; less experienced management; and limited or less developed
product lines and markets. Because small- and mid-capitalization companies
typically reinvest a high proportion of their earnings in their businesses, they
may not pay dividends for some time, particularly if they are newer
companies. Smaller companies’
securities often trade in lower volumes and in many instances, are traded
over-the-counter or on a regional securities exchange, where the frequency and
volume of trading is substantially less than is typical for securities of larger
companies traded on national securities exchanges. Therefore, the securities of
smaller companies may be subject to wider price fluctuations and it might be
harder for the Fund to dispose of its holdings at an acceptable price when it
wants to sell them.
Geographic Focus Risk. The Fund may from time
to time have a substantial amount of its assets invested in securities of
issuers located in a single country or a limited number of countries. Adverse
economic, political or social conditions in those countries may therefore have a
significant negative impact on the Fund’s investment performance. This risk is heightened if the Fund focuses
its investments in emerging market countries or developed countries prone to
periods of instability.
Depositary Receipts Risk. Depositary receipts
are subject to many of the same risks as direct investments in the underlying
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Fund may therefore receive less timely information or have
less control than if it invested directly in the foreign issuer. For some depositary receipts, the custodian
or similar financial institution that holds the issuer's shares in a trust
account is located in the issuer's home country. The Fund could be exposed to
the credit risk of the custodian or financial institution, and in cases where
the issuer’s home country does not have developed financial markets, greater
market risk. In addition, the depository institution may not have physical
custody of the underlying securities at all times and may charge fees for
various services, including forwarding dividends and interest and corporate
actions. The Fund would be expected to pay a share of the additional fees, which
it would not pay if investing directly in the foreign securities.
Active Trading Risk. Active trading of
portfolio securities may result in added expenses, a lower return and increased
tax liability.
ESG Risk. Because the Fund evaluates ESG
factors to assess and exclude certain investments for non-financial reasons, the
Fund may forego some market opportunities available to funds that do not use
these ESG factors. Information used by the Fund to evaluate ESG factors,
including data provided by third-party vendors, may not be readily available,
complete or accurate, and may vary across providers and issuers and within
industries, which could negatively impact the Fund’s ability to apply its
methodology and in turn could negatively impact the Fund’s performance.
Currently, there is a lack of common industry standards relating to the
development and application of ESG criteria which may make it difficult to
compare the Fund’s principal investment strategies with the investment
strategies of other funds that apply certain ESG criteria or that use a
different third-party vendor for ESG data. In addition, the Fund’s assessment of
a company may differ from that of other funds or an investor. As a result, the
companies deemed eligible for inclusion in the Fund’s portfolio may not reflect
the beliefs or values of any particular investor and may not be deemed to
exhibit positive or favorable ESG characteristics if different metrics were used
to evaluate them. Regulatory changes or interpretations regarding the
definitions and/or use of ESG criteria could have a material adverse effect on
the Fund’s ability to invest in accordance with its investment policies and/or
achieve its investment objective.
Investments in Underlying Funds Risk. To the
extent the Fund invests in shares of other investment companies, including
mutual funds and ETFs, the Fund bears its proportionate share of the underlying
fund’s fees and expenses, such as investment advisory fees and other operating
expenses that are separate from those of the Fund. The Fund is also subject to
the risks associated with the securities in which the underlying fund
invests.
Non-Diversification Risk. The Fund is
non-diversified and can invest a greater portion of its assets in the
obligations or securities of a small number of issuers or any single issuer than
a diversified fund can. A change
in the value of one or a few issuers’
securities will therefore affect the value of the Fund more than if it was a
diversified fund.
Management Risk. The Fund is actively
managed and could experience losses if the Advisor or Sub-Advisor’s judgment
about markets, interest rates or the attractiveness, relative values, liquidity,
or potential appreciation of particular investments made for the Fund’s
portfolio prove to be incorrect. There can be no guarantee that these techniques
or the Advisor or Sub-Advisor’s investment decisions will produce the desired
results. Additionally, legislative, regulatory, or tax developments may affect
the investment techniques available to the Advisor or Sub-Advisor in connection
with managing the Fund and may also adversely affect the ability of the Fund to
achieve its investment goal.
Market
Trading Risks.
Absence of active market. Although shares of
the Fund are listed for trading on one or more stock exchanges, there can be no
assurance that an active trading market for such shares will develop or be
maintained. There are no obligations of market makers to make a market in the
Fund’s shares or of an Authorized Participant to submit purchase or redemption
orders for Creation Units. Decisions by market makers or Authorized Participants
to reduce their role or step away from these activities in times of market
stress could inhibit the effectiveness of the arbitrage process in maintaining
the relationship between the underlying value of the Fund’s portfolio securities
and the Fund’s market price. Additionally, in stressed market conditions, the
market for the Fund’s shares may become less liquid in response to deteriorating
liquidity in the markets for the Fund’s portfolio holdings, which may cause a
significant variance in the market price of the Fund’s shares and their
underlying value. The absence of an
active market for the
Fund’s shares may contribute
to the Fund’s shares trading at a premium or discount to its NAV and may
contribute to greater than normal intraday bid/ask spreads.
Secondary listings. The Fund’s shares may be
listed or traded on U.S. and non-U.S. stock exchanges other than the U.S. stock
exchange where the Fund’s primary listing is maintained, and may otherwise be
made available to non-U.S. investors through funds or structured investment
vehicles similar to depositary receipts.
The Fund’s shares may be less
actively traded in certain markets than in others, and investors are subject to
the execution and settlement risks and market standards of the market where they
or their broker direct their trades for execution. Certain information available
to investors who trade Fund shares on a U.S. stock exchange during regular U.S.
market hours may not be available to investors who trade in other markets, which
may result in secondary market prices in such markets being less
efficient.
Secondary market trading. Shares of the Fund
may trade in the secondary market at times when the Fund does not accept orders
to purchase or redeem shares. At such times, shares may trade in the secondary
market with more significant premiums or discounts than might be experienced at
times when the Fund accepts purchase and redemption orders.
There can be no assurance
that the Fund’s shares will continue to trade on a stock exchange or in any
market or that the Fund’s shares will continue to meet the requirements for
listing or trading on any exchange or in any market, or that such requirements
will remain unchanged. Secondary market trading in Fund shares may be halted by
a stock exchange because of market conditions or other reasons. In addition,
trading in Fund shares on a stock exchange or in any market may be subject to
trading halts caused by extraordinary market volatility pursuant to “circuit
breaker” rules on the stock exchange or market.
During a “flash crash,” the
market prices of the Fund’s shares may decline suddenly and significantly. Such
a decline may not reflect the performance of the portfolio securities held by
the Fund. Flash crashes may cause Authorized Participants and other market
makers to limit or cease trading in the Fund’s shares for temporary or longer
periods. Shareholders could suffer significant losses to the extent that they
sell shares at these temporarily low market prices.
Shares of the Fund, similar
to shares of other issuers listed on a stock exchange, may be sold short and are
therefore subject to the risk of increased volatility associated with short
selling.
Premium/Discount. Shares of the Fund may trade
at prices other than NAV. Shares of the Fund trade on stock exchanges at prices
at, above or below their most recent NAV. The NAV of the Fund is calculated at
the end of each business day and fluctuates with changes in the market value of
the Fund’s holdings since the most recent calculation. The trading prices of the
Fund’s shares fluctuate continuously throughout trading hours based on market
supply and demand rather than NAV. As a result, the trading prices of the Fund’s
shares may deviate significantly from NAV during periods of market
volatility.
Any of these factors, among
others, may lead to the Fund’s shares trading at a premium or discount to NAV.
Thus, you may pay more (or less) than NAV when you buy shares of the Fund in the
secondary market, and you may receive less (or more) than NAV when you sell
those shares in the secondary market. The investment manager cannot predict
whether shares will trade above (premium), below (discount) or at NAV. Because
shares can be created and redeemed in Creation Units at NAV, the investment
manager believes that large discounts or premiums to the NAV of the Fund are not
likely to be sustained over the long-term. While the creation/redemption feature
is designed to make it likely that the Fund’s shares normally will trade on
stock exchanges at prices close to the Fund’s next calculated NAV, exchange
prices are not expected to correlate exactly with the Fund’s NAV due to timing
reasons as well as market supply and demand factors. In addition, disruptions to
creations and redemptions or extreme market volatility may result in trading
prices for shares of the Fund that differ significantly from its NAV.
Cost of buying or selling Fund shares. Buying
or selling Fund shares on an exchange involves two types of costs that apply to
all securities transactions. When buying or selling shares of the Fund through a
broker, you will likely incur a brokerage commission or other charges imposed by
brokers as determined by that broker. In addition, you may incur the cost of the
“spread,” that is, the difference between what investors are willing to pay for
Fund shares (the “bid” price) and the price at which they are willing to sell
Fund shares (the “ask” price). Because of the costs inherent in buying or
selling Fund shares, frequent
trading may detract
significantly from investment results and an investment in Fund shares may not
be advisable for investors who anticipate regularly making small
investments.
International Closed Market Trading Risk. To
the extent that the underlying securities held by the Fund trade on an exchange
that is closed when the securities exchange on which the Fund shares list and
trade is open, there may be market uncertainty about the stale security pricing
(i.e., the last quote from its closed foreign market) resulting in premiums or
discounts to NAV that may be greater than those experienced by other ETFs.
Authorized Participant Concentration Risk. Only
an Authorized Participant may engage in creation or redemption transactions
directly with the Fund. The Fund has a limited number of institutions that act
as Authorized Participants. To the extent that these institutions exit the
business or are unable to proceed with creation and/or redemption orders with
respect to the Fund and no other Authorized Participant is able to step forward
to create or redeem Creation Units (as defined below), Fund shares may trade at
a discount to NAV and possibly face trading halts and/or delisting. This risk
may be more pronounced in volatile markets, potentially where there are
significant redemptions in ETFs generally.
New Fund Risk. The Fund is a new fund, with a
limited or no operating history and a small asset base. There can be no
assurance that the Fund will grow to or maintain a viable size. Due to the
Fund's small asset base, certain of the Fund's expenses and its portfolio
transaction costs may be higher than those of a fund with a larger asset base.
To the extent that the Fund does not grow to or maintain a viable size, it may
be liquidated, and the expenses, timing and tax consequences of such liquidation
may not be favorable to some shareholders.
Small Fund Risk. When the Fund’s size is
small, the Fund may experience low trading volume and wide bid/ask spreads. In
addition, the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. If the Fund were to be required to
delist from the listing exchange, the value of the Fund may rapidly decline and
performance may be negatively impacted. In addition, any resulting liquidation
of the Fund could cause the Fund to incur elevated transaction costs for the
Fund and negative tax consequences for its shareholders.
Large Shareholder Risk. Certain large
shareholders, including other funds or accounts advised by the Advisor or an
affiliate of the Advisor, may from time to time own a substantial amount of the
Fund’s shares. In addition, a third party investor, the Advisor or an affiliate
of the Advisor, an authorized participant, a lead market maker, or another
entity may invest in the Fund and hold its investment for a limited period of
time solely to facilitate commencement of the Fund or to facilitate the Fund’s
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment. Dispositions of a large number of
shares by these shareholders may adversely affect the Fund’s liquidity and net
assets to the extent such transactions are executed directly with the Fund in
the form of redemptions through an authorized participant, rather than executed
in the secondary market. These redemptions may also force the Fund to sell
portfolio securities when it might not otherwise do so, which may negatively
impact the Fund’s NAV and increase the Fund’s brokerage costs. To the extent
these large shareholders transact in shares on the secondary market, such
transactions may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Emerge EMPWR Sustainable Emerging
Markets Equity ETF
Investment
Objective
The Fund’s investment
objective is to seek long-term growth of capital. The Fund’s investment
objective is non-fundamental, which means it may be changed by the board of
trustees without shareholder approval. Shareholders will be given at least 60
days’ advance notice of any change to the Fund’s investment objective.
Principal
Investment Strategies
Under normal market
conditions, the Fund invests at least 80% of its net assets, plus borrowings for
investment purposes, if any, in equity securities of issuers located in emerging
markets countries that, at the time of investment, meet the ESG criteria
established by Emerge Capital Management Inc. (Emerge or the Advisor).
Shareholders will be given at least 60 days’ advance notice of any change to the
Fund’s 80% policy.
The Fund considers a
country's market to be an "emerging market" if it is defined as an emerging or
developing economy by any of the International Bank for Reconstruction and
Development (i.e., the World Bank), the International Finance Corporation or the
United Nations or its authorities. Additionally, the Fund, for purposes of its
investments, may consider a country included in JP Morgan, MSCI or FTSE emerging
markets indices to be an emerging market country. The Fund’s Sub-Advisor,
Channing Global Advisors, LLC (Channing Global or the Sub-Advisor) may consider
a company to be in an emerging market country if the company has been organized
under the laws of, has its principal offices in, or has its securities
principally traded in, an emerging market country, or if the company derives at
least 50% of revenues or net profits from, or has at least 50% of assets or
production capacities in, an emerging market country. The countries included in
this definition will change over time.
