ck0001592900-20230930
Freedom
100 Emerging Markets ETF
(a
series of EA Series Trust)
Ticker
Symbol: FRDM
Prospectus
January 31,
2024
Listed
on Cboe BZX Exchange, Inc.
These
securities have not been approved or disapproved by the Securities and Exchange
Commission nor has the Securities and Exchange Commission passed upon the
accuracy or adequacy of this Prospectus. Any representation to the contrary is a
criminal offense.
FREEDOM
100 EMERGING MARKETS ETF
INVESTMENT
OBJECTIVE
The
Freedom 100
Emerging Markets ETF (the “Fund”) seeks to track the total
return performance, before fees and expenses, of the Freedom 100 Emerging
Markets Index (the “Index”).
FEES AND
EXPENSES
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund (“Shares”). You may also pay brokerage commissions on
the purchase and sale of Shares, which are not reflected in the table and
example below.
ANNUAL FUND
OPERATING EXPENSES (EXPENSES THAT YOU PAY EACH YEAR AS A PERCENTAGE OF THE VALUE
OF YOUR INVESTMENT)
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Management
Fee |
0.49 |
% |
Distribution
and/or Service (12b-1) Fees |
None |
Other
Expenses |
0.00 |
% |
Total
Annual Fund Operating Expenses |
0.49 |
% |
EXAMPLE
The
following 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 for the time periods indicated and then redeem all of your Shares
at the end of those periods. The example also assumes that the Fund provides a
return of 5% a year and that operating expenses remain the same. You may also
pay brokerage commissions on the purchase and sale of Shares, which are not
reflected in the example. Although your actual costs may be higher
or lower, based on these assumptions your costs would
be:
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One
Year: |
Three
Years: |
Five
Years: |
10
Years |
$50 |
$157 |
$274 |
$616 |
PORTFOLIO
TURNOVER
The
Fund may pay transaction costs, including 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 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. For the
fiscal year ended September 30, 2023, the Fund’s portfolio turnover rate was
15% of the average
value of its portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund uses a “passive management” (or indexing) approach to seek to track the
total return performance, before fees and expenses, of the Index. The Freedom
100 Emerging Markets Index is a freedom-weighted emerging markets equity
index.
Freedom
100 Emerging Markets Index
The
Index is designed to track the performance of a portfolio of approximately 100
equity securities, which included preferred stocks, in emerging market
countries. Country inclusion and weights are determined based on third-party
quantified data covering 83 personal and economic freedom variables. Variables
can be categorized into three main types of freedom metrics: civil freedom (such
as absence of terrorism, human trafficking, torture, disappearances and
detainments), political freedom (such as rule of law, due process, freedom of
the press, freedom of expression, freedom of religion, and freedom of assembly),
and economic freedom (such as marginal tax rates, access to international trade,
business regulations, soundness of the money supply, and size of government). A
quantitative model is used to assign country weights based on the above metrics
as described below. Securities within each included country are selected using
minimum market capitalization (“market cap”) and liquidity (90-day average daily
value of shares traded on a public exchange) requirements, and are subsequently
market cap-weighted. For clarification, country weights are established first,
then security weights are established (within previously established country
weights). The Index excludes state owned enterprises
(“SOEs”).
The Index was developed in 2017 by Life + Liberty Indexes, LLC, the
Fund’s index provider (the “Index Provider”).
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The
Initial Index Universe |
Index
construction begins with an initial universe of common and preferred
stocks (or their depositary receipts) with headquarters domiciled in
emerging market countries. As of September 30, 2023, the initial country
universe includes: Brazil, Chile, China, Colombia, Czech Republic, Egypt,
Greece, Hungary, India, Indonesia, Kuwait, Malaysia, Mexico, Peru,
Philippines, Poland, Qatar, Saudi Arabia, South Africa, South Korea,
Taiwan, Thailand, Turkey, United Arab Emirates (collectively, the “Initial
Country Universe”). |
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Market
Capitalization Screens |
The
Index Provider determines the countries eligible to be included in the
Index at the time of each annual reconstitution of the Index based on the
market capitalization of each emerging market relative to world market
capitalization (market capitalization ratio). Countries with a market
capitalization ratio of at least 0.15% of current world market
capitalization and an average market capitalization ratio of at least
0.15% for the prior three years are eligible to be included in the Index
(the “Eligible Universe”). |
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Country
Selection and Weighting |
Countries
in the eligible universe are freedom-weighted by their country level
freedom scores (“Freedom Scores”). Freedom Scores are composed of 83
quantified personal and economic freedom variables compiled by independent
third party think-tanks - the Cato Institute and the Fraser Institute.
Freedom Scores are used by the Index Provider to derive country weights
and inclusions. Based on Index rules, the higher a country’s Freedom
Score, the higher its weight in the Index. The lower a country’s Freedom
Score, the lower its weight in the Index. Countries with a negative weight
are excluded from the Index. As of September 30, 2023, the following ten
Emerging Markets were included in the Index: Taiwan, South Korea, Chile,
Poland, South Africa, Brazil, Malaysia, Indonesia, Mexico, and the
Philippines. (the “included countries”). |
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Component
Selection and Weighting |
The
Index securities universe includes all companies domiciled in each of the
included countries as determined by the index calculator. Securities must
meet minimum market capitalization and liquidity requirements to be
eligible for inclusion. Securities with fewer than six months of trading
history are excluded from the Index. The ten largest securities within
each included country are selected and weighted based on free-float market
capitalization. To be clear, country weights are established first, then
individual security weights are established (within previously established
country weights). Either local shares or depositary receipts can be used
in the Index with preference given to depositary receipts for new
additions. SOEs, which are defined by the Index Provider as companies with
20% or more government ownership, are excluded from the Index. The Index
may include small-, mid-, and large-capitalization companies; however, the
rules of the Index will naturally favor large-capitalization companies
with high liquidity. |
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Index
Rebalance |
The
Index is assessed annually in January of each year at which time the Index
is reconstituted and rebalanced by the Index Provider. Component changes
are made after the market close on the third Friday of January and become
effective at the market open on the next trading day. |
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The
Fund’s Investment Strategy
Under normal
circumstances, at least 80% of the Fund’s total assets (exclusive of collateral
held from securities lending) will be invested in the component securities of
the Index or in depositary receipts representing such component
securities.
The
Fund will generally use a “replication” strategy to seek to achieve its
investment objective, meaning the Fund will invest in all of the component
securities of the Index in the same approximate proportions as in the Index, but
may, when the Adviser believes it is in the best interests of the Fund, use a
“representative sampling” strategy, meaning the Fund may invest in a sample of
the securities in the Index whose risk, return and other characteristics closely
resemble the risk, return and other characteristics of the Index as a
whole.
The
Fund will not concentrate its investments in a particular industry or group of
industries, as that term is used in the Investment Company Act of 1940, as
amended (the “Investment Company Act”), except that the Fund
will
invest more than 25% of its total assets in securities of the same industry to
approximately the same extent that the Index concentrates in the securities of a
particular industry or group of industries.
The
Fund may also invest up to 20% of its assets in cash and cash equivalents, other
investment companies, as well as securities and other instruments not included
in the Index but which the Adviser believes will help the Fund track the Index.
For example, the Fund may invest in securities that are not components of the
Index to reflect various corporate actions and other changes to the Index (such
as reconstitutions, additions and deletions).
As
of September 30, 2023, the Fund had significant exposure to the following
sectors: Information Technology (28.1%) and Financials (25.1%). As of the same
date, the Fund had significant exposure to Taiwan (21.9%), Republic of Korea
(19.2%), Chile (17.4%) and Poland (15.2%).
Under
normal circumstances, the Fund will invest at least 80% of its net assets, plus
borrowings for investment purposes, in securities economically tied to emerging
market countries. The Fund’s 80% policy is non-fundamental and can be changed
without shareholder approval. However, Fund shareholders would be given at least
60 days’ notice prior to any such change.
For
purposes of the Fund’s 80% policy, the securities of a company are considered to
be economically tied to an emerging market country if one or more of the
following attributes are tied to an emerging markets country: stock exchange
listing; where it is registered, organized or incorporated; where its
headquarters are located; where it derives at least 50% of its revenues or
profits from goods produced or sold, investments made, or services performed; or
where at least 50% of its assets are located.
PRINCIPAL
RISKS
An
investment in the Fund involves risk, including those described below.
There
is no assurance that the Fund will achieve its investment objective.
An
investor may lose money by investing in the Fund. An investment in
the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or
any government agency. More complete risk descriptions are set
forth below under the heading “Additional
Information About the Fund’s Risks.”
Each
risk summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a
risk you could lose all or a portion of your investment in the Fund. Some or all
of these risks may adversely affect the Fund’s NAV, trading price, yield, total
return and/or ability to meet its objectives.
Foreign
Investment Risk. Returns
on investments in foreign securities could be more volatile than, or trail the
returns on, investments in U.S. securities. Investments in or exposures to
foreign securities are subject to special risks, including risks associated with
foreign securities generally, including differences in information available
about issuers of securities and investor protection standards applicable in
other jurisdictions; capital controls risks, including the risk of a foreign
jurisdiction imposing restrictions on the ability to repatriate or transfer
currency or other assets; currency risks; political, diplomatic and economic
risks; regulatory risks; and foreign market and trading risks, including the
costs of trading and risks of settlement in foreign
jurisdictions.
Concentration
Risk.
The Fund may be susceptible to an increased risk of loss, including losses due
to adverse occurrences affecting the Fund more than the market as a whole, to
the extent that the Fund’s investments are concentrated in the securities of a
particular issuer or issuers, country, group of countries, region, market,
industry, group of industries, sector, or asset
class.
