-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ODTfenJM2hqJDNr7xo7J8SCYHUlrQ6LHRtYW4OrUTd4fvPD4dfSizHjM6Tyo8l+o mFh+PRc8oBa3E0JtcDpD2Q== 0001135428-10-000476.txt : 20101012 0001135428-10-000476.hdr.sgml : 20101011 20101012165051 ACCESSION NUMBER: 0001135428-10-000476 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20100731 FILED AS OF DATE: 20101012 DATE AS OF CHANGE: 20101012 EFFECTIVENESS DATE: 20101012 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAITHSHARES TRUST CENTRAL INDEX KEY: 0001452937 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-22263 FILM NUMBER: 101119703 BUSINESS ADDRESS: STREET 1: 3555 NORTHWEST 58 TH STREET STREET 2: SUITE 410 CITY: OKLAHOMA CITY STATE: OK ZIP: 73112 BUSINESS PHONE: 405-778-8377 MAIL ADDRESS: STREET 1: 3555 NORTHWEST 58 TH STREET STREET 2: SUITE 410 CITY: OKLAHOMA CITY STATE: OK ZIP: 73112 FORMER COMPANY: FORMER CONFORMED NAME: FAITHSHARES INC DATE OF NAME CHANGE: 20090225 FORMER COMPANY: FORMER CONFORMED NAME: VERITAS FUNDS INC DATE OF NAME CHANGE: 20081230 0001452937 S000026712 FaithShares Baptist Values Fund C000080181 ETF Shares 0001452937 S000026713 FaithShares Catholic Values Fund C000080182 ETF Shares 0001452937 S000026714 FaithShares Christian Values Fund C000080183 ETF Shares 0001452937 S000026715 FaithShares Lutheran Values Fund C000080184 ETF Shares 0001452937 S000026716 FaithShares Methodist Values Fund C000080185 ETF Shares N-CSR 1 faithshares_ncsr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________ FORM N-CSR ________ CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-22263 FaithShares Trust (Exact name of registrant as specified in charter) ________ Thompson S. Phillips, Jr. J. Garrett Stevens 3555 Northwest 58(th) Street Suite 410 Oklahoma City, OK 73112 (Address of principal executive offices) (Zip code) SEI Investments Global Fund Services One Freedom Valley Drive Oaks, PA 19456 (Name and address of agent for service) Registrant's telephone number, including area code: 405-778-8377 Date of fiscal year end: July 31, 2010 Date of reporting period: July 31, 2010 Item 1. Reports to Stockholders. ================================================================================ [LOGO OMITTED] FAITH SHARES ANNUAL REPORT JULY 31, 2010 FAITHSHARES BAPTIST VALUES FUND ETF FAITHSHARES CATHOLIC VALUES FUND ETF FAITHSHARES CHRISTIAN VALUES FUND ETF FAITHSHARES LUTHERAN VALUES FUND ETF FAITHSHARES METHODIST VALUES FUND ETF ================================================================================ ================================================================================ FAITH SHARES TABLE OF CONTENTS ================================================================================ Management Discussion of Fund Performance ................................... 1 Schedules of Investments FaithShares Baptist Values Fund .......................................... 9 FaithShares Catholic Values Fund ......................................... 11 FaithShares Christian Values Fund ........................................ 13 FaithShares Lutheran Values Fund ......................................... 15 FaithShares Methodist Values Fund ........................................ 17 Statements of Assets and Liabilities ........................................ 19 Statements of Operations .................................................... 20 Statements of Changes in Net Assets ......................................... 21 Financial Highlights ........................................................ 22 Notes to the Financial Statements ........................................... 23 Report of Independent Registered Public Accounting Firm ..................... 29 Disclosure of Fund Expenses ................................................. 30 Supplemental Information .................................................... 32 Trustees and Officers of the Trust .......................................... 35 Notice to Shareholders ...................................................... 38 The Funds file their complete schedules of Fund holdings with the Securities and Exchange Commission (the "Commission") for the first and third quarters of each fiscal year on Form N-Q within sixty days after the end of the period. The Funds' Forms N-Q is available on the Commission's website at http://www.sec.gov, and may be reviewed and copied at the Commission's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. A description of the policies and procedures that FaithShares Funds use to determine how to vote proxies relating to Fund securities, as well as information relating to how the Funds voted proxies relating to Fund securities during the most recent 12-month period ended June 30, is available (i) without charge, upon request, by calling 1-877-FAITH-55; and (ii) on the Commission's website at http://www.sec.gov. ================================================================================ FAITH SHARES MANAGEMENT DISCUSSION OF FUND PERFORMANCE (UNAUDITED) ================================================================================ Baptist Values Fund The Baptist Values Fund employs a "passive management" investment strategy designed to track the total return performance of the FaithShares Baptist Values Index (the "BV Index" or "Index"), a custom index developed by Morgan Stanley Composite Index ("MSCI"), formerly the FTSE KLD Index. The BV Index is designed to measure the performance of U.S. large capitalization companies that are in accordance with the guidelines for social screening recommended by various Baptist denominations (the "Baptist Guidelines"). U.S. large capitalization companies are considered to be the 400 largest market capitalization U.S. companies among the following industries: basic materials, consumer goods, consumer services, financials, health care, industrials, oil and gas, technology, telecommunications and utilities. The BV Index has zero tolerance for, and therefore excludes from its Index, companies involved in the following activities: direct participation or support of abortion; the manufacture of alcoholic beverages; the ownership or operation of, or support of, gambling facilities, products or services; production of military weapons; the production, sale or distribution of pornography; and manufacture of tobacco products. The BV Index is comprised of 100 securities each of whose weighting in the BV Index is rebalanced each year in June to 1%. Companies can only be added to the BV Index at reconstitution each year. Companies may be removed at any time during the year due to certain corporate actions (such as the merger or sale of a company where the Index opts not to take shares of the new company). Companies included in the BV Index that, after reconstitution, no longer continue to satisfy the screening guidelines for the Baptist Values Fund will not be removed from the BV Index until reconstitution, and the Baptist Values Fund, to the extent it has invested in such companies, will continue to hold their securities until the next reconstitution. Catholic Values Fund The Catholic Values Fund employs a "passive management" investment strategy designed to track the total return performance of the FaithShares Catholic Values Index (the "CV Index" or "Index"), a custom index developed by MSCI, formerly the FTSE KLD Index. The CV Index is designed to measure the performance of U.S. large capitalization companies that operate in accordance with the U.S. Conference of Catholic Bishops' ("USCCB") Socially Responsible Investment Guidelines ("SRI Guidelines"). U.S. large capitalization companies are considered to be the 400 largest market capitalization U.S. companies among the following industries: basic materials, consumer goods, consumer services, financials, health care, industrials, oil and gas, technology, telecommunications and utilities. The SRI Guidelines focus on avoiding participation in harmful activities and promotion of the common good. The CV Index has zero tolerance for, and therefore excludes from its Index, companies involved in the following activities: direct participation or support of abortion; manufacture of contraceptive products; use of embryonic stem cell or fetal tissue for research or in a product; and manufacture of tobacco products. The CV Index also excludes companies that manufacture anti-personnel landmines or that derive greater than 5% of revenues from the production of firearms or military weapons. The CV Index avoids inclusion of companies that have been involved in predatory lending controversies and not taken steps to address them; have a pattern of racial or gender discrimination or labor rights controversies without taking steps to address such situations; and use sweatshops in the manufacture of goods. In applying the SRI Guidelines, MSCI considers companies for the CV Index with the following corporate practices: have corporate responsibility guidelines; have corporate policies on equal pay and promotion opportunities for women and minorities; provide generous wages and have generous benefit policies; and have programs and policies to protect the environment and reduce greenhouse gas emissions. Companies that provide customers with access to health care and pharmaceuticals; affordable housing or lending for housing or create environmentally beneficial technologies and/or develop alternative, renewable or clean energy resources are also selected for the CV Index. The CV Index is comprised of 100 securities each of whose weighting in the Index is rebalanced each year in June to 1%. Companies can only be added to the CV Index at reconstitution each year. Companies may be removed at any time during the year due to certain corporate actions (such as the merger or sale of a company where the CV Index opts not to take shares of the new company). Companies included in the CV Index that, after reconstitution, no longer continue to satisfy the 1 ================================================================================ FAITH SHARES MANAGEMENT DISCUSSION OF FUND PERFORMANCE (UNAUDITED) ================================================================================ Catholic Values Fund (continued) screening guidelines for the Catholic Values Fund will not be removed from the CV Index until reconstitution and the Catholic Values Fund, to the extent it has invested in such companies, will continue to hold their securities until the next reconstitution. Christian Values Fund The Christian Values Fund employs a "passive management" investment strategy designed to track the total return performance of the FaithShares Christian Values Index (the "CHV Index" or "Index"), a custom index developed by MSCI, formerly the FTSE KLD Index. The CHV Index is designed to measure the performance of U.S. large capitalization companies screened based on a composite of the guidelines of various Christian denominations (the "Christian Guidelines"). U.S. large capitalization companies are considered to be the 400 largest market capitalization U.S. companies among the following industries: basic materials, consumer goods, consumer services, financials, health care, industrials, oil and gas, technology, telecommunications and utilities. The CHV Index has zero tolerance for, and therefore excludes from its Index, companies involved in: the direct participation or support of abortion; manufacture of alcoholic beverages; ownership of, or support of, gambling facilities, products or services; production or distribution of violent media; production, sale or distribution of pornography, use of embryonic stem cell or fetal tissue for research in a product; and manufacture, sale or distribution of tobacco products or supply of key elements to the tobacco industry. The CHV Index is comprised of 100 securities each of whose weighting in the Index is rebalanced each year in June to 1%. Companies can only be added to the CHV Index at reconstitution each year. Companies may be removed at any time during the year due to certain corporate actions (such as the merger or sale of a company where the CHV Index opts not to take shares of the new company). Companies included in the CHV Index that, after reconstitution, no longer continue to satisfy the screening guidelines for the Christian Values Fund will not be removed from the CHV Index until reconstitution, and the Christian Values Fund, to the extent it has invested in such companies, will continue to hold their securities until the next reconstitution. Lutheran Values Fund The Lutheran Values Fund employs a "passive management" investment strategy designed to track the total return performance of the FaithShares Lutheran Values Index (the "LV Index" or "Index"), a custom index developed by MSCI, formerly the FTSE KLD Index. The LV Index is designed to measure the performance of U.S. large capitalization companies that operate in accordance with the guidelines for social investing and shareholder advocacy recommended by various Lutheran denominations ("Lutheran Guidelines"). U.S. large capitalization companies are considered to be the 400 largest market capitalization U.S. companies among the following industries: basic materials, consumer goods, consumer services, financials, health care, industrials, oil and gas, technology, telecommunications and utilities. The LV Index has zero tolerance, and therefore excludes from its Index, companies involved in the following activities: manufacture of distilled alcohol; ownership or operation of, or support of, gambling facilities or products or services; research and development of nuclear, biological or chemical weapons; production, sale or distribution of pornography; and manufacture of tobacco products. The LV Index also has zero tolerance for companies that are major producers of toxic chemicals or have significant toxic waste releases, significant hazardous waste sites, or significant environmental penalties liabilities. The LV Index strives to include companies involved in the following: community development, affordable housing, corporate policies to purchase from women and minority business, sustainable forestry and renewable energy. The LV Index is comprised of 100 securities each of whose weighting in the Index is rebalanced each year in June to 1%. Companies can only be added to the LV Index at reconstitution each year. Companies may be removed at any time during the year due to certain corporate actions (such as the merger or sale of a company where the Index opts not to take shares of the new company). Companies included in the LV Index that, after reconstitution, no longer continue to satisfy the screening guidelines for the Lutheran Values Fund will not be removed from the LV Index until reconstitution, and the Lutheran Values Fund, to the extent it has invested in such companies, will continue to hold their securities until the next reconstitution. 