The Fund invests
predominantly in equity securities. An equity security, or stock, represents a
proportionate share, or the right to acquire a proportionate share, of the
ownership of a company; an equity security’s value is based on the success of
the company’s business and the value of its assets, as well as general market
conditions. Equity securities include common stock (including real estate
investment trusts), preferred stock, securities convertible into common stock,
depositary receipts, or securities or other instruments whose price is linked to
the value of common stock. Depositary receipts are certificates typically issued
by a bank or trust company that give their holders the right to receive
securities issued by a foreign or domestic company. The Fund may invest in the
securities of issuers of all capitalization sizes.
The Fund, from time to
time, may have significant investments in one or more countries, including
China. Investments in Chinese companies may be made through a special structure
known as a variable interest entity (VIE) that is designed to provide foreign
investors with exposure to Chinese companies that operate in certain sectors in
which China restricts or prohibits foreign investments. In a VIE structure,
instead of directly owning the equity interests in a Chinese company, the listed
company has contractual arrangements with the Chinese company. In a VIE
structure, foreign investors, such as the Fund, will only own stock in a shell
company rather than directly in the VIE, which must be owned by Chinese
nationals (and/or Chinese companies) to obtain the licenses and/or assets
required to operate in certain restricted or prohibited sectors in China. The
value of the shell company is derived from its ability to consolidate the VIE
into its financials pursuant to contractual arrangements that allow the shell
company to exert a degree of control over, and obtain economic benefits arising
from, the VIE without formal legal ownership.
The
Fund is non-diversified, which means it can invest a greater percentage of its
assets in a small group of issuers or any one issuer than a diversified fund
can.
In selecting companies,
Channing Global Advisors, LLC (Channing Global or the Sub-Advisor) uses
proprietary fundamental data screening and fundamental research to identify
companies that the Sub-Advisor’s believes present attractive growth
opportunities, based on certain characteristics that, in the Sub-Advisor’s view,
position the company to benefit from secular and tactical themes. In identifying
companies that offer attractive thematic growth opportunities, the Sub-Advisor
seeks to identify favorable secular and tactical themes resulting from country
and sector catalysts, such as changes in commodities pricing, interest rates,
exchange rates, or regulation. Through fundamental research, the Sub-Advisor
then seeks to identify what the Sub-Advisor believes are high quality growth
companies that, in the Sub-Advisor’s view, are undervalued relative to their
estimated earnings and cash-flow growth and poised to deliver excess returns.
For purposes of the Sub-Advisor’s selection process, “quality” includes
measurements such as trading volume, balance sheet, income statement, cash flow,
and
sustainable growth; and
“growth” includes measurements such as net income and earnings before interest,
taxes, depreciation, and amortization. The Sub-Advisor may recommend selling
securities for several reasons, including when there are more attractive
opportunities or where the original investment thesis for a company is no longer
valid.
Emerge considers ESG
factors within its securities selection process for each equity security for the
Fund. Emerge assesses whether a company meets the Fund’s ESG standards based on
its proprietary ESG framework. Emerge uses ESG research, ratings, and analytics
from independent third-party data providers to screen investments based on ESG
criteria determined by Emerge. The Fund may hold securities of issuers for which
third-party data is not available. Where an issuer has not been assigned a
rating by the third-party data provider, Emerge’s ESG analysis incorporates
publicly available data. Emerge has the right to change the third-party data
providers that support its ESG framework at any time. In determining whether an
issuer meets Emerge’s ESG investment criteria, Emerge considers: (i) negative
screening criteria to eliminate certain types of issuers in light of social and
environmental considerations; and (ii) governance-related risk ratings published
by third party data providers, including Sustainalytics, designed to measure the
degree to which a company’s economic value is at risk driven by the magnitude of
a company’s unmanaged ESG risks. [As of the date of this Prospectus,] Emerge
applies a negative screen to exclude companies for investment that derive 20% or
more of their revenues from biological and chemical weapons, thermal coal
extraction, gambling, adult entertainment, tobacco production, recreational
cannabis and alcoholic beverages. Emerge may modify the above list of negative
screens at any time, without prior shareholder approval or notice. ESG risk
ratings data compiled by third-party data providers forms the basis for Emerge’s
governance-related risk assessment and screening. Emerge may consider excluding,
reducing or eliminating exposure to issuers with high ESG risk ratings, as
determined by one or more third-party data providers.
The
Fund is an actively managed ETF and, thus, does not seek to replicate the
performance of a specified index. Accordingly, the Advisor has discretion on a
daily basis to manage the Fund’s portfolio in accordance with the Fund’s
investment objective.
When the Advisor or
Sub-Advisor believes market or economic conditions are unfavorable for
investors, the Advisor may invest up to 100% of the Fund’s assets in a temporary
defensive manner by holding all or a substantial portion of its assets in cash,
cash equivalents or other high quality short-term investments. Temporary
defensive investments generally may include short-term U.S. government
securities, high grade commercial paper, bank obligations, repurchase
agreements, money market fund shares (including shares of an affiliated money
market fund), and other money market instruments. The Fund also may invest in
these types of securities or hold cash while looking for suitable investment
opportunities, to maintain liquidity. In these circumstances, the Fund may be
unable to achieve its investment goal.
The Fund may invest
securities of other investment companies, including ETFs.
The Fund’s investments in
the types of securities and other investments described in this prospectus vary
from time to time, and, at any time, the Fund may not be invested in all of the
types of securities and other investments described in this prospectus. The Fund
may also invest in securities and other investments not described in this
prospectus. More detailed information about the Fund and its policies and risks
can be found in the Fund’s SAI.
Principal
Risks
Market Risk. The market values of securities or
other investments owned by the Fund will go up or down, sometimes rapidly or
unpredictably. The Fund’s investments may decline in value due to factors
affecting individual issuers (such as the results of supply and demand), or
sectors within the securities markets. The value of a security or other
investment also may go up or down due to general market conditions that are not
specifically related to a particular issuer, such as real or perceived adverse
economic conditions, changes in interest rates or exchange rates, or adverse
investor sentiment generally. Global economies and financial markets are
becoming increasingly interconnected, and conditions and events in one country,
region or financial market may adversely impact issuers in a different country,
region or financial market. These risks may be magnified if certain events or
developments adversely interrupt the global supply chain, and could affect
companies worldwide.
During a general downturn in
the securities markets, multiple asset classes may decline in value. When
markets perform well, there can be no assurance that securities or other
investments held by the Fund will participate in or otherwise benefit from the
advance. Stock prices tend to go up and down more dramatically than those of
debt
securities. A slower-growth
or recessionary economic environment could have an adverse effect on the prices
of the various stocks held by the Fund.
Events such as war; acts of
terrorism; social unrest; natural, environmental, or humanmade disasters, and
the spread of infectious illness or other public health threats can cause
significant economic impacts, including market closures and dislocations,
extreme volatility, liquidity constraints, and increased trading costs, that can
significantly impact the Fund and its investments. The full impact such events,
including the COVID-19 pandemic, is unpredictable, may result in a high degree of
uncertainty for potentially extended periods of time, and may adversely affect
the Fund’s performance. Efforts to contain the spread of COVID-19 have resulted
in global travel restrictions and disruptions of healthcare systems, business
operations and supply chains, layoffs, reduced consumer demand, defaults and
credit ratings downgrades, and other significant economic impacts. The effects
of COVID-19 have impacted global economic activity across many industries and
may heighten other pre-existing political, social and economic risks, locally or
globally.
Foreign Securities Risk. The Fund's foreign
investments may be adversely affected by political, economic, and social
instability and volatility, changes in economic or taxation policies; difficulty
in enforcing obligations; lack of or ineffective government supervision and
regulation of securities and currency markets, trading systems, and brokers;
decreased liquidity and increased volatility; lack of or limited availability of
information, which can impede the Fund’s ability to evaluate such investments;
and trading restrictions and economic sanctions. Foreign companies generally may
be subject to less stringent regulations than U.S. companies, including
financial reporting requirements and auditing and accounting controls, and may
therefore be more susceptible to fraud or corruption. The Fund’s foreign
investments may be subject to currency exchange rate fluctuations, which may
cause the value of securities denominated in such foreign currency (or other
instruments through which the Fund has exposure to foreign currencies) to
decline in value. Foreign investments also involve the risk of the possible
seizure, nationalization or expropriation of the issuer or foreign deposits (in
which the Fund could lose its entire investments in a certain market) and the
possible adoption of foreign governmental restrictions such as exchange
controls. The risks of foreign investments may be greater in developing or
emerging market countries.
Emerging Markets Securities Risk. The Fund’s
investments in emerging markets are subject to the risks of foreign investing
generally, and have additional heightened risks due to a lack of established
legal, political, business, and social frameworks to support securities markets.
These risks include currency exchange rate volatility and increased potential
for currency devaluations; greater sensitivity to interest rate changes; higher
rates of inflation; lower trading volumes; pervasiveness of corruption and
fraud; less government supervision and regulation; and more governmental
limitations on foreign investment than more developed markets. Such countries’
economies may be more dependent on relatively few industries or investors that
may be highly vulnerable to local and global changes. Companies in emerging
market countries generally may be subject to less stringent regulatory,
disclosure, financial reporting, accounting, auditing and recordkeeping
standards than companies in more developed countries. As a result, information
about such companies may be less available and reliable, which can impede the
Fund’s ability to evaluate such companies. In addition, certain emerging market
countries have material limitations on PCAOB inspection, investigation and
enforcement capabilities which hinder the ability to engage in independent
oversight or inspection of accounting firms located in or operating in certain
emerging markets; therefore, there is no guarantee that the quality of financial
reporting or the audits conducted by audit firms of emerging market issuers meet
PCAOB standards. The financial institutions and issuers with which the Fund
transacts in emerging markets countries may possess less financial
sophistication, creditworthiness and/or resources possessed than those in
developed countries. Securities law in many emerging market countries may be
relatively new and unsettled and change quickly and unpredictably. The ability
to bring and enforce actions (including bankruptcy, confiscatory taxation,
expropriation, nationalization of a company’s assets, restrictions on foreign
ownership of local companies, restrictions on withdrawing assets from the
country, protectionist measures and practices such as share blocking), or to
obtain information needed to pursue or enforce such actions, may be limited and
shareholder claims may be difficult or impossible to pursue. Taxation systems at
the federal, regional, and local levels may be less transparent and inconsistent
enforced, and subject to sudden change, as compared to developed countries. In
addition, the ability of foreign entities to participate in privatization
programs of certain developing or emerging market countries may be limited by
local law. Investments in emerging markets securities may be subject to
additional transaction costs, delays in settlement procedures, and unexpected
market closures.
China Investing Risk: The Fund’s investments in
China (including Chinese companies listed on US and Hong Kong exchanges), Hong
Kong and Taiwan, are subject to the risks of emerging markets investing
generally, and
have heightened risks such
as greater government control over the economy, exposure to currency
fluctuations, less liquidity, expropriation, confiscatory taxation,
nationalization, difficulty in obtaining information necessary for
investigations into and/or litigation against Chinese companies as well as in
obtaining and/or enforcing judgments, limited legal remedies for shareholders,
and exchange control regulations (including currency blockage). Inflation and
rapid fluctuations in inflation and interest rates have had, and may continue to
have, negative effects on the economy and securities markets of China, Hong Kong
and Taiwan. In addition, investments in Taiwan and Hong Kong could be adversely
affected by their respective political and economic relationship with China.
Additionally, the inability of the Public Company Accounting Oversight Board
(PCAOB) to inspect audit work papers and practices of PCAOB-registered
accounting firms in China with respect to their audit work of U.S. reporting
companies may impose significant additional risks associated with investments in
China. In addition, the standards for environmental, social and corporate
governance matters in China, Hong Kong and Taiwan tend to be lower than such
standards in more developed economies.
Certain securities issued
by companies located or operating in China, such as China A-shares, are subject
to trading restrictions, quota limitations and less market liquidity. For
investments using a VIE structure, all or most of the value of such an
investment depends on the enforceability of the contracts between the listed
company and the China-based VIE. Currently, the Chinese government has never
approved VIE structures. Investments through a VIE structure are subject to the
risk that the VIE will breach its contracts with the listed company that holds
such contractual rights; that any breach of such contracts will likely be
subject to Chinese law and jurisdiction; and that Chinese law may be interpreted
or change in a way that affects the enforceability of the VIE's arrangements, or
contracts between the VIE and the listed company may otherwise not be
enforceable under Chinese law. As a result, the market value of the Fund's
associated holdings would likely be significantly negatively impacted, which may
result in significant losses with little or no recourse available.
