SP Funds S&P 500 Sharia Industry Exclusions ETF
Ticker: SPUS

SP Funds Dow Jones Global Sukuk ETF
Ticker: SPSK

SP Funds S&P Global REIT Sharia ETF
Ticker: SPRE

Annual Report

November 30, 2021

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The Sharia ETF

Dear Shareholders,

The SP Funds S&P 500 Sharia Industry Exclusions ETF (SPUS) (the “Sharia ETF”), a faith-based, broad market equity fund, was launched on December 18, 2019, with a view to providing a broad exposure to Sharia-compliant U.S. stocks. The Sharia ETF seeks to track the performance of the S&P 500 Shariah Industry Exclusions Index, which is a subset of the S&P 500^® Index (the “S&P 500”). The Sharia ETF offers high-income potential with a dividend yield for the period of 0.96% while offering a good relative defensive characteristic and a strong growth profile.

The Sharia investing style uses negative screening against companies which are engaged in socially injurious activities like alcohol, gambling, interest or weapons. The Sharia ETF also filters out the companies with higher leverage. Generally, higher leverage is used to counter agency problems in the companies with governance issues, which when screened out, results in constituents having relatively better corporate governance. The companies with higher carbon emissions, including oil and gas and utilities related companies are capital intensive and are also filtered out by Sharia screens.

The S&P 500 gained 27.92% for the one-year period ended November 30, 2021. The Dow Jones Industrial Average (DJIA) gained 16.35%, while the Nasdaq Composite gained 27.37% for the same period. The year 2021 was defined by only one correction in a bull market which remained intact. The S&P 500 surged almost 28% in the year from November 30, 2020. The S&P 500 fell 6.5% in a three-week span in September—nearly qualifying as a market correction—before once again rallying into the end of the year. The Sharia ETF performed well in this strange year under a variety of different market conditions, finishing the calendar year with a 30.14% gain, outperforming the S&P 500 by 6.96%. The Sharia ETF gained 35.40% for the fiscal year ended November 30, 2021, compared to 27.92% for the S&P 500 for the same period. Time and again, investors brushed off news that could have derailed stocks in years past. In fact, the S&P 500 notched 70 all-time highs in 2021, a record that is second only to 1995. The market recovery was bedraggled by inflation, widespread supply chain issues and increasing swoon on potential tapering. The Sharia ETF’s lower exposure to highly leveraged companies, higher exposure to the balance sheet and the business quality helped it to outperform the broader market, hence living up to its capital preservation objective.

Even ignoring the pandemic, inflation and rising interest rate environment for a moment, 2021’s stock market defied expectations. The S&P 500 is up more than strategists forecasted this time last year (they called for an increase of about 5%), and it is even having a better year than its historical average (about 10%). The Sharia ETF benefitted from higher exposure to the Real Estate, Information Technology, Health Care and Communications sectors. But under weights in the Financials, Energy and Consumer Cyclicals sectors relative to the S&P 500 detracted from performance. The quality and growth factors performed very well for the fiscal year which may have packed the whole business cycle in it. One of the big takeaways from this year, after the worst of the pandemic became apparent, was the concept of resilience.

In roughly one year, the Sharia ETF’s assets under management more than tripled from $38.82 million to over $123.43 million as of November 30, 2021. Importantly, the Sharia ETF’s assets grew consistently through the market turmoil in the Q3 of year, which we believe demonstrates investor confidence in its resilience.

The Sharia ETF has enjoyed widespread industry recognition early in its life. The Sharia ETF is the only Sharia-compliant, broad market U.S. equities fund in the market and is among handful of all the Sharia-compliant equity ETFs. It has received strong reviews from industry pundits as published in financial media.