Depositary
Receipts Risk.
The risks of investments in depositary receipts, including American Depositary
Receipts (“ADRs”), European Depositary Receipts (“EDRs”), and Global Depositary
Receipts (“GDRs”), are substantially similar to Foreign Investment Risk. In
addition, depositary receipts may not track the price of the underlying foreign
securities, and their value may change materially at times when the U.S. markets
are not open for trading.
Emerging
Markets Risk.
The Fund may invest in companies organized in emerging market nations.
Investments in securities and instruments traded in developing or emerging
markets, or that provide exposure to such securities or markets, can involve
additional risks relating to political, economic, or regulatory conditions not
associated with investments in U.S. securities and instruments or investments in
more developed international markets. Such conditions may impact the ability of
the Fund to buy, sell or otherwise transfer securities, adversely affect the
trading market and price for Fund shares and cause the Fund to decline in
value.
Geographic
Investment Risk. To
the extent the Fund invests a significant portion of its assets in the
securities of companies of a single country or region, it is more likely to be
impacted by events or conditions affecting that country or
region.
Investing
in Taiwan Risk. The
economy of Taiwan is heavily dependent on exports. Currency fluctuations,
increasing competition from Asia’s other emerge economies, and conditions that
weaken demand for Taiwan’s export products worldwide could have a negative
impact on the Taiwanese economy as a whole. Concerns over Taiwan’s history of
political contention and its current relationship with China may also have a
significant impact on the economy of
Taiwan.
Investing
in South Korea Risk. The
Fund is susceptible to adverse market, political, regulatory and geographic
events affecting South Korea. The South Korean economy is dependent on the
economies of other Asian countries, especially China and Southeast Asia, and the
United States as key trading partners. Furthermore, South Korea’s economy may be
significantly affected by currency fluctuations and increasing competition from
Asia’s other low-cost emerging economies. Also, tensions with North Korea could
escalate and lead to further uncertainty in the political and economic climate
of South Korea.
Investing
in Chile Risk.
Investments in Chilean issuers involve risks that are specific to Chile,
including legal, regulatory, political, currency, environmental and economic
risks. Among other things, the Chilean economy is heavily dependent on the
export of certain commodities.
Investing
in Poland Risk. Investments in Polish issuers may subject
the Fund to legal, regulatory, political, currency and economic risk specific to
Poland. Among other things, Poland’s economy is still relatively undeveloped and
is heavily dependent on relationships with certain key trading partners,
including Germany and other European Union (“the EU”) countries. As a result,
Poland’s continued growth is dependent on the growth of these
economies.
Freedom
Investment Strategy Risk.
The Fund’s Freedom investment strategy limits the types and number of investment
opportunities available to the Fund and, as a result, the Fund may underperform
other emerging markets funds that do not have a freedom focus. In addition, the
Index Provider may be unsuccessful in creating an index composed only of
companies in countries that benefit from significant personal and economic
freedoms.
Freedom
Score Risk. The
Index Provider relies upon the Fraser Institute, a global, independent
think-tank partnership, to obtain the Freedom Score used in the Index. The
Freedom Score is derived using quantified data derived from government
organizations, non-governmental organizations (“NGO” or collectively “NGOs”),
private sector actors, and other entities. This data is consolidated, analyzed,
and disseminated by the Fraser Institute. Changes to the Freedom Score
methodology or its data sources by the Fraser Institute are not controlled by
the Index Provider, who relies exclusively upon the Freedom Score output for use
in the Index. Should the Fraser Institute cease to provide the Freedom Score
entirely, materially delay its reporting of the Freedom Score, or materially
modify the calculation of the Freedom Score, the Index Provider will use its own
patent-pending algorithm to produce the Freedom Score output internally using
similar inputs and variables.
Annual
Rebalance Risk. The
Index’s components are reconstituted annually. As a result, (i) the Index’s
exposure to one or more markets may be affected by significant market movements
promptly following the annual reconstitution that are not predictive of those
markets’ performance for the subsequent year and (ii) changes to the Index’s
market exposure may lag a significant change in one or more market’s direction
(up or down) by as long as a year if such changes first take effect promptly
following the reconstitution. Such lags between market performance and changes
to the Index’s exposure may result in significant underperformance relative to
the broader foreign equity markets.
Information
Technology Sector Risk. The
Fund will have exposure to companies operating in the technology sector.
Technology companies, including information technology companies, may have
limited product lines, financial resources and/or personnel. Technology
companies typically face intense competition and potentially rapid product
obsolescence. They are also heavily dependent on intellectual property rights
and may be adversely affected by the loss or impairment of those
rights.
Financials
Sector Risk.
The Fund is expected to have exposure to companies in the financials sector, and
therefore, the Fund’s performance could be negatively impacted by events
affecting this sector. The financials sector includes, for example, banks and
financial institutions providing mortgage and mortgage related services. This
sector can be significantly affected by, among other things, changes in interest
rates, government
regulation,
the rate of defaults on corporate, consumer and government debt, the
availability and cost of capital, and fallout from the housing and sub-prime
mortgage crisis.
Geopolitical/Natural
Disaster Risks.
The Fund’s investments are subject to geopolitical and natural disaster risks,
such as war, terrorism, trade disputes, political or economic dysfunction within
some nations, public health crises and related geopolitical events, as well as
environmental disasters, epidemics and/or pandemics, which may add to
instability in world economies and volatility in markets. The impact may be
short-term or may last for extended
periods.
Quantitative
Security Selection Risk.
Data for some companies in which the Fund invests or upon which the Fund
calculates its allocations may be less available and/or less current than data
for companies in other markets. The Index uses a quantitative model to generate
investment decisions and its processes and stock selection could be adversely
affected if it relies on erroneous or outdated data. In addition, securities
selected using the quantitative model could perform differently from the
financial markets as a whole as a result of the characteristics used in the
analysis, the weight placed on each characteristic and changes in the
characteristic’s historical trends.
Equity
Investing Risk. An
investment in the Fund involves risks similar to those of investing in any fund
holding equity securities, such as market fluctuations, changes in interest
rates and perceived trends in stock prices. The values of equity securities
(including preferred stocks) could decline generally or could underperform other
investments. In addition, securities may decline in value due to factors
affecting a specific issuer, market or securities markets
generally.
Passive
Investment Risk. The
Fund is not actively managed and the Adviser will not sell shares of an equity
security due to current or projected underperformance of a security, industry or
sector, unless that security is removed from the Index, sold in connection with
a rebalancing of the Index as addressed in the Index methodology, or sold to
comply with the Fund’s investment limitations (for example, to maintain the
Fund’s tax status). Maintaining investments regardless of market conditions or
the performance of individual investments could cause the Fund’s return to be
lower than if the Fund employed an active
strategy.
Tracking
Error Risk.
As with all index funds, the performance of the Fund and its Index may differ
from each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the
Index.
Investment
Risk. When
you sell your Shares of the Fund, they could be worth less than what you paid
for them. The Fund could lose money due to short-term market movements and over
longer periods during market downturns. Securities may decline in value due to
factors affecting securities markets generally or particular asset classes or
industries represented in the markets. The value of a security may decline due
to general market conditions, economic trends or events that are not
specifically related to the issuer of the security or to factors that affect a
particular industry or group of industries. During a general downturn in the
securities markets, multiple asset classes may be negatively affected.
Therefore, you may lose money by investing in the
Fund.
Market
Capitalization Risk. To
the extent the Fund emphasizes large-, mid- or small-capitalization stocks, it
will assume the associated risks. At any given time, any of these market
capitalizations may be out of favor with investors.
•Large-Capitalization
Investing.
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and therefore subject to slower growth during
times of economic expansion. Large-capitalization companies may also be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
•Mid-Capitalization
Investing.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large capitalization stocks or the stock market
as a whole.
•Small-Capitalization
Investing.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or
mid-
capitalization
stocks or the stock market as a whole. There is typically less publicly
available information concerning smaller-capitalization companies than for
larger, more established
companies.
ETF
Risks.
•Authorized
Participants, Market Makers and Liquidity Providers Concentration
Risk.
The Fund has a limited number of financial institutions that may act as
Authorized Participants (“APs”). In addition, there may be a limited number of
market makers and/or liquidity providers in the marketplace. To the extent
either of the following events occur, Shares may trade at a material discount to
NAV and possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their
functions.
•Premium-Discount
Risk.
The
Shares may trade above or below their net asset value (“NAV”). The market prices
of Shares will generally fluctuate in accordance with changes in NAV as well as
the relative supply of, and demand for, Shares on Cboe BZX Exchange, Inc. (the
“Exchange”) or other securities exchanges. The trading price of Shares may
deviate significantly from NAV during periods of market volatility or limited
trading activity in Shares. In addition, you may incur the cost of the “spread,”
that is, any difference between the bid price and the ask price of the Shares.
In addition, because securities held by the Fund may trade on foreign exchanges
that are closed when its primary listing exchange is open, the Fund is likely to
experience premiums and discounts greater than those of domestic
ETFs.
•Cost
of Trading Risk.
Investors
buying or selling Shares in the secondary market will pay brokerage commissions
or other charges imposed by brokers as determined by that broker. Brokerage
commissions are often a fixed amount and may be a significant proportional cost
for investors seeking to buy or sell relatively small amounts of
Shares.
•Trading
Risk.