2 ================================================================================ FAITH SHARES MANAGEMENT DISCUSSION OF FUND PERFORMANCE (UNAUDITED) ================================================================================ Methodist Values Fund The Methodist Values Fund employs a "passive management" investment strategy designed to track the total return performance of the FaithShares Methodist Values Index (the "MV Index" or "Index"), a custom index developed by MSCI, formerly the FTSE KLD Index. The MV Index is designed to measure the performance of U.S. large capitalization companies that operate in accordance with the investment philosophy of the United Methodist Church (the "Methodist Guidelines"). U.S. large capitalization companies are considered to be the 400 largest market capitalization U.S. companies among the following industries: basic materials, consumer goods, consumer services, financials, health care, industrials, oil and gas, technology, telecommunications and utilities. The MV Index focuses on avoiding companies that derive specified revenues from business practices that conflict with the teachings of the United Methodist Church. For example, companies that derive 10% or more of revenues from the following activities will be excluded from the MV Index: sale, distribution or marketing of alcoholic beverages or supplying key elements for alcoholic production; production of goods and services related to gambling; manufacture, sale or distribution of antipersonnel weapons and ammunition; production, sale or distribution of pornographic products or services; sale, distribution, or marketing of tobacco products or supplying key elements to the tobacco industry; or a combination of the aforementioned activities. The MV Index is comprised of 100 securities each of whose weighting in the Index is rebalanced each year in June to 1%. Companies can only be added to the MV Index at reconstitution each year. Companies may be removed at any time during the year due to certain corporate actions (such as the merger or sale of a company where the Index opts not to take shares of the new company). Companies included in the MV Index that, after reconstitution, no longer continue to satisfy the screening guidelines for the Methodist Values Fund will not be removed from the MV Index until reconstitution, and the Methodist Values Fund, to the extent it has invested in such companies, will continue to hold their securities until the next reconstitution. 3 ================================================================================ FAITH SHARES MANAGEMENT DISCUSSION OF FUND PERFORMANCE (UNAUDITED) BAPTIST VALUES FUND ================================================================================ Baptist Values Fund The Baptist Values Fund's investment objective is to track the performance, before fees and expenses, of FaithShares Baptist Values Index, a custom index developed by MSCI. Fund Review For the period ending July 31, 2010, the Fund, since its inception on December 14, 2009 returned 2.45% versus Baptist Values Index at 3.06% . The performance difference is mainly due to the Fund's expense ratio and partially due to the timing difference between stocks being removed from the index versus the Fund during Mergers Acquisitions transactions. The Fund significantly outperformed the S&P 500 Index return of 0.05% for the time period. The Fund's performance was aided principally by its equally-weighted structure. The Fund was aided by a lack of exposure to any of the companies involved in the April 2010 Gulf of Mexico oil spill. Some the companies that contributed to the Fund's upside performance were Genzyme, SalesForce.com, Aflac, Deere. Growth of a $10,000 Investment --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED JULY 31, 2010* --------------------------------------------------------------- CUMULATIVE INCEPTION TO DATE --------------------------------------------------------------- NET ASSET VALUE MARKET PRICE --------------------------------------------------------------- Baptist Values Fund 2.45% 2.21% BV Index 3.06% 3.06% --------------------------------------------------------------- [LINE GRAPH OMITTED] DEC. 14, JULY 31, 2009 2010 ------- ------- FaithShares Baptist Values ETF* $10,000 $10,245 BV Index $10,000 $10,306 *FUND COMMENCED OPERATIONS ON DECEMBER 14, 2009. THE PERFORMANCE DATA QUOTED HEREIN REPRESENTS PAST PERFORMANCE AND THE RETURN AND VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT, WHEN REDEEMED, MAY BE WORTH LESS THAN ITS ORIGINAL COST. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE AND SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF THE FUTURE RESULTS OF THE FUND. THE FUND'S PERFORMANCE ASSUMES THE REINVESTMENT OF ALL DIVIDENDS AND ALL CAPITAL GAINS. INDEX RETURNS ASSUME REINVESTMENT OF DIVIDENDS AND, UNLIKE A FUND'S RETURNS, DO NOT REFLECT ANY FEES OR EXPENSES. IF SUCH FEES AND EXPENSES WERE INCLUDED IN THE INDEX RETURNS, THE PERFORMANCE WOULD HAVE BEEN LOWER. PLEASE NOTE THAT ONE CANNOT INVEST DIRECTLY IN AN UNMANAGED INDEX. THERE ARE NO ASSURANCES THAT THE FUND WILL MEET ITS STATED OBJECTIVES. THE FUND'S HOLDINGS AND ALLOCATIONS ARE SUBJECT TO CHANGE AND SHOULD NOT BE CONSIDERED RECOMMENDATIONS TO BUY INDIVIDUAL SECURITIES. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. SEE DEFINITION OF COMPARATIVE INDICES IN MANAGEMENT DISCUSSION OF FUND PERFORMANCE. 4 ================================================================================ FAITH SHARES MANAGEMENT DISCUSSION OF FUND PERFORMANCE (UNAUDITED) CATHOLIC VALUES FUND ================================================================================ Catholic Values Fund The Catholic Values Fund's investment objective is to track the performance, before fees and expenses, of the FaithShares Catholic Values Index, a custom index developed by MSCI. Fund Review For the period ending July 31, 2010, the Fund, since its inception on December 8, 2009 returned 4.99% versus the Catholic Values Index at 5.87% . The performance difference is mainly due to the Fund's expense ratio and partially due to the timing difference between stocks being removed from the index versus the Fund during Mergers & Acquisitions transactions. The Fund significantly outperformed the S&P 500 Index return of 2.12% for the same time period. The Fund's performance was aided principally by its equally-weighted structure. The Fund was also aided by a lack of exposure to any of the companies involved in the April 2010 Gulf of Mexico oil spill. Some of the companies that contributed to the Fund's upside performance were Genzyme, SalesForce.com, Aflac, Deere and Wisconsin Energy. Growth of a $10,000 Investment --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED JULY 31, 2010* --------------------------------------------------------------- CUMULATIVE INCEPTION TO DATE --------------------------------------------------------------- NET ASSET VALUE MARKET PRICE --------------------------------------------------------------- Catholic Values Fund 4.99% 4.02% --------------------------------------------------------------- CV Index 5.87% 5.87% --------------------------------------------------------------- [LINE GRAPH OMITTED] DEC. 8, JULY 31, 2009 2010 ------- ------- FaithShares Catholic Values ETF* $10,000 $10,499 CV Index $10,000 $10,587 *FUND COMMENCED OPERATIONS ON DECEMBER 8, 2009. THE PERFORMANCE DATA QUOTED HEREIN REPRESENTS PAST PERFORMANCE AND THE RETURN AND VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT, WHEN REDEEMED, MAY BE WORTH LESS THAN ITS ORIGINAL COST. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE AND SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF THE FUTURE RESULTS OF THE FUND. THE FUND'S PERFORMANCE ASSUMES THE REINVESTMENT OF ALL DIVIDENDS AND ALL CAPITAL GAINS. INDEX RETURNS ASSUME REINVESTMENT OF DIVIDENDS AND, UNLIKE A FUND'S RETURNS, DO NOT REFLECT ANY FEES OR EXPENSES. IF SUCH FEES AND EXPENSES WERE INCLUDED IN THE INDEX RETURNS, THE PERFORMANCE WOULD HAVE BEEN LOWER. PLEASE NOTE THAT ONE CANNOT INVEST DIRECTLY IN AN UNMANAGED INDEX. THERE ARE NO ASSURANCES THAT THE FUND WILL MEET ITS STATED OBJECTIVES. THE FUND'S HOLDINGS AND ALLOCATIONS ARE SUBJECT TO CHANGE AND SHOULD NOT BE CONSIDERED RECOMMENDATIONS TO BUY INDIVIDUAL SECURITIES. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. SEE DEFINITION OF COMPARATIVE INDICES IN MANAGEMENT DISCUSSION OF FUND PERFORMANCE. 5 ================================================================================ FAITH SHARES MANAGEMENT DISCUSSION OF FUND PERFORMANCE (UNAUDITED) CHRISTIAN VALUES FUND ================================================================================ Christian Values Fund The Christian Values Fund's investment objective is to track the performance, before fees and expenses, of the FaithShares Christian Values Index, a custom index developed by MSCI. Fund Review For the period ending July 31, 2010, the Fund, since its inception on December 8, 2009 returned 5.62% versus the Christian Values Index at 6.42% . The performance difference is mainly due to the Fund's expense ratio and partially due to the timing difference between stocks being removed from the index versus the Fund during Mergers & Acquisitions transactions. The Fund significantly outperformed the S&P 500 Index return of 2.12% . The Fund's performance was aided principally by its equally-weighted structure. The Fund was also aided by a lack of exposure to any of the companies involved in the April 2010 Gulf of Mexico oil spill. Some of the companies that contributed to the Fund's upside performance were Genzyme, Biogen Idec, Aflac, Deere and First Solar. Growth of a $10,000 Investment --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED JULY 31, 2010* --------------------------------------------------------------- CUMULATIVE INCEPTION TO DATE --------------------------------------------------------------- NET ASSET VALUE MARKET PRICE --------------------------------------------------------------- Christian Values Fund 5.62% 4.87% --------------------------------------------------------------- CV Index 6.42% 6.42% --------------------------------------------------------------- [LINE GRAPH OMITTED] DEC. 8, JULY 31, 2009 2010 ------- ------- FaithShares Christian Values ETF* $10,000 $10,562 CHV Index $10,000 $10,642 *FUND COMMENCED OPERATIONS ON DECEMBER 8, 2009. THE PERFORMANCE DATA QUOTED HEREIN REPRESENTS PAST PERFORMANCE AND THE RETURN AND VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT, WHEN REDEEMED, MAY BE WORTH LESS THAN ITS ORIGINAL COST. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE AND SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF THE FUTURE RESULTS OF THE FUND. THE FUND'S PERFORMANCE ASSUMES THE REINVESTMENT OF ALL DIVIDENDS AND ALL CAPITAL GAINS. INDEX RETURNS ASSUME REINVESTMENT OF DIVIDENDS AND, UNLIKE A FUND'S RETURNS, DO NOT REFLECT ANY FEES OR EXPENSES. IF SUCH FEES AND EXPENSES WERE INCLUDED IN THE INDEX RETURNS, THE PERFORMANCE WOULD HAVE BEEN LOWER. PLEASE NOTE THAT ONE CANNOT INVEST DIRECTLY IN AN UNMANAGED INDEX. THERE ARE NO ASSURANCES THAT THE FUND WILL MEET ITS STATED OBJECTIVES. THE FUND'S HOLDINGS AND ALLOCATIONS ARE SUBJECT TO CHANGE AND SHOULD NOT BE CONSIDERED RECOMMENDATIONS TO BUY INDIVIDUAL SECURITIES. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. SEE DEFINITION OF COMPARATIVE INDICES IN MANAGEMENT DISCUSSION OF FUND PERFORMANCE. 6 ================================================================================ FAITH SHARES MANAGEMENT DISCUSSION OF FUND PERFORMANCE (UNAUDITED) LUTHERAN VALUES FUND ================================================================================ Lutheran Values Fund The Lutheran Values Fund's investment objective is to track the performance, before fees and expenses, of the FaithShares Lutheran Values Index, a custom index developed by MSCI. Fund Review For the period ending July 31, 2010, the Fund, since its inception on December 14, 2009 returned 0.36% versus the Lutheran Values Index at 0.91% . The performance difference is mainly due to the Fund's expense ratio and partially due to the timing difference between stocks being removed from the index versus the Fund during Mergers & Acquisitions transactions. The Fund outperformed the S&P 500 Index return of 0.05% . The Fund's performance was aided principally by its equally-weighted structure. The Fund was also aided by a lack of exposure to any of the companies involved in the April 2010 Gulf of Mexico oil spill. Some of the companies that contributed to the Fund's upside performance were Genzyme, SalesForce.com, Aflac, Deere and Noble. Growth of a $10,000 Investment --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED JULY 31, 2010* --------------------------------------------------------------- CUMULATIVE INCEPTION TO DATE --------------------------------------------------------------- NET ASSET VALUE MARKET PRICE --------------------------------------------------------------- Lutheran Values Fund 0.36% 0.36% --------------------------------------------------------------- LV Index 0.91% 0.91% --------------------------------------------------------------- [LINE GRAPH OMITTED] DEC. 14, JULY 31, 2009 2010 ------- ------- FaithShares Lutheran Values ETF* $10,000 $10,036 LV Index $10,000 $10,091 *FUND COMMENCED OPERATIONS ON DECEMBER 14, 2009. THE PERFORMANCE DATA QUOTED HEREIN REPRESENTS PAST PERFORMANCE AND THE RETURN AND VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT, WHEN REDEEMED, MAY BE WORTH LESS THAN ITS ORIGINAL COST. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE AND SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF THE FUTURE RESULTS OF THE FUND. THE FUND'S PERFORMANCE ASSUMES THE REINVESTMENT OF ALL DIVIDENDS AND ALL CAPITAL GAINS. INDEX RETURNS ASSUME REINVESTMENT OF DIVIDENDS AND, UNLIKE A FUND'S RETURNS, DO NOT REFLECT ANY FEES OR EXPENSES. IF SUCH FEES AND EXPENSES WERE INCLUDED IN THE INDEX RETURNS, THE PERFORMANCE WOULD HAVE BEEN LOWER. PLEASE NOTE THAT ONE CANNOT INVEST DIRECTLY IN AN UNMANAGED INDEX. THERE ARE NO ASSURANCES THAT THE FUND WILL MEET ITS STATED OBJECTIVES. THE FUND'S HOLDINGS AND ALLOCATIONS ARE SUBJECT TO CHANGE AND SHOULD NOT BE CONSIDERED RECOMMENDATIONS TO BUY INDIVIDUAL SECURITIES. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. SEE DEFINITION OF COMPARATIVE INDICES IN MANAGEMENT DISCUSSION OF FUND PERFORMANCE. 7 ================================================================================ FAITH SHARES MANAGEMENT DISCUSSION OF FUND PERFORMANCE (UNAUDITED) METHODIST VALUES FUND ================================================================================ Methodist Values Fund The Methodist Values Fund's investment objective is to track the performance, before fees and expenses, of the FaithShares Methodist Values Index, a custom index developed by MSCI. Fund Review For the period ending July 31, 2010, the Fund, since its inception on December 8, 2009 returned 5.57% versus the Methodist Values Index at 6.44% . The performance difference is mainly due to the Fund's expense ratio and partially due to the timing difference between stocks being removed from the index versus the Fund during Mergers & Acquisitions transactions. The Fund significantly outperformed the S&P 500 Index return of 2.12% . The Fund's performance was aided principally by its equally-weighted structure. The Fund was also aided by a lack of exposure to any of the companies involved in the April 2010 Gulf of Mexico oil spill. Some of the companies that contributed to the Fund's upside performance were Genzyme, Aflac, Deere, CH Robinson Worldwide and Noble. Growth of a $10,000 Investment --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED JULY 31, 2010* --------------------------------------------------------------- CUMULATIVE INCEPTION TO DATE --------------------------------------------------------------- NET ASSET VALUE MARKET PRICE --------------------------------------------------------------- Methodist Values Fund 5.57% 4.70% --------------------------------------------------------------- MV Index 6.44% 6.44% --------------------------------------------------------------- [LINE GRAPH OMITTED] DEC. 8, JULY 31, 2009 2010 ------- ------- FaithShares Methodist Values ETF* $10,000 $10,557 MV Index $10,000 $10,644 *FUND COMMENCED OPERATIONS ON DECEMBER 8, 2009. THE PERFORMANCE DATA QUOTED HEREIN REPRESENTS PAST PERFORMANCE AND THE RETURN AND VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT, WHEN REDEEMED, MAY BE WORTH LESS THAN ITS ORIGINAL COST. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE AND SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF THE FUTURE RESULTS OF THE FUND. THE FUND'S PERFORMANCE ASSUMES THE REINVESTMENT OF ALL DIVIDENDS AND ALL CAPITAL GAINS. INDEX RETURNS ASSUME REINVESTMENT OF DIVIDENDS AND, UNLIKE A FUND'S RETURNS, DO NOT REFLECT ANY FEES OR EXPENSES. IF SUCH FEES AND EXPENSES WERE INCLUDED IN THE INDEX RETURNS, THE PERFORMANCE WOULD HAVE BEEN LOWER. PLEASE NOTE THAT ONE CANNOT INVEST DIRECTLY IN AN UNMANAGED INDEX. THERE ARE NO ASSURANCES THAT THE FUND WILL MEET ITS STATED OBJECTIVES. THE FUND'S HOLDINGS AND ALLOCATIONS ARE SUBJECT TO CHANGE AND SHOULD NOT BE CONSIDERED RECOMMENDATIONS TO BUY INDIVIDUAL SECURITIES. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. SEE DEFINITION OF COMPARATIVE INDICES IN MANAGEMENT DISCUSSION OF FUND PERFORMANCE. 8 FAITH SHARES SCHEDULE OF INVESTMENTS o BAPTIST VALUES FUND ================================================================================ July 31, 2010 SECTOR WEIGHTINGS+ (UNAUDITED) 18.4% Information Technology 15.8% Financials 11.4% Industrials 10.9% Consumer Staples 10.9% Health Care 10.4% Consumer Discretionary 10.1% Energy 3.1% Utilities 3.1% Materials 3.0% Telecommunication Services 2.9% Time Deposit + Percentages based on total investments. - -------------------------------------------------------------------------------- DESCRIPTION SHARES MARKET VALUE - -------------------------------------------------------------------------------- COMMON STOCK -- 97.1% Consumer Discretionary -- 10.4% Gap 615 $ 11,138 Johnson Controls 452 13,022 Kohl's* 246 11,732 Limited Brands 521 13,358 McDonalds 185 12,900 NIKE, Cl B 175 12,887 Nordstrom 333 11,322 Staples 595 12,096 Starbucks 466 11,580 Tiffany 298 12,537 TJX 284 11,792 ----------- 134,364 ----------- Consumer Staples -- 10.9% Avon Products 452 14,071 Campbell Soup 348 12,493 Clorox 192 12,457 Colgate-Palmolive 161 12,716 Estee Lauder, Cl A 218 13,570 General Mills 335 11,457 HJ Heinz 294 13,077 Procter & Gamble 212 12,966 Sara Lee 873 12,912 Sysco 421 13,039 Whole Foods Market* 322 12,226 ----------- 140,984 ----------- Energy -- 10.1% Cimarex Energy 165 11,364 Denbury Resources* 760 12,038 Devon Energy 180 11,248 Marathon Oil 391 13,079 Newfield Exploration* 232 12,403 Noble 420 13,650 Range Resources 263 9,763 Smith International 315 13,066 Southwestern Energy* 293 10,680 Spectra Energy 607 12,619 - -------------------------------------------------------------------------------- DESCRIPTION SHARES MARKET VALUE - -------------------------------------------------------------------------------- Ultra Petroleum* 246 $ 10,423 ----------- 130,333 ----------- Financials -- 15.8% Aflac 298 14,658 American Express 310 13,838 Bank of New York Mellon 496 12,435 Charles Schwab 847 12,527 CME Group, Cl A 42 11,710 Comerica 340 13,042 Fifth Third Bancorp 958 12,176 IntercontinentalExchange* 107 11,301 KeyCorp 1,570 13,282 Lincoln National 471 12,265 M&T Bank 146 12,752 Northern Trust 256 12,030 State Street 347 13,505 T Rowe Price Group 254 12,250 US Bancorp 566 13,528 Vornado Realty Trust[] 164 13,576 ----------- 204,875 ----------- Health Care -- 10.9% Aetna 426 11,864 Allergan 212 12,945 Baxter International 306 13,394 Becton Dickinson 181 12,453 Genzyme* 254 17,668 Gilead Sciences* 363 12,095 Hospira* 232 12,087 Johnson & Johnson 220 12,780 McKesson 184 11,559 Medtronic 335 12,385 Waters* 182 11,677 ----------- 140,907 ----------- Industrials -- 11.4% Cooper Industries 271 12,236 Cummins 177 14,091 Deere 220 14,669 Emerson Electric 276 13,673 FedEx 167 13,786 First Solar* 106 13,298 Rockwell Automation 242 13,104 Rockwell Collins 224 12,804 Tyco International 340 13,015 United Parcel Service, Cl B 210 13,650 WW Grainger 121 13,553 ----------- 147,879 ----------- Information Technology -- 18.4% Adobe Systems* 394 11,316 Applied Materials 982 11,588 Autodesk* 458 13,529 Cisco Systems* 570 13,150 Dell* 919 12,168 EMC* 674 13,339 Google, Cl A* 26 12,606 Hewlett-Packard 281 12,937 9 FAITH SHARES SCHEDULE OF INVESTMENTS o BAPTIST VALUES FUND ================================================================================ - -------------------------------------------------------------------------------- SHARES/FACE DESCRIPTION AMOUNT MARKET VALUE - -------------------------------------------------------------------------------- Intel 606 $ 12,483 International Business Machines 101 12,968 Microsoft 495 12,776 Motorola* 1,766 13,227 Oracle 566 13,380 Paychex 455 11,825 Salesforce.com* 134 13,259 Seagate Technology* 840 10,542 Symantec* 868 11,258 Texas Instruments 497 12,271 Xerox 1,379 13,432 ----------- 238,054 ----------- Materials -- 3.1% Air Products & Chemicals 185 13,427 Lubrizol 144 13,463 Praxair 162 14,065 ----------- 40,955 ----------- Telecommunication Services -- 3.0% American Tower, Cl A* 290 13,410 Crown Castle International* 332 13,117 NII Holdings* 338 12,661 ----------- 39,188 ----------- Utilities -- 3.1% Exelon 319 13,344 PG&E 302 13,409 Xcel Energy 595 13,084 ----------- 39,837 ----------- Total Common Stock (Cost $1,272,047) 1,257,376 ----------- TIME DEPOSIT -- 2.9% Brown Brothers Harriman Sweep 0.030%, 08/02/10 $ 37,531 37,531 ----------- Total Time Deposit (Cost $37,531) 37,531 ----------- Total Investments -- 100.0% (Cost $1,309,578) $ 1,294,907 =========== PERCENTAGES ARE BASED ON NET ASSETS OF $1,295,016. * NON-INCOME PRODUCING SECURITY + REAL ESTATE INVESTMENT TRUST. CL -- CLASS The summary of inputs used to value the Fund's net assets as of July 31, 2010 is as follows: LEVEL 1 LEVEL 2 LEVEL 3 TOTAL ------------------------------------------------------- Common Stock $1,257,376 $ - $ - $ 1,257,376 Time Deposit - 37,531 - 37,531 ------------------------------------------------------- Total $1,257,376 $ 37,531 $ - $ 1,294,907 ======================================================= There have been no significant transfers between Level 1 & Level 2. The accompanying notes are an integral part of the financial statements. 10 FAITH SHARES SCHEDULE OF INVESTMENTS o CATHOLIC VALUES FUND ================================================================================ July 31, 2010 SECTOR WEIGHTINGS+ (UNAUDITED) 18.4% Information Technology 16.1% Financials 11.6% Health Care 11.2% Industrials 11.0% Consumer Staples 10.5% Consumer Discretionary 10.1% Energy 3.1% Utilities 3.1% Telecommunication Services 3.1% Materials 1.8% Time Deposit + Percentages based on total investments. - -------------------------------------------------------------------------------- DESCRIPTION SHARES MARKET VALUE - -------------------------------------------------------------------------------- COMMON STOCK -- 98.2% Consumer Discretionary -- 10.5% Gap 1,245 $ 22,547 JC Penney 994 24,482 Johnson Controls 914 26,332 Kohl's* 484 23,082 Limited Brands 1,055 27,050 McDonald's 362 25,242 NIKE, Cl B 354 26,069 Staples 1,205 24,498 Starbucks 944 23,459 Starwood Hotels & Resorts Worldwide 543 26,308 Tiffany 603 25,368 ----------- 274,437 ----------- Consumer Staples -- 11.0% Avon Products 915 28,484 Campbell Soup 705 25,310 Clorox 405 26,276 Colgate-Palmolive 327 25,827 Estee Lauder, Cl A 442 27,514 General Mills 679 23,222 HJ Heinz 578 25,709 Kimberly-Clark 418 26,802 Procter & Gamble 418 25,565 Sysco 894 27,687 Whole Foods Market* 652 24,757 ----------- 287,153 ----------- Energy -- 10.1% Cimarex Energy 333 22,933 Denbury Resources* 1,539 24,378 Devon Energy 380 23,746 EOG Resources 240 23,400 Marathon Oil 791 26,459 Newfield Exploration* 469 25,073 Noble 851 27,658 Range Resources 533 19,785 Southwestern Energy* 593 21,615 Spectra Energy 1,268 26,362 - -------------------------------------------------------------------------------- DESCRIPTION SHARES MARKET VALUE - -------------------------------------------------------------------------------- Ultra Petroleum* 523 $ 22,159 ----------- 263,568 ----------- Financials -- 16.1% Aflac 604 29,711 American Express 628 28,034 Bank of New York Mellon 1,004 25,170 Charles Schwab 1,715 25,365 CME Group, Cl A 85 23,698 Comerica 688 26,392 Fifth Third Bancorp 1,940 24,657 KeyCorp 3,179 26,894 Lincoln National 953 24,816 M&T Bank 296 25,853 New York Community Bancorp 1,631 28,151 Northern Trust 519 24,388 T Rowe Price Group 534 25,755 US Bancorp 1,182 28,250 Vornado Realty Trust[] 331 27,400 XL Group, Cl A 1,469 26,045 ----------- 420,579 ----------- Health Care -- 11.6% Abbott Laboratories 543 26,650 Aetna 862 24,007 Allergan 430 26,256 CIGNA 748 23,008 Genzyme* 514 35,754 Gilead Sciences* 734 24,457 Hospira* 470 24,487 McKesson 372 23,369 Medtronic 678 25,066 Quest Diagnostics 495 23,260 Waters* 368 23,611 WellPoint* 480 24,346 ----------- 304,271 ----------- Industrials -- 11.2% Cooper Industries 548 24,742 CSX 480 25,306 Cummins 358 28,500 Deere 445 29,673 Emerson Electric 559 27,693 First Solar* 214 26,846 Ingersoll-Rand 673 25,211 Norfolk Southern 450 25,321 Rockwell Automation 491 26,588 Tyco International 689 26,375 WW Grainger 245 27,442 ----------- 293,697 ----------- Information Technology -- 18.4% Adobe Systems* 798 22,918 Agilent Technologies* 814 22,735 Applied Materials 1,930 22,774 Autodesk* 927 27,384 Cisco Systems* 1,120 25,839 Dell* 1,860 24,626 EMC* 1,365 27,013 Google, Cl A* 53 25,697 11 FAITH SHARES SCHEDULE OF INVESTMENTS o CATHOLIC VALUES FUND ================================================================================ - -------------------------------------------------------------------------------- SHARES/FACE DESCRIPTION AMOUNT MARKET VALUE - -------------------------------------------------------------------------------- Hewlett-Packard 552 $ 25,414 Intel 1,227 25,276 International Business Machines 200 25,680 Microsoft 1,002 25,862 Motorola* 3,674 27,518 Oracle 1,145 27,068 Salesforce.com* 272 26,914 Seagate Technology* 1,701 21,348 Texas Instruments 1,035 25,554 Xerox 2,792 27,194 Yahoo!* 1,693 23,499 ----------- 480,313 ----------- Materials -- 3.1% Air Products & Chemicals 374 27,145 Alcoa 2,363 26,395 Lubrizol 291 27,205 ----------- 80,745 ----------- Telecommunication Services -- 3.1% American Tower, Cl A* 587 27,143 Crown Castle International* 672 26,551 Sprint Nextel* 5,693 26,017 ----------- 79,711 ----------- Utilities -- 3.1% PG&E 611 27,128 Public Service Enterprise Group 785 25,827 Wisconsin Energy 526 28,551 ----------- 81,506 ----------- Total Common Stock (Cost $2,632,906) 2,565,980 ----------- TIME DEPOSIT -- 1.8% Brown Brothers Harriman Sweep 0.030%, 08/02/10 $ 47,306 47,306 ----------- Total Time Deposit (Cost $47,306) 47,306 ----------- Total Investments -- 100.0% (Cost $2,680,212) $ 2,613,286 =========== PERCENTAGES ARE BASED ON NET ASSETS OF $2,613,673. * NON-INCOME PRODUCING SECURITY. ++ REAL ESTATE INVESTMENT TRUST CL -- CLASS The summary of inputs used to value the Fund's net assets as of July 31, 2010 is as follows: LEVEL 1 LEVEL 2 LEVEL 3 TOTAL -------------------------------------------------------- Common Stock $ 2,565,980 $ - $ - $ 2,565,980 Time Deposit - 47,306 - 47,306 -------------------------------------------------------- Total $ 2,565,980 $ 47,306 $ - $ 2,613,286 ======================================================== There have been no significant transfers between Level 1 & Level 2. The accompanying notes are an integral part of the financial statements. 12 FAITH SHARES SCHEDULE OF INVESTMENTS o CHRISTIAN VALUES FUND ================================================================================ July 31, 2010 SECTOR WEIGHTINGS+ (UNAUDITED) 18.3% Information Technology 15.9% Financials 11.9% Health Care 11.4% Industrials 11.0% Consumer Staples 10.3% Consumer Discretionary 10.0% Energy 3.2% Materials 3.1% Utilities 3.0% Telecommunication Services 1.9% Time Deposit + Percentages based on total investments. - -------------------------------------------------------------------------------- DESCRIPTION SHARES MARKET VALUE - -------------------------------------------------------------------------------- COMMON STOCK -- 98.1% Consumer Discretionary -- 10.3% Gap 1,235 $ 22,366 Johnson Controls 915 26,361 Kohl's* 492 23,463 Limited Brands 1,051 26,948 McDonald's 371 25,870 NIKE, Cl B 357 26,290 Nordstrom 669 22,746 Staples 1,193 24,254 Starbucks 946 23,508 Tiffany 601 25,284 TJX 574 23,832 --- -------- 270,922 --- -------- Consumer Staples -- 11.0% Avon Products 923 28,733 Campbell Soup 711 25,525 Clorox 406 26,341 Coca-Cola Enterprises 978 28,069 Colgate-Palmolive 328 25,906 Estee Lauder, Cl A 444 27,639 General Mills 686 23,461 HJ Heinz 577 25,665 Procter & Gamble 427 26,115 Sara Lee 1,783 26,371 Whole Foods Market* 656 24,908 ----------- 288,733 ----------- Energy -- 10.0% Cimarex Energy 333 22,934 Denbury Resources* 1,535 24,314 Devon Energy 381 23,809 EOG Resources 240 23,400 Marathon Oil 795 26,593 Newfield Exploration* 469 25,073 Noble 850 27,625 Range Resources 528 19,599 Southwestern Energy* 594 21,651 Spectra Energy 1,260 26,195 Ultra Petroleum* 527 22,329 ----------- 263,522 ----------- - -------------------------------------------------------------------------------- DESCRIPTION SHARES MARKET VALUE - -------------------------------------------------------------------------------- Financials -- 15.9% Aflac 603 $ 29,662 American Express 627 27,989 Bank of New York Mellon 1,005 25,196 Charles Schwab 1,699 25,128 CME Group, Cl A 85 23,698 Comerica 689 26,430 Fifth Third Bancorp 1,915 24,340 IntercontinentalExchange* 212 22,391 KeyCorp 3,173 26,844 Lincoln National 956 24,894 M&T Bank 309 26,988 Northern Trust 518 24,341 State Street 699 27,205 T Rowe Price Group 535 25,803 US Bancorp 1,168 27,915 Vornado Realty Trust[] 332 27,483 ----------- 416,307 ----------- Health Care -- 11.9% Aetna 863 24,034 Allergan 431 26,317 Biogen Idec* 544 30,399 Genzyme* 514 35,754 Gilead Sciences* 738 24,590 Hospira* 473 24,643 McKesson 374 23,495 Medtronic 678 25,066 Quest Diagnostics 494 23,213 Varian Medical Systems* 504 27,821 Waters* 371 23,803 WellPoint* 482 24,447 ----------- 313,582 ----------- Industrials -- 11.4% Cooper Industries 549 24,787 Cummins 357 28,421 Deere 446 29,739 Eaton 358 28,089 Emerson Electric 560 27,742 First Solar* 218 27,348 ITT 549 25,869 Rockwell Automation 490 26,534 Rockwell Collins 452 25,836 Tyco International 694 26,566 United Technologies 389 27,658 ----------- 298,589 ----------- Information Technology -- 18.3% Adobe Systems* 808 23,206 Analog Devices 865 25,699 Applied Materials 1,962 23,152 Autodesk* 929 27,442 Cisco Systems* 1,133 26,138 Dell* 1,879 24,878 EMC* 1,374 27,191 Google, Cl A* 53 25,697 Hewlett-Packard 554 25,506 Intel 1,231 25,358 International Business Machines 202 25,937 Microsoft 1,005 25,939 13 FAITH SHARES SCHEDULE OF INVESTMENTS o CHRISTIAN VALUES FUND ================================================================================ - -------------------------------------------------------------------------------- SHARES/FACE DESCRIPTION AMOUNT MARKET VALUE - -------------------------------------------------------------------------------- Motorola* 3,613 $ 27,062 Oracle 1,145 27,068 Paychex 921 23,937 Seagate Technology* 1,709 21,448 Symantec* 1,760 22,827 Texas Instruments 1,040 25,678 Xerox 2,803 27,301 ------------ 481,464 ------------ Materials -- 3.2% Air Products & Chemicals 375 27,217 Lubrizol 291 27,206 Praxair 329 28,564 ------------ 82,987 ------------ Telecommunication Services -- 3.0% American Tower, Cl A* 591 27,328 Crown Castle International* 670 26,472 NII Holdings* 679 25,435 ------------ 79,235 ------------ Utilities -- 3.1% PG&E 616 27,350 Wisconsin Energy 523 28,389 Xcel Energy 1,215 26,718 ------------ 82,457 ------------ Total Common Stock (Cost $2,572,189) 2,577,798 ------------ TIME DEPOSIT -- 1.9% Brown Brothers Harriman Sweep 0.030%, 08/02/10 $ 50,921 50,921 ------------ Total Time Deposit (Cost $50,921) 50,921 ------------ Total Investments -- 100.0% (Cost $2,623,110) $ 2,628,719 ============ PERCENTAGES ARE BASED ON NET ASSETS OF $2,628,516. * NON-INCOME PRODUCING SECURITY. ++ REAL ESTATE INVESTMENT TRUST CL -- CLASS The summary of inputs used to value the Fund's net assets as of July 31, 2010 is as follows: Level 1 Level 2 Level 3 Total --------------------------------------------------------- Common Stock $ 2,577,798 $ - $ - $ 2,577,798 Time Deposit - 50,921 - 50,921 --------------------------------------------------------- Total $ 2,577,798 $ 50,921 $ - $ 2,628,719 ========================================================= There have been no significant transfers between Level 1 & Level 2. The accompanying notes are an integral part of the financial statements. 