Additionally, the Chinese
economy is highly dependent on the property sector and exportation of products
and services, and could experience a significant slowdown or otherwise be
adversely impacted due to a slowdown in the housing construction and development
markets, a reduction in global demand for Chinese exports, contraction in
spending on domestic goods by Chinese consumers, a downturn in any of the
economies of China’s key trading partners, the institution of tariffs or other
trade barriers, trade or political disputes with China’s major trading partners,
natural disasters, or public health threats. Trade disputes may trigger a significant
reduction in international trade, the oversupply of certain manufactured goods,
substantial price reductions of goods and possible failure of individual
companies and/or large segments of China’s export industry, which could have a
negative impact on the Fund’s performance.
Significant portions of the
Chinese securities markets may become rapidly illiquid, as Chinese issuers have
the ability to suspend the trading of their equity securities, and have shown a
willingness to exercise that option in response to market volatility and other
events. The liquidity of Chinese securities may shrink or disappear suddenly and
without warning as a result of adverse economic, market or political events,
natural disasters, public health threats or adverse investor perceptions,
whether or not accurate.
Additionally, changes in
applicable Chinese tax law could reduce the after-tax profits of the Fund,
directly or indirectly, including by reducing the after-tax profits of companies
in China in which the Fund invests. Uncertainties in Chinese tax rules could
result in unexpected tax liabilities for the Fund.
Thematic Investing Risk. The Fund’s investment
strategies incorporate the identification of thematic investment opportunities
and the Fund’s performance may be negatively impacted if the Sub-Advisor does
not correctly identify such opportunities or if the theme develops in an
unexpected manner. Sales growth and acceleration for a particular economic theme
may not continue, and the business models employed by the companies focused on a
particular economic theme may not prove to be successful. Securities selected
pursuant to an investment theme may be impacted by factors unrelated to the
theme, particularly with respect to companies that may have multiple lines of
business, and may underperform. Adverse developments and risks unrelated to the
investment theme affecting companies in which the Fund invests may negatively
impact the Fund’s performance. The customers and/or suppliers of thematic
companies may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on thematic companies.
The Fund’s thematic
investments will also subject the Fund to growth style investing risks. Growth
stock prices reflect projections of future earnings or revenues, and can,
therefore, fall dramatically if the company fails to meet those projections.
Growth stocks may be more expensive relative to their current earnings or assets
compared to
value or other stocks, and
if earnings growth expectations moderate, their valuations may return to more
typical norms, causing their stock prices to fall. Prices of these companies’
securities may be more volatile than other securities, particularly over the
short term.
Large Capitalization Company Risk. Large
capitalization companies may fall out of favor with investors based on market
and economic conditions. In addition, larger companies may not be able to attain
the high growth rates of successful smaller companies and may be less capable of
responding quickly to competitive challenges and industry changes.
Small- and Mid-Capitalization Companies Risk.
Securities issued by small- and mid-capitalization companies may be more
volatile in price and less liquid than those of larger companies and may involve
more risks. Such risks may include greater sensitivity to changing economic
conditions, including interest rate increases as small- and mid-capitalization
companies may find it more difficult to borrow money to continue or expand
operations, or may have difficulty in repaying any loans; less certain growth
prospects and fewer funds for growth
and development; less experienced management; and limited or less developed
product lines and markets. Because small- and mid-capitalization companies
typically reinvest a high proportion of their earnings in their businesses, they
may not pay dividends for some time, particularly if they are newer
companies. Smaller companies’
securities often trade in lower volumes and in many instances, are traded
over-the-counter or on a regional securities exchange, where the frequency and
volume of trading is substantially less than is typical for securities of larger
companies traded on national securities exchanges. Therefore, the securities of
smaller companies may be subject to wider price fluctuations and it might be
harder for the Fund to dispose of its holdings at an acceptable price when it
wants to sell them.
Geographic Focus Risk. The Fund may from time
to time have a substantial amount of its assets invested in securities of
issuers located in a single country or a limited number of countries. Adverse
economic, political or social conditions in those countries may therefore have a
significant negative impact on the Fund’s investment performance. This risk is heightened if the Fund focuses
its investments in emerging market countries or developed countries prone to
periods of instability.
Sector Focus Risk To the extent that the Fund
focuses on particular industries, sectors or types of investment from time to
time, the Fund may be subject to greater risks of adverse developments in such
areas of focus than a fund that invests in a wider variety of industries,
sectors or investments.
Depositary Receipts Risk. Depositary receipts
are subject to many of the same risks as direct investments in the underlying
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Fund may therefore receive less timely information or have
less control than if it invested directly in the foreign issuer. For some depositary receipts, the custodian
or similar financial institution that holds the issuer's shares in a trust
account is located in the issuer's home country. The Fund could be exposed to
the credit risk of the custodian or financial institution, and in cases where
the issuer’s home country does not have developed financial markets, greater
market risk. In addition, the depository institution may not have physical
custody of the underlying securities at all times and may charge fees for
various services, including forwarding dividends and interest and corporate
actions. The Fund would be expected to pay a share of the additional fees, which
it would not pay if investing directly in the foreign securities.
ESG Risk. Because the Fund evaluates ESG
factors to assess and exclude certain investments for non-financial reasons, the
Fund may forego some market opportunities available to funds that do not use
these ESG factors. Information used by the Fund to evaluate ESG factors,
including data provided by third-party vendors, may not be readily available,
complete or accurate, and may vary across providers and issuers and within
industries, which could negatively impact the Fund’s ability to apply its
methodology and in turn could negatively impact the Fund’s performance.
Currently, there is a lack of common industry standards relating to the
development and application of ESG criteria which may make it difficult to
compare the Fund’s principal investment strategies with the investment
strategies of other funds that apply certain ESG criteria or that use a
different third-party vendor for ESG data. In addition, the Fund’s assessment of
a company may differ from that of other funds or an investor. As a result, the
companies deemed eligible for inclusion in the Fund’s portfolio may not reflect
the beliefs or values of any particular investor and may not be deemed to
exhibit positive or favorable ESG characteristics if different metrics were used
to evaluate them. Regulatory changes or interpretations regarding the
definitions and/or use of ESG criteria could have a material adverse effect on
the Fund’s ability to invest in accordance with its investment policies and/or
achieve its investment objective.
Investments in Underlying Funds Risk. To the
extent the Fund invests in shares of other investment companies, including
mutual funds and ETFs, the Fund bears its proportionate share of the underlying
fund’s fees and expenses, such as investment advisory fees and other operating
expenses that are separate from those of the Fund. The Fund is also subject to
the risks associated with the securities in which the underlying fund
invests.
Non-Diversification Risk. The Fund is
non-diversified and can invest a greater portion of its assets in the
obligations or securities of a small number of issuers or any single issuer than
a diversified fund can. A change
in the value of one or a few issuers’
securities will therefore affect the value of the Fund more than if it was a
diversified fund.
Management Risk. The Fund is actively
managed and could experience losses if the Advisor and Sub-Advisor’s judgment
about markets, interest rates or the attractiveness, relative values, liquidity,
or potential appreciation of particular investments made for the Fund’s
portfolio prove to be incorrect. There can be no guarantee that these techniques
or the Advisor and Sub-Advisor’s investment decisions will produce the desired
results. Additionally, legislative, regulatory, or tax developments may affect
the investment techniques available to the Advisor and Sub-Advisor in connection
with managing the Fund and may also adversely affect the ability of the Fund to
achieve its investment goal.
Market
Trading Risks.
Absence of active market. Although shares of
the Fund are listed for trading on one or more stock exchanges, there can be no
assurance that an active trading market for such shares will develop or be
maintained. There are no obligations of market makers to make a market in the
Fund’s shares or of an Authorized Participant to submit purchase or redemption
orders for Creation Units. Decisions by market makers or Authorized Participants
to reduce their role or step away from these activities in times of market
stress could inhibit the effectiveness of the arbitrage process in maintaining
the relationship between the underlying value of the Fund’s portfolio securities
and the Fund’s market price. Additionally, in stressed market conditions, the
market for the Fund’s shares may become less liquid in response to deteriorating
liquidity in the markets for the Fund’s portfolio holdings, which may cause a
significant variance in the market price of the Fund’s shares and their
underlying value. The absence of an
active market for the Fund’s shares may contribute to the Fund’s shares trading
at a premium or discount to its NAV and may contribute to greater than normal
intraday bid/ask spreads.
Secondary listings. The Fund’s shares may be
listed or traded on U.S. and non-U.S. stock exchanges other than the U.S. stock
exchange where the Fund’s primary listing is maintained, and may otherwise be
made available to non-U.S. investors through funds or structured investment
vehicles similar to depositary receipts.
The Fund’s shares may be less
actively traded in certain markets than in others, and investors are subject to
the execution and settlement risks and market standards of the market where they
or their broker direct their trades for execution. Certain information available
to investors who trade Fund shares on a U.S. stock exchange during regular U.S.
market hours may not be available to investors who trade in other markets, which
may result in secondary market prices in such markets being less
efficient.
Secondary market trading. Shares of the Fund
may trade in the secondary market at times when the Fund does not accept orders
to purchase or redeem shares. At such times, shares may trade in the secondary
market with more significant premiums or discounts than might be experienced at
times when the Fund accepts purchase and redemption orders.
There can be no assurance
that the Fund’s shares will continue to trade on a stock exchange or in any
market or that the Fund’s shares will continue to meet the requirements for
listing or trading on any exchange or in any market, or that such requirements
will remain unchanged. Secondary market trading in Fund shares may be halted by
a stock exchange because of market conditions or other reasons. In addition,
trading in Fund shares on a stock exchange or in any market may be subject to
trading halts caused by extraordinary market volatility pursuant to “circuit
breaker” rules on the stock exchange or market.
During a “flash crash,” the
market prices of the Fund’s shares may decline suddenly and significantly. Such
a decline may not reflect the performance of the portfolio securities held by
the Fund. Flash crashes may cause Authorized Participants and other market
makers to limit or cease trading in the Fund’s shares for temporary or longer
periods. Shareholders could suffer significant losses to the extent that they
sell shares at these temporarily low market prices.
Shares of the Fund, similar
to shares of other issuers listed on a stock exchange, may be sold short and are
therefore subject to the risk of increased volatility associated with short
selling.
Premium/Discount. Shares of the Fund may trade
at prices other than NAV. Shares of the Fund trade on stock exchanges at prices
at, above or below their most recent NAV. The NAV of the Fund is calculated at
the end of each business day and fluctuates with changes in the market value of
the Fund’s holdings since the most recent calculation. The trading prices of the
Fund’s shares fluctuate continuously throughout trading hours based on market
supply and demand rather than NAV. As a result, the trading prices of the Fund’s
shares may deviate significantly from NAV during periods of market
volatility.
Any of these factors, among
others, may lead to the Fund’s shares trading at a premium or discount to NAV.
Thus, you may pay more (or less) than NAV when you buy shares of the Fund in the
secondary market, and you may receive less (or more) than NAV when you sell
those shares in the secondary market. The investment manager cannot predict
whether shares will trade above (premium), below (discount) or at NAV. Because
shares can be created and redeemed in Creation Units at NAV, the investment
manager believes that large discounts or premiums to the NAV of the Fund are not
likely to be sustained over the long-term. While the creation/redemption feature
is designed to make it likely that the Fund’s shares normally will trade on
stock exchanges at prices close to the Fund’s next calculated NAV, exchange
prices are not expected to correlate exactly with the Fund’s NAV due to timing
reasons as well as market supply and demand factors. In addition, disruptions to
creations and redemptions or extreme market volatility may result in trading
prices for shares of the Fund that differ significantly from its NAV.
Cost of buying or selling Fund shares. Buying
or selling Fund shares on an exchange involves two types of costs that apply to
all securities transactions. When buying or selling shares of the Fund through a
broker, you will likely incur a brokerage commission or other charges imposed by
brokers as determined by that broker. In addition, you may incur the cost of the
“spread,” that is, the difference between what investors are willing to pay for
Fund shares (the “bid” price) and the price at which they are willing to sell
Fund shares (the “ask” price). Because of the costs inherent in buying or
selling Fund shares, frequent trading may detract significantly from investment
results and an investment in Fund shares may not be advisable for investors who
anticipate regularly making small investments.
International Closed Market Trading Risk. To
the extent that the underlying securities held by the Fund trade on an exchange
that is closed when the securities exchange on which the Fund shares list and
trade is open, there may be market uncertainty about the stale security pricing
(i.e., the last quote from its closed foreign market) resulting in premiums or
discounts to NAV that may be greater than those experienced by other ETFs.
