RPAR Risk Parity ETF

Ticker: RPAR

UPAR Ultra Risk Parity ETF

Ticker: UPAR

Annual Report

December 31, 2022

RPAR Risk Parity ETF and UPAR Ultra Risk Parity ETF

most markets WERE down IN 2022 DUE TO MATERIAL TIGHTENING

The downturn in 2022 was very different from a typical market selloff, where stocks fall and bonds rally as economic growth weakens. Last year, virtually all asset classes underperformed because the Federal Reserve (the “Fed”) embarked on the most aggressive tightening in four decades to fight inflation, raising rates by 4.25% in only 9 months.

A material tightening versus expectations poses a headwind for all assets because all assets compete with the risk-free rate. When that rate goes from 0% to 4.25%, investors are no longer willing to earn 1.5% on Treasuries or a 4% earnings yield on equities when they can do better holding cash with no risk. As a result, all assets repriced lower to offer higher expected returns (higher yields) going forward, which helps assets remain competitive with the now-higher cash yield (the risk-free rate). That is why stocks, bonds, and other asset classes all experienced major declines at the same time.

risk parity WAS DOWN DURING THE TIGHTENING AND HAS BOUNCED BACK SINCE

Risk parity is an asset-allocation strategy that seeks to balance to growth and inflation surprises by investing in assets that perform well in different growth and inflation environments. This is in contrast to a traditional 60/40 portfolio that is typically biased to underperform during inflationary periods (both stocks and bonds underperformed cash in the 1970s) and during periods of weak growth (stocks lost money during the entire first decade of the 2000s).

The RPAR Risk Parity ETF (“RPAR”) and UPAR Ultra Risk Parity ETF (“UPAR”) (together the “Funds”), each a risk parity ETF, were down -28.45% (-28.48% NAV) and -37.08% (-37.53% NAV), respectively from Q1 to Q3 2022.¹ This is because diversification does not typically work well during a material tightening as all assets experience downward pressure at the same time. Such environments are generally rare and short-lived because capitalism requires that assets outperform cash over time – attractive returns are needed to incentivize productive investment. Once inflation began to moderate and expectations of tightening eased around the end of the third quarter, markets began to rally.

The table below shows a breakdown of risk parity performance by asset class in 2022, first from Q1 to Q3 2022 (“Tightening”) and then for Q4 2022 (“Post-Tightening”). All asset classes were down through Q3 as discussed, but commodity producer equities held up reasonably well because of the spike in energy prices.

Since October 2022, all assets have recovered, as weaker inflation has led markets to expect less tightening than they had initially feared – in fact, markets now expect the Fed to ease in 2023. As the expected risk-free rate retraced, higher-yielding assets suddenly looked quite attractive, and prices rose. This is the opposite of what happened in the Tightening. As a result, RPAR gained 7.92% during the fourth quarter (and UPAR gained 10.76%).²

Note: Asset class returns are based on actual performance earned in the RPAR Risk Parity ETF. Source: The Fund’s market price returns were reported by US Bank and asset class performance were provided by Toroso Investments, LLC, 12/31/21 – 12/31/22. Please see corresponding footnotes and disclosures for reference.

¹The UPAR Ultra Risk Parity ETF (UPAR) market price return reflects the period from the fund’s inception date (1/03/2022) through 9/30/2022. The RPAR Risk Parity ETF (RPAR) market price return reflects the first three quarters of 2022 (12/31/21 – 9/30/22). Source: US Bank.

²Source: Toroso Investments, LLC, 9/30/22 – 12/31/22.

³The Funds’ market price returns were reported by US Bank and asset class performance were provided by Toroso Investments, LLC, 12/31/21 – 12/31/22.

RPAR Risk Parity ETF and UPAR Ultra Risk Parity ETF

Note: Asset class returns are based on actual performance earned in the UPAR Ultra Risk Parity ETF. Source: The Fund’s market price returns were reported by US Bank and asset class performance were provided by Toroso Investments, LLC, (UPAR Inception: 1/03/22 through 12/31/22). Please see corresponding footnotes and disclosures for reference.

Note that risk parity may also underperform during a period of panic/crisis when investors broadly sell assets to move to cash. Diversification does not generally work well in these brief periods because everything falls at the same time (similar to a material tightening). This occurred over about two weeks in March 2020 at the onset of the pandemic, when RPAR fell about 20% (quickly recovering to end the month down only 6%).

THE TIGHTENING IN 2022 IS NOT UNPRECEDENTED: THE EARLY 1980s VOLCKER ANALOGUE

The aggressive tightening environment we experienced during the first three quarters of 2022 is similar to the tightening that occurred in the early 1980s under Fed Chairman Paul Volcker. Like today, inflation was elevated, and the Volcker Fed tightened policy aggressively to bring it under control. The charts below show the estimated increase in real expected short-term interest rates⁴ due to the tightening and corresponding asset-class performance. As you can see, the expected real rate rose over 8% from trough to peak (1980-82). All asset classes performed poorly during this large unexpected tightening and rebounded when tightening expectations finally eased. Note that below we show excess returns (above the risk-free rate) to facilitate comparison with the current period, as cash rates started at 8% back then and 0% today.