Although
the Shares are listed on the Exchange, there can be no assurance that an active
or liquid trading market for them will develop or be maintained. In addition,
trading in Shares on the Exchange may be halted. In stressed market conditions,
the liquidity of Shares may begin to mirror the liquidity of its underlying
portfolio holdings, which can be less liquid than Shares, potentially causing
the market price of Shares to deviate from its NAV. 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 high trading volume and market liquidity,
and higher if the Fund has little trading volume and market liquidity (which is
often the case for funds that are newly launched or small in
size).
PERFORMANCE
The following
performance information provides some indication of the risks of investing in
the Fund. The bar chart shows the Fund’s performance for calendar years ended
December 31. The table illustrates how the Fund’s average annual returns for the
one-year and since inception periods compare with those of the Index and a broad
measure of market performance. The Fund’s past
performance, before and after taxes, is not necessarily an indication of how the
Fund will perform in the future. Updated performance information
is also available on the Fund’s website at www.freedometfs.com
or by calling the Fund at (215)
882-9983.
Calendar Year Total
Returns
During
the period of time shown in the bar chart, the highest quarterly
return was 27.51% for the quarter ended December 31, 2020, and
the lowest quarterly return was
-30.04% for the quarter ended March 31,
2020.
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Average
Annual Total Returns
(for
periods ended December 31, 2023) |
1
Year |
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Since
Inception
(05/23/19) |
Return Before
Taxes |
23.23% |
| 8.56% |
Return After
Taxes on Distributions |
22.72% |
| 8.34% |
Return After
Taxes on Distributions and Sale of Shares |
14.57% |
| 7.01% |
Freedom
100 Emerging Markets Index (reflects no deduction for
fees or expenses)1 |
23.61% |
| 8.82% |
Solactive
GBS Emerging Markets Large & Mid Cap Index (reflects
no deduction for fees or expenses)1 |
11.60% |
| 3.53% |
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1Index
assumes withholding of taxes on
dividends.
After-tax returns are
calculated using the highest historical individual U.S. federal marginal income
tax rates during the period covered by the table above and do not reflect the
impact of state and local taxes. Actual
after-tax returns depend on an investor’s tax situation and may differ from
those shown. After-tax returns shown are not relevant to investors who hold
their Shares through tax-deferred arrangements such as an individual retirement
account (“IRA”) or other tax-advantaged accounts.
Solactive
GBS Emerging Markets Large & Mid Cap Index intends to track the performance
of the large- and mid-cap segment covering approximately the largest 85% of the
free-float market capitalization in the Emerging Markets. It is calculated as a
Net Total Return index in USD and weighted by free-float market capitalization.
The term “free-float” generally includes only securities that are publicly
available in the securities markets.
INVESTMENT
ADVISER
Empowered
Funds, LLC dba EA Advisers (“Adviser”) serves as the investment adviser of the
Fund.
PORTFOLIO
MANAGERS
Messrs.
Wm. Joshua Russell and Richard Shaner have been the portfolio managers for the
Fund and have managed the Fund since 2023 and 2022, respectively. Mr. Shaner has
been primarily and jointly responsible for the day-to-day management of the Fund
since 2022. Mr. Russell has been primarily and jointly responsible for the
day-to-day management of the Fund since January 2023.
PURCHASE
AND SALE OF FUND SHARES
The
Fund issues and redeems Shares on a continuous basis only in large blocks of
Shares, typically 50,000 Shares, called “Creation Units,” and only APs
(typically, broker-dealers) may purchase or redeem Creation Units. Creation
Units generally are issued and redeemed ‘in-kind’ for securities and partially
in cash. Individual Shares may only be purchased and sold in secondary market
transactions through brokers. Once created, individual Shares generally trade in
the secondary market at market prices that change throughout the day. Market
prices of Shares may be greater or less than their NAV. Except when aggregated
in Creation Units, the Fund’s shares are not redeemable securities.
TAX
INFORMATION
The
Fund’s distributions generally are taxable to you as ordinary income, capital
gains, or some combination of both, unless your investment is in an Individual
Retirement Account (“IRA”) or other tax-advantaged account. However, subsequent
withdrawals from such a tax-advantaged account may be subject to U.S. federal
income tax. You should consult your own tax advisor about your specific tax
situation.
PURCHASES
THROUGH BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If
you purchase Shares through a broker-dealer or other financial intermediary, the
Fund and its related companies may pay the intermediary for the sale of Shares
and related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend Shares over another investment. Ask your salesperson or visit your
financial intermediary’s website for more information.
ADDITIONAL
INFORMATION
ABOUT
THE
FUND
HOW
IS
THE
FUND
DIFFERENT
FROM
A MUTUAL
FUND?
Redeemability.
Mutual
fund shares may be bought from, and redeemed with, the issuing fund for cash at
NAV typically calculated once at the end of the business day. Shares of the
Fund, by contrast, cannot be purchased from or redeemed with the Fund except by
or through APs (typically, broker-dealers), and then principally for an in-kind
basket of securities (and a limited cash amount). In addition, the Fund issues
and redeems Shares on a continuous basis only in large blocks of Shares,
typically 50,000 Shares, called “Creation Units.”
Exchange
Listing. Unlike
mutual fund shares, Shares of the Fund are listed for trading on the Exchange.
Investors can purchase and sell Shares on the secondary market through a broker.
Investors purchasing Shares in the secondary market through a brokerage account
or with the assistance of a broker may be subject to brokerage commissions and
charges. Secondary-market transactions do not occur at NAV, but at market prices
that change throughout the day, based on the supply of, and demand for, Shares
and on changes in the prices of the Fund’s portfolio holdings. The market price
of Shares may differ from the NAV of the Fund. The difference between market
price of Shares and the NAV of the Fund is called a premium when the market
price is above the reported NAV and called a discount when the market price is
below the reported NAV, and the difference is expected to be small most of the
time, though it may be significant, especially in times of extreme market
volatility.
Tax
Treatment. Shares
have been designed to be tax-efficient. Specifically, their in-kind creation and
redemption feature has been designed to protect Fund shareholders from adverse
tax consequences applicable to registered investment companies as a result of
cash transactions in the registered investment company’s shares, including cash
redemptions. Nevertheless, to the extent redemptions from the Fund are paid in
cash, the Fund may realize capital gains or losses, including in some cases
short-term capital gains, upon the sale of portfolio securities to generate the
cash to satisfy the redemption.
Transparency.
The
Fund’s portfolio holdings are disclosed on its website daily after the close of
trading on the Exchange and prior to the opening of trading on the Exchange the
following day. A description of the Fund’s policies and procedures with respect
to the disclosure of the Fund’s portfolio holdings is available in the Fund’s
Statement of Additional Information (“SAI”).
Premium/Discount
Information. Information
about the premiums and discounts at which the Fund’s Shares have traded is
available at www.freedometfs.com/funds.
ADDITIONAL
INFORMATION
ABOUT
THE
INDEX
The
Index Provider is not affiliated with the Fund, the Adviser, the Fund’s
distributor, the Index Calculation Agent or any of their respective affiliates.
The Index Provider has licensed the use of the Index to the Adviser, which has
sub-licensed it to the Trust on behalf of the Fund. None of the Index Provider
or any of its respective affiliates make investment decisions, provide
investment advice, or otherwise act in the capacity of an investment adviser to
the Fund, nor are they involved in the calculation of the Index.
The
Index Provider has retained an unaffiliated third party, Solactive AG, to
calculate the Index. The Calculation Agent, using the applicable rules-based
methodology, will calculate, maintain and disseminate the Index on a daily
basis.
The
Index Provider will monitor the results produced by the Calculation Agent to
help ensure that the Index is being calculated in accordance with the applicable
rules-based methodology.
Freedom
100 Emerging Markets ETF (Ticker: FRDM) is not offered or sold by Life + Liberty
Indexes or any of its affiliates, licensors or contractors (the “LL Parties”)
nor do any of the LL Parties offer any express or implicit guarantee, warranty
or assurance either with regard to the results of using the Freedom 100 Emerging
Markets Index (the “Index”) or the Index Price at any time or in any other
respect. The Index is calculated and published by the LL Parties. Life + Liberty
Indexes has entered an agreement with FRDM’s Adviser to sponsor the Fund. The LL
Parties use commercially reasonable efforts to ensure that the Index is
calculated correctly. Neither publication of the Index by the LL Parties
nor the licensing of the Index or Index trademark(s) for the purpose of use in
connection with the Freedom 100 Emerging Markets ETF (Ticker: FRDM) constitutes
a recommendation by any of the LL Parties to invest in the Freedom 100 Emerging
Markets ETF (Ticker: FRDM).” “Freedom 100” and “Life + Liberty Indexes” are
trademarks of Life + Liberty Investments, LLC.
ADDITIONAL
INFORMATION
ABOUT
THE
FUND’S
INVESTMENT
OBJECTIVE
AND
STRATEGIES
The
Fund’s investment objective is a non-fundamental investment policy and may be
changed without a vote of shareholders with prior written notice to
shareholders.
Under
normal circumstances, at least 80% of the Fund’s total assets (exclusive of
collateral held from securities lending) will be invested in the component
securities of the Index and depositary receipts representing such component
securities.
ADDITIONAL
INFORMATION
ABOUT
THE
FUND’S
RISKS
The
following information is in addition to, and should be read along with, the
description of the Fund’s principal investment risks in the sections titled
“Fund Summary—Principal Investment Risks” above.