Authorized Participant Concentration Risk. Only
an Authorized Participant may engage in creation or redemption transactions
directly with the Fund. The Fund has a limited number of institutions that act
as Authorized Participants. To the extent that these institutions exit the
business or are unable to proceed with creation and/or redemption orders with
respect to the Fund and no other Authorized Participant is able to step forward
to create or redeem Creation Units (as defined below), Fund shares may trade at
a discount to NAV and possibly face trading halts and/or delisting. This risk
may be more pronounced in volatile markets, potentially where there are
significant redemptions in ETFs generally.
New Fund Risk. The Fund is a new fund, with a
limited or no operating history and a small asset base. There can be no
assurance that the Fund will grow to or maintain a viable size. Due to the
Fund's small asset base, certain of the Fund's expenses and its portfolio
transaction costs may be higher than those of a fund with a larger asset base.
To the extent that the Fund does not grow to or maintain a viable size, it may
be liquidated, and the expenses, timing and tax consequences of such liquidation
may not be favorable to some shareholders.
Small Fund Risk. When the Fund’s size is
small, the Fund may experience low trading volume and wide bid/ask spreads. In
addition, the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. If the Fund were to be required to
delist from the listing exchange, the value of the Fund may rapidly decline and
performance may be negatively impacted. In addition, any resulting liquidation
of the Fund could cause the Fund to incur elevated transaction costs for the
Fund and negative tax consequences for its shareholders.
Large Shareholder Risk. Certain large
shareholders, including other funds or accounts advised by the Advisor or an
affiliate of the Advisor, may from time to time own a substantial amount of the
Fund’s shares. In addition, a third party investor, the Advisor or an affiliate
of the Advisor, an authorized participant, a lead market maker, or another
entity may invest in the Fund and hold its investment for a limited period of
time solely to facilitate
commencement of the Fund or
to facilitate the Fund’s achieving a specified size or scale. There can be no
assurance that any large shareholder would not redeem its investment.
Dispositions of a large number of shares by these shareholders may adversely
affect the Fund’s liquidity and net assets to the extent such transactions are
executed directly with the Fund in the form of redemptions through an authorized
participant, rather than executed in the secondary market. These redemptions may
also force the Fund to sell portfolio securities when it might not otherwise do
so, which may negatively impact the Fund’s NAV and increase the Fund’s brokerage
costs. To the extent these large shareholders transact in shares on the
secondary market, such transactions may account for a large percentage of the
trading volume on the listing exchange and may, therefore, have a material
upward or downward effect on the market price of the shares.
Emerge EMPWR Unified Sustainable
Equity ETF
Investment
Objective
The Fund’s investment
objective is to seek long-term growth of capital. The Fund’s investment
objective is non-fundamental, which means it may be changed by the board of
trustees without shareholder approval. Shareholders will be given at least 60
days’ advance notice of any change to the Fund’s investment objective.
Principal
Investment Strategies
Under normal market
conditions, the Fund invests at least 80% of its net assets, plus borrowings for
investment purposes, if any, in equity securities that, at the time of
investment, meet the ESG criteria established by Emerge Capital Management Inc.
(Emerge or the Advisor). Shareholders will be given at least 60
days’ advance notice of any change to the Fund’s 80% policy.
An equity security, or
stock, represents a proportionate share, or the right to acquire a proportionate
share, of the ownership of a company; an equity security’s value is based on the
success of the company’s business and the value of its assets, as well as
general market conditions. Equity securities include common stock (including
real estate investment trusts), preferred stock, securities convertible into
common stock, depositary receipts, or securities or other instruments whose
price is linked to the value of common stock. Depositary receipts are
certificates typically issued by a bank or trust company that give their holders
the right to receive securities issued by a foreign or domestic company.
The
Fund’s investments may include securities of U.S. and non-U.S. issuers,
including issuers located in emerging markets countries.
The
Fund may invest in the securities of issuers of all capitalization sizes.
The
Fund is non-diversified, which means it can invest a greater percentage of its
assets in a small group of issuers or any one issuer than a diversified fund
can.
The Fund is structured as a
multi-manager fund (meaning the Fund's assets are managed by multiple
sub-advisors) and the Fund’s investment manager, Emerge, has overall
responsibility for the Fund’s investments. The Fund’s multi-manager structure
combines a select set of Emerge’s EMPWR equity investment managers to produce a
portfolio consisting of the securities of the following individual strategies
employed by each sub-advisor: dividend yield, equity growth, global core, and
emerging markets.
The Advisor is responsible
for allocating and re-allocating the Fund’s assets among the sub-advisors and/or
any investment funds in which the Fund may invest and for cash management, and
for monitoring and assessing the performance of each sub-advisor. The Advisor
uses asset allocation and macro-economic factors to determine the optimal
combination of strategies. Each sub-advisor acts independently from the others
and uses its own distinct investment style and investment process in
recommending securities to buy and sell.
Emerge
considers ESG factors within its securities selection process for each equity
security for the Fund. Emerge assesses whether a company meets the Fund’s ESG
standards based on its proprietary ESG framework. Emerge uses ESG research,
ratings, and analytics from independent third-party data providers to screen
investments based on ESG criteria determined by Emerge. The Fund may hold
securities of issuers for which third-party data is not available. Where an
issuer has not been assigned a rating by the third-party data provider, Emerge’s
ESG analysis incorporates publicly available data. Emerge has the right to
change the third-party data providers that support its ESG framework at any
time. In determining whether an issuer meets Emerge’s ESG investment criteria,
Emerge considers: (i) negative screening criteria to eliminate certain types of
issuers in light of social and environmental considerations; and (ii)
governance-related risk ratings published by third party data providers,
including Sustainalytics, designed to measure the degree to which a company’s
economic value is at risk driven by the magnitude of a company’s unmanaged ESG
risks. [As of the date of this Prospectus,] Emerge applies a negative screen to
exclude companies for investment that derive 20% or more of their revenues from
biological and chemical weapons, thermal coal extraction, gambling, adult
entertainment, tobacco production, recreational cannabis and alcoholic
beverages. Emerge may modify the above list of negative screens at any time,
without prior shareholder approval or notice. ESG risk ratings data compiled by
third-party data providers forms the basis for Emerge’s governance-related risk
assessment and screening. Emerge may consider excluding, reducing or eliminating
exposure to issuers with high ESG risk ratings, as determined by one or more
third-party data providers.
In
attempting to meet its investment objective, the Fund may engage in active and
frequent trading of portfolio securities.
The Fund is an actively
managed ETF that does not seek to replicate the performance of a specified
index. Accordingly, Emerge has discretion on a daily basis to manage the Fund’s
portfolio in accordance with the Fund’s investment objective.
When the Advisor or a
sub-advisor believes market or economic conditions are unfavorable for
investors, the Advisor may invest up to 100% of the Fund’s assets in a temporary
defensive manner by holding all or a substantial portion of its assets in cash,
cash equivalents or other high quality short-term investments. Temporary
defensive investments generally may include short-term U.S. government
securities, high grade commercial paper, bank obligations, repurchase
agreements, money market fund shares (including shares of an affiliated money
market fund), and other money market instruments. The Fund also may invest in
these types of securities or hold cash while looking for suitable investment
opportunities, to maintain liquidity. In these circumstances, the Fund may be
unable to achieve its investment goal.
The Fund may invest
securities of other investment companies, including ETFs.
The Fund’s investments in
the types of securities and other investments described in this prospectus vary
from time to time, and, at any time, the Fund may not be invested in all of the
types of securities and other investments described in this prospectus. The Fund
may also invest in securities and other investments not described in this
prospectus. More detailed information about the Fund and its policies and risks
can be found in the Fund’s SAI.
Principal
Risks
Market Risk. The market values of securities or
other investments owned by the Fund will go up or down, sometimes rapidly or
unpredictably. The Fund’s investments may decline in value due to factors
affecting individual issuers (such as the results of supply and demand), or
sectors within the securities markets. The value of a security or other
investment also may go up or down due to general market conditions that are not
specifically related to a particular issuer, such as real or perceived adverse
economic conditions, changes in interest rates or exchange rates, or adverse
investor sentiment generally. Global economies and financial markets are
becoming increasingly interconnected, and conditions and events in one country,
region or financial market may adversely impact issuers in a different country,
region or financial market. These risks may be magnified if certain events or
developments adversely interrupt the global supply chain, and could affect
companies worldwide.
During a general downturn
in the securities markets, multiple asset classes may decline in value. When
markets perform well, there can be no assurance that securities or other
investments held by the Fund will participate in or otherwise benefit from the
advance. Stock prices tend to go up and down more dramatically than those of
debt securities. A slower-growth or recessionary economic environment could have
an adverse effect on the prices of the various stocks held by the Fund.
Events such as war; acts of
terrorism; social unrest; natural, environmental, or humanmade disasters, and
the spread of infectious illness or other public health threats can cause
significant economic impacts, including market closures and dislocations,
extreme volatility, liquidity constraints, and increased trading costs, that can
significantly impact the Fund and its investments. The full impact such events,
including the COVID-19 pandemic, is unpredictable, may result in a high degree of
uncertainty for potentially extended periods of time, and may adversely affect
the Fund’s performance. Efforts to contain the spread of COVID-19 have resulted
in global travel restrictions and disruptions of healthcare systems, business
operations and supply chains, layoffs, reduced consumer demand, defaults and
credit ratings downgrades, and other significant economic impacts. The effects
of COVID-19 have impacted global economic activity across many industries and
may heighten other pre-existing political, social and economic risks, locally or
globally.
Multi-Manager Risk. The Fund’s performance
depends on the skill of the Advisor in selecting, overseeing, and allocating
Fund assets to the sub-advisors. The sub-advisors’ investment styles may not
always be complementary and the sub-advisors may make decisions that conflict
with each other. For example, it is possible that a sub-advisor may purchase a
security for the Fund at the same time that another sub-advisor sells the same
security, resulting in higher expenses without accomplishing any net investment
result; or that several sub-advisors purchase the same security at the same
time, without aggregating their transactions, resulting in higher expenses.
Further, the Fund's exposure to a given security, industry, sector or market
capitalization could be smaller or larger than if the Fund were managed by a
single adviser, which could adversely affect the Fund's performance depending on
the performance of those securities and the overall market environment.
Foreign Securities Risk. The Fund's foreign
investments may be adversely affected by political, economic, and social
instability and volatility, changes in economic or taxation policies; difficulty
in enforcing obligations; lack of or ineffective government supervision and
regulation of securities and currency markets, trading systems, and brokers;
decreased liquidity and increased volatility; lack of or limited availability of
information, which can impede the Fund’s ability to evaluate such investments;
and trading restrictions and economic sanctions. Foreign companies generally may
be subject to less stringent regulations than U.S. companies, including
financial reporting requirements and auditing and accounting controls, and may
therefore be more susceptible to fraud or corruption. The Fund’s foreign
investments may be subject to currency exchange rate fluctuations, which may
cause the value of securities denominated in such foreign currency (or other
instruments through which the Fund has exposure to foreign currencies) to
decline in value. Foreign investments also involve the risk of the possible
seizure, nationalization or expropriation of the issuer or foreign deposits (in
which the Fund could lose its entire investments in a certain market) and the
possible adoption of foreign governmental restrictions such as exchange
controls. The risks of foreign investments may be greater in developing or
emerging market countries.
Emerging Markets Securities Risk. The Fund’s
investments in emerging markets are subject to the risks of foreign investing
generally, and have additional heightened risks due to a lack of established
legal, political, business, and social frameworks to support securities markets.
These risks include currency exchange rate volatility and increased potential
for currency devaluations; greater sensitivity to interest rate changes; higher
rates of inflation; lower trading volumes; pervasiveness of corruption and
fraud; less government supervision and regulation; and more governmental
limitations on foreign investment than more developed markets. Such countries’
economies may be more dependent on relatively few industries or investors that
may be highly vulnerable to local and global changes. Companies in emerging
market countries generally may be subject to less stringent regulatory,
disclosure, financial reporting, accounting, auditing and recordkeeping
standards than companies in more developed countries. As a result, information
about such companies may be less available and reliable, which can impede the
Fund’s ability to evaluate such companies. In addition, certain emerging market
countries have material limitations on Public Company Accounting Oversight Board
(PCAOB) inspection, investigation and enforcement capabilities which hinder the
ability to engage in independent oversight or inspection of accounting firms
located in or operating in certain emerging markets; therefore, there is no
guarantee that the quality of financial reporting or the audits conducted by
audit firms of emerging market issuers meet PCAOB standards. The financial
institutions and issuers with which the Fund transacts in emerging markets
countries may possess less financial sophistication, creditworthiness and/or
resources possessed than those in developed countries. Securities law in many
emerging market countries may be relatively new and unsettled and change quickly
and unpredictably. The ability to bring and enforce actions (including
bankruptcy, confiscatory taxation, expropriation, nationalization of a company’s
assets, restrictions on foreign ownership of local companies, restrictions on
withdrawing assets from the country, protectionist measures and practices such
as share blocking), or to obtain information needed to pursue or enforce such
actions, may be limited and shareholder claims may be difficult or impossible to
pursue. Taxation systems at the federal, regional, and local levels may be less
transparent and inconsistent enforced, and subject to sudden change, as compared
to developed countries. In addition, the ability of foreign entities to
participate in privatization programs of certain developing or emerging market
countries may be limited by local law. Investments in emerging markets
securities may be subject to additional transaction costs, delays in settlement
procedures, and unexpected market closures.