14 FAITH SHARES SCHEDULE OF INVESTMENTS o LUTHERAN VALUES FUND ================================================================================ July 31, 2010 SECTOR WEIGHTINGS+ (UNAUDITED) 18.4% Information Technology 16.0% Financials 11.4% Industrials 10.9% Consumer Staples 10.8% Health Care 10.5% Consumer Discretionary 10.0% Energy 3.1% Materials 3.0% Utilities 3.0% Telecommunication Services 2.9% Time Deposit + Percentages based on total investments. - -------------------------------------------------------------------------------- DESCRIPTION SHARES MARKET VALUE - -------------------------------------------------------------------------------- COMMON STOCK -- 97.1% Consumer Discretionary -- 10.5% Gap 604 $ 10,938 JC Penney 482 11,872 Johnson Controls 443 12,763 Kohl's* 245 11,684 Limited Brands 512 13,128 McDonald's 184 12,831 NIKE, Cl B 172 12,666 Staples 584 11,873 Starbucks 458 11,381 Tiffany 293 12,326 TJX 279 11,584 ----------- 133,046 ----------- Consumer Staples -- 10.9% Avon Products 444 13,821 Campbell Soup 342 12,278 Clorox 191 12,392 Colgate-Palmolive 152 12,005 Estee Lauder, Cl A 215 13,384 General Mills 329 11,252 HJ Heinz 275 12,232 Procter & Gamble 212 12,966 Sara Lee 857 12,675 Sysco 413 12,791 Whole Foods Market* 316 11,998 ----------- 137,794 ----------- Energy -- 10.0% Chesapeake Energy 512 10,767 Cimarex Energy 162 11,157 Denbury Resources* 747 11,832 Devon Energy 180 11,248 Marathon Oil 384 12,845 Newfield Exploration* 228 12,189 Noble 413 13,423 Range Resources 259 9,614 Southwestern Energy* 288 10,498 Spectra Energy 596 12,391 Ultra Petroleum* 246 10,423 ----------- 126,387 ----------- - -------------------------------------------------------------------------------- DESCRIPTION SHARES MARKET VALUE - -------------------------------------------------------------------------------- Financials -- 16.0% Aflac 293 $ 14,413 American Express 305 13,615 Bank of New York Mellon 487 12,209 CME Group, Cl A 41 11,431 Comerica 334 12,812 Fifth Third Bancorp 941 11,960 IntercontinentalExchange* 105 11,090 KeyCorp 1,542 13,045 Lincoln National 462 12,030 M&T Bank 143 12,490 New York Community Bancorp 791 13,653 Northern Trust 252 11,842 State Street 341 13,272 T Rowe Price Group 254 12,250 US Bancorp 556 13,289 Vornado Realty Trust[] 161 13,327 ----------- 202,728 ----------- Health Care -- 10.8% Aetna 418 11,641 Allergan 209 12,762 Baxter International 301 13,175 Becton Dickinson 178 12,246 Genzyme* 249 17,320 Gilead Sciences* 356 11,862 Hospira* 228 11,879 Johnson & Johnson 217 12,605 Life Technologies* 250 10,748 Medtronic 316 11,683 Waters* 178 11,420 ----------- 137,341 ----------- Industrials -- 11.4% Cooper Industries 266 12,010 CSX 233 12,284 Cummins 174 13,852 Deere 216 14,403 Emerson Electric 271 13,425 FedEx 164 13,538 First Solar* 104 13,047 Rockwell Automation 238 12,888 Rockwell Collins 220 12,575 United Parcel Service, Cl B 206 13,390 WW Grainger 119 13,329 ----------- 144,741 ----------- Information Technology -- 18.4% Adobe Systems* 387 11,115 Agilent Technologies* 395 11,032 Applied Materials 979 11,552 Autodesk* 450 13,293 Cisco Systems* 568 13,104 Dell* 903 11,956 EMC* 662 13,101 Google, Cl A* 25 12,121 Hewlett-Packard 266 12,247 Intel 595 12,257 International Business Machines 101 12,968 Microsoft 486 12,544 Motorola* 1,762 13,197 Oracle 556 13,144 15 FAITH SHARES SCHEDULE OF INVESTMENTS o LUTHERAN VALUES FUND ================================================================================ - -------------------------------------------------------------------------------- SHARES/FACE DESCRIPTION AMOUNT MARKET VALUE - -------------------------------------------------------------------------------- Salesforce.com* 132 $ 13,061 Seagate Technology* 825 10,354 Symantec* 852 11,050 Texas Instruments 496 12,246 Xerox 1,355 13,198 ------------ 233,540 ------------ Materials -- 3.1% Air Products & Chemicals 181 13,137 Alcoa 1,146 12,801 Lubrizol 141 13,182 ------------ 39,120 ------------ Telecommunication Services -- 3.0% American Tower, Cl A* 285 13,179 Crown Castle International* 326 12,880 Sprint Nextel* 2,762 12,622 ------------ 38,681 ------------ Utilities -- 3.0% PG&E 285 12,654 Public Service Enterprise Group 381 12,535 Xcel Energy 593 13,040 ------------ 38,229 ------------ Total Common Stock (Cost $1,264,707) 1,231,607 ------------ TIME DEPOSIT -- 2.9% Brown Brothers Harriman Sweep 0.030%, 08/02/10 $ 36,820 36,820 ------------ Total Time Deposit (Cost $36,820) 36,820 ------------ Total Investments -- 100.0% (Cost $1,301,527) $ 1,268,427 ============ PERCENTAGES ARE BASED ON NET ASSETS OF $1,268,424. * NON-INCOME PRODUCING SECURITY. ++ REAL ESTATE INVESTMENT TRUST CL -- CLASS The summary of inputs used to value the Fund's net assets as of July 31, 2010 is as follows: Level 1 Level 2 Level 3 Total --------------------------------------------------------- Common Stock $ 1,231,607 $ - $ - $ 1,231,607 Time Deposit - 36,820 - 36,820 --------------------------------------------------------- Total $ 1,231,607 $ 36,820 $ - $ 1,268,427 ========================================================== There have been no significant transfers between Level 1 & Level 2. The accompanying notes are an integral part of the financial statements. 16 FAITH SHARES SCHEDULE OF INVESTMENTS o METHODIST VALUES FUND ================================================================================ July 31, 2010 SECTOR WEIGHTINGS+ (UNAUDITED) 18.2% Information Technology 15.9% Financials 11.5% Industrials 11.0% Health Care 10.9% Consumer Staples 10.4% Consumer Discretionary 9.2% Energy 3.7% Time Deposit\ 3.1% Utilities 3.1% Materials 3.0% Telecommunication Services + Percentages based on total investments. - -------------------------------------------------------------------------------- DESCRIPTION SHARES MARKET VALUE - -------------------------------------------------------------------------------- COMMON STOCK -- 96.3% Consumer Discretionary -- 10.4% Gap 1,247 $ 22,583 Johnson Controls 915 26,361 Kohl's* 484 23,082 Limited Brands 1,057 27,102 McDonald's 362 25,242 NIKE, Cl B 355 26,142 Staples 1,206 24,518 Starbucks 946 23,508 Starwood Hotels & Resorts Worldwide 544 26,357 Tiffany 604 25,410 TJX 576 23,916 ----------- 274,221 ----------- Consumer Staples -- 10.9% Avon Products 917 28,546 Campbell Soup 740 26,566 Clorox 406 26,341 Colgate-Palmolive 327 25,827 Estee Lauder, Cl A 443 27,577 General Mills 680 23,256 HJ Heinz 578 25,710 Kellogg 468 23,423 Procter & Gamble 418 25,565 Sysco 894 27,687 Whole Foods Market* 653 24,794 ----------- 285,292 ----------- Energy -- 9.2% Cimarex Energy 334 23,003 Denbury Resources* 1,542 24,425 Devon Energy 381 23,809 Marathon Oil 792 26,492 Newfield Exploration* 470 25,126 Noble 852 27,690 Range Resources 534 19,822 Southwestern Energy* 594 21,651 Spectra Energy 1,268 26,362 Ultra Petroleum* 524 22,202 ----------- 240,582 ----------- - -------------------------------------------------------------------------------- DESCRIPTION SHARES MARKET VALUE - -------------------------------------------------------------------------------- Financials -- 15.9% Aflac 605 $ 29,760 American Express 629 28,079 Bank of New York Mellon 1,006 25,220 BlackRock, Cl A 166 26,143 Charles Schwab 1,718 25,409 CME Group, Cl A 85 23,698 Comerica 689 26,430 IntercontinentalExchange* 216 22,814 KeyCorp 3,184 26,937 Lincoln National 954 24,842 M&T Bank 296 25,852 Northern Trust 520 24,435 State Street 704 27,400 T Rowe Price Group 535 25,803 US Bancorp 1,180 28,202 Vornado Realty Trust[] 332 27,483 ----------- 418,507 ----------- Health Care -- 11.0% Aetna 864 24,063 Allergan 431 26,317 Baxter International 621 27,181 Becton Dickinson 368 25,318 Bristol-Myers Squibb 1,023 25,493 Genzyme* 514 35,754 Gilead Sciences* 736 24,523 Hospira* 471 24,539 Johnson & Johnson 447 25,966 Medtronic 679 25,103 Waters* 368 23,611 ----------- 287,868 ----------- Industrials -- 11.5% CH Robinson Worldwide 446 29,079 Cooper Industries 549 24,787 Cummins 358 28,500 Deere 445 29,673 Eaton 357 28,010 Emerson Electric 560 27,743 First Solar* 214 26,846 Rockwell Automation 492 26,642 Tyco International 690 26,413 United Parcel Service, Cl B 425 27,625 WW Grainger 245 27,443 ----------- 302,761 ----------- Information Technology -- 18.2% Adobe Systems* 799 22,947 Agilent Technologies* 815 22,763 Applied Materials 1,928 22,750 Autodesk* 928 27,413 Cisco Systems* 1,120 25,839 Dell* 1,863 24,666 EMC* 1,367 27,053 Google, Cl A* 53 25,697 Hewlett-Packard 552 25,414 Intel 1,229 25,318 International Business Machines 200 25,680 Microsoft 1,003 25,888 Motorola* 3,680 27,563 17 FAITH SHARES SCHEDULE OF INVESTMENTS o METHODIST VALUES FUND ================================================================================ - -------------------------------------------------------------------------------- SHARES/FACE DESCRIPTION AMOUNT MARKET VALUE - -------------------------------------------------------------------------------- Oracle 1,147 $ 27,115 Paychex 923 23,989 Seagate Technology* 1,704 21,385 Texas Instruments 1,036 25,579 Xerox 2,797 27,243 Yahoo!* 1,696 23,540 ------------ 477,842 ------------ Materials -- 3.1% Air Products & Chemicals 374 27,145 Alcoa 2,366 26,428 Lubrizol 291 27,206 ------------ 80,779 ------------ Telecommunication Services -- 3.0% American Tower, Cl A* 588 27,189 Crown Castle International* 673 26,590 NII Holdings* 685 25,660 ------------ 79,439 ------------ Utilities -- 3.1% Exelon 647 27,064 PG&E 612 27,173 Xcel Energy 1,233 27,114 ------------ 81,351 ------------ Total Common Stock (Cost $2,600,262) 2,528,642 ------------ TIME DEPOSIT -- 3.7% Brown Brothers Harriman Sweep 0.030%, 08/02/10 $ 97,712 97,712 ------------ Total Time Deposit (Cost $97,712) 97,712 ------------ Total Investments -- 100.0% (Cost $2,697,974) $ 2,626,354 ============ PERCENTAGES ARE BASED ON NET ASSETS OF $2,626,921. * NON-INCOME PRODUCING SECURITY. ++ REAL ESTATE INVESTMENT TRUST CL -- CLASS The summary of inputs used to value the Fund's net assets as of July 31, 2010 is as follows: Level 1 Level 2 Level 3 Total --------------------------------------------------------- Common Stock $ 2,528,642 $ - $ - $ 2,528,642 Time Deposit - 97,712 - 97,712 --------------------------------------------------------- Total $ 2,528,642 $ 97,712 $ - $ 2,626,354 ========================================================= There have been no significant transfers between Level 1 & Level 2. The accompanying notes are an integral part of the financial statements. 18 FAITH SHARES STATEMENTS OF ASSETS AND LIABILITIES JULY 31, 2010
=========================================================================================================================== FaithShares FaithShares FaithShares FaithShares FaithShares Baptist Catholic Christian Lutheran Methodist Values ETF Values ETF Values ETF Values ETF Values ETF Assets: Cost of Investments $ 1,309,578 $ 2,680,212 $ 2,623,110 $ 1,301,527 $ 2,697,974 -------------- --- ---------- ------------- --- ---------- -------------- Investments at Value $ 1,294,907 $ 2,613,286 $ 2,628,719 $ 1,268,427 $ 2,626,354 Dividend and Interest Receivable 1,045 2,277 1,501 915 2,464 -------------- --- ---------- ------------- --- ---------- -------------- Total Assets 1,295,952 2,615,563 2,630,220 1,269,342 2,628,818 -------------- --- ---------- ------------- --- ---------- -------------- Liabilities: Payable due to Investment Adviser 936 1,890 1,704 918 1,897 -------------- --- ---------- ------------- --- ---------- -------------- Total Liabilities 936 1,890 1,704 918 1,897 -------------- --- ---------- ------------- --- ---------- -------------- Net Assets $ 1,295,016 $ 2,613,673 $ 2,628,516 $ 1,268,424 $ 2,626,921 ============== === ========== ============= === ========== ============== Net Assets Consist of: Paid-in Capital $ 1,268,956 $ 2,652,493 $ 2,565,093 $ 1,269,402 $ 2,654,137 Undistributed Net Investment Income 377 1,021 506 291 1,103 Accumulated Net Realized Gain on Investments 40,354 27,085 57,308 31,831 43,301 Net Unrealized Appreciation (Depreciation) on Investments (14,671) (66,926) 5,609 (33,100) (71,620) -------------- --- ---------- ------------- --- ---------- -------------- Net Assets $ 1,295,016 $ 2,613,673 $ 2,628,516 $ 1,268,424 $ 2,626,921 ============== === ========== ============= === ========== ============== Outstanding Shares of Beneficial Interest (unlimited authorization -- no par value) 50,000 100,000 100,000 50,000 100,000 Net Asset Value per share $25.90 $26.14 $26.29 $25.37 $26.27 ============== === ========== ============= === ========== ==============
The accompanying notes are an integral part of the financial statements. 19 FAITH SHARES STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED JULY 31, 2010