Annual
Rebalance Risk. The
Index’s components are reconstituted annually. As a result, (i) the Index’s
exposure to one or more markets may be affected by significant market movements
promptly following the annual reconstitution that are not predictive of those
markets’ performance for the subsequent year and (ii) changes to the Index’s
market exposure may lag a significant change in one or more market’s direction
(up or down) by as long as a year if such changes first take effect promptly
following the reconstitution. Such lags between market performance and changes
to the Index’s exposure may result in significant underperformance relative to
the broader foreign equity markets.
Concentration
Risk.
The Fund may be susceptible to an increased risk of loss, including losses due
to adverse occurrences affecting the Fund more than the market as a whole, to
the extent that the Fund’s investments are concentrated in the securities of a
particular issuer or issuers, country, group of countries, region, market,
industry, group of industries, sector, or asset class.
Country
Specific Risks.
To the extent the Fund invests a significant portion of its assets in the
securities of companies of a single country or region, it is more likely to be
impacted by events or conditions affecting that country or region.
Investing
in Taiwan Risk.
Investments in Taiwanese issuers may subject the Fund to legal, regulatory,
political, currency and economic risks that are specific to Taiwan.
Specifically, Taiwan’s geographic proximity and history of political contention
with China have resulted in ongoing tensions between the two countries. These
tensions may materially affect the Taiwanese economy and its securities market.
Taiwan’s economy is export-oriented, so it depends on an open world trade regime
and remains vulnerable to fluctuations in the world economy. Rising labor costs
and increasing environmental consciousness have led some labor-intensive
industries to relocate to countries with cheaper work forces, and continued
labor outsourcing may adversely affect the Taiwanese economy.
Investing in South
Korea Risk.
Investments in South Korean issuers involve risks that are specific to South
Korea, including legal, regulatory, political, currency, security and economic
risks. Substantial political tensions exist between North Korea and South Korea
and recently these political tensions have escalated. The outbreak of
hostilities between the two nations, or even the threat of an outbreak of
hostilities, will likely adversely impact the South Korean economy. In addition,
South Korea’s economic growth potential has recently been on a decline, mainly
because of a rapidly aging population and structural problems.
Investing
in Chile Risk.
Investment in Chilean issuers involves risks that are specific to Chile,
including, legal, regulatory, political, environmental and economic risks.
Chile’s economy is export-dependent and relies heavily on trading relationships
with certain key trading partners, including China, Brazil, Japan, South Korea,
the U.S. and the Netherlands. Future changes in the price or the demand for
Chilean exported products by China, Brazil, Japan, South Korea, the U.S. and
Netherlands, changes in these countries’ economies, trade regulations or
currency exchange rates could adversely impact the Chilean economy and the
issuers to which the Fund has exposure.
Investing
in Poland Risk.
Investment in Polish issuers involves risks that are specific to Poland,
including, legal, regulatory, political, and economic risks. Poland’s economy,
among other things, is dependent upon the export of raw materials and consumer
goods. As a result, Poland is dependent on trading relationships with certain
key trading partners, including Germany and other EU countries. Poland’s
economy, like most other economies in Eastern Europe, remains relatively
undeveloped and can be particularly sensitive to political and economic
developments.
Emerging
Markets Risk.
Investments in securities and instruments traded in developing or emerging
markets, or that provide exposure to such securities or markets, can involve
additional risks relating to political,
economic,
or regulatory conditions not associated with investments in U.S. securities and
instruments. For example, developing and emerging markets may be subject to (i)
greater market volatility, (ii) lower trading volume and liquidity, (iii)
greater social, political and economic uncertainty, (iv) governmental controls
on foreign investments and limitations on repatriation of invested capital, (v)
lower disclosure, corporate governance, auditing and financial reporting
standards, (vi) fewer protections of property rights, (vii) restrictions on the
transfer of securities or currency, and (viii) settlement and trading practices
that differ from those in U.S. markets. Each of these factors may impact the
ability of the Fund to buy, sell or otherwise transfer securities, adversely
affect the trading market and price for Shares and cause the Fund to decline in
value.
Equity
Investing Risk. An
investment in the Fund involves risks similar to those of investing in any fund
holding equity securities, such as market fluctuations, changes in interest
rates and perceived trends in stock prices. The values of equity securities
(including preferred stocks) could decline generally or could underperform other
investments. Different types of equity securities tend to go through cycles of
outperformance and underperformance in comparison to the general securities
markets. In addition, securities may decline in value due to factors affecting a
specific issuer, market or securities markets generally. Recent turbulence in
financial markets and reduced liquidity in credit and fixed income markets may
negatively affect many issuers worldwide, which may have an adverse effect on
the Fund.
ETF
Risks.
•Authorized
Participants, Market Makers and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that may act as Authorized
Participants (“APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become unable to
process creation and/or redemption orders and no other APs step forward to
perform these services, or (ii) market makers and/or liquidity providers exit
the business or significantly reduce their business activities and no other
entities step forward to perform their functions.
•Premium-Discount
Risk.
The
Shares may trade above or below their net asset value (“NAV”). The market prices
of Shares will generally fluctuate in accordance with changes in NAV as well as
the relative supply of, and demand for, Shares on the Exchange or other
securities exchanges. The trading price of Shares may deviate significantly from
NAV during periods of market volatility or limited trading activity in Shares.
In addition, you may incur the cost of the “spread,” that is, any difference
between the bid price and the ask price of the Shares. In addition, because
securities held by the Fund may trade on foreign exchanges that are closed when
its primary listing exchange is open, the Fund is likely to experience premiums
and discounts greater than those of domestic ETFs.
•Cost
of Trading Risk.
Investors
buying or selling Shares in the secondary market will pay brokerage commissions
or other charges imposed by brokers as determined by that broker. Brokerage
commissions are often a fixed amount and may be a significant proportional cost
for investors seeking to buy or sell relatively small amounts of Shares. In
addition, secondary market investors will also incur the cost of the difference
between the price that an investor is willing to pay for Shares (the “bid”
price) and the price at which an investor is willing to sell Shares (the “ask”
price). This difference in bid and ask prices is often referred to as the
“spread” or “bid/ask spread.” The bid/ask spread varies over time for Shares
based on trading volume and market liquidity, and is generally lower if Shares
have more trading volume and market liquidity and higher if Shares have little
trading volume and market liquidity. Further, increased market volatility may
cause increased bid/ask spreads.
•Trading
Risk.
Although
the Shares are listed on the Exchange, there can be no assurance that an active
or liquid trading market for them will develop or be maintained. In addition,
trading in Shares on the Exchange may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
When markets are stressed, Shares could suffer erratic or unpredictable trading
activity, extraordinary volatility or wide bid/ask spreads, which could cause
some market makers and APs to reduce their market activity or “step away” from
making a market in ETF shares. This could cause the Fund’s market price to
deviate, materially, from the NAV, and reduce the effectiveness of the ETF
arbitrage process. Further, trading in Shares on the Exchange is subject to
trading halts caused by extraordinary market volatility pursuant to the “circuit
breaker” rules, which temporarily halt trading on the Exchange when a decline in
the S&P 500 Index during a single day reaches certain thresholds (e.g., 7%,
13% and 20%). There can be no assurance that the requirements of the Exchange
necessary to maintain the listing of the Fund will continue to be met or will
remain
unchanged.
In stressed market conditions, the liquidity of Shares may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than Shares, and this could lead to differences
between the market price of the Shares and the underlying value of those
Shares.
Financials
Sector Risk.
Companies in the financials sector of an economy are subject to extensive
governmental regulation and intervention, which may adversely affect the scope
of their activities, the prices they can charge, the amount of capital they must
maintain and, potentially, their size. The extent to which the Fund may invest
in a company that engages in securities-related activities or banking is limited
by applicable law. Governmental regulation may change frequently and may have
significant adverse consequences for companies in the financials sector,
including effects not intended by such regulation. Recently enacted legislation
in the U.S. has relaxed capital requirements and other regulatory burdens on
certain U.S. banks. While the effect of the legislation may benefit certain
companies in the financials sector, increased risk taking by affected banks may
also result in greater overall risk in the U.S. and global financials sector.
The impact of changes in capital requirements, or recent or future regulation in
various countries, on any individual financial company or on the financials
sector as a whole cannot be predicted. Certain risks may impact the value of
investments in the financials sector more severely than those of investments
outside this sector, including the risks associated with companies that operate
with substantial financial leverage. Companies in the financials sector may also
be adversely affected by increases in interest rates and loan losses, decreases
in the availability of money or asset valuations, credit rating downgrades and
adverse conditions in other related markets. Insurance companies, in particular,
may be subject to severe price competition and/or rate regulation, which may
have an adverse impact on their profitability. The financials sector is
particularly sensitive to fluctuations in interest rates. The financials sector
is also a target for cyberattacks, and may experience technology malfunctions
and disruptions. In recent years, cyberattacks and technology malfunctions and
failures have become increasingly frequent in this sector and have reportedly
caused losses to companies in this sector, which may negatively impact the
Fund.
Foreign
Investment Risk. The
Fund may invest in foreign securities, including non-U.S. dollar-denominated
securities traded outside of the United States and U.S. dollar-denominated
securities of foreign issuers traded in the United States. Returns on
investments in foreign securities could be more volatile than, or trail the
returns on, investments in U.S. securities. Investments in foreign securities,
including investments in American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs), and Global Depositary Receipts (GDRs), are subject
to special risks, including the following:
Foreign
Securities Risk.