Large Capitalization Company Risk. Large
capitalization companies may fall out of favor with investors based on market
and economic conditions. In addition, larger companies may not be able to attain
the high growth rates of successful smaller companies and may be less capable of
responding quickly to competitive challenges and industry changes.
Small- and Mid-Capitalization Companies Risk.
Securities issued by small- and mid-capitalization companies may be more
volatile in price and less liquid than those of larger companies and may involve
more risks. Such risks may include greater sensitivity to changing economic
conditions, including interest rate increases as small- and mid-capitalization
companies may find it more difficult to borrow money to continue or expand
operations, or may have difficulty in repaying any loans; less certain growth
prospects and fewer funds for growth
and development; less experienced management; and limited or less developed
product lines and markets. Because small- and mid-capitalization companies
typically reinvest a high proportion of their earnings in their businesses, they
may not pay dividends for some time, particularly if they are newer
companies. Smaller companies’
securities often trade in lower volumes and in many instances, are traded
over-the-counter or on a regional securities exchange, where the frequency and
volume of trading is substantially less than is typical for securities of larger
companies traded on national securities exchanges. Therefore, the securities of
smaller companies may
be subject to wider price
fluctuations and it might be harder for the Fund to dispose of its holdings at
an acceptable price when it wants to sell them.
Dividend Paying Stock Risk. Issuers that have
paid regular dividends or distributions to shareholders may not continue to do
so, or may not continue to do so at the same level, in the future. If the
dividends or distributions received by the Fund decreases, the Fund may have
less income to distribute to the Fund’s shareholders. Securities that pay
dividends, as a group, can fall out of favor with the market, causing such
securities to underperform securities that do not pay dividends. Depending upon
market conditions and political and legislative responses to such conditions,
dividend-paying securities that meet the Fund’s investment criteria may not be
widely available and/or may be highly concentrated in only a few market sectors.
In addition, common stocks with higher dividend yields can be sensitive to
interest rate movements: when interest rates rise, the prices of these stocks
may tend to fall. Conversely, the prices of higher yielding stocks may tend to
rise when interest rates fall. Interest rate changes can be sudden and
unpredictable and are influenced by a number of factors including government
policy, monetary policy, inflation expectations, perceptions of risk, and supply
and demand of bonds.
Geographic Focus Risk. The Fund may from time
to time have a substantial amount of its assets invested in securities of
issuers located in a single country or a limited number of countries. Adverse
economic, political or social conditions in those countries may therefore have a
significant negative impact on the Fund’s investment performance. This risk is heightened if the Fund focuses
its investments in emerging market countries or developed countries prone to
periods of instability.
Sector Focus Risk To the extent that the Fund
focuses on particular industries, sectors or types of investment from time to
time, the Fund may be subject to greater risks of adverse developments in such
areas of focus than a fund that invests in a wider variety of industries,
sectors or investments.
Depositary Receipts Risk. Depositary receipts
are subject to many of the same risks as direct investments in the underlying
securities. In addition, the underlying issuers of certain depositary receipts
are under no obligation to distribute shareholder communications or pass through
any voting rights with respect to the deposited securities to the holders of
such receipts. The Fund may therefore receive less timely information or have
less control than if it invested directly in the foreign issuer. For some depositary receipts, the custodian
or similar financial institution that holds the issuer's shares in a trust
account is located in the issuer's home country. The Fund could be exposed to
the credit risk of the custodian or financial institution, and in cases where
the issuer’s home country does not have developed financial markets, greater
market risk. In addition, the depository institution may not have physical
custody of the underlying securities at all times and may charge fees for
various services, including forwarding dividends and interest and corporate
actions. The Fund would be expected to pay a share of the additional fees, which
it would not pay if investing directly in the foreign securities.
Thematic Investing Risk. The Fund’s investment
strategies incorporate the identification of thematic investment opportunities
and the Fund’s performance may be negatively impacted if s sub-advisor does not
correctly identify such opportunities or if the theme develops in an unexpected
manner. Sales growth and acceleration for a particular economic theme may not
continue, and the business models employed by the companies focused on a
particular economic theme may not prove to be successful. Securities selected
pursuant to an investment theme may be impacted by factors unrelated to the
theme, particularly with respect to companies that may have multiple lines of
business, and may underperform. Adverse developments and risks unrelated to the
investment theme affecting companies in which the Fund invests may negatively
impact the Fund’s performance. The customers and/or suppliers of thematic
companies may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on thematic companies.
The Fund’s thematic
investments will also subject the Fund to growth style investing risks. Growth
stock prices reflect projections of future earnings or revenues, and can,
therefore, fall dramatically if the company fails to meet those projections.
Growth stocks may be more expensive relative to their current earnings or assets
compared to value or other stocks, and if earnings growth expectations moderate,
their valuations may return to more typical norms, causing their stock prices to
fall. Prices of these companies’ securities may be more volatile than other
securities, particularly over the short term.
Active Trading Risk. Active trading of
portfolio securities may result in added expenses, a lower return and increased
tax liability.
ESG Risk. Because the Fund evaluates ESG
factors to assess and exclude certain investments for non-financial reasons, the
Fund may forego some market opportunities available to funds that do not use
these ESG factors.
Information used by the
Fund to evaluate ESG factors, including data provided by third-party vendors,
may not be readily available, complete or accurate, and may vary across
providers and issuers and within industries, which could negatively impact the
Fund’s ability to apply its methodology and in turn could negatively impact the
Fund’s performance. Currently, there is a lack of common industry standards
relating to the development and application of ESG criteria which may make it
difficult to compare the Fund’s principal investment strategies with the
investment strategies of other funds that apply certain ESG criteria or that use
a different third-party vendor for ESG data. In addition, the Fund’s assessment
of a company may differ from that of other funds or an investor. As a result,
the companies deemed eligible for inclusion in the Fund’s portfolio may not
reflect the beliefs or values of any particular investor and may not be deemed
to exhibit positive or favorable ESG characteristics if different metrics were
used to evaluate them. Regulatory changes or interpretations regarding the
definitions and/or use of ESG criteria could have a material adverse effect on
the Fund’s ability to invest in accordance with its investment policies and/or
achieve its investment objective.
Investments in Underlying Funds Risk. To the
extent the Fund invests in shares of other investment companies, including
mutual funds and ETFs, the Fund bears its proportionate share of the underlying
fund’s fees and expenses, such as investment advisory fees and other operating
expenses that are separate from those of the Fund. The Fund is also subject to
the risks associated with the securities in which the underlying fund
invests.
Non-Diversification Risk. The Fund is
non-diversified and can invest a greater portion of its assets in the
obligations or securities of a small number of issuers or any single issuer than
a diversified fund can. A change
in the value of one or a few issuers’
securities will therefore affect the value of the Fund more than if it was a
diversified fund.
Management Risk. The Fund is actively
managed and could experience losses if the Advisor or one of the sub-advisors’s
judgment about markets, interest rates or the attractiveness, relative values,
liquidity, or potential appreciation of particular investments made for the
Fund’s portfolio prove to be incorrect. There can be no guarantee that these
techniques or the Advisor or one of the sub-advisors’ investment decisions will
produce the desired results. Additionally, legislative, regulatory, or tax
developments may affect the investment techniques available to the Advisor or
one of the sub-advisors in connection with managing the Fund and may also
adversely affect the ability of the Fund to achieve its investment goal.
Market
Trading Risks.
Absence of active market. Although shares of
the Fund are listed for trading on one or more stock exchanges, there can be no
assurance that an active trading market for such shares will develop or be
maintained. There are no obligations of market makers to make a market in the
Fund’s shares or of an Authorized Participant to submit purchase or redemption
orders for Creation Units. Decisions by market makers or Authorized Participants
to reduce their role or step away from these activities in times of market
stress could inhibit the effectiveness of the arbitrage process in maintaining
the relationship between the underlying value of the Fund’s portfolio securities
and the Fund’s market price. Additionally, in stressed market conditions, the
market for the Fund’s shares may become less liquid in response to deteriorating
liquidity in the markets for the Fund’s portfolio holdings, which may cause a
significant variance in the market price of the Fund’s shares and their
underlying value. The absence of an
active market for the Fund’s shares may contribute to the Fund’s shares trading
at a premium or discount to its NAV and may contribute to greater than normal
intraday bid/ask spreads.
Secondary listings. The Fund’s shares may be
listed or traded on U.S. and non-U.S. stock exchanges other than the U.S. stock
exchange where the Fund’s primary listing is maintained, and may otherwise be
made available to non-U.S. investors through funds or structured investment
vehicles similar to depositary receipts.
The Fund’s shares may be less
actively traded in certain markets than in others, and investors are subject to
the execution and settlement risks and market standards of the market where they
or their broker direct their trades for execution. Certain information available
to investors who trade Fund shares on a U.S. stock exchange during regular U.S.
market hours may not be available to investors who trade in other markets, which
may result in secondary market prices in such markets being less
efficient.
Secondary market trading. Shares of the Fund
may trade in the secondary market at times when the Fund does not accept orders
to purchase or redeem shares. At such times, shares may trade in the secondary
market with more significant premiums or discounts than might be experienced at
times when the Fund accepts purchase and redemption orders.
There can be no assurance
that the Fund’s shares will continue to trade on a stock exchange or in any
market or that the Fund’s shares will continue to meet the requirements for
listing or trading on any exchange or in any market, or that such requirements
will remain unchanged. Secondary market trading in Fund shares may be halted by
a stock exchange because of market conditions or other reasons. In addition,
trading in Fund shares on a stock exchange or in any market may be subject to
trading halts caused by extraordinary market volatility pursuant to “circuit
breaker” rules on the stock exchange or market.
During a “flash crash,” the
market prices of the Fund’s shares may decline suddenly and significantly. Such
a decline may not reflect the performance of the portfolio securities held by
the Fund. Flash crashes may cause Authorized Participants and other market
makers to limit or cease trading in the Fund’s shares for temporary or longer
periods. Shareholders could suffer significant losses to the extent that they
sell shares at these temporarily low market prices.
Shares of the Fund, similar
to shares of other issuers listed on a stock exchange, may be sold short and are
therefore subject to the risk of increased volatility associated with short
selling.
Premium/Discount. Shares of the Fund may trade
at prices other than NAV. Shares of the Fund trade on stock exchanges at prices
at, above or below their most recent NAV. The NAV of the Fund is calculated at
the end of each business day and fluctuates with changes in the market value of
the Fund’s holdings since the most recent calculation. The trading prices of the
Fund’s shares fluctuate continuously throughout trading hours based on market
supply and demand rather than NAV. As a result, the trading prices of the Fund’s
shares may deviate significantly from NAV during periods of market
volatility.
Any of these factors, among
others, may lead to the Fund’s shares trading at a premium or discount to NAV.
Thus, you may pay more (or less) than NAV when you buy shares of the Fund in the
secondary market, and you may receive less (or more) than NAV when you sell
those shares in the secondary market. The investment manager cannot predict
whether shares will trade above (premium), below (discount) or at NAV. Because
shares can be created and redeemed in Creation Units at NAV, the investment
manager believes that large discounts or premiums to the NAV of the Fund are not
likely to be sustained over the long-term. While the creation/redemption feature
is designed to make it likely that the Fund’s shares normally will trade on
stock exchanges at prices close to the Fund’s next calculated NAV, exchange
prices are not expected to correlate exactly with the Fund’s NAV due to timing
reasons as well as market supply and demand factors. In addition, disruptions to
creations and redemptions or extreme market volatility may result in trading
prices for shares of the Fund that differ significantly from its NAV.
Cost of buying or selling Fund shares. Buying
or selling Fund shares on an exchange involves two types of costs that apply to
all securities transactions. When buying or selling shares of the Fund through a
broker, you will likely incur a brokerage commission or other charges imposed by
brokers as determined by that broker. In addition, you may incur the cost of the
“spread,” that is, the difference between what investors are willing to pay for
Fund shares (the “bid” price) and the price at which they are willing to sell
Fund shares (the “ask” price). Because of the costs inherent in buying or
selling Fund shares, frequent trading may detract significantly from investment
results and an investment in Fund shares may not be advisable for investors who
anticipate regularly making small investments.