FY 2021 Recap

Mark Twain once said, “History doesn’t repeat itself, but it often rhymes”. Year 2021 was a unique investing year, similar to year 2020 which was a year of surprises. Given that both the economic expansion and bull market were only a matter of months old when 2021 began, it is remarkable that the S&P 500 closed at 23.18% for the period ended November 30, 2021. As for the year that was—it was, posting a broad 27.92% gain), and 434 issuers gained for the year, as 96 gained over 50% and 7 declined at least 25%. All 11 sectors posted double-digit gains (7 gained last year, with 5 in the double digits). COVID-19 continued to dominate the news. But it was spending inside, especially via e-commerce, that permitted record earnings, sales, and margins for the S&P 500, as consumer wealth shot up (via equities and home ownership, as well as lower spending), and confinement seemed to boost spending. Also supporting the economy was a friendly Federal Reserve, which kept rates near zero. While the supply shortage is expected to ease, labor shortages (or “displacements”—the new term that has emerged) may be harder to resolve. Telecommuting has also added to the labor change, as it started growing pre-COVID-19 and is now in full swing, with most offices still more empty than full. Still, optimism prevails, as money flowed into the market (which

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helps to keep nervous money managers in), and the S&P 500 posted new closing highs (70 for the S&P 500 in 2021, ranking second only to 1995’s 77).

A new breed of day traders kicked off 2021 with a novel speculative mania. Fueled by a desire to upend the status quo and also turn a profit, amateur investors used social media to drive up shares of companies that hedge fund professionals were shorting. In January alone, video game retailer GameStop (GME) gained as much as 1,700% and AMC Entertainment Holdings (AMC) surged more than 800%. While speculative fervor may have cooled and dynamics within the market shifted, investors had reason to remain optimistic because of the very robust economic recovery. The total market capitalization of the cryptocurrency market tripled during the year. You can see the lack of passion in the fact that fewer stocks were participating in the market’s gains in the back half of the year. While the early months of 2021 saw upwards of 90% of constituents in the S&P 500 trading above their 200-day average, that fell below 60% as the year wore on. In early December, just five stocks—Microsoft (MSFT), Google (GOOG), Apple (AAPL), Nvidia (NVDA) and Tesla (TSLA)—accounted for 51% of the S&P 500’s return since April. Higher inflation, and concerns about how that might derail economic growth and the stock market, was one of the biggest stories of 2021. The year ended with the Consumer Price Index (CPI) rising at the fastest clip on an annual basis since the early 1980s.

The story of the stock market in 2021 would not be complete without mention of the Federal Reserve. What made 2020 and 2021 so strong was the recovery from a macro perspective and a really, really strong push from a policy perspective. Throughout 2021, the Fed kept interest rates near zero and continued pumping billions of dollars into markets each month—measures that encouraged investors to seek out higher-returning assets, like stocks, and contributed to higher inflation. But investors are keenly aware that the Fed’s support will inevitably end. As the Fed eases up its support, investors will once again focus more on whether the fundamentals that drive stock prices—the pace of economic growth and corporate earnings—can support another year of double-digit gains.

Past performance does not guarantee future results.

Looking Ahead

We remain cautiously bullish about the economic outlook. There likely will be two distinct phases to the path forward. The first, over the next few months, appears challenging. Omicron infections are exploding across the country and leading to partial, localized lockdowns again. These lockdowns are a far cry from April 2020 when 95% of Americans were under stay-at-home orders, but the measures should slow the pace of positive economic performance into year-end. The post-vaccine period should deliver real GDP growth in the excess of 5% in 2022 (according to Factset). While that would be slower than the growth seen past year, it would still be better than the sub-3% expansions seen in recent years before the pandemic.