======================================================================================================= FaithShares FaithShares FaithShares FaithShares FaithShares Baptist Catholic Christian Lutheran Methodist Values Values Values Values Values ETF(1) ETF(2) ETF(2) ETF(1) ETF(2) Investment Income: Dividend Income $ 20,884 $ 26,509 $ 21,469 $ 20,675 $ 28,055 Interest Income 4 16 12 4 15 ----------- ----------- ----------- ----------- ----------- Total Investment Income 20,888 26,525 21,481 20,679 28,070 ----------- ----------- ----------- ----------- ----------- Investment Advisory Fees 11,584 14,763 12,549 11,504 14,767 ----------- ----------- ----------- ----------- ----------- Total Expenses 11,584 14,763 12,549 11,504 14,767 ----------- ----------- ----------- ----------- ----------- Net Investment Income 9,304 11,762 8,932 9,175 13,303 ----------- ----------- ----------- ----------- ----------- Net Realized Gain on: Investments(3) 153,810 179,596 180,901 131,733 197,438 ----------- ----------- ----------- ----------- ----------- Net Realized Gain on Investments 153,810 179,596 180,901 131,733 197,438 ----------- ----------- ----------- ----------- ----------- Net Change in Unrealized Appreciation (Depreciation) on: Investments (14,671) (66,926) 5,609 (33,100) (71,620) ----------- ----------- ----------- ----------- ----------- Net Change in Unrealized Appreciation (Depreciation) on Investments (14,671) (66,926) 5,609 (33,100) (71,620) ----------- ----------- ----------- ----------- ----------- Net Realized and Unrealized Gain on Investments 139,139 112,670 186,510 98,633 125,818 ----------- ----------- ----------- ----------- ----------- Net Increase in Net Assets Resulting from Operations $ 148,443 $ 124,432 $ 195,442 $ 107,808 $ 139,121 =========== =========== =========== =========== ===========
(1) Inception date December 14, 2009. (2) Inception date December 8, 2009. (3) Includes realized gains as a result of in-kind transactions. (see Note 5 in Notes to the Financials Statements) The accompanying notes are an integral part of the financial statements. 20 FAITH SHARES STATEMENTS OF CHANGES IN NET ASSETS ================================================================================
FaithShares FaithShares FaithShares FaithShares FaithShares Baptist Catholic Christian Lutheran Methodist Values ETF(1) Values ETF(2) Values ETF(2) Values ETF(1) Values ETF(2) ---------------- ---------------- ------------------ ---------------- ---------------- Period Ended Period Ended Period Ended Period Ended Period Ended July 31, 2010 July 31, 2010 July 31, 2010 July 31, 2010 July 31, 2010 Operations: Net Investment Income $ 9,304 $ 11,762 $ 8,932 $ 9,175 $ 13,303 Net Realized Gain on Investments and Foreign Currency Transactions 153,810(3) 179,596(3) 180,901(3) 131,733(3) 197,438(3) Net Change in Unrealized Appreciation (Depreciation) on Investments and Foreign Currency Transactions (14,671) (66,926) 5,609) (33,100) (71,620) ---------------- ---------------- --- -------------- ---------------- ---------------- Net Increase in Net Assets Resulting from Operations 148,443 124,432 195,442 107,808 139,121 ---------------- ---------------- --- -------------- ---------------- ---------------- Dividends and Distributions: Net Investment Income (8,927) (10,759) (8,426) (8,884) (12,200) ---------------- ---------------- --- -------------- ---------------- ---------------- Total Dividends and Distributions (8,927) (10,759) (8,426) (8,884) (12,200) ---------------- ---------------- --- -------------- ---------------- ---------------- Capital Share Transactions: Issued In-Kind 3,943,000 3,870,500 3,781,500 3,933,500 3,873,000 Redeemed In-Kind (2,787,500 ) (1,404,500 ) (1,373,000 ) (2,764,000 ) (1,406,000 ) ---------------- ---------------- --- -------------- ---------------- ---------------- Increase in Net Assets from Capital Share Transactions 1,155,500 2,466,000 2,408,500 1,169,500 2,467,000 ---------------- ---------------- --- -------------- ---------------- ---------------- Total Increase in Net Assets 1,295,016 2,579,673 2,595,516 1,268,424 2,593,921 ---------------- ---------------- --- -------------- ---------------- ---------------- Net Assets: Beginning of Period -- 34,000 33,000 -- 33,000 ---------------- ---------------- --- -------------- ---------------- ---------------- End of Period (Includes Undistributed net investment income of $377, $1,021, $506, $291 and $1,103, respectively) $ 1,295,016 $ 2,613,673 $ 2,628,516 $ 1,268,424 $ 2,626,921 ================ ================ ================== ================ ================ Share Transactions: Issued In-Kind 150,000 148,640 148,680 150,000 148,680 Redeemed In-Kind (100,000) (50,000) (50,000) (100,000) (50,000) ---------------- ---------------- --- -------------- ---------------- ---------------- Net Increase in Shares Outstanding from Share Transactions 50,000 98,640 98,680 50,000 98,680 ================ ================ === ============== ================ ================
(1) Inception date December 14, 2009. (2) Inception date December 8, 2009. (3) Includes realized gains as a result of in-kind transactions. (see Note 5 in Notes to the Financials Statements) Amounts designated as "--"are $0. The accompanying notes are an integral part of the financial statements. 21 FAITH SHARES FINANCIAL HIGHLIGHTS ================================================================================ Selected Per Share Data & Ratios For a Share Outstanding Throughout the Period
Net Realized Ratio of and Net Net Net Asset Unrealized Distribution Assets Ratio of Investment Value, Net Gain (Loss) from Net Net Asset End of Expenses to Income to Beginning Investment on Total from Investment Value, End Total Period Average Average of Period Income* Investments Operations Income of Period Return(1) (000) Net Assets Net Assets - ------------------------------------------------------------------------------------------------------------------------------------ FaithShares Baptist Values ETF Institutional Shares (3) 2010 $ 25 .40 $ 0 .12 $ 0 .50 $ 0 .62 $ (0 .12) $ 25 .90 2 .45% $ 1,295 0 .87%(2) 0 .70%(2) FaithShares Catholic Values ETF Institutional Shares (4) 2010 $ 25 .00 $ 0 .12 $ 1 .13 $ 1 .25 $ (0 .11) $ 26 .14 4 .99% $ 2,614 0 .87%(2) 0 .70%(2) FaithShares Christian Values ETF Institutional Shares (4) 2010 $ 25 .00 $ 0 .11 $ 1 .29 $ 1 .40 $ (0 .11) $ 26 .29 5 .62% $ 2,629 0 .87%(2) 0 .62%(2) FaithShares Lutheran Values ETF Institutional Shares (3) 2010 $ 25 .40 $ 0 .12 $(0 .03) $ 0 .09 $ (0 .12) $ 25 .37 0 .36% $ 1,268 0 .87%(2) 0 .70%(2) FaithShares Methodist Values ETF Institutional Shares (4) 2010 $ 25 .00 $ 0 .13 $ 1 .26 $ 1 .39 $ (0 .12) $ 26 .27 5 .57% $ 2,627 0 .87%(2) 0 .79%(2)
Portfolio Turnover(1)(5) - -------------------------------------------------------------------------------- FaithShares Baptist Values ETF Institutional Shares (3) 24% FaithShares Catholic Values ETF Institutional Shares (4) 42% FaithShares Christian Values ETF Institutional Shares (4) 23% FaithShares Lutheran Values ETF Institutional Shares (3) 25% FaithShares Methodist Values ETF Institutional Shares (4) 41% * Per share data calculated using average shares method. (1) Returns and portfolio turnover rates are for the period indicated and have not been annualized. Returns do not reflect the deduction of taxes the shareholder would pay on fund distributions or redemption of Fund shares. (2) Annualized. (3) Inception date December 14, 2009. (4) Inception date December 8, 2009. (5) Portfolio turnover rate does not include securities received or delivered from processing creations or redemptions. The accompanying notes are an integral part of the financial statements. 22 FAITH SHARES NOTES TO THE FINANCIAL STATEMENTS JULY 31, 2010 ================================================================================ 1. ORGANIZATION The FaithShares Trust (the "Trust") is a Delaware Statutory Trust formed on July 17, 2009. The Trust is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, as an open-end management investment company with five investment portfolios: FaithShares Baptist Values Fund, FaithShares Catholic Values Fund, FaithShares Christian Values Fund, FaithShares Lutheran Values Fund, FaithShares Methodist Values Fund (each an "exchange-traded fund", collectively the "Funds" or "ETFs"). The Funds seek to provide investment results that correspond generally to the performance, before fees and expenses, of the Fund's respective Index, each a custom index developed by MSCI Index. The Funds are classified as "non-diversified". This means that each Fund may invest most of its assets in securities of a single issuer than that of a diversified fund. As a result, the performance of that issuer can have substantial impact on the share price. The Funds intend to maintain the required level of diversification so as to qualify as a "regulated investment company" or "RIC" for purposes of the Internal Revenue Code of 1986, as amended. FaithShares Advisors, LLC (the "Adviser"), an Oklahoma Limited Liability Company, serves as the investment adviser for the Funds and is subject to the supervision of the Board of Trustees (the "Board"). The Adviser is responsible for managing the investment activities of the Funds, the Funds' business affairs and other administrative matters. Shares of each of the Funds are listed and traded on the NYSE Arca, Inc. Market prices for the Shares may be different from their net asset value ("NAV"). Each Fund will issue and redeem Shares on a continuous basis at NAV only in large blocks of Shares, typically 50,000 Shares, called Creation Units ("Creation Units"). Creation Units will be issued and redeemed principally in-kind for securities included in a specified universe. Once created, Shares will trade in a secondary market at market prices that change throughout the day in amounts less than a Creation Unit. 2. UNCERTAINTY As described in note 4, all operating expenses of the Trust are paid directly by FaithShares Advisors, LLC (the Adviser) as part of a unified fee arrangement. Based on the Trust's current asset levels, the investment management fees being paid to the Adviser (as further described in note 4) are not covering the operating expenses of the Funds being paid directly by the Adviser. The Adviser is seeking additional capital investments from multiple sources to enable the Adviser to continue paying all operating expenses of the Trust, as well as market and grow the assets of the Trust. The Adviser is also considering additional actions which may include the merging, reorganization or closing of certain of the Trust's Funds. Moreover, the Board of Trustees of the Trust has the authority to approve the liquidation of each Fund, without a vote of shareholders. The Board also has the authority to retain a successor investment adviser for an interim period not exceeding 150 days. However, the retention of a successor adviser to serve after such interim period is required to be approved by "vote of a majority of the outstanding voting securities," as defined by the Investment Company Act of 1940, of each Fund. These conditions raise substantial doubt about the Funds' ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. 3. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the Significant Accounting Policies followed by the Funds. Use of Estimates and Indemnifications -- The preparation of financial statements, in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the normal course of business, the Trust enters into contracts that contain a variety of representations which provide general indemnifications. The Trust's maximum exposure under these arrangements cannot be known; however, the Trust expects any risk of loss to be remote. SECURITY VALUATION -- Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded (or at approximately 4:00 pm Eastern Time if a security's primary exchange is normally open at that time), or, if there is no such reported sale, at the most recent mean between the quoted bid and asked prices (absent both bid and asked prices on such exchange, the bid price may be used). For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. If available, debt securities are priced based upon valuations provided by independent, third-party pricing agents. Such values generally reflect the last reported sales price if the security is actively traded. The third-party pricing agents may also value debt securities at an evaluated bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations, or other methodologies designed to identify the market value for such securities. Debt obligations with remaining maturities of sixty days or less may be valued at their amortized cost, which approximates market 23 FAITH SHARES NOTES TO THE FINANCIAL STATEMENTS JULY 31, 2010 ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (continued) value. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates. Prices for most securities held in the Funds are provided daily by recognized independent pricing agents. If a security price cannot be obtained from an independent, third-party pricing agent, the Funds seek to obtain a bid price from at least one independent broker. Securities for which market prices are not "readily available" are valued in accordance with Fair Value Procedures established by the Board. The Funds' Fair Value Procedures are implemented through a Fair Value Committee (the "Committee") designated by the Board. Some of the more common reasons that may necessitate that a security be valued using Fair Value Procedures include: the security's trading has been halted or suspended; the security has been de-listed from a national exchange; the security's primary trading market is temporarily closed at a time when under normal conditions it would be open; the security has not been traded for an extended period of time; the security's primary pricing source is not able or willing to provide a price; or trading of the security is subject to local government-imposed restrictions. When a security is valued in accordance with the Fair Value Procedures, the Committee will determine the value after taking into consideration relevant information reasonably available to the Committee. In accordance with the authoritative guidance on fair value measurements and disclosure under GAAP, the Funds discloses fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: o Level 1 -- Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Funds have the ability to access at the measurement date; o Level 2 -- Quoted prices which are not active, or inputs that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and o Level 3 -- Prices, inputs or exotic modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no market activity). The valuation techniques used by the Funds to measure fair value during the period ended July 31, 2010 maximized the use of observable inputs and minimized the use of unobservable inputs. For the period ended July 31, 2010 there has been no significant changes to the Funds' fair valuation methodologies. FEDERAL INCOME TAXES -- It is the Funds' intention to continue to qualify as a regulated investment company for Federal income tax purposes by complying with the appropriate provisions of the Subchapter M of the Internal Revenue Code of 1986, as amended. Accordingly, no provisions for Federal income taxes have been made in the financial statements. The Funds evaluate tax positions taken or expected to be taken in the course of preparing the Funds' tax returns to determine whether it is "more-likely-than-not" (i.e., greater than 50 percent) that each tax position will be sustained upon examination by a taxing authority based on the technical merits of the position. Tax positions not 24 FAITH SHARES NOTES TO THE FINANCIAL STATEMENTS JULY 31, 2010 ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (continued) deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. The Funds did not record any tax provision in the current period. However, management's conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, examination by tax authorities (i.e., the last 3 tax year ends, as applicable), on-going analysis of and changes to tax laws, regulations and interpretations thereof. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on trade date. Costs used in determining realized gains and losses on the sale of investment securities are based on specific identification. Dividend income is recorded on the ex-dividend date. Interest income is recognized on the accrual basis from the settlement date. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Funds distribute substantially all of their net investment income quarterly. Any net realized capital gains are distributed annually. All distributions are recorded on ex-dividend date. CREATION UNITS -- Purchasers of Creation Units at NAV must pay a standard creation transaction fee of $500 to the Adviser. The maximum creation transaction fee for each Fund will be $3,000. An Authorized Participant who holds Creation Units and wishes to redeem at NAV would also pay a standard Redemption Fee of $500 to the Adviser. The maximum redemption transaction fee for each Fund will be $3,000. Except when aggregated in Creation Units, shares are not redeemable securities of a Fund. Shares of a Fund may only be purchased or redeemed by certain financial institutions ("Authorized Participants"). An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a DTC participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors will not qualify as Authorized Participants or have the resources to buy and sell whole Creation Units. Therefore, they will be unable to purchase or redeem the shares directly from the Funds. Rather, most retail investors will purchase shares in the secondary market with the assistance of a broker and will be subject to customary brokerage commissions or fees. 4. AGREEMENTS INVESTMENT ADVISORY AGREEMENT The Adviser serves as the investment adviser to the Funds. Subject to the supervision of the Board of Trustees, the Adviser is responsible for making investment decisions for each Fund, and manages the investment portfolios and business affairs of the Funds. For its service to the Funds, under the Advisory Agreement, Funds pay a fee to the Adviser, which is calculated daily and paid monthly at the following rates: 0.87% of the combined daily net assets of the Funds on the first $1.5 Billion, 0.75% on the next $1 billion and 0.65% exceeding $2.5 billion. In addition, the Adviser pays all expenses of each Fund other than the management fee, distribution fees pursuant to the Fund's Distribution and Service Plan, if any, brokerage expenses, acquired fund fees and expenses and other extraordinary expenses. The Adviser intends to donate 10% of the net income it derives from each Fund to a charitable organization selected by such Fund, and whose mission is aligned with the moral and social beliefs of the faith represented by each Fund. 25 FAITH SHARES NOTES TO THE FINANCIAL STATEMENTS JULY 31, 2010 ================================================================================ 4. AGREEMENTS (continued) DISTRIBUTION AGREEMENT SEI Investments Distribution Co. ("SIDCO") serves as each Fund's underwriter and distributor of Shares pursuant to a Distribution Agreement. Under the Distribution Agreement, SIDCO, as agent, receives orders to purchase shares in Creation Unit Aggregations and transmits such orders to the Trust's custodian and transfer agent. The Distributor has no obligation to sell any specific quantity of Fund shares. SIDCO bears the following costs and expenses relating to the distribution of shares: (i) the costs of processing and maintaining records of creations of Creation Units; (ii) all costs of maintaining the records required of a registered broker/dealer; (iii) the expenses of maintaining its registration or qualification as a dealer or broker under federal or state laws; (iv) filing fees; and (v) all other expenses incurred in connection with the distribution services as contemplated in the Distribution Agreement. The Distributor does not maintain any secondary market in Fund Shares. The Trust has adopted a Distribution and Service Plan ("Plan") pursuant to Rule 12b-1 under the 1940 Act. In accordance with its Plan, each Fund is authorized to pay an amount up to 0.25% of its average net assets each year for certain distribution-related activities. For the first twelve months of operations, no fees will be charged by the Distributor under the Plan and the Plan will only be implemented with the approval of the Board. ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT AND TRANSFER AGENT SEI Investments Global Funds Services (the "Administrator") serves as the Funds' Administrator pursuant to an Administration Agreement. Brown Brothers Harriman Co. (the "Custodian" and "Transfer Agent") serves as the Funds' Custodian and Transfer Agent pursuant to a Custody Agreement and Transfer Agency and Services Agreement. The Adviser of the Funds pays these fees. 5. INVESTMENT TRANSACTIONS For the period ended July 31, 2010, the purchases and sales of investments in securities excluding in-kind transactions, long-term U.S. Government and short-term securities were: Sales and Purchases Maturities --------------- --------------- FaithShares Baptist Values ETF $ 498,111 $ 544,376 FaithShares Catholic Values ETF 1,082,480 1,060,268 FaithShares Christian Values ETF 526,433 532,289 FaithShares Lutheran Values ETF 514,188 559,304 FaithShares Methodist Values ETF 1,047,687 1,083,239 For the period ended July 31, 2010, in-kind transactions associated with creations and redemptions were: Net realized gain Sales and (loss) on in-kind Purchases Maturities transactions ----------- ----------- ----------------- FaithShares Baptist Values ETF $ 3,922,473 $ 2,757,971 $ 113,456 FaithShares Catholic Values ETF 3,789,394 1,358,279 152,493 FaithShares Christian Values ETF 3,729,281 1,332,136 121,246 FaithShares Lutheran Values ETF 3,912,932 2,734,843 99,902 FaithShares Methodist Values ETF 3,801,928 1,363,552 154,137 There were no purchases or sales of long-term U.S. Government securities by the Funds. 26 FAITH SHARES NOTES TO THE FINANCIAL STATEMENTS JULY 31, 2010 ================================================================================ 6. TAX INFORMATION The amount and character of income and capital gain distributions to be paid, if any, are determined in accordance with Federal income tax regulations, which may differ from GAAP. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent. To the extent these differences are permanent in nature, they are charged or credited to undistributed net investment income (loss), accumulated net realized gain (loss) or paid-in capital, as appropriate, in the period that the differences arise. In accordance with accounting pronouncements, the Funds have recorded several reclassifications in the capital accounts. These reclassifications have no impact on the net asset value of the Funds. The following differences, primarily attributable to redemptions in kind, have been reclassified to/from the following accounts during the fiscal period ended July 31, 2010. Undistributed Net Accumulated Paid-in Investment Net Realized FaithShares Funds Capital Income Loss - -------------------------------- --------- ------------- ------------ FaithShares Baptist Values ETF $ 113,456 $ -- $(113,456) FaithShares Catholic Values ETF 152,493 18 (152,511) FaithShares Christian Values ETF 123,593 -- (123,593) FaithShares Lutheran Values ETF 99,902 -- (99,902) FaithShares Methodist Values ETF 154,137 -- (154,137) The tax character of dividends and distributions paid during the last fiscal period were as follows: Ordinary Long-Term FaithShares Funds Income Capital Gain Totals - --------------------------------- ----------- ------------ --------- FaithShares Baptist Values ETF 2010 $ 8,927 $ -- $ 8,927 FaithShares Catholic Values ETF 2010 $ 10,759 $ -- $ 10,759 FaithShares Christian Values ETF 2010 $ 8,426 $ -- $ 8,426 FaithShares Lutheran Values ETF 2010 $ 8,884 $ -- $ 8,884 FaithShares Methodist Values ETF 2010 $ 12,200 $ -- $ 12,200 As of July 31, 2010, the components of Distributable Earnings (Accumulated Losses) on a tax basis were as follows:
FaithShares Funds ---------------- --- -------------- --------------------- -------------- --- -------------- FaithShares FaithShares FaithShares FaithShares FaithShares Baptist Values Catholic Christian Lutheran Methodist ETF Values ETF Values ETF Values ETF Values ETF ---------------- --- -------------- --- ------------- --- -------------- --- -------------- Undistributed Ordinary Income $ 40,731 $ 29,486 $ 57,814 $ 32,122 $ 45,998 Unrealized Appreciation (Depreciation) (14,671) (68,306) 5,609 (33,100) (73,214) ---------------- --- -------------- --- ------------- --- -------------- --- -------------- Total Distributable Earnings (Accumulated Losses) $ 26,060 $ (38,820) $ 63,423 $ (978) $ (27,216) ================ === ============== === ============= === ============== === ==============
27 FAITH SHARES NOTES TO THE FINANCIAL STATEMENTS JULY 31, 2010 ================================================================================ 6. TAX INFORMATION (continued) For Federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward for a maximum period of eight years and applied against future gains. As of July 31, 2010, the Funds had no capital loss carryforwards. The Federal tax cost and aggregate gross unrealized appreciation and depreciation on investments held by the Funds at July 31, 2010 were as follows:
Aggregated Aggregated Gross Gross Net Unrealized Federal Tax Unrealized Unrealized Appreciation FaithShares Funds Cost Appreciation Depreciation (Depreciation) - -------------------------------- --- ----------- --- ------------ -------------- -------------- FaithShares Baptist Values ETF $ 1,309,578 $ 51,917 $ (66,588) $ (14,671) FaithShares Catholic Values ETF 2,681,592 88,599 (156,905) (68,306) FaithShares Christian Values ETF 2,623,110 82,495 (76,886) 5,609 FaithShares Lutheran Values ETF 1,301,527 44,168 (77,268) (33,100) FaithShares Methodist Values ETF 2,699,568 84,719 (157,933) (73,214)
7. CONCENTRATION OF RISKS The Funds assets will be concentrated in an industry or group of industries to the extent that the Index concentrates in a particular industry or group of industries. By concentrating its assets in a particular industry or group of industries, the Funds are subject to the risk that economic, political or other conditions that have a negative effect on that industry or group of industries will negatively impact the Funds to a greater extent than if the Funds' net assets were invested in a wider variety of industries. 8. OTHER At July 31, 2010, 100% of total shares outstanding were held by one Authorized Participant each for the FaithShares Baptist Values Fund, FaithShares Catholic Values Fund, FaithShares Christian Values Fund, FaithShares Lutheran Values Fund and FaithShares Methodist Values Fund. 9. SUBSEQUENT EVENT The Funds have evaluated the need for additional disclosures and/or adjustments resulting from subsequent events. Based on this evaluation, no additional disclosures or adjustments were required to the financial statements. 28 FAITH SHARES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ================================================================================ The Board of Trustees and Shareholders of FaithShares Trust: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the FaithShares Baptist Values Fund ETF, FaithShares Catholic Values Fund ETF, FaithShares Christian Values Fund ETF, FaithShares Lutheran Values Fund ETF, and FaithShares Methodist Values Fund ETF (each a "Fund" and collectively the "Funds") as of July 31, 2010, and the related statements of operations and changes in net assets and the financial highlights for the period from inception (December 8, 2009 and December 14, 2009, as applicable) through the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 2010, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the aforementioned funds comprising FaithShares Trust as of July 31, 2010, and the results of their operations, the changes in their net assets and the financial highlights for the period from inception (December 8, 2009 and December 14, 2009, as applicable) through the period then ended, in conformity with U.S. generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Funds will continue as a going concern. As discussed in note 2 to the financial statements, the Funds have a unified fee arrangement and are dependent on the operations of the Funds' investment adviser, FaithShares Advisors, LLC, to pay all operating expenses of the Funds. FaithShares Advisors, LLC is experiencing financial challenges and seeking additional sources of financing. These conditions raise substantial doubt about the Funds' ability to continue as a going concern. Management's plans in regard to the Funds are also described in note 2. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ KPMG LLP Philadelphia, Pennsylvania October 8, 2010 29 FAITH SHARES DISCLOSURE OF FUND EXPENSES (UNAUDITED) ================================================================================ All funds have operating expenses. As a shareholder of a fund, your investment is affected by these ongoing costs, which include (among others) costs for Fund management, administrative services, brokerage fees and shareholder reports like this one. It is important for you to understand the impact of these costs on your investment returns. Operating expenses such as these are deducted from a fund's gross income and directly reduce your final investment return. These expenses are expressed as a percentage of the fund's average net assets; this percentage is known as the fund's expense ratio. The following examples use the expense ratio and are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period. The table on the next page illustrates your Fund's costs in two ways: ACTUAL FUND RETURN. This section helps you to estimate the actual expenses after fee waivers that your Fund incurred over the period. The "Expenses Paid During Period" column shows the actual dollar expense cost incurred by a $1,000 investment in the Fund, and the "Ending Account Value" number is derived from deducting that expense cost from the Fund's gross investment return. You can use this information, together with the actual amount you invested in the Funds, to estimate the expenses you paid over that period. Simply divide your actual account value by $1,000 to arrive at a ratio (for example, an $8,600 account value divided by $1,000 = $8.6), then multiply that ratio by the number shown for your Funds under "Expenses Paid During Period." HYPOTHETICAL 5% RETURN. This section helps you compare your Fund's costs with those of other funds. It assumes that the Funds had an annual 5% return before expenses during the year, but that the expense ratio (Column 3) for the period is unchanged. This example is useful in making comparisons because the Securities and Exchange Commission requires all funds to make this 5% calculation. You can assess your Fund's comparative cost by comparing the hypothetical result for your Fund in the "Expense Paid During Period" column with those that appear in the same charts in the shareholder reports for other funds. NOTE: Because the return is set at 5% for comparison purposes -- NOT your Fund's actual return -- the account values shown may not apply to your specific investment. 30 FAITH SHARES DISCLOSURE OF FUND EXPENSES (UNAUDITED)