International Closed Market Trading Risk. To
the extent that the underlying securities held by the Fund trade on an exchange
that is closed when the securities exchange on which the Fund shares list and
trade is open, there may be market uncertainty about the stale security pricing
(i.e., the last quote from its closed foreign market) resulting in premiums or
discounts to NAV that may be greater than those experienced by other ETFs.
Authorized Participant Concentration Risk. Only
an Authorized Participant may engage in creation or redemption transactions
directly with the Fund. The Fund has a limited number of institutions that act
as Authorized Participants. To the extent that these institutions exit the
business or are unable to proceed with creation and/or redemption orders with
respect to the Fund and no other Authorized Participant is able to step forward
to create or redeem Creation Units (as defined below), Fund shares may trade at
a discount to NAV and possibly face trading halts and/or delisting. This risk
may be more pronounced in volatile markets, potentially where there are
significant redemptions in ETFs generally.
New Fund Risk. The Fund is a new fund, with a
limited or no operating history and a small asset base. There can be no
assurance that the Fund will grow to or maintain a viable size. Due to the
Fund's small asset base, certain of the Fund's expenses and its portfolio
transaction costs may be higher than those of a fund with a larger asset base.
To the extent that the Fund
does not grow to or maintain a viable size, it may be liquidated, and the
expenses, timing and tax consequences of such liquidation may not be favorable
to some shareholders.
Small Fund Risk. When the Fund’s size is
small, the Fund may experience low trading volume and wide bid/ask spreads. In
addition, the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. If the Fund were to be required to
delist from the listing exchange, the value of the Fund may rapidly decline and
performance may be negatively impacted. In addition, any resulting liquidation
of the Fund could cause the Fund to incur elevated transaction costs for the
Fund and negative tax consequences for its shareholders.
Large Shareholder Risk. Certain large
shareholders, including other funds or accounts advised by the Advisor or an
affiliate of the Advisor, may from time to time own a substantial amount of the
Fund’s shares. In addition, a third party investor, the Advisor or an affiliate
of the Advisor, an authorized participant, a lead market maker, or another
entity may invest in the Fund and hold its investment for a limited period of
time solely to facilitate commencement of the Fund or to facilitate the Fund’s
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment. Dispositions of a large number of
shares by these shareholders may adversely affect the Fund’s liquidity and net
assets to the extent such transactions are executed directly with the Fund in
the form of redemptions through an authorized participant, rather than executed
in the secondary market. These redemptions may also force the Fund to sell
portfolio securities when it might not otherwise do so, which may negatively
impact the Fund’s NAV and increase the Fund’s brokerage costs. To the extent
these large shareholders transact in shares on the secondary market, such
transactions may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Management
Investment
Manager and Sub-Advisors
Emerge Capital Management
Inc., 325 Delaware Avenue, Suite 204, Buffalo, New York 14202, is each Fund’s
investment manager. Emerge manages, as of [ ], over $[ ] in assets, and
has been providing investment management services since 2016. Emerge is a
majority woman-owned firm.
The following sub-advisors
serve as sub-advisors to the Funds (Sub-Advisors) pursuant to a separate
agreement with Emerge:
Fund |
Sub-Advisors |
Emerge EMPWR Sustainable Dividend Equity ETF |
CAIM LLC, 595 Bay Isles Road, Suite 210,
LongBoat Key, Florida 34228
CAIM LLC manages, as of [ ], over $[ ] in assets, and has been
providing investment management services since [ ]. |
Emerge EMPWR Sustainable Select Growth Equity ETF |
Grace Capital, 400 Crown Colony Drive,
Suite 101, Quincy, Massachusetts 02169
Grace Capital manages, as of [ ], over $[ ] in assets, and has
been providing investment management services since [ ]. |
Emerge EMPWR Sustainable Global Core Equity ETF |
Zevin, 2 Oliver Street, Suite 806,
Boston, Massachusetts 02109
Zevin manages, as of [ ], over $[ ] in assets, and has been
providing investment management services since [ ]. |
Emerge EMPWR Sustainable Emerging Markets Equity ETF |
Channing Global, 801 Brickell Avenue,
Suite 800, Miami, Florida 33131
Channing Global manages, as of [ ], over $[ ] in assets, and
has been providing investment management services since [
]. |
Emerge EMPWR Unified Sustainable Equity ETF |
CAIM LLC, Grace Capital, Zevin and
Channing Global.
Please see above for a description of each sub-advisor’s business and
assets under management. |
Each Sub-Advisor provides
Emerge with investment management advice (which may include research and
analysis services). Each Sub-Advisor serves as a sub-advisor on a
non-discretionary basis, which means that the Sub-Advisors will not be
responsible for selecting brokers or placing the Fund’s trades. Rather, the
Sub-Advisors will provide trade recommendations to Emerge and, in turn, Emerge
will be responsible for selecting brokers and placing the Fund’s trades.
Each Sub-Advisor is part of
Emerge’s EMPWR program, an emerging managers program. Emerge’s EMPWR program
includes a roster of emerging portfolio managers with a special focus on women
portfolio managers.
The portfolio managers for
each Fund are as follows:
Fund |
Portfolio Managers |
|
|
Emerge EMPWR Sustainable Dividend Equity ETF |
Catherine Maniscalco
Avery
Catherine Maniscalco Avery is the Founder and President of CAIM LLC.
Prior to founding CAIM LLC in 2007, Ms. Avery worked for a number of
investment firms in the United States, including Morgan Stanley, Shearson
Lehman Hutton, Prudential Securities and Merrill
Lynch. |
Fund |
Portfolio Managers |
|
|
|
Ms. Avery has been a portfolio manager of the Fund since its
inception (2022).
Lisa Lake
Langley
Lisa Lake Langley is the Chief Executive Officer, President, and
Founder of Emerge and Emerge Canada Inc. Prior to founding Emerge in 2016,
Ms. Langley was the Chief Operating Officer and a Partner at Sandhill
Investment Management.
Ms. Langley has been a portfolio manager of the Fund since its
inception (2022). |
|
|
Emerge EMPWR Sustainable Select Growth Equity ETF |
Catherine
Faddis
Catherine Faddis is President and Chief Executive Officer of Grace
Capital. Prior to joining Grace Capital in [___], Ms. Faddis was an
Analyst at Putnam Investments, and Auditor and CPA at Deloitte.
Ms. Faddis has been a portfolio manager of the Fund since its
inception (2022).
Lisa Lake
Langley
Please see above for a description of Ms. Langley’s experience during
the past five years.
Ms. Langley has been a portfolio manager of the Fund since its
inception (2022). |
|
|
Emerge EMPWR Sustainable Global Core Equity ETF |
Jane Lou Li
Jane Lou Li is a Portfolio Manager and Senior Equity Analyst at
Zevin. Prior to joining Zevin in [ ], Ms. Li was a Portfolio Manager
and Director of Research at Grace Capital. Prior to joining Grace Capital,
Ms. Li was a founding partner and senior equity analyst at Monarch
Partners Asset Management, a fund manager and equity analyst at Fidelity
Investments, and an analyst at Goldman Sachs.
Ms. Li has been a portfolio manager of the Fund since its inception
(2022).
Lisa Lake
Langley
Please see above for a description of Ms. Langley’s experience during
the past five years.
Ms. Langley has been a portfolio manager of the Fund since its
inception (2022). |
|
|
Emerge EMPWR Sustainable Emerging Markets Equity ETF |
Joséphine
Jiménez
Joséphine Jiménez is Chief Investment Officer, Portfolio Manager,
Analyst, and Founder of Channing Global. Prior to founding Channing Global
in 2017, Ms. Jiménez was a Managing Member of Victoria Emerging Markets
and a consultant and portfolio manager at RockCreek.
Ms. Jiménez has been a portfolio manager of the Fund since its
inception (2022).
Lisa Lake
Langley
Please see above for a description of Ms. Langley’s experience during
the past five years.
Ms. Langley has been a portfolio manager of the Fund since its
inception (2022). |
|
|
Emerge EMPWR Unified Sustainable Equity ETF |
Catherine Maniscalco
Avery
Please see above for a description of Ms. Avery’s experience during
the past five years.
Ms. Avery has been a portfolio manager of the Fund since its
inception (2022).
Catherine Faddis |
Fund |
Portfolio Managers |
|
Please see above for a description of Ms. Faddis’ experience during
the past five years.
Ms. Faddis has been a portfolio manager of the Fund since its
inception (2022).
Jane Lou Li
Please see above for a description of Ms. Li’s experience during the
past five years.
Ms. Li has been a portfolio manager of the Fund since its inception
(2022).
Joséphine
Jiménez
Please see above for a description of Ms. Jimenez’s experience during
the past five years.
Ms. Jiménez has been a portfolio manager of the Fund since its
inception (2022).
Lisa Lake
Langley
Please see above for a description of Ms. Langley’s experience during
the past five years.
Ms. Langley has been a portfolio manager of the Fund since its
inception (2022). |
The Funds’ SAI provides
additional information about portfolio manager compensation, other accounts that
they manage and their ownership of Fund shares.
Each Fund pays Emerge a
unified management fee for managing the Fund’s assets. Pursuant to the
investment management agreement with Emerge ETF Trust (Trust) on behalf of the
Fund, Emerge pays all of the ordinary operating expenses of the Fund, [except
for (i) the Fund’s management fee, (ii) payments under the Fund’s Rule 12b-1
plan (if any), (iii) brokerage expenses (including any costs incidental to
transactions in portfolio securities or instruments), (iv) taxes, (v) interest
(including borrowing costs and dividend expenses on securities sold short and
overdraft charges), (vi) litigation expenses (including litigation to which the
Trust or the Fund may be a party and indemnification of the Trustees and
officers with respect thereto), and (vii) other non-routine or extraordinary
expenses, such as proxy-related expenses]. The fee is equal to an annual rate of
[ ]% of the average daily net assets of each Fund. Emerge pays each Sub-Advisor
for its services.
A discussion regarding the
basis for the board of trustees approving the investment management and
sub-advisory contracts of the Funds will be available in the Funds’ first report
to shareholders.
Exclusion of
Investment Manager from Commodity Pool Operator Definition
With respect to each Fund,
Emerge has claimed an exclusion from the definition of “commodity pool operator”
(CPO) under the Commodity Exchange Act (CEA) and the rules of the Commodity
Futures Trading Commission (CFTC) and, therefore, is not subject to CFTC
registration or regulation as a CPO. In addition, Emerge is relying upon a
related exclusion from the definition of “commodity trading advisor” (CTA) under
the CEA and the rules of the CFTC with respect to the Fund.
The terms of the CPO
exclusion require the Funds, among other things, to adhere to certain limits on
their investments in “commodity interests.” Commodity interests include
commodity futures, commodity options and swaps, which in turn include
non-deliverable forwards. The Funds are permitted to invest in these instruments
as further described in the Funds’ SAI. The Funds are not intended as a vehicle
for trading in the commodity futures, commodity options or swaps markets. The
CFTC has neither reviewed nor approved Emerge’s reliance on these exclusions, or
the Funds, their investment strategies or this prospectus.
[Manager
of Managers Structure]
[The board of trustees has
authorized each Fund to operate in a “manager of managers” structure whereby the
investment manager can appoint and replace both affiliated and unaffiliated
sub-advisors, and enter into, amend and terminate sub-advisory agreements with
such sub-advisors, each subject to board approval but without obtaining prior
shareholder approval (Manager of Managers Structure). The Funds will, however,
inform shareholders of the hiring of any new sub-advisor within 90 days after
the hiring. The Manager of Managers Structure provides the Fund with greater
flexibility and efficiency by preventing the Fund from incurring the expense and
delays associated with obtaining shareholder approval of such sub- advisory
agreements.
The use of the Manager of
Managers Structure with respect to the Funds is subject to certain conditions
that are set forth in SEC exemptive relief and no-action letter guidance issued
by the SEC staff. Under the Manager of Managers Structure, the investment
manager has the ultimate responsibility, subject to oversight by the Trust’s
board of trustees, to oversee sub-advisors and recommend their hiring,
termination and replacement. The investment manager will also, subject to the
review and oversight of the Trust’s board of trustees: set the Fund’s overall
investment strategy; evaluate, select and recommend sub-advisors to manage all
or a portion of the Fund’s assets; and implement procedures reasonably designed
to ensure that each sub-advisor complies with the Fund’s investment objective,
policies and restrictions. Subject to review and oversight by the Trust’s board
of trustees, the investment manager will allocate and, when appropriate,
reallocate the Fund’s assets among sub-advisors and monitor and evaluate the
sub-advisors’ performance.]