Investments in non-U.S. securities involve risks that may not be present with
investments in U.S. securities. For example, investments in non-U.S. securities
may be subject to risk of loss due to foreign currency fluctuations or to
political or economic instability. There may be less information publicly
available about a non-U.S. issuer than a U.S. issuer. Non-U.S. issuers may be
subject to different accounting, auditing, financial reporting and investor
protection standards than U.S. issuers. Changes to the financial condition or
credit rating of foreign issuers may also adversely affect the value of the
Fund’s securities. Investments in non-U.S. securities may be subject to
withholding or other taxes and may be subject to additional trading, settlement,
custodial, and operational risks. Because legal systems differ, there is also
the possibility that it will be difficult to obtain or enforce legal judgments
in some countries. Since foreign exchanges may be open on days when the Fund
does not price its Shares, the value of the securities in the Fund’s portfolio
may change on days when shareholders will not be able to purchase or sell the
Fund’s Shares. Conversely, Shares may trade on days when foreign exchanges are
closed. Investment in foreign securities may involve higher costs than
investment in U.S. securities, including higher transaction and custody costs as
well as the imposition of additional taxes by foreign governments. Each of these
factors can make investments in the Fund more volatile and potentially less
liquid than other types of investments.
Capital
Controls Risk.
Economic conditions, such as volatile currency exchange rates and interest
rates, political events and other conditions may, without prior warning, lead to
government intervention and the imposition of “capital controls” or
expropriation or nationalization of assets. The possible establishment of
exchange controls or freezes on the convertibility of currency, or the adoption
of other governmental restrictions, might adversely affect an investment in
foreign securities. Capital controls include the prohibition of, or restrictions
on, the ability to transfer currency, securities or other assets within or out
of a jurisdiction. Levies may be placed on profits repatriated by foreign
entities (such as the Fund). Capital controls may impact the ability of the Fund
to buy, sell or otherwise transfer
securities
or currency, may adversely affect the trading market and price for Shares of the
Fund, and may cause the Fund to decline in value.
Depositary
Receipt Risk.
The Fund’s investments in foreign companies may be in the form of depositary
receipts, including ADRs, EDRs, and GDRs. ADRs, EDRs, and GDRs are generally
subject to the risks of investing directly in foreign securities and, in some
cases, there may be less information available about the underlying issuers than
would be the case with a direct investment in the foreign issuer. ADRs are U.S.
dollar-denominated receipts representing shares of foreign-based corporations.
GDRs are similar to ADRs but are shares of foreign-based corporations generally
issued by international banks in one or more markets around the world.
Investment in ADRs and GDRs may be more or less liquid than the underlying
shares in their primary trading market and GDRs may be more volatile. Depositary
receipts may be “sponsored” or “unsponsored” and may be unregistered and
unlisted. Sponsored depositary receipts are established jointly by a depositary
and the underlying issuer, whereas unsponsored depositary receipts may be
established by a depositary without participation by the underlying issuer.
Holders of an unsponsored depositary receipt generally bear all the costs
associated with establishing the unsponsored depositary receipt. In addition,
the issuers of the securities underlying unsponsored depositary receipts are not
obligated to disclose material information in the United States and, therefore,
there may be less information available regarding such issuers and there may not
be a correlation between such information and the market value of the depositary
receipts. In general, ADRs must be sponsored, but the Fund may invest in
unsponsored ADRs under certain limited circumstances. It is expected that not
more than 10% of the net assets of the Fund will be invested in unsponsored
ADRs. The Fund’s investments may also include ADRs and GDRs that are not
purchased in the public markets and are restricted securities that can be
offered and sold only to “qualified institutional buyers” under Rule 144A of the
Securities Act of 1933, as amended (the “Securities Act”). The Adviser will
determine the liquidity of these investments pursuant to guidelines established
by the Board. If a particular investment in such ADRs or GDRs is deemed
illiquid, that investment will be included within the Fund’s limitation on
investment in illiquid securities. Moreover, if adverse market conditions were
to develop during the period between the Fund’s decision to sell these types of
ADRs or GDRs and the point at which the Fund is permitted or able to sell such
security, the Fund might obtain a price less favorable than the price that
prevailed when it decided to sell.
Currency
Risk.
The Fund’s NAV is determined on the basis of U.S. dollars; therefore, the Fund
may lose value if the local currency of a foreign market depreciates against the
U.S. dollar, even if the local currency value of the Fund’s holdings goes up.
Currency exchange rates may fluctuate significantly over short periods of time.
Currency exchange rates also can be affected unpredictably by intervention; by
failure to intervene by U.S. or foreign governments or central banks; or by
currency controls or political developments in the U.S. or abroad. Changes in
foreign currency exchange rates may affect the NAV of the Fund and the price of
the Fund’s Shares. Devaluation of a currency by a country’s government or
banking authority would have a significant impact on the value of any
investments denominated in that currency.
Political
and Economic Risk.
The Fund is subject to foreign political and economic risk not associated with
U.S. investments, meaning that political events (civil unrest, national
elections, changes in political conditions and foreign relations, imposition of
exchange controls and repatriation restrictions), social and economic events
(labor strikes, rising inflation) and natural disasters occurring in a foreign
country could cause the Fund’s investments to experience gains or losses. The
Fund also could be unable to enforce its ownership rights or pursue legal
remedies in countries where it invests.
Foreign
Market and Trading Risk.
The trading markets for many foreign securities are not as active as U.S.
markets and may have less governmental regulation and oversight. Foreign markets
also may have clearance and settlement procedures that make it difficult for the
Fund to buy and sell securities. The procedures and rules governing foreign
transactions and custody (holding of the Fund’s assets) also may involve delays
in payment, delivery or recovery of money or investments. These factors could
result in a loss to the Fund by causing the Fund to be unable to dispose of an
investment or to miss an attractive investment opportunity, or by causing Fund
assets to be uninvested for some period of time.
Geopolitical/Natural
Disaster Risks. The
Fund’s investments are subject to geopolitical and natural disaster risks, such
as war, terrorism, trade disputes, political or economic dysfunction within some
nations, public health crises and related geopolitical events, as well as
environmental disasters, epidemics and/or pandemics,
which
may add to instability in world economies and volatility in markets. The impact
may be short-term or may last for extended periods.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on their profit margins. Like
other technology companies, information technology companies may have limited
product lines, markets, financial resources or personnel. The products of
information technology companies may face obsolescence due to rapid
technological developments, frequent new product introduction, unpredictable
changes in growth rates and competition for the services of qualified personnel.
Companies in the information technology sector are heavily dependent on patent
and intellectual property rights. The loss or impairment of these rights may
adversely affect the profitability of these companies. Companies in the
information technology sector are facing increased government and regulatory
scrutiny and may be subject to adverse government or regulatory action.
Companies in the application software industry, in particular, may also be
negatively affected by the decline or fluctuation of subscription renewal rates
for their products and services, which may have an adverse effect on profit
margins. Companies in the systems software industry may be adversely affected
by, among other things, actual or perceived security vulnerabilities in their
products and services, which may result in individual or class action lawsuits,
state or federal enforcement actions and other remediation costs.
Investment
Risk. As
with all investments, an investment in the Fund is subject to investment risk.
Investors in the Fund could lose money, including the possible loss of the
entire principal amount of an investment, over short or long periods of
time.
Market
Capitalization Risk. To
the extent the Fund emphasizes large-, mid- or small-capitalization stocks, it
will assume the associated risks. At any given time, any of these market
capitalizations may be out of favor with investors.
•Large-Capitalization
Investing.
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and therefore subject to slower growth during
times of economic expansion. Large-capitalization companies may also be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
•Mid-Capitalization
Investing.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large capitalization stocks or the stock market
as a whole.
•Small-Capitalization
Investing.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies.
Passive
Investment Risk.
The Fund invests in the securities included in, or representative of, it’s Index
regardless of their investment merit. The Fund does not attempt to outperform
its respective Index or take defensive positions in declining markets. As a
result, the Fund’s performance may be adversely affected by a general decline in
the market segments relating to its Index. The returns from the types of
securities in which the Fund invest may underperform returns from the various
general securities markets or different asset classes. This may cause the Fund
to underperform other investment vehicles that invest in different asset
classes. Different types of securities (for example, large-, mid- and
small-capitalization stocks) tend to go through cycles of doing better – or
worse – than the general securities markets. In the past, these periods have
lasted for as long as several years.
Quantitative
Security Selection Risk.
Data for some issuers may be less available and/or less current than data for
issuers in other markets. The Index uses a quantitative model, and its processes
could be adversely affected if erroneous or outdated data is utilized. In
addition, securities selected using a quantitative model could perform
differently from the financial markets as a whole as a result of the
characteristics used in the analysis, the weight placed on each characteristic
and changes in the characteristic’s historical trends. The factors used in such
analyses may not be predictive of a security’s value and its effectiveness can
change over time. These changes may not be reflected in the quantitative
model.
Rebalance
Postponement & Ad Hoc Rebalance Risk. Unusual
market conditions may cause the Index Provider to postpone a scheduled rebalance
for the Index, which could cause the Index to vary from its normal or expected
composition. The postponement of a scheduled rebalance in a time of market
volatility could mean that constituents that would otherwise be removed at
rebalance due to changes in market capitalizations, issuer credit ratings, or
other reasons may remain, causing the performance and constituents of the Index
to vary from those expected under normal conditions. Apart from scheduled
rebalances, the Index Provider or its agents may carry out additional ad hoc
rebalances to the Index due to reaching certain weighting constraints, unusual
market conditions or in order, for example, to correct an error in the selection
of index constituents. When the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Therefore, errors and additional ad hoc rebalances carried out
by the Index Provider or its agents to the Index may increase the costs to and
the tracking error risk of the Fund.