========================================================================================= Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During 2/1/2010 7/31/2010 Ratios Period(1) - -------------------------------- ----------- ---------------------- ---------- ----------- FaithShares Baptist Values ETF - -------------------------------- ----------- ---------------------- ---------- ----------- Actual Fund Return $1,000.00 $1,051.00 0.87% $4.42 Hypothetical 5% Return 1,000.00 1,020.48 0.87 4.36 - -------------------------------- ----------- ---------------------- ---------- ----------- FaithShares Catholic Values ETF - -------------------------------- ----------- ---------------------- ---------- ----------- Actual Fund Return 1,000.00 1,042.10 0.87 4.41 Hypothetical 5% Return 1,000.00 1,020.48 0.87 4.36 - -------------------------------- ----------- ---------------------- ---------- ----------- FaithShares Christian Values ETF - -------------------------------- ----------- ---------------------- ---------- ----------- Actual Fund Return 1,000.00 1,048.90 0.87 4.42 Hypothetical 5% Return 1,000.00 1,020.48 0.87 4.36 - -------------------------------- ----------- ---------------------- ---------- ----------- FaithShares Lutheran Values ETF - -------------------------------- ----------- ---------------------- ---------- ----------- Actual Fund Return 1,000.00 1,031.90 0.87 4.38 Hypothetical 5% Return 1,000.00 1,020.48 0.87 4.36 - -------------------------------- ----------- ---------------------- ---------- ----------- FaithShares Methodist Values ETF - -------------------------------- ----------- ---------------------- ---------- ----------- Actual Fund Return 1,000.00 1,048.80 0.87 4.42 Hypothetical 5% Return 1,000.00 1,020.48 0.87 4.36 - -------------------------------- ----------- ---------------------- ---------- -----------
(1) Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied 181/365 (to reflect the actual time the Fund was operational). 31 FAITH SHARES SUPPLEMENTAL INFORMATION (UNAUDITED) ================================================================================ Net asset value, or "NAV", is the price per share at which the Funds issue and redeem shares. It is calculated in accordance with the standard formula for valuing mutual fund shares. The "Market Price" of the Funds generally is determined using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Funds are listed for trading, as of the time that the Funds' NAV is calculated. The Funds' Market Price may be at, above or below their NAV. The NAV of the Funds will fluctuate with changes in the market value of their Funds holdings. The Market Price of the Funds will fluctuate in accordance with changes in its NAV, as well as market supply and demand. Premiums or discounts are the differences (expressed as a percentage) between the NAV and Market Price of the Funds on a given day, generally at the time NAV is calculated. A premium is the amount that the Funds are trading above the reported NAV, expressed as a percentage of the NAV. A discount is the amount that the Funds are trading below the reported NAV, expressed as a percentage of the NAV. The following information shows the frequency distributions of premiums and discounts for the Funds. The information shown is for the full calendar quarter completed after the inception date through the date of the most recent calendar quarter end. Each line in the table shows the number of trading days in which the Funds traded within the premium/discount range indicated. The number of trading days in each premium/discount range is also shown as a percentage of the total number of trading days in the period covered by each table. All data presented here represents past performance, which cannot be used to predict future results. FaithShares Baptist Values ETF ====================================== ========= ================= Number of Percentage of Premium/Discount Range Days Total Days ====================================== ========= ================= Greater than 3.5% 0 0.00 % Greater than 3.0% and Less than 3.5% 0 0.00 Greater than 2.0% and Less than 2.5% 0 0.00 Greater than 1.5% and Less than 2.0% 0 0.00 Greater than 1.0% and Less than 1.5% 0 0.00 Greater than 0.5% and Less than 1.0% 0 0.00 Between 0.5% and -0.5% 121 98.37 Less than -0.5% and Greater than -1.0% 2 1.63 Less than -1.0% and Greater than -1.5% 0 0.00 Less than -1.5% and Greater than -2.0% 0 0.00 Less than -2.0% and Greater than -2.5% 0 0.00 Less than -2.5% and Greater than -3.0% 0 0.00 Less than -3.0% and Greater than -3.5% 0 0.00 Less than -3.5% and Greater than -4.0% 0 0.00 Less than -4.0% and Greater than -4.5% 0 0.00 Less than -4.5% and Greater than -5.0% 0 0.00 ========= ================= Total 123 100.00 % ========= ================= 32 FAITH SHARES SUPPLEMENTAL INFORMATION (UNAUDITED) ================================================================================ FaithShares Catholic Values ETF ====================================== ========= ================= Number of Percentage of Premium/Discount Range Days Total Days ====================================== ========= ================= Greater than 3.5% 0 0.00 % Greater than 3.0% and Less than 3.5% 0 0.00 Greater than 2.0% and Less than 2.5% 0 0.00 Greater than 1.5% and Less than 2.0% 0 0.00 Greater than 1.0% and Less than 1.5% 0 0.00 Greater than 0.5% and Less than 1.0% 0 0.00 Between 0.5% and -0.5% 123 100.00 Less than -0.5% and Greater than -1.0% 0 0.00 Less than -1.0% and Greater than -1.5% 0 0.00 Less than -1.5% and Greater than -2.0% 0 0.00 Less than -2.0% and Greater than -2.5% 0 0.00 Less than -2.5% and Greater than -3.0% 0 0.00 Less than -3.0% and Greater than -3.5% 0 0.00 Less than -3.5% and Greater than -4.0% 0 0.00 Less than -4.0% and Greater than -4.5% 0 0.00 Less than -4.5% and Greater than -5.0% 0 0.00 ========= ================= Total 123 100.00 % ====================================== ========= ================= FaithShares Christian Values ETF ====================================== ========= ================= Number of Percentage of Premium/Discount Range Days Total Days ====================================== ========= ================= Greater than 3.5% 0 0.00 % Greater than 3.0% and Less than 3.5% 0 0.00 Greater than 2.0% and Less than 2.5% 0 0.00 Greater than 1.5% and Less than 2.0% 0 0.00 Greater than 1.0% and Less than 1.5% 0 0.00 Greater than 0.5% and Less than 1.0% 0 0.00 Between 0.5% and -0.5% 123 100.00 Less than -0.5% and Greater than -1.0% 0 0.00 Less than -1.0% and Greater than -1.5% 0 0.00 Less than -1.5% and Greater than -2.0% 0 0.00 Less than -2.0% and Greater than -2.5% 0 0.00 Less than -2.5% and Greater than -3.0% 0 0.00 Less than -3.0% and Greater than -3.5% 0 0.00 Less than -3.5% and Greater than -4.0% 0 0.00 Less than -4.0% and Greater than -4.5% 0 0.00 Less than -4.5% and Greater than -5.0% 0 0.00 ========= ================= Total 123 100.00 % ========= ================= 33 FAITH SHARES SUPPLEMENTAL INFORMATION (UNAUDITED) ================================================================================ FaithShares Lutheran Values ETF ====================================== ========= ================= Number of Percentage of Premium/Discount Range Days Total Days ====================================== ========= ================= Greater than 3.5% 0 0.00 % Greater than 3.0% and Less than 3.5% 0 0.00 Greater than 2.0% and Less than 2.5% 0 0.00 Greater than 1.5% and Less than 2.0% 0 0.00 Greater than 1.0% and Less than 1.5% 0 0.00 Greater than 0.5% and Less than 1.0% 3 2.44 Between 0.5% and -0.5% 118 95.93 Less than -0.5% and Greater than -1.0% 2 1.63 Less than -1.0% and Greater than -1.5% 0 0.00 Less than -1.5% and Greater than -2.0% 0 0.00 Less than -2.0% and Greater than -2.5% 0 0.00 Less than -2.5% and Greater than -3.0% 0 0.00 Less than -3.0% and Greater than -3.5% 0 0.00 Less than -3.5% and Greater than -4.0% 0 0.00 Less than -4.0% and Greater than -4.5% 0 0.00 Less than -4.5% and Greater than -5.0% 0 0.00 ========= ================= Total 123 100.00 % ========= ================= FaithShares Methodist Values ETF ====================================== ========= ================= Number of Percentage of Premium/Discount Range Days Total Days ====================================== ========= ================= Greater than 3.5% 0 0.00 % Greater than 3.0% and Less than 3.5% 0 0.00 Greater than 2.0% and Less than 2.5% 0 0.00 Greater than 1.5% and Less than 2.0% 0 0.00 Greater than 1.0% and Less than 1.5% 0 0.00 Greater than 0.5% and Less than 1.0% 0 0.00 Between 0.5% and -0.5% 123 100.00 Less than -0.5% and Greater than -1.0% 0 0.00 Less than -1.0% and Greater than -1.5% 0 0.00 Less than -1.5% and Greater than -2.0% 0 0.00 Less than -2.0% and Greater than -2.5% 0 0.00 Less than -2.5% and Greater than -3.0% 0 0.00 Less than -3.0% and Greater than -3.5% 0 0.00 Less than -3.5% and Greater than -4.0% 0 0.00 Less than -4.0% and Greater than -4.5% 0 0.00 Less than -4.5% and Greater than -5.0% 0 0.00 ========= ================= Total 123 100.00 % ========= ================= 34 FAITH SHARES TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
========================================================================================================= Set forth below are the names, addresses, ages, position with the Trust, Term of Office and Length of Time Served, the principal occupations for the last five years, number of Funds in fund complex overseen by trustee, and other directorships outside the fund complex of each of the persons currently serving as Trustees and Officers of the Trust. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trustees and Officers. The SAI may be obtained without charge by calling 1-877-FAITH-55. The following chart lists Trustees and Officers as of July 31, 2010. Number of Portfolios in Fund Term of Office Principal Complex Other Name, Address, Position(s) Held and Length of Occupation(s) Overseen By Directorships held and Age with the Trust Time Served (1) During Past 5 Years Trustee by Trustee - ------------------ ----------------- --------------- ------------------- ------------- ------------------ Thompson S. Trustee, Since 2009 Phillps Capital 5 None Phillips, Jr. President and Advisors 1990 to 3555 Northwest Treasurer Present -- 58th Street Founder; Suite 600 T.S. Phillips Oklahoma City, OK Investments, Inc. 73112 2004 -- Present -- (58 years old) President and Founder; FaithShares Advisors, LLC 2009 to Present -- President and Portfolio Manager - ------------------ ----------------- --------------- ------------------- ------------- ------------------ J. Garrett Stevens Trustee, Chief Since 2009 Phillips Capital 5 None 3555 Northwest Executive Officer Advisors 2001 -- 58th Street and Secretary Present -- Vice Suite 410 President; Oklahoma City, OK T.S. Phillips 73112 Investments, Inc. (30 years old) 2001 to Present -- Vice President; FaithShares Advisors, LLC 2009 to Present -- Chief Executive Officer and Portfolio Manager - ------------------ ----------------- --------------- ------------------- ------------- ------------------ 35 FAITH SHARES TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED) ========================================================================================================== Number of Portfolios in Fund Term of Office Principal Complex Other Name, Address, Position(s) Held and Length of Occupation(s) Overseen By Directorships held and Age with the Trust Time Served (1) During Past 5 Years Trustee by Trustee - ------------------ ------------------ --------------- -------------------- ------------- ------------------ Nancy Bainbridge Trustee Since 2009 Commercial Federal 5 None c/o FaithShares Bank -- Vice- Trust President May 2002- 3555 Northwest March 2005; Spirit 58th Street Bank- Senior Vice- Suite 410 President March Oklahoma City, OK 2005-March 2010, 73112 Senior Vice- (54 years old) President Bank 2 March 2010 -- Present - ------------------ ------------------ --------------- -------------------- ------------- ------------------ Thomas C. Burgin Trustee Since 2009 T.C. Burgin, CPA, 5 Director of the c/o FaithShares PC- President 1991- South Oklahoma Trust Present Chamber of 3555 Northwest Commerce 58th Street Suite 410 Oklahoma City, OK 73112 (59 years old) - ------------------ ------------------ --------------- -------------------- ------------- ------------------ Dr. Adrian E. Cole Trustee Since 2009 New Covenant 5 Director of c/o FaithShares United Methodist Oklahoma Federal Trust Church 1996- Credit Union 3555 Northwest Present-Senior 58th Street Minister Suite 410 Oklahoma City, OK 73112 (58 years old) - ------------------ ------------------ --------------- -------------------- ------------- ------------------ Steven McConnell Trustee Since 2009 DeBee Gilchrist -- 5 None c/o FaithShares Attorney 2004-2006 Trust Legacy Bank- 3555 Northwest Corporate Counsel 58th Street & Senior Trust Suite 410 Officer 2006-Present Oklahoma City, OK 73112 (42 years old) 36 FAITH SHARES TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED) ================================================================================================================= Term of Office Name, Address, Position(s) Held and Length of Principal Occupation(s) During Past 5 Other Directorships and Age with the Trust Time Served (1) Years held - ----------------- ------------------- --------------- --------------------------------------- ------------------- Stephen F. Panner Assistant Treasurer Since 2009 Fund Accounting Director of the SEI None. SEI Investments Investments Global Fund Services, 2005- Company present. Fund Administration Manager, One Freedom Old Mutual Fund Services, 2000-2005. Valley Drive Chief Financial Officer, Controller and Oaks, PA 19456 Treasurer, PBHG Funds and PBHG (40 years old) Insurance Series Fund, 2004-2005. Assistant Treasurer, PBHG Funds and PBHG Insurance Series Fund, 2000-2004. Assistant Treasurer, Old Mutual Fund Advisors Fund, 2004-2005. - ----------------- ------------------- --------------- --------------------------------------- ------------------- Carolyn Mead Assistant Secretary Since 2009 Counsel at SEI Investments since 2007. None. SEI Investments Associate at Stradley, Ronon, Stevens & Company Young from 2004 to 2007. Counsel at ING One Freedom Variable Annuities from 1999 to 2002. Valley Drive Oaks, PA 19456 (52 years old) (1)Each Trustee shall serve during the continued life of the Trust until he or she dies, resigns, is declared bankrupt or incompetent by a court of competent, or is removed.