All data is sourced from Bloomberg as of 12/31/22. Asset class returns reflect performance for the indices and inception dates listed and do not represent returns earned in the Funds. Global Equities: MSCI World Index (BB: NDDUWI, Jan. 1970) | Treasuries: Bloomberg Barclays Long Treasury Index (BB: LUTLTRUU, Feb. 1973) | Commodities: Bloomberg Commodity Total Return Index (BB: BCOMTR, Feb. 1960 | Physical Gold: the change in spot price of gold (BB: XAU, Jan. 1970). Please see corresponding footnotes and disclosures for reference.

RPAR Risk Parity ETF and UPAR Ultra Risk Parity ETF

The impact of tightening on performance in the Volcker era is very similar to what we experienced last year, as you can see in the charts below. The expected real short-term interest rate rose ~5% from peak to trough, as Jerome Powell’s Fed (“Powell”) raised rates. Most asset classes performed poorly through Q3 but began to rebound in Q4 after tightening expectations peaked.

All data is sourced from Bloomberg as of 12/31/22. Asset class returns reflect performance for the indices and inception dates listed and do not represent returns earned in the Funds. Global Equities: MSCI World Index (BB: NDDUWI, Jan. 1970) | Treasuries: Bloomberg Barclays Long Treasury Index (BB: LUTLTRUU, Feb. 1973) | TIPS: Merrill Lynch 15+ Year Inflation-Linked Bond Index (BB: G8QI, May 1998 | Commodity Producers: Commodity Producers: Morningstar Global Upstream Natural Resources Index (BB: MUNRT, Jan. 2000) | Physical Gold: the change in spot price of gold (BB: XAU, Jan. 1970). Please see corresponding footnotes and disclosures for reference.

We believe significant tightening has already been priced in and what will really matter from this point forward will be (a) whether the Fed raises rates more or less than expected and (b) how growth and inflation unfold. Additionally, we believe forward-looking returns have increased as the expected returns across asset classes now incorporate a higher risk-free rate. This is clearest today in bonds that currently offer much higher yields.

PERFORMANCE UPDATE

The table below summarizes the returns of the Funds as well as their underlying asset classes as of December 31, 2022.

Note: Asset class returns are based on actual performance earned in the RPAR Risk Parity ETF. Source: The Funds’ market price and NAV returns were reported by US Bank and asset class performance were provided by Toroso Investments, LLC as of 12/31/22. Please see corresponding footnotes and disclosures for reference.

Note: Asset class returns are based on actual performance earned in the RPAR Risk Parity ETF. Source: The Funds’ market price and NAV returns were reported by US Bank and asset class performance were provided by Toroso Investments, LLC as of 12/31/22. Please see corresponding footnotes and disclosures for reference.

THE NEED FOR GOOD BALANCE LOOKING AHEAD

Economic growth and inflation are highly uncertain looking ahead. There is a wide range of potential outcomes with a heightened risk of extreme outcomes. The 60/40 portfolio is essentially a bet that the Fed achieves a “soft landing,” bringing inflation down while maintaining growth. But if a recession results or inflation stays elevated, the 60/40 portfolio may underperform. Given these risks, we believe it is prudent to be well-balanced across asset classes biased to outperform during different growth and inflation environments. In addition, as mentioned, we believe that the long-term expected return of a risk parity portfolio is materially higher now than a year ago due to a significantly higher risk-free rate.

Please contact your financial advisor or one of our shareholder associates at (833) 540-0039 with any questions. You may also visit our website at www.rparetf.com or reach us via email at info@rparetf.com.

Important Information

Before investing you should carefully consider the Funds’ investment objectives, risks, charges and expenses. Please read each prospectus carefully before you invest.

Past performance does not guarantee future results.

A fund’s NAV is the sum of all its assets less any liabilities, divided by the number of shares outstanding. The market price is the most recent price at which the fund was traded.

Risk parity is a portfolio allocation strategy using risk to determine allocations across various components of an investment portfolio. As with all ETFs, fund shares may be bought and sold in the secondary market at market prices. The market price normally should approximate a fund’s net asset value per share (NAV), but the market price sometimes may be higher or lower than the NAV. The Funds are newer with a limited operating history. There are a limited number of financial institutions authorized to buy and sell shares directly with the Funds; and there may be a limited number of other liquidity providers in the marketplace. There is no assurance that Funds’ shares will trade at any volume, or at all, on any stock exchange. Low trading activity may result in shares trading at a material discount to NAV.