Tracking
Error Risk. As
with all index funds, the performance of the Fund and its Index may differ from
each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by an Index. In addition,
the Fund may not be fully invested in the securities of its Index at all times
or may hold securities not included in the Index. As a result of legal
restrictions or limitations that apply to the Fund but not to the Index, the
Fund may have less relative short exposure than the Index during periods in
between the Index’s monthly hedging reconstitutions. Such differences in short
exposure may cause the performance of the Fund and its Index to differ from each
other.
FUND
MANAGEMENT
Empowered
Funds, LLC dba
EA Advisers
acts as the Fund’s investment adviser. The Adviser is located at 19 East Eagle
Road, Havertown, PA 19083 and is wholly-owned by Alpha Architect LLC. The
Adviser is registered with the Securities and Exchange Commission (“SEC”) under
the Investment Advisers Act of 1940 and provides investment advisory services
solely to the Fund and other exchange-traded funds. The Adviser was founded in
October 2013.
The
Adviser is responsible for overseeing the management and business affairs of the
Fund and has discretion to purchase and sell securities in accordance with the
Fund’s objectives, policies and restrictions. The Adviser continuously reviews,
supervises and administers the Fund’s investment programs pursuant to the terms
of investment advisory agreement (the “Advisory Agreement”) between the Trust
and the Adviser. The Adviser (or an affiliate of the Adviser) bears all of the
Adviser’s own costs associated with providing these advisory services and all
expenses of the Fund, except for the fee payment under the Advisory Agreement,
payments under the Fund’s Rule 12b-1 Distribution and Service Plan (the “Plan”),
brokerage expenses, acquired fund fees and expenses (including affiliated funds’
fees and expenses), taxes, interest (including borrowing costs), litigation
expense and other non-routine or extraordinary expenses.
Pursuant
to the terms of the Advisory Agreement, the Fund pays the Adviser an annual
advisory fee based on its average daily net assets for the services and
facilities it provides payable at the annual rate as follows:
|
|
|
|
| |
Fund |
Advisory Fee |
Freedom
100 Emerging Markets ETF |
0.49% |
The
Advisory Agreement for the Fund provides that it may be terminated at any time,
without the payment of any penalty, by the Board or, with respect to the Fund,
by a majority of the outstanding shares of the Fund, on 60 days’ written notice
to the Adviser, and by the Adviser upon 60 days’ written notice, and that it
shall be automatically terminated if it is assigned.
PORTFOLIO
MANAGERS
Messrs.
Wm. Joshua Russell and Richard Shaner are the portfolio managers who are
primarily and jointly responsible for the day-to-day management of the
Fund.
Mr.
Wm. Joshua Russell, PhD, CFA has been a Senior Portfolio Manager with the
Advisor since October 2022 and a portfolio manager of the Fund since January
2023. Prior to this he was a Portfolio Manager at Carson Group where he was
responsible for approximately $1.7 billion in assets. He has also served in
quant research roles as VP, Sr. Research Analyst at Franklin Templeton and
Senior Quantitative Strategist at WisdomTree. Prior to entering the industry,
Dr. Russell was a PhD candidate where he conducted research on large-scale
distributed
systems for the US Army, the US Air Force, and NASA. He earned a PhD in
Electrical and Computer Engineering, a Masters in Economics, and a Masters in
Electrical and Computer Engineering at the University of California, Santa
Barbara. He earned a Bachelor of Science in Electrical Engineering from the
University of Washington and is a CFA® Charterholder.
Mr.
Richard Shaner has been portfolio manager of the Fund since 2022. Mr. Shaner has
advised on trading and execution matters for the Adviser since January 2021,
where he supports trading operations and assists in quantitative research. Prior
to Mr. Shaner’s tenure with the Adviser, Mr. Shaner executed various trading
strategies for a private family office. Mr. Shaner has a B.Sc in Kinesiology and
Applied Physiology from the University of Colorado. He is also a CFA®
Charterholder.
The
Fund’s SAI provides additional information about the portfolio managers,
including other accounts they manage, their ownership in the Fund and
compensation.
FUND
SPONSOR
The
Adviser has entered into a fund sponsorship agreement with
Life + Liberty Investments, LLC, the Fund’s index provider pursuant to
which it is also the sponsor of the Fund (“Fund Sponsor”). Under this
arrangement, the Fund Sponsor has agreed to provide financial support to the
Fund (as described below) and, in turn, the Adviser has agreed to share with the
Fund Sponsor a portion of profits, if any, generated by the Fund’s Advisory Fee
(also as described below). Every month, the Advisory Fee, which is a unitary
management fee, is calculated and paid to the Adviser.
If
the amount of the unitary management fee exceeds the Fund’s operating expenses
and the Adviser-retained amount, the Adviser pays the net total to the Fund
Sponsor. The amount paid to the Fund Sponsor represents both the index licensing
fee and any remaining profits from the Advisory Fee. During months where there
are no profits or the funds are not sufficient to cover the entire index
licensing fee, the index licensing fee is automatically waived.
If
the amount of the unitary management fee is less than the Fund’s operating
expenses and the Adviser-retained amount, the Fund Sponsor is obligated to
reimburse the Adviser for the shortfall.
APPROVAL
OF
ADVISORY
AGREEMENT
A
discussion regarding the basis for the Board’s approval of the Advisory
Agreement with respect to the Fund is available in the Fund’s annual
report
for the fiscal year ended September 30, 2022.
OTHER
SERVICE
PROVIDERS
Quasar
Distributors, LLC (“Distributor”) serves as the distributor of Creation Units
(defined above) for the Fund on an agency basis. The Distributor does not
maintain a secondary market in Shares.
U.S.
Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services, is
the administrator, fund accountant and transfer agent for the Fund.
U.S.
Bank National Association is the custodian for the Fund.
Practus,
LLP, 11300 Tomahawk Creek Parkway, Suite 310, Leawood, Kansas 66211, serves as
legal counsel to the Trust.
Tait,
Weller & Baker LLP, 50 South 16th
Street, Suite 2900, Philadelphia, PA 19102, serves as the Fund’s independent
registered public accounting firm. The independent registered public accounting
firm is responsible for auditing the annual financial statements of the
Fund.
THE
EXCHANGE
Shares
of the Fund are not sponsored, endorsed or promoted by the Exchange. The
Exchange is not responsible for, nor has it participated, in the determination
of the timing of, prices of, or quantities of Shares of the Fund to be issued,
nor in the determination or calculation of the equation by which the Shares are
redeemable. The Exchange has no obligation or liability to owners of the Shares
of the Fund in connection with the administration, marketing or trading of the
Shares of the Fund. Without limiting any of the foregoing, in no event shall the
Exchange have any liability for any direct, indirect, special, punitive,
consequential or any other damages (including lost profits) even if notified of
the possibility of such damages.
BUYING
AND
SELLING
FUND
SHARES
Shares
will be issued or redeemed by the Fund at NAV per Share only in Creation Units
of 50,000 Shares. Creation Units are generally issued and redeemed only in-kind
for securities although a portion may be in cash.
Shares
will trade on the secondary market, however, which is where most retail
investors will buy and sell Shares. It is expected that only a limited number of
institutional investors, called Authorized Participants or “APs,” will purchase
and redeem Shares directly from the Fund. APs may acquire Shares directly from
the Fund, and APs may tender their Shares for redemption directly to the Fund,
at NAV per Share only in large blocks, or Creation Units. Purchases and
redemptions directly with the Fund must follow the Fund’s procedures, which are
described in the SAI.
Except
when aggregated in Creation Units, Shares are not redeemable with the Fund.
BUYING
AND
SELLING
SHARES
ON
THE
SECONDARY
MARKET
Most
investors will buy and sell Shares in secondary market transactions through
brokers and, therefore, must have a brokerage account to buy and sell Shares.
Shares can be bought or sold through your broker throughout the trading day like
shares of any publicly traded issuer. The Trust does not impose any redemption
fees or restrictions on redemptions of Shares in the secondary market. When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the
bid and the offered prices in the secondary market for Shares. The price at
which you buy or sell Shares (i.e.,
the market price) may be more or less than the NAV of the Shares. Unless imposed
by your broker, there is no minimum dollar amount you must invest in the Fund
and no minimum number of Shares you must buy.
Shares
of the Fund are listed on the Exchange under the following symbol:
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Fund |
Trading Symbol |
Freedom
100 Emerging Markets ETF |
FRDM |
The
Exchange is generally open Monday through Friday and is closed for weekends and
the following holidays: New Year’s Day, Martin Luther King, Jr. Day,
Washington’s
Birthday,
Good Friday, Memorial Day, Juneteenth National Independence Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day.
For
information about buying and selling Shares on the Exchange or in the secondary
markets, please contact your broker or dealer.
Book
Entry. Shares
are held in book entry form, which means that no stock certificates are issued.
The Depository Trust Company (“DTC”), or its nominee, will be the registered
owner of all outstanding Shares of the Fund and is recognized as the owner of
all Shares. Participants in DTC 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 on the procedures of DTC and its participants. These
procedures are the same as those that apply to any stocks that you hold in book
entry or “street name” through your brokerage account. Your account information
will be maintained by your broker, which will provide you with account
statements, confirmations of your purchases and sales of Shares, and tax
information. Your broker also will be responsible for distributing income
dividends and capital gain distributions and for ensuring that you receive
shareholder reports and other communications from the Fund.
Share
Trading Prices. The
trading prices of the Fund’s Shares may differ from the Fund’s daily NAV and can
be affected by market forces of supply and demand for the Fund’s Shares, the
prices of the Fund’s portfolio securities, economic conditions and other
factors.