37 FAITH SHARES NOTICE TO SHAREHOLDERS (UNAUDITED)
==================================================================================================================================== For shareholders that do not have an July 31, 2010, tax year end, this notice is for informational purposes only. For shareholders with an July 31, 2010, tax year end, please consult your tax advisor as to the pertinence of this notice. For the fiscal year ended July 31, 2010, the Fund is designating the following items with regard to distributions paid during the year. Dividends Qualifying For Corporate Long Term Ordinary Dividend Qualifying U.S. Qualified Qualified Capital Gain Income Total Receivable Dividend Government Interest Short-Term Distribution Distribution Distributions Deduction (1) Income (2) Interest (3) Income (4) Capital Gain (5) - ------------------------------------------------------------------------------------------------------------------------------------ FaithShares Baptist Values ETF 0.00% 100.00% 100.00% 41.69% 41.09% 0.00% 0.01% 0.00% FaithShares Catholic Values ETF 0.00% 100.00% 100.00% 65.34% 62.96% 0.00% 0.03% 0.00% FaithShares Christian Values ETF 0.00% 100.00% 100.00% 31.41% 32.41% 0.00% 0.02% 0.00% FaithShares Lutheran Values ETF 0.00% 100.00% 100.00% 49.97% 49.34% 0.00% 0.01% 0.00% FaithShares Methodist Values ETF 0.00% 100.00% 100.00% 47.81% 45.62% 0.00% 0.02% 0.00%
(1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction and is reflected as a percentage of ordinary Income distributions (the total of short term capital gain and net investment income distributions). (2) The percentage in this column represents the amount of "Qualifying Dividend Income" as created by the Jobs and Growth Relief Reconciliation Act of 2003 and is reflected as a percentage of ordinary income distributions (the total of short term capital gain and net investment income distributions). It is the intention of each of the aforementioned funds to designate the maximum amount permitted by law. (3) "U.S. Government Interest" represents the amount of interest that was derived from U.S. Government obligations and distributed during the fiscal year. Generally, interest from direct U.S. Government obligations is exempt from state income tax. However, for shareholders of these Funds who are residents of California, Connecticut and New York, the statutory threshold requirements were not satisfied to permit exemption of these amounts from state income. (4) The percentage in this column represents the amount of "Qualifying Interest Income" as created by the American Jobs Creation Act of 2004 and is a percentage of net investment income that is exempt from U.S. withholding tax when paid for foreign investors. This provision of the Internal Revenue Code will be expiring for tax years beginning after December 31, 2009. (5) The percentage in this column represents the amount of "Qualifying Short-Term Capital Gain" as created by the American Jobs Creation Act of 2004 and is reflected as a percentage of short-term capital gain distributions that is exempt from U.S. withholding tax when paid to foreign investors. This provision of the Internal Revenue Code will be expiring for tax years beginning after December 31, 2009. The information reported herein may differ from the information and distributions taxable to the shareholder for the calendar year ending December 31, 2010. Complete information will be computed and reported with year 2010 Form 1099-DIV. 38 FAITH SHARES NOTES ================================================================================ [LOGO OMITTED] FAITH SHARES 3555 Northwest 58(th) Street, Suite 410 Oklahoma City, Oklahoma 73112 INVESTMENT ADVISER: FaithShares Advisors, LLC 3555 Northwest 58(th) Street, Suite 410 Oklahoma City, Oklahoma 73112 DISTRIBUTOR: SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL: Morgan, Lewis & Bockius LLP 1111 Pennsylvania Ave, NW Washington, DC 20004 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: KPMG LLP 1601 Market Street Philadelphia, PA 19103 This information must be preceded or accompanied by a current prospectus for the Funds. FSF--AR-001-0100 Item 2. Code of Ethics. A code of ethics, as defined in Item 2 of Form N-CSR, adopted by the registrant and applicable to the registrant's principal executive officer and principal financial officer, was in effect during the entire period covered by this report. A copy of the code of ethics dated October 20, 2010 is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers granted to this code of ethics during the period covered by this report. Item 3. Audit Committee Financial Expert. The registrant's board of trustees has determined that Thomas C. Burgin, member of the registrant's Audit Committee, is an "audit committee financial expert" and is "independent" as that term is defined in Item 3 of Form N-CSR. Item 4. Principal Accountant Fees and Services. (a)-(d) Aggregate fees billed to registrant for the fiscal year ended July 31, 2010 for professional services rendered by registrant's principal accountant were as follows: 2010 -------------------------------------------------- (a) Audit Fees $101,000 -------------------------------------------------- (b) Audit-Related Fees $0 -------------------------------------------------- (c) Tax Fees $0 -------------------------------------------------- (d) All Other Fees $0 Audit Fees include amounts related to the audit of the registrant's annual financial statements and services normally provided by the principal accountant in connection with statutory and regulatory filings. All Other Fees include amounts billed for products and services other than those disclosed in paragraphs (a) through (c) of this Item. (e)(1) The registrant's Audit Committee has adopted, and the Board of Trustees has ratified, an Audit and Non-Audit Services Pre-Approval Policy (the "Policy"), which requires the registrant's Audit Committee to pre-approve all audit and non-audit services provided by the principal accountant to the registrant. The Policy also requires the Audit Committee to pre-approve any engagement of the principal accountant to provide non-audit services to the registrant's investment adviser, if the services relate directly to the registrant's operations and financial reporting. (e)(2) No services included in (b)-(d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Not applicable. (g) The aggregate fees billed by registrant's principal accountant for non-audit services rendered to the registrant, for non-audit services rendered to the registrant's investment adviser, and for non-audit services rendered to entities controlled by the adviser for the last fiscal year was $0. (h) During the past fiscal year, all non-audit services provided by registrant's principal accountant to either registrant's investment adviser or to any entity controlling, controlled by, or under common control with registrant's investment adviser that provides ongoing services to registrant were pre-approved by the audit committee of registrant's board of trustees. Included in the audit committee's pre-approval was the review and consideration as to whether the provision of these non-audit services is compatible with maintaining the principal accountant's independence. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Company and Affiliated Purchasers. Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. There have been no material changes. Item 11. Controls and Procedures. (a) The certifying officers, whose certifications are included herewith, have evaluated the registrant's disclosure controls and procedures within 90 days of the filing date of this report. In their opinion, based on their evaluation, the registrant's disclosure controls and procedures are adequately designed, and are operating effectively to ensure, that information required to be disclosed by the registrant in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no significant changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Items 12. Exhibits. (a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is attached. (Ex.99A). (a)(2) A separate certification for the principal executive officer and the principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended (17 CFR 270.30a -2(a)), are filed herewith.(Ex.99B) (a)(3) Not applicable. (b) Officer certifications as required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended (17 CFR 270.30a -2(b)) are filed herewith ..(Ex.99C) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) FaithShares Trust By (Signature and Title)* /s/ J. Garrett Stevens ----------------------------- J. Garrett Stevens Chief Executive Officer Date: October 12, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ J. Garrett Stevens ----------------------------- J. Garrett Stevens Chief Executive Officer Date: October 12, 2010 By (Signature and Title)* /s/ Thompson S. Phillips, Jr. ----------------------------- Thompson S. Phillips, Jr. Treasurer Date: October 12, 2010 * Print the name and title of each signing officer under his or her signature. EX-99.CERT 2 ex-cert.txt CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, J. Garrett Stevens, certify that: 1. I have reviewed this report on Form N-CSR of FaithShares Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: October 12, 2010 /s/ J. Garrett Stevens - ------------------------ J. Garrett Stevens Chief Executive Officer CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Thompson S. Phillips, Jr., certify that: 1. I have reviewed this report on Form N-CSR of FaithShares Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during second quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: October 12, 2010 /s/ Thompson S. Phillips, Jr. - ----------------------------- Thompson S. Phillips, Jr. Treasurer EX-99.906 CERT 3 ex-906cert.txt CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned, the Chief Executive Officer of FaithShares Trust (the "Funds"), with respect to the Funds' Form N-CSR for the period ended July 31, 2010 as filed with the Securities and Exchan e Commission, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowlede: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Funds. Dated: October 12, 2010 /s/ J. Garrett Stevens ----------------------- J. Garrett Stevens Chief Executive Officer CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned, the Treasurer of FaithShares Trust (the "Funds"), with respect to the Funds' Form N-CSR for the period ended July 31, 2010 as filed with the Securities and Exchange Commission, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Funds. Dated: October 12, 2010 /s/ Thompson S. Phillips, Jr. ------------------------- Thompson S. Phillips, Jr. Treasurer EX-99.P CODE ETH 4 ex-code.txt FAITHSHARES TRUST Financial Officer Code of Ethics I. Introduction The reputation and integrity of FaithShares Trust (the "Trust") are valuable assets that are vital to the Trust's success. The Trust's senior financial officers ("SFOs") are responsible for conducting the Trust's business in a manner that demonstrates a commitment to the highest standards of integrity. The Trust's SFOs include the principal executive officer, the principal financial officer, comptroller or principal accounting officer, and any person who performs a similar function. The Sarbanes-Oxley Act of 2002 (the "Act") effected sweeping corporate disclosure and financial reporting reform on public companies, including mutual funds, to address corporate malfeasance and assure investors that the companies in which they invest are accurately and completely disclosing financial information. Under the Act, all public companies (including the Trust) must either have a code of ethics for their SFOs, or disclose why they do not. The Act was intended to foster corporate environments which encourage employees to question and report unethical and potentially illegal business practices. The Trust has chosen to adopt this Financial Officer Code of Ethics (the "Code") to encourage its SFOs to act in a manner consistent with the highest principles of ethical conduct. II. Purposes of the Code The purposes of this Code are: o To promote honest and ethical conduct by the Trust's SFOs, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o To assist the Trust's SFOs in recognizing and avoiding conflicts of interest, including disclosing to an appropriate person any material transaction or relationship that reasonably could be expected to give rise to such a conflict; o To promote full, fair, accurate, timely, and understandable disclosure in reports and documents that the Trust files with, or submits to, the SEC and in other public communications made by the Trust; o To promote compliance with applicable laws, rules and regulations; o To encourage the prompt internal reporting to an appropriate person of violations of this Code; and o To establish accountability for adherence to this Code. III. Questions about this Code The Trust's compliance officer designated to oversee compliance with the Trust's Code of Ethics adopted pursuant to Rule 17j-1 shall serve as Compliance Officer for the implementation and administration of this Code. You should direct your questions about this Code to the Compliance Officer. IV. Conduct Guidelines The Trust has adopted the following guidelines under which the Trust's SFOs must perform their official duties and conduct the business affairs of the Trust. 1. Ethical and honest conduct is of paramount importance. The Trust's SFOs must act with honesty and integrity and avoid violations of this Code, including the avoidance of actual or apparent conflicts of interest with the Trust in personal and professional relationships. 2. SFOs must disclose material transactions or relationships. The Trust's SFOs must disclose to the Compliance Officer any actual or apparent conflicts of interest the SFO may have with the Trust that reasonably could be expected to give rise to any violations of this Code. Such conflicts of interest may arise as a result of material transactions or business or personal relationships to which the SFO may be a party. If it is not possible to disclose the matter to the Compliance Officer, it should be disclosed to the Trust's Chief Financial Officer, Chief Executive Officer or another appropriate person. In addition to disclosing any actual or apparent conflicts of interest in which an SFO is personally involved, the Trust's SFOs have an obligation to report any other actual or apparent conflicts which they discover or of which they otherwise become aware. If you are unsure whether a particular fact pattern gives rise to a conflict of interest, or whether a particular transaction or relationship is "material," you should bring the matter to the attention of the Compliance Officer. 3. Standards for quality of information shared with service providers of the Trust. The Trust's SFOs must at all times seek to provide information to the Trust's service providers (adviser, administrator, outside auditor, outside counsel, custodian, etc.) that is accurate, complete, objective, relevant, timely, and understandable. 4. Standards for quality of information included in periodic reports. The Trust's SFOs must at all times endeavor to ensure full, fair, timely, accurate, and understandable disclosure in the Trust's periodic reports. 5. Compliance with laws. The Trust's SFOs must comply with the federal securities laws and other laws and rules applicable to the Trust, such as the Internal Revenue Code of 1986, as amended. 6. Standard of care. The Trust's SFOs must at all times act in good faith and with due care, competence and diligence, without misrepresenting material facts or allowing your independent judgment to be subordinated. The Trust's SFOs must conduct the affairs of the Trust in a responsible manner, consistent with this Code. 7. Confidentiality of information. The Trust's SFOs must respect and protect the confidentiality of information acquired in the course of their professional duties, except when authorized by the Trust to disclose it or where disclosure is otherwise legally mandated. You may not use confidential information acquired in the course of your work for personal advantage. 8. Sharing of information and educational standards. The Trust's SFOs should share information with relevant parties to keep them informed of the business affairs of the Trust, as appropriate, and maintain skills important and relevant to the Trust's needs. 9. Promote ethical conduct. The Trust's SFOs should at all times proactively promote ethical behavior among peers in your work environment. 10. Standards for recordkeeping. The Trust's SFOs must at all times endeavor to ensure that the Trust's financial books and records are thoroughly and accurately maintained to the best of their knowledge in a manner consistent with applicable laws and this Code. V. Waivers of this Code You may request a waiver of a provision of this Code by submitting your request in writing to the Compliance Officer for appropriate review. For example, if a family member works for a service provider that prepares the Trust's financial statements, you may have a potential conflict of interest in reviewing those statements and should seek a waiver of this Code to review the work. An executive officer of the Trust, or another appropriate person (such as a designated Board or Audit Committee member), will decide whether to grant a waiver. All waivers of the Code must be disclosed to the Trust's shareholders to the extent required by SEC rules. VI. Affirmation of the Code Upon adoption of the Code, the Trust's SFOs must affirm in writing that they have received, read and understand the Code, and annually thereafter must affirm that they have complied with the requirements of the Code. To the extent necessary, the Trust's Compliance Officer will provide guidance on the conduct required by this Code and the manner in which violations or suspected violations must be reported and waivers must be requested. VII. Reporting Violations In the event that an SFO discovers or, in good faith, suspects a violation of this Code, the SFO must immediately report the violation or suspected violation to the Compliance Officer. The Compliance Officer may, in his or her discretion, consult with another member of the Trust's senior management or the Board in determining how to address the suspected violation. For example, a Code violation may occur when a periodic report or financial statement of the Trust omits a material fact, or is technically accurate but, in the view of the SFO, is written in a way that obscures its meaning. SFOs who report violations or suspected violations in good faith will not be subject to retaliation of any kind. Reported violations will be investigated and addressed promptly and will be treated as confidential to the extent possible. VIII. Violations of the Code Dishonest or unethical conduct or conduct that is illegal will constitute a violation of this Code, regardless of whether this Code specifically refers to such particular conduct. A violation of this Code may result in disciplinary action, up to and including removal as an SFO of the Trust. A variety of laws apply to the Trust and its operations, including the Securities Act of 1933, the Investment Company Act of 1940, state laws relating to duties owed by Trust officers, and criminal laws. The Trust will report any suspected criminal violations to the appropriate authorities, and will investigate, address and report, as appropriate, non-criminal violations. -----END PRIVACY-ENHANCED MESSAGE-----