A Fund’s exposure to investments in physical commodities may fluctuate rapidly and subjects a Fund to greater volatility than investments in traditional securities, such as stocks and bonds. Interest payments on TIPS are unpredictable and will fluctuate as the principal and corresponding interest payments are adjusted for inflation. Equity securities, such as common stocks, are subject to market, economic and business risks that may cause their prices to fluctuate. The Funds invest in foreign and emerging market securities which involves certain risks such as currency volatility, political and social instability and reduced market liquidity. The Funds may invest in securities issued by the U.S. government or its agencies or instrumentalities. There can be no guarantee that the United States will be able to meet its payment obligations with respect to such securities.

Shares of the Funds are distributed by Foreside Fund Services, LLC. Foreside is not affiliated with Toroso, US Bank, or RPAR, LLC.

Index Definitions

Global Equities: The MSCI World Index (BB: NDDUWI) reflects the performance of large and mid cap representation across 23 developed markets countries. Wit more than 1,600 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

Treasuries: The Bloomberg Barclays US Long Treasury Index (BB: LUTLTRUU) measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury with 10 years or more to maturity.

The Bloomberg Barclays US Aggregate Bond Index (BB: LBUSTRUU) is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).

Intermediate-Term Government Bond returns as reported by the 2016 Roger G. Ibbotson SBBI Yearbook (Stocks, Bonds, Bills and Inflation), U.S. Capital Markets Performance by Asset Class 1926-2015. Appendix A-10: Intermediate-term Government Bonds: Total Returns. Published by John Wiley & Sons, Inc. Hoboken, NJ, 2016.

RPAR Risk Parity ETF and UPAR Ultra Risk Parity ETF

RPAR ETFs

TIPS. Treasury Inflation-Protected Securities (TIPS) are a type of Treasury security issued by the U.S. government that are indexed to inflation in order to protect investors from a decline in the purchasing power of money. The Bank of America Merrill Lynch 15+ Year US Inflation-Linked Treasury Index (BB: G8QI) is an unmanaged index comprised of U.S. Treasury Inflation Protected Securities with at least $1 billion in outstanding face value and a remaining term to final maturity greater than or equal to 15 years.

Commodities: The Bloomberg Commodity Index Total Return (BB: BCOMTR) provides a broad-based exposure to commodities, and no single commodity or commodity sector dominates the index. The index is not driven by micro-economic events affecting one commodity market or sector, rather the diversified commodity exposure of Bloomberg Commodity Index represents the aggregate commodity market.

Commodity Producers: The Morningstar Global Upstream Natural Resources Index (BB: MUNRT) reflects the performance of a selection of equity securities that are traded in or are issued by companies domiciled in global developed or emerging markets (including the U.S.). The companies included in the index have significant business operations in the ownership, management and/or production of natural resources in energy, agriculture, precious or industrial metals, timber and water resources sectors.

Gold: Reflects the percent change in the spot price of gold (BB: XAU).

RPAR Risk Parity ETF

This chart illustrates the performance of a hypothetical $10,000 investment made on December 12, 2019 (commencement of operations), and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The returns reflect fee waivers in effect for the “NAV” returns. In the absence of such waivers, total returns would be reduced. The chart assumes reinvestment of capital gains, dividends, and return of capital, if applicable, for a fund and dividends for an index.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (833) 540-0039. The Fund’s gross expense ratio is 0.53% and net expense ratio is 0.51% (as of the Fund’s most recently filed prospectus dated March 30, 2022). The Fund’s investment adviser has agreed to waive a portion of its management fees for the Fund through at least April 30, 2023.

UPAR Ultra Risk Parity ETF

This chart illustrates the performance of a hypothetical $10,000 investment made on January 3, 2022 (commencement of operations), and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The returns reflect fee waivers in effect for the “NAV” return. In the absence of such waivers, total return would be reduced. The chart assumes reinvestment of capital gains, dividends, and return of capital, if applicable, for a fund and dividends for an index.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (833) 540-0039. The Fund’s gross expense ratio is 0.68% and net expense ratio is 0.65% (as of the Fund’s most recently filed prospectus dated December 29, 2021). The Fund’s investment adviser has agreed to waive a portion of its management fees for the Fund through at least April 30, 2023.

RPAR Risk Parity ETF

⁽¹⁾Percentages are based on total investments, including derivative contracts.

⁽²⁾Represents the notional amount of the futures contracts.

⁽³⁾Represents short-term investments and investments purchased with collateral from securities lending less liabilities in excess of assets.

UPAR Ultra Risk Parity ETF

⁽¹⁾Percentages are based on total investments, including derivative contracts.

⁽²⁾Represents the notional amount of the futures contracts.

⁽³⁾Represents short-term investments plus assets in excess of liabilities.

RPAR Risk Parity ETF

RPAR Risk Parity ETF

RPAR Risk Parity ETF

UPAR Ultra Risk Parity ETF

UPAR Ultra Risk Parity ETF

UPAR Ultra Risk Parity ETF