The
Exchange through the facilities of the Consolidated Tape Association or another
market information provider intends to disseminate the approximate value of the
Fund’s portfolio every fifteen seconds during regular U.S. trading hours. This
approximate value should not be viewed as a “real-time” update of the NAV of the
Fund because the approximate value may not be calculated in the same manner as
the NAV, which is computed once a day. The quotations for certain investments
may not be updated during U.S. trading hours if such holdings do not trade in
the U.S., except such quotations may be updated to reflect currency
fluctuations.
The
Fund is not involved in, or responsible for, the calculation or dissemination of
the approximate values and makes no warranty as to the accuracy of these
values.
Continuous
Offering. The
method by which Creation Units of Shares are created and traded may raise
certain issues under applicable securities laws. Because new Creation Units of
Shares are issued and sold by the Fund on an ongoing basis, a “distribution,” as
such term is used in the Securities Act, may occur at any point. 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 which could render them statutory underwriters and
subject them to the prospectus delivery requirements and liability provisions of
the Securities Act. For example, a broker-dealer firm or its client may be
deemed a statutory underwriter if it takes Creation Units after placing an order
with the Distributor, breaks them down into constituent Shares and sells the
Shares directly to customers or if it chooses to couple the creation of a supply
of new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a characterization
as an underwriter.
Broker-dealer
firms should also note that dealers who are not “underwriters” but are effecting
transactions in Shares, whether or not participating in the distribution of
Shares, are generally required to deliver a prospectus. This is because the
prospectus delivery exemption in Section 4(a)(3) of the Securities Act is
not available in respect of such transactions as a result of Section 24(d)
of the Investment Company Act of 1940. As a result, broker-dealer firms should
note that dealers who are not “underwriters” but are participating in a
distribution (as contrasted with engaging in ordinary secondary market
transactions) and thus dealing with the Shares that are part of an overallotment
within the meaning of Section 4(a)(3)(C) of the Securities Act, will be unable
to take advantage of the prospectus delivery exemption provided by Section
4(a)(3) of the Securities Act. For delivery of prospectuses to exchange members,
the prospectus delivery mechanism of Rule 153 under the Securities Act is only
available with respect to transactions on a national exchange.
ACTIVE
INVESTORS
AND
MARKET
TIMING
The
Board has evaluated the risks of market timing activities by the Fund’s
shareholders. The Board noted that the Fund’s Shares can be purchased and
redeemed directly from the Fund only in Creation Units by APs and that the vast
majority of trading in the Fund’s Shares occurs on the secondary market. Because
the secondary market trades do not directly involve the Fund, it is unlikely
those trades would cause the harmful effects of market timing, including
dilution, disruption of portfolio management, increases in the Fund’s trading
costs and the realization of capital gains. With regard to the purchase or
redemption of Creation Units directly with the Fund, to the extent effected
in-kind (i.e.,
for securities), the Board noted that those trades do not cause the harmful
effects (as previously noted) that may result from frequent cash trades. To the
extent trades are effected in whole or in part in cash, the Board noted that
those trades could result in dilution to the Fund and increased transaction
costs, which could negatively impact the Fund’s ability to achieve its
investment objective, although in certain circumstances (e.g., in conjunction
with a rebalance of the Fund’s Index), such trades may benefit Fund shareholders
by increasing the tax efficiency of the Fund. The Board also noted that direct
trading by APs is critical to ensuring that the Fund’s Shares trade at or close
to NAV. In addition, the Fund will impose transaction fees on purchases and
redemptions of Shares to cover the custodial and other costs incurred by the
Fund in effecting trades. Given this structure, the Board determined that it is
not necessary to adopt policies and procedures to detect and deter market timing
of the Fund’s Shares.
DISTRIBUTION
AND
SERVICE
PLAN
The
Fund has adopted the Plan pursuant to Rule 12b-1 under the Investment Company
Act. Under the Plan, the Fund may be authorized to pay distribution fees of up
to 0.25% of its average daily net assets each year to the Distributor and other
firms that provide distribution and shareholder services (“Service Providers”).
As of the date of this Prospectus, the maximum amount payable under the Plan is
set at 0% until further action by the Board. In the event 12b-1 fees are
charged, over time they would increase the cost of an investment in the Fund
because they would be paid on an ongoing basis.
NET
ASSET
VALUE
The
NAV of Shares is calculated each business day as of the close of regular trading
on the New York Stock Exchange (“NYSE”), generally 4:00 p.m., Eastern
time.
The
Fund calculates its NAV per Share by:
•Taking
the current market value of its total assets,
•Subtracting
any liabilities, and
•Dividing
that amount by the total number of Shares owned by shareholders.
If
you buy or sell Shares on the secondary market, you will pay or receive the
market price, which may be higher or lower than NAV. Your transaction will be
priced at NAV only if you purchase or redeem your Shares in Creation
Units.
Because
securities listed on foreign exchanges may trade on weekends or other days when
the Fund does not price its Shares, the NAV of the Fund, to the extent it may
hold foreign securities, may change on days when shareholders will not be able
to purchase or sell Shares. In particular, where all or a portion of the Fund’s
underlying securities trade in a market that is closed when the market in which
the Fund’s shares are listed and trading in that market is open, there may be
changes between the last quote from its closed foreign market and the value of
such security during the Fund’s domestic trading day. In addition, please note
that this in turn could lead to differences between the market price of the
Fund’s shares and the underlying value of those shares.
Equity
securities that are traded on a national securities exchange, except those
listed on the NASDAQ Global Market®
(“NASDAQ”) are valued at the last reported sale price on the exchange on which
the security is principally traded. Securities traded on NASDAQ will be valued
at the NASDAQ Official Closing Price (“NOCP”). If, on a particular day, an
exchange-traded or NASDAQ security does not trade, then the most recent quoted
bid for exchange traded or the mean between the most recent quoted bid and ask
price for NASDAQ securities will be used. Equity securities that are not traded
on a listed exchange are generally valued at the last sale price in the
over-the-counter market. If a nonexchange traded security does not trade on a
particular day, then the mean between the last quoted closing bid and asked
price will be used.
The
value of assets denominated in foreign currencies is converted into U.S. dollars
using exchange rates deemed appropriate by the Fund.
Redeemable
securities issued by open-end investment companies are valued at the investment
company’s applicable net asset value, with the exception of exchange-traded
open-end investment companies which are priced as equity
securities.
If
a market price is not readily available or is deemed not to reflect market
value, the Fund will determine the price of the security held by the Fund based
on a determination of the security’s fair value pursuant to policies and
procedures approved by the Board.
Fair
valuation may have the effect of reducing stale pricing arbitrage opportunities
presented by the pricing of Shares. However, when the Fund uses fair valuation
to price securities, it may value those securities higher or lower than another
fund would have priced the security. Also, the use of fair valuation may cause
the Shares’ NAV performance to diverge from the Shares’ market price and from
the performance of various benchmarks used to compare the Fund’s performance
because benchmarks generally do not use fair valuation techniques. Because of
the judgment involved in fair valuation decisions, there can be no assurance
that the value ascribed to a particular security is accurate.
FUND
WEBSITE
AND
DISCLOSURE
OF
PORTFOLIO
HOLDINGS
The
Trust maintains a website for the Fund at www.freedometfs.com/funds.
Among other things, the website includes this Prospectus and the SAI, and
includes the Fund’s holdings, the Fund’s last annual and semi-annual reports.
The website shows the Fund’s daily NAV per share, market price, and premium or
discount, each as of the prior business day. The website also shows the extent
and frequency of the Fund’s premiums and discounts. Further, the website
includes the Fund’s median bid-ask spread over the most recent thirty calendar
days.
Each
day the Fund is open for business, the Trust publicly disseminates the Fund’s
full portfolio holdings as of the close of the previous day through its website
at www.freedometfs.com/funds. A description of the Trust’s policies and
procedures with respect to the disclosure of the Fund’s portfolio holdings is
available in the Fund’s SAI.
INVESTMENTS
BY
OTHER
INVESTMENT
COMPANIES
For
purposes of the Investment Company Act, Shares are issued by a registered
investment company and purchases of such Shares by registered investment
companies and companies relying on Section 3(c)(1) or
3(c)(7)
of the Investment Company Act are subject to the restrictions set forth in
Section 12(d)(1) of the Investment Company Act, except as permitted by Rule
6c-11, Rule 12d1-4, or an exemptive order of the SEC.
DIVIDENDS,
DISTRIBUTIONS,
AND
TAXES
As
with any investment, you should consider how your investment in Shares will be
taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in Shares.
Unless
your investment in Shares is made through a tax-exempt entity or tax-deferred
retirement account, such as an IRA plan, you need to be aware of the possible
tax consequences when:
•Your
Fund makes distributions,
•You
sell your Shares listed on the Exchange, and
•You
purchase or redeem Creation Units.
Dividends
and Distributions
Dividends
and Distributions.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended. As a
regulated investment company, the Fund generally pays no U.S. federal income tax
on the income and gains it distributes to you. The Fund expects to declare and
to distribute its net investment income, if any, to shareholders as dividends
quarterly. The Fund will distribute net realized capital gains, if any, at least
annually. The Fund may distribute such income dividends and capital gains more
frequently, if necessary, in order to reduce or eliminate U.S. 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 an income dividend or a capital gains
distribution. Distributions may be reinvested automatically in additional whole
Shares only if the broker through whom you purchased Shares makes such option
available.
Avoid
“Buying a Dividend.”