The Agreement and
Declaration of Trust (the “Declaration”) provides that by virtue of becoming a
shareholder of the Trust, each shareholder shall be held expressly to have
agreed to be bound by the provisions of the Declaration. However, shareholders
should be aware that they cannot waive their rights under the federal securities
laws. The Declaration provides a detailed process for the bringing of derivative
actions by shareholders for claims other than federal securities law claims
beyond the process otherwise required by law. The Trust’s process for bringing
derivative suits may be more restrictive than other investment companies. The
process for derivative actions for the Trust also may make it more expensive for
a shareholder to bring a suit than if the shareholder was not required to follow
such a process.
The Declaration also
requires that actions by shareholders against a Fund be brought only in certain
specified venues (the “Exclusive Jurisdictions”) and that the right to jury
trial be waived to the fullest extent permitted by law. Other investment
companies may not be subject to similar restrictions. In addition, the
designation of Exclusive Jurisdictions may make it more expensive for a
shareholder to bring a suit than if the shareholder was permitted to select
another jurisdiction.
Also, the designation of
Exclusive Jurisdictions and the waiver of jury trials limit a shareholder’s
ability to litigate a claim in the jurisdiction and in a manner that may be more
favorable to the shareholder. A court may choose not to enforce these provisions
of the Declaration.
Distributions and Taxes
The information is provided
with respect to each Fund (hereafter the Fund).
Income
and Capital Gain Distributions
As a regulated investment
company, the Fund generally pays no federal income tax on the income and gains
it distributes to you.
[Each of Fund intends to
pay income dividends annually from its net investment income.]
Capital gains, if any, may
be paid at least annually. The Fund may distribute income dividends and capital
gains more frequently, if necessary, in order to reduce or eliminate federal
excise or income taxes on the Fund. The amount of any distribution will vary,
and there is no guarantee the Fund will pay either income dividends or capital
gain distributions. Distributions in cash may be reinvested automatically in
additional whole Fund shares only if the broker through whom you purchased the
shares makes such option available.
Annual statements. After the close of each
calendar year, you will receive tax information from the broker with respect to
the federal income tax treatment of the Fund’s distributions and any taxable
sales of Fund shares occurring during the prior calendar year. You may receive
revised tax information if the Fund must reclassify its distributions or the
broker must adjust the cost basis of any covered shares sold after you receive
your tax information. Distributions declared in December to shareholders of
record in such month and paid in January are taxable as if they were paid in
December. Additional tax information about the Fund’s distributions is available
at [ ].com.
Avoid “buying a dividend.” At the time you
purchase your Fund shares, the Fund’s net asset value may reflect undistributed
income, undistributed capital gains, or net unrealized appreciation in the value
of the portfolio securities held by the Fund. For taxable investors, a
subsequent distribution to you of such amounts, although constituting a return
of your investment, would be taxable. Buying shares in the Fund just before it
declares an income dividend or capital gain distribution is sometimes known as
“buying a dividend.”
Tax
Considerations
If you are a taxable
investor, Fund distributions are generally taxable to you as ordinary income,
capital gains or some combination of both. This is the case whether you reinvest
your distributions in additional Fund shares or receive them in cash. Investment
company dividends paid to you from interest earned on certain U.S. government
securities may be exempt from state and local taxation, subject in some states
to minimum investment or reporting requirements that must be met by the
Fund.
Dividend income. Income dividends are generally
subject to tax at ordinary rates. Income dividends reported by the Fund as
qualified dividend income may be subject to tax by individuals at reduced
long-term capital gains tax rates provided certain holding period requirements
are met. Because Emerge EMPWR Emerging Markets ETF invests primarily in debt
securities, it is expected that either none or only a small portion of the
Fund’s income dividends may be qualified dividends. Investment company dividends
paid to you from interest earned on certain U.S. government securities may be
exempt from state and local taxation, subject in some states to minimum
investment or reporting requirements that must be met by the Fund.
A return-of-capital
distribution is generally not taxable but will reduce the cost basis of your
shares, and will result in a higher capital gain or a lower capital loss when
you later sell your shares.
Capital gains. Fund distributions of short-term
capital gains are also subject to tax at ordinary rates. Fund distributions of
long-term capital gains are taxable at the reduced long-term capital gains rates
no matter how long you have owned your Fund shares. For single individuals with
taxable income not in excess of $40,400 in 2021 ($80,800 for married individuals
filing jointly), the long-term capital gains tax rate is 0%. For single
individuals and joint filers with taxable income in excess of these amounts but
not more than $445,850 or $501,600, respectively, the long- term capital gains
tax rate is 15%. The rate is 20% for single individuals with taxable income in
excess of $445,850 and married individuals filing jointly with taxable income in
excess of $501,600. An additional 3.8% Medicare tax may also be imposed as
discussed below.
Reclassification risk. The IRS has announced
that holders of tax-exempt securities (i.e., a security issued as paying
tax-exempt interest income) such as the Fund have certain risks if the
securities were issued in connection with abusive transactions, refinancing
irregularities, or the misuse of proceeds from the security offering. While the
Fund endeavors to purchase bona fide tax-exempt securities there are risks that:
(a) a tax-exempt security may
be reclassified by the IRS,
or a state tax authority, as paying taxable interest income instead and/or (b)
future legislative, administrative or court actions could adversely impact the
qualification of income from a tax-exempt security as tax-free. Under 2017
legislation commonly known as the Tax Cuts and Jobs Act, interest paid on a bond
issued after December 31, 2017 to advance refund another bond is subject to
federal income tax. These events may create taxable income for the Fund and its
shareholders and the Fund may be required to send to you and file with the IRS
and state tax authorities information returns for the current or prior calendar
years classifying (or reclassifying) some of its exempt-interest dividends as
taxable dividends. On prior year dividends, you might need to file amended
income tax returns and pay additional tax and interest to avoid additional
penalties and to limit interest charges on these taxable dividends. In addition,
such reclassifications or actions could cause the value of the security, and
therefore the value of the Fund’s shares, to decline.
Sales of exchange-listed shares. Currently, any
capital gain or loss realized on the sale of Fund shares generally is treated as
long-term capital gain or loss if the shares have been held for more than one
year and as short-term capital gain or loss if the shares have been held for one
year or less.
Cost basis reporting. Contact the broker
through whom you purchased your Fund shares to obtain information with respect
to the available cost basis reporting methods and elections for your
account.
Taxes on creation and redemption of creation units.
An Authorized Participant who exchanges securities for Creation Units
generally will recognize a gain or loss. The gain or loss will be equal to the
difference between the market value of the Creation Units at the time of
purchase and the exchanger’s aggregate basis in the securities surrendered plus
any cash paid for the Creation Units. An Authorized Participant who exchanges
Creation Units for securities will generally recognize a gain or loss equal to
the difference between the exchanger’s basis in the Creation Units and the
aggregate market value of the securities and the amount of cash received. The
Internal Revenue Service, however, may assert that a loss realized upon an
exchange of securities for Creation Units cannot be deducted currently under the
rules governing “wash sales,” or on the basis that there has been no significant
change in economic position. Authorized Participants exchanging securities
should consult their own tax advisor with respect to whether wash sale rules
apply and when a loss might be deductible.
Authorized Participants
that create or redeem Creation Units will be sent a confirmation statement
showing how many shares they purchased or sold and at what price.
Under current federal tax
laws, any capital gain or loss realized upon a redemption of Creation Units is
generally treated as long-term capital gain or loss if the shares have been held
for more than one year and as a short-term capital gain or loss if the shares
have been held for one year or less.
If the Fund redeems
Creation Units in part or entirely in cash, it may recognize more capital gains
than it will if it redeems Creation Units in-kind.
Medicare tax. An additional 3.8% Medicare tax
is imposed on certain net investment income (including ordinary dividends and
capital gain distributions received from the Fund and net gains from redemptions
or other taxable dispositions of Fund shares) of U.S. individuals, estates and
trusts to the extent that such person’s “modified adjusted gross income” (in the
case of an individual) or “adjusted gross income” (in the case of an estate or
trust) exceeds a threshold amount.
Backup withholding. A shareholder may be
subject to backup withholding on any distributions of income (including
exempt-interest dividends), capital gains, or proceeds from the sale or exchange
of Fund shares if the shareholder has provided either an incorrect tax
identification number or no number at all, is subject to backup withholding by
the IRS for failure to properly report payments of interest or dividends, has
failed to certify that the shareholder is not subject to backup withholding, or
has not certified that the shareholder is a U.S. person (including a U.S.
resident alien). The backup withholding rate is currently 24%. State backup
withholding may also apply.
State, local and foreign taxes. Distributions
of ordinary income and capital gains, and gains from the sale of your Fund
shares, are generally subject to state and local taxes. If the Fund qualifies,
it may elect to pass through to you as a foreign tax credit or deduction any
foreign taxes that it pays on its investments.
Non-U.S. investors. Non-U.S. investors may be
subject to U.S. withholding tax at 30% or a lower treaty rate on Fund dividends
of ordinary income. Non-U.S. investors may be subject to U.S. estate tax on the
value of their shares. They are subject to special U.S. tax certification
requirements to avoid backup withholding, claim any exemptions from withholding
and claim any treaty benefits. Exemptions from U.S. withholding tax are
generally provided for capital gains realized on the sale of Fund shares,
exempt-interest dividends, capital gain dividends
paid by the Fund from net
long-term capital gains, short-term capital gain dividends paid by the Fund from
net short-term capital gains and interest-related dividends paid by the Fund
from its qualified net interest income from U.S. sources. However,
notwithstanding such exemptions from U.S. withholding tax at source, any such
dividends and distributions of income and capital gains will be subject to
backup withholding at a rate of 24% if you fail to properly certify that you are
not a U.S. person.
Other reporting and withholding requirements.
Payments to a shareholder that is either a foreign financial institution
or a non-financial foreign entity within the meaning of the Foreign Account Tax
Compliance Act (FATCA) may be subject to a 30% withholding tax on income
dividends (other than exempt-interest dividends)paid by the Fund. The FATCA
withholding tax generally can be avoided by such foreign entity if it provides
the Fund, and in some cases, the IRS, information concerning the ownership of
certain foreign financial accounts or other appropriate certifications or
documentation concerning its status under FATCA. The Fund may be required to
report certain shareholder account information to the IRS, non-U.S. taxing
authorities or other parties to comply with FATCA.
Other tax information. This discussion of
“Distributions and Taxes” is for general information only and is not tax advice.
You should consult your own tax advisor regarding your particular circumstances,
and about any federal, state, local and foreign tax consequences before making
an investment in the Fund. Additional information about the tax consequences of
investing in the Fund may be found in the SAI.
Shareholder Information
Buying and Selling Shares
Shares of a Fund may be
acquired or redeemed directly from the Fund only in Creation Units or multiples
thereof, as discussed in the Creations and Redemptions section of this
prospectus. Only an Authorized Participant may engage in creation or redemption
transactions directly with the Fund. Once created, shares of a Fund generally
trade in the secondary market in amounts less than a Creation Unit.
Shares
of the Funds are listed on a national securities exchange for trading during the
trading day. Shares can be bought and sold throughout the trading day like
shares of other publicly traded companies. The Trust does not impose any minimum
investment for shares of the Fund purchased on an exchange. Shares of the Funds
trade under the following symbol:
Fund |
Symbol |
Emerge EMPWR Sustainable Dividend Equity ETF |
[ ] |
Emerge EMPWR Sustainable Select Growth Equity ETF |
[ ] |
Emerge EMPWR Sustainable Global Core Equity ETF |
[ ] |
Emerge EMPWR Sustainable Emerging Markets Equity ETF |
[ ] |
Emerge EMPWR Unified Sustainable Equity ETF |
[ ] |
Buying or selling Fund
shares on an exchange involves two types of costs that may apply to all
securities transactions. When buying or selling shares of a Fund through a
broker, you will likely incur a brokerage commission or other charges determined
by your broker. The commission is frequently a fixed amount and may be a
significant proportional cost for investors seeking to buy or sell small amounts
of shares. In addition, you may incur the cost of the “spread,” that is, any
difference between the bid price and the ask price. The spread varies over time
for shares of the Fund based on the Fund’s trading volume and market liquidity,
and is generally lower if the Fund has a lot of trading volume and market
liquidity, and higher if the Fund has little trading volume and market
liquidity.
The board of trustees has
not adopted a policy of monitoring for frequent purchases and redemptions of
Fund shares (frequent trading) that appear to attempt to take advantage of a
potential arbitrage opportunity presented by a lag between a change in the value
of a Fund’s portfolio securities after the close of the primary markets for the
Fund’s portfolio securities and the reflection of that change in the Fund’s NAV
(market timing), because the Fund generally sells and redeems its shares
directly through transactions that are in-kind and/or for cash, subject to the
conditions described below under Creations and Redemptions. The board of
trustees has not adopted a policy of monitoring for frequent trading activity
because shares of the Funds are listed for trading on a national securities
exchange.