At the time you purchase Shares of the Fund, the Fund’s NAV may reflect
undistributed income, undistributed capital gains, or net unrealized
appreciation in value of 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 gains distribution is
sometimes known as “buying a dividend.”
Taxes
Tax
Considerations.
The Fund expects, based on its investment objective and strategies, that its
distributions, if any, will be taxable as ordinary income, capital gains, or
some combination of both. This is true whether you reinvest your distributions
in additional Shares or receive them in cash. For federal income tax purposes,
Fund distributions of short-term capital gains are taxable to you as ordinary
income. Fund distributions of long-term capital gains are taxable to you as
long-term capital gain no matter how long you have owned your Shares. A portion
of income dividends reported by the Fund may be qualified dividend income
eligible for taxation by certain shareholders at long-term capital gain rates
provided certain holding period requirements are met.
Taxes
on Sales of Shares.
A sale or exchange of Shares is a taxable event and, accordingly, a capital gain
or loss will generally be recognized. Currently, any capital gain or loss
realized upon a sale of 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. The
ability to deduct capital losses may be limited.
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 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. This Medicare
tax, if applicable, is reported by you on, and paid with, your U.S. federal
income tax return.
Backup
Withholding.
By law, if you do not provide the Fund with your proper taxpayer identification
number and certain required certifications, you may be subject to backup
withholding on any distributions of income, capital gains or proceeds from the
sale of your Shares. The Fund also must backup withhold if the Internal Revenue
Service (“IRS”) instructs it to do so. When backup withholding is required, the
amount will be 24% of any distributions or proceeds paid.
State
and Local Taxes.
Fund distributions and gains from the sale or exchange of your Shares generally
are subject to state and local taxes.
Taxes
on Purchase and Redemption of Creation Units.
An AP who exchanges equity securities for Creation Units generally will
recognize a gain or a 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 and the cash amount
paid. A person who exchanges Creation Units for equity securities generally will
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 received
and the cash amount received. The IRS, 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. Persons exchanging securities should
consult their own tax advisor with respect to whether the wash sale rules apply
and when a loss might not be deductible.
Under
current U.S. federal tax laws, any capital gain or loss realized upon 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 cash, it may recognize more capital gains
than it will if it redeems Creation Units in-kind.
Foreign
Tax Credits.
If the Fund qualifies to pass through to you the tax benefits from foreign taxes
it pays on its investments, and elects to do so, then any foreign taxes it pays
on these investments may be passed through to you as a foreign tax
credit.
Non-U.S.
Investors.
Non-U.S. investors may be subject to U.S. withholding tax at a 30% or lower
treaty rate and are subject to special U.S. tax certification requirements to
avoid backup withholding and claim any treaty benefits. An exemption from U.S.
withholding tax is provided for capital gain dividends paid by the Fund from
long-term capital gains, if any. However, interest-related dividends paid by the
Fund from its qualified net interest income from U.S. sources and short-term
capital gain dividends may be exempt from U.S. withholding provided the Fund
makes certain designations and other requirements are met. Furthermore,
notwithstanding such exemptions from U.S. withholding at the 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. In addition, U.S. estate tax may apply to Shares of the
Fund.
Other
Reporting and Withholding Requirements.
Under the Foreign Account Tax Compliance Act (FATCA), the Fund will be required
to withhold a 30% tax on (i) income dividends paid by the Fund, and (ii)
possibly in the future, certain capital gain distributions and the proceeds
arising from the sale of Shares paid by the Fund, to certain foreign entities,
referred to as foreign financial institutions or non-financial foreign entities,
that fail to comply (or be deemed compliant) with extensive reporting and
withholding requirements designed to inform the U.S. Department of the Treasury
of U.S.-owned foreign investment accounts. The Fund may disclose the information
that it receives from its shareholders to the IRS, non-U.S. taxing authorities
or other parties as necessary to comply with FATCA. Withholding also may be
required if a foreign entity that is a shareholder of the Fund fails to provide
the Fund with appropriate certifications or other documentation concerning its
status under FATCA.
Possible
Tax Law Changes.
At the time that this prospectus is being prepared, various administrative and
legislative changes to the U.S. federal tax laws are under consideration, but it
is not possible at this time to determine whether any of these changes will be
made or what the changes might entail.
This
discussion of “Dividends, Distributions and Taxes” is not intended or written to
be used as tax advice. Because everyone’s tax situation is unique, you should
consult your tax professional about U.S. federal, state, local or foreign tax
consequences before making an investment in the Fund.
FINANCIAL
HIGHLIGHTS
The
financial highlights table is intended to help you understand the Fund’s
financial performance for the period of the Fund’s operations. Certain
information reflects financial results for a single Share. The total returns in
the table represent the rate that an investor would have gained (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). The information in the table below prior to 2023 fiscal year was
audited by the Fund’s prior independent registered public accounting firm.
Information for the remaining period in the table has been audited by Tait,
Weller & Baker LLP, an independent registered public accounting firm, whose
report, along with the Fund’s financial statements, is included in the Fund’s
Annual
Report,
which is available upon request.
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Net
Asset
Value,
Beginning
of
Period |
|
Net
Investment
Income(1) |
|
Net
Realized
and
Unrealized
Gains/(Losses)
on
Investments |
|
Net
Increase
(Decrease)
in
Net
Asset
Value
Resulting
from
Operations |
|
Distributions
from
Net
Investment
Income |
|
Distributions
from
Realized
Gains |
| Total Distributions |
| Transaction Fees
|
|
Net
Asset
Value,
End
of
Period |
|
Total
Return(2) |
|
Net
Assets,
End
of
Period
(000’s) |
|
Net
Expenses(3)(4) |
|
Net
Investment
Income(3) |
|
Portfolio
Turnover
Rate(5)(8) |
Freedom
100 Emerging Markets ETF |
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Year
Ended September 30, 2023 |
$25.04 |
| 0.94 |
| 3.60 |
| 4.54 |
| (1.32) |
| (0.05) |
| (1.37) |
| 0.06 |
| $28.27 |
| 18.42% |
| $609,130 |
| 0.49% |
| 3.18% |
| 15% |
Year
Ended September 30, 2022 |
$32.99 |
| 1.22 |
| (8.73) |
| (7.51) |
| (0.48) |
| (0.02) |
| (0.50) |
| 0.06 |
| $25.04 |
| (22.96)% |
| $206,583 |
| 0.49% |
| 3.99% |
| 8% |
Year
Ended September 30, 2021 |
$25.07 |
| 0.82 |
| 7.33 |
| 8.15 |
| (0.35) |
| - |
| (0.35) |
| 0.12 |
| $32.99 |
| 32.97% |
| $100,613 |
| 0.49% |
| 2.49% |
| 22% |
Year
Ended September 30, 2020 |
$25.33 |
| 0.34 |
| (0.31) |
| 0.03 |
| (0.31) |
| - |
| (0.31) |
| 0.02 |
| $25.07 |
| 0.25% |
| $20,058 |
| 0.49% |
| 1.40% |
| 19% |
May
23, 2019
(6)
to September 30, 2019 |
$25.00 |
| 0.31 |
| 0.19 |
| 0.50 |
| (0.20) |
| - |
| (0.20) |
| 0.03 |
| $25.33 |
| 2.11% |
| $12,663 |
| 0.49% |
| 3.42% |
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0%(7) |
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(1)Net
investment income per share represents net investment income divided by the
daily average shares of beneficial interest outstanding throughout the
period.
(2)All
returns reflect reinvested dividends, if any, but do not reflect the impact of
taxes. Total return for a period of less than one year is not
annualized.
(3)For
periods of less than one year, these ratios are annualized.
(4)Net
expenses include effects of any reimbursement or recoupment.
(5)Portfolio
turnover is not annualized and is calculated without regard to short-term
securities having a maturity of less than one year.
(6)Commencement
of operations.
(7)Rounds
to less than 0.5%.
(8)Excludes
impact of in-kind transactions.
If
you would like more information about the Fund and the Trust, the following
documents are available free, upon request:
ANNUAL/SEMI-ANNUAL
REPORTS
TO
SHAREHOLDERS
Additional
information about the Fund is in its annual
and semi-annual
reports to shareholders. The annual report explains the market conditions and
investment strategies affecting the Fund’s performance during the last fiscal
year.
STATEMENT
OF
ADDITIONAL
INFORMATION
The
SAI dated January 31, 2024, which contains more details about the Fund, is
incorporated by reference in its entirety into this Prospectus, which means that
it is legally part of this Prospectus.
To
receive a free copy of the latest annual or semi-annual report, or the SAI, or
to request additional information about the Fund, please contact us as
follows:
|
|
|
|
| |
Call: |
(215)
882-9983 |
| |
Write: |
19
East Eagle Road |
| Havertown,
PA 19083 |
| |
Visit: |
www.freedometfs.com/funds |
PAPER
COPIES
Please
note that paper copies of the Fund’s shareholder reports will generally not be
sent, unless you specifically request paper copies of the Fund’s reports from
your financial intermediary, such as a broker-dealer or bank. Instead, the
reports will be made available on the Fund’s website, and you will be notified
by mail each time a report is posted and provided with a website link to access
the report.
You
may elect to receive all future Fund reports in paper free of charge. Please
contact your financial intermediary to inform them that you wish to continue
receiving paper copies of Fund shareholder reports and for details about whether
your election to receive reports in paper will apply to all funds held with your
financial intermediary.
INFORMATION
PROVIDED
BY
THE
SECURITIES
AND
EXCHANGE
COMMISSION
Reports
and other information about the Fund are also available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov; or
Investment
Company Act File No. 811-22961.