The primary listing
exchange for each Fund is [ ] (the “Exchange”). The Exchange is open for
trading Monday through Friday and is closed on weekends and the following
holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good
Friday, Memorial Day, Juneteenth, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Section 12(d)(1) of the
Investment Company Act of 1940, as amended (1940 Act), restricts investments by
investment companies in the securities of other investment companies. Registered
investment companies are permitted to invest in the Funds beyond the limits set
forth in Section 12(d)(1), subject to Rule 12d1-4 under the 1940 Act. In order
for a registered investment company to invest in shares of a Fund beyond the
limitations of Section 12(d)(1) pursuant to Rule 12d1-4, the registered
investment company must enter into an agreement with the Trust, on behalf of the
Fund.
Book
Entry
Shares of the Funds are
held in book-entry form, which means that no share certificates are issued. The
Depository Trust Company (DTC) or its nominee is the record owner of all
outstanding shares of the Funds and is recognized as the owner of all shares for
all purposes.
Investors owning shares of
the Funds are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for shares of the Fund.
DTC participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other institutions that directly or indirectly
maintain a custodial relationship with DTC. As a beneficial owner of shares, you
are not entitled to receive physical delivery of stock certificates or to have
shares registered in your name, and you are not considered a registered owner of
shares. Therefore, to exercise any right as an owner of shares, you must rely
upon the procedures of DTC and its participants. These procedures are the same
as those that apply to any other securities that you hold in book-entry or
“street name” form.
Share Price
The trading prices of a
Fund’s shares in the secondary market generally differ from the Fund’s daily NAV
and are affected by market forces such as supply and demand, economic conditions
and other factors.
Calculating
NAV
The NAV of each Fund is
determined by deducting the Fund’s liabilities from the total assets of the
portfolio. The NAV per share is determined by dividing the total NAV of the Fund
by the number of shares outstanding.
Each Fund calculates the
NAV per share each business day as of 4 p.m. Eastern time which normally
coincides with the close of trading on the New York Stock Exchange (NYSE). The
Funds do not calculate the NAV on days the NYSE is closed for trading, which
include New Year’s Day, Martin Luther King Jr. Day, President’s Day, Good
Friday, Memorial Day, Juneteenth, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. If the NYSE has a scheduled early close or unscheduled early
close, the Funds’ share price would still be determined as of 4 p.m. Eastern
time. The Funds’ NAV per share is readily available online at [
].com.
When determining their
NAVs, the Funds value cash and receivables at their realizable amounts, and
records interest as accrued and dividends on the ex-dividend date. The Funds
generally utilize two independent pricing services to assist in determining a
current market value for each security. If market quotations are readily
available for portfolio securities listed on a securities exchange, the Funds
value those securities at the last quoted sale price or the official closing
price of the day, respectively, or, if there is no reported sale, within the
range of the most recent quoted bid and ask prices. The Funds value
over-the-counter portfolio securities within the range of the most recent bid
and ask prices. If portfolio securities trade both in the over-the-counter
market and on a stock exchange, the Funds value them according to the broadest
and most representative market.
Prices received by the
Funds for securities may be based on institutional “round lot” sizes, but the
Funds may hold smaller, “odd lot” sizes. Odd lots may trade at lower prices than
round lots.
Generally, trading in
corporate bonds, U.S. government securities and money market instruments is
substantially completed each day at various times before 4 p.m. Easter time. The
value of these securities used in computing the NAV is determined as of such
times. Occasionally, events affecting the values of these securities may occur
between the times at which they are determined and 4 p.m. Eastern time that will
not be reflected in the computation of the NAV. The Funds rely on third-party
pricing vendors to provide evaluated prices that reflect current fair market
value at 4 p.m. Eastern time.
The Funds have procedures,
approved by the board of trustees, to determine the fair value of individual
securities and other assets for which market prices are not readily available
(such as certain restricted or unlisted securities and private placements) or
which may not be reliably priced (such as in the case of trade suspensions or
halts, price movement limits set by certain foreign markets, and thinly traded
or illiquid securities). Some methods for valuing these securities may include:
fundamental analysis (earnings multiple, etc.), matrix pricing, discounts from
market prices of similar securities, or discounts applied due to the nature and
duration of restrictions on the disposition of the securities. The board of
trustees oversees the application of fair value pricing procedures.
The application of fair
value pricing procedures represents a good faith determination based upon
specifically applied procedures. There can be no assurance that a Fund could
obtain the fair value assigned to a security if the Fund was able to sell the
security at approximately the time at which the Fund determines its NAV per
share.
The Fund generally
determines the value of a foreign security as of the close of trading on the
foreign stock exchange on which the security is primarily traded, or as of 4
p.m. Eastern time, if earlier. The value of a foreign security held by the Fund
is converted into its U.S. dollar equivalent at the foreign exchange rate in
effect at [4 p.m. Eastern time] on the day that the value of the foreign
security is determined. If no sale is reported at [4 p.m. Eastern time], the
foreign security will be valued within the range of the most recent quoted bid
and ask prices.
Occasionally events (such
as repatriation limits or restrictions) may impact the availability or
reliability of foreign exchange rates used to convert the U.S. dollar equivalent
value. If such an event occurs, the foreign exchange rate will be valued at fair
value using procedures established and approved by the board of trustees.
Trading in securities on
foreign securities stock exchanges and over-the-counter markets, such as those
in Europe and Asia, may be completed well before 4 p.m. Eastern time.
Occasionally, events occur between the time at which trading in a foreign
security is completed and 4 p.m. Eastern time that might call into question the
availability (including the reliability) of the value of a foreign portfolio
security held by a Fund. In accordance with procedures established and approved
by the Trust’s board of trustees, the investment manager monitors for
significant events following the close of trading in foreign stock
markets.
In the event the investment
manager identifies a significant event, the investment manager will measure
price movements using a series of country specific market proxies (such as
baskets of American Depositary Receipts, futures contracts and ETFs) against
established trigger thresholds for each specific market proxy to assist in
determining if the significant event calls into question the availability
(including the reliability) of the values of foreign securities between the
times at which they are determined on their primary trading market and 4 p.m.
Eastern time.
If such trigger thresholds
are exceeded, the foreign securities may be valued using fair value procedures
established and approved by the board of trustees. In certain circumstances
these procedures include the use of independent pricing services. The intended
effect of applying fair value pricing is to compute an NAV that accurately
reflects the value of the Fund’s portfolio at the time that the NAV is
calculated.
In addition, trading in
foreign portfolio securities generally, or in securities markets in a particular
country or countries, may not take place on every NYSE business day.
Furthermore, trading takes place in various foreign markets on days that are not
business days for the NYSE, and on which the Fund’s NAV is not calculated (in
which case, the NAV of the Fund’s shares may change on days when shareholders
will not be able to purchase or sell Fund shares). Thus, the calculation of the
Fund’s NAV does not take place contemporaneously with the determination of the
prices of many of the foreign portfolio securities used in the calculation. If
significant events affecting the last determined values of these foreign
securities occur (determined through the monitoring process described above),
the securities may be valued at fair value determined in good faith in
accordance with the Fund’s fair value procedures established and approved by the
board of trustees.
Creations and Redemptions
Prior to trading in the
secondary market, shares of a Fund are “created” at NAV by market makers, large
investors and institutions only in block-size Creation Units. An “Authorized
Participant” is a member or participant of a clearing agency registered with the
SEC, which has a written agreement with the Fund or one of its service providers
(AP Agreement) that allows such member or participant to place orders for the
purchase and redemption of Creation Units. All orders for the creation or
redemption of Creation Units for the Fund must be placed by or through an
Authorized Participant that has entered into an AP Agreement with [ ], the
Funds’ distributor (Distributor).
A creation transaction,
which is subject to acceptance by the Distributor or its agents, generally takes
place when an Authorized Participant deposits into the Fund a designated
portfolio of securities, assets or other positions and/or an amount of cash
(which may include cash in lieu of certain securities, assets or other
positions) in exchange for a specified number of Creation Units.
Similarly, shares can be
redeemed only in Creation Units, generally for a designated portfolio of
securities, assets or other positions and/or cash (which may include cash in
lieu of certain securities, assets or other positions).
The prices at which
creations and redemptions occur are based on the next calculation of NAV after a
creation or redemption order is received in an acceptable form under the AP
Agreement.
Creation and redemption
baskets may differ and the Funds will accept “custom baskets.” More information
regarding custom baskets is contained in the Funds’ SAI. As a result of any
system failure or other interruption, creation or redemption orders either may
not be executed according to the Funds’ instructions or may not be executed at
all, or the Funds may not be able to place or change such orders. Information
about the procedures regarding creations and redemptions of Creation Units
(including the cut-off times for receipt of creation and redemption orders) is
included in the Funds’ SAI.
Because new shares may be
created and issued on an ongoing basis, at any point during the life of the
Funds a “distribution,” as such term is used in the 1933 Act, may be occurring.
Broker-dealers and other persons are cautioned that some activities on their
part may, depending on the circumstances, result in their being deemed
participants in a distribution in a manner that could render them statutory
underwriters and subject to the prospectus delivery and liability provisions of
the 1933 Act. Any determination of whether one is an underwriter must take into
account all the relevant facts and circumstances of each particular case.
Broker-dealers should also
note that dealers who are not “underwriters” but are participating in a
distribution (as contrasted to ordinary secondary transactions), and thus
dealing with shares that are part of an “unsold allotment” within the meaning of
Section 4(a)(3)(C) of the 1933 Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the 1933 Act. For
delivery of prospectuses to exchange members, the prospectus delivery mechanism
of Rule 153 under the 1933 Act is available only with respect to transactions on
a national securities exchange.
Premium/Discount
Information
Information regarding how
often the shares of the Funds traded on the applicable Exchange at a price above
(at a premium) or below (at a discount) the NAV of the Funds for the most
recently completed calendar year, and the most recently completed calendar
quarters since that year, will be available at emergecm.com.
Portfolio
Holdings
A description of the Funds’
policies and procedures regarding the release of portfolio holdings information
is also available in the Funds’ SAI. The Funds disclose their portfolio holdings
daily at emergecm.com.
Delivery
of Shareholder Documents – Householding
Householding for the Fund
is available through certain broker- dealers. Householding is a process in which
related shareholders in a household will be sent only one copy of the financial
reports and prospectus. You may contact your broker-dealer to enroll in
householding. Once enrolled, this process will continue indefinitely unless you
instruct your broker-dealer otherwise. If you prefer not to have these documents
householded, please contact your broker-dealer. At any time you may view current
prospectuses and financial reports on our website.
Distribution
The Distributor or its
agents distribute Creation Units for the Funds on an agency basis. The
Distributor does not maintain a secondary market in shares of the Funds.
The board of trustees has
adopted a distribution plan, sometimes known as a Rule 12b-1 plan, that allows
the Funds to pay distribution fees of up to 0.25% per year, to those who sell
and distribute Fund shares and provide other services to shareholders. The board
of trustees, however, has determined not to authorize payment of a Rule 12b-1
plan fee at this time.
Because these fees are paid
out of a Fund’s assets on an ongoing basis, to the extent that a fee is
authorized, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
Disclaimer
©2022 Sustainalytics. All Rights Reserved. The
information, data, analyses and opinions contained herein: (1) includes the
proprietary information of Sustainalytics; (2) may not be copied or
redistributed except as specifically authorized; (3) do not constitute
investment advice nor an
endorsement of any product or project; (4) are provided solely for informational
purposes; and (5) are not warranted to be complete, accurate or timely.
Sustainalytics is not responsible for any trading decisions, damages or other
losses related to it or its use. The use of the data is subject to conditions
available at https://www.sustainalytics.com/legal-disclaimers.
Financial Highlights
There
is no financial information for the Funds because they have not yet commenced
operations as of the date of this prospectus.
For More Information
Information on the Funds’
NAVs, market prices, premiums and discounts, and bid/ask spreads can be found
online at emergecm.com.
You can learn more about
the Fund in the following documents:
Annual/Semiannual
Report to Shareholders
Once available, annual and
semi-annual reports to shareholders include a discussion of recent market
conditions and Fund strategies that significantly affected Fund performance
during its last fiscal year, financial statements, detailed performance
information, portfolio holdings and, in the annual report only, the independent
registered public accounting firm’s report.
SAI
The SAI contains more
information about the Funds, their investments and policies. The SAI is
incorporated by reference (is legally a part of this prospectus).
For a free copy of the
current annual/semiannual report (once available) or the SAI, please contact
your investment representative or call us at the number below. You also can view
the current annual/semiannual report (once available) and the SAI online through
emergecm.com.
Reports and other
information about the Funds are available on the EDGAR Database on the SEC’s
Internet site at http://www.sec.gov, and copies of this information may be
obtained, after paying a duplicating fee, by electronic request at the following
email address:
[email protected].
Individual investors should
contact their financial advisor or broker dealer representative for more
information about Emerge ETFs.
Financial
professionals should call [ ].