This leaves us slightly cautious on the near-term outlook, but moderately positive for the medium-term with expensive valuation offset by the positive cycle outlook. The consensus from strategists is the year end 2022 target of 5,000 for the broad market benchmark S&P 500, which implies a 7% gain for the year. This view is underpinned by aggregate earnings per share for the companies in the S&P 500 will come in at $233 in 2022. The baseline view among analysts tracked by FactSet is that the figure will be $220. That outperformance, if it happens, would mark a continuation of a trend that has benefited investors recently. In the third quarter, S&P 500 earnings per share (EPS) was about 10% higher than analysts estimated. While that was less than the beats of above 20% seen in prior quarters, it shows that

¹https://finance.yahoo.com/quote/%5EGSPC/chart?p=%5EGSPC

²https://finance.yahoo.com/quote/DX=F?p=DX=F&.tsrc=fin-srch

³https://finance.yahoo.com/quote/GC=F?p=GC=F&.tsrc=fin-srch

⁴https://www.bloomberg.com/quote/BUC1STAT:IND

⁵https://finance.yahoo.com/quote/TIP?p=TIP&.tsrc=fin-srch

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Wall Street continues to underestimate companies’ abilities to generate profits. Analysts are known for making conservative estimates, especially when there is a surge in demand like the one seen in the post-lockdown era.

We have a positive medium-term outlook for economies and corporate earnings. Corporate earnings are forecast to be in the range of the aggregate EPS of $233 for 2022. It would be about 6% higher than the aggregate analyst estimate, and according to Credit Suisse data going back to 2016, companies often beat earnings expectations by about 6%. That is all good for stocks, but one risk to this call on the S&P 500 is that valuations seem a little high. This forecast implies that the S&P 500’s aggregate 2022 earnings multiple—the value of all the stocks in the index relative to total per-share profits—should be 21.5 times. That is where the figure is now, but many see valuations coming down because bond yields could easily head higher.

The 10-year Treasury yield, at 1.68%, is still negative in real terms. It is well below long-term inflation expectations, a rarity historically. Morgan Stanley strategists have forecast a forward earnings multiple of 18, given the risk of higher bond yields. That would make a 7% gain on the S&P 500 very difficult unless earnings rose spectacularly. But Jefferies counters that argument, at least for the near term. “As long as the US Breakeven inflation curve remains inverted [negative real yield], equities will have some room for multiples to expand.” The idea that is if real returns on Treasury debt are negative, investors will still have ample reason to put money into stocks.

Equity markets can often navigate rising bond yields if the reason is better prospects for economic growth, but a rise in the excess of 50 basis points may provide a test. Technology stocks received a large boost to valuation from lower discount rates. The large tech stocks make up around 25% of the S&P 500 capitalization. A bond market led reversal in tech stocks could stall the overall market even if the remaining 75% of the S&P 500 makes post-pandemic gains. Vaccines should allow dislocated sectors to bounce back strongly in the second half of 2022. However, there is a lot of uncertainty about stocks like hotels, which were languishing even before the advent of COVID-19, as the names like Airbnb acted as disruptors. The Sharia ETF excluding some of these names in Sharia screening, will remain beneficial for its performance in 2022. The banks are considered pro-cyclical and by conventional logic an expansion should be positive for banks. The Fed’s focus on generating an inflation overshoot will leave plenty of runway for the expansion to strengthen and broaden. This may benefit real assets, including real estate, commodities and related sectors. We feel that the stocks included in the technology sector has been substituting the stocks in other sectors which were in other sectors like transportation, industrials etc., and in fact has been providing similar economic function. This will call for a potential rotation within the Technology sector from COVID-19 leaders like Zoom and Slack to the companies in Industrial Automation, 5G and electric vehicles. This may provide an added boon to expected performance of the Sharia ETF in the year 2022.

We thank you for the assets you have entrusted with us and deeply value our relationship. For any questions about the Sharia ETF please contact your financial advisor or one of our shareholder associates. You may also visit our website at www.spfunds.com or reach us via email at [email protected].

SP Funds

The Sukuk ETF

Dear Shareholders,

The SP Funds Dow Jones Global Sukuk ETF (the “Sukuk ETF”), a faith-based, fixed income fund, was launched on December 27, 2019, with a view to providing a broad exposure to global sukuks, which are the contracts designed to be Sharia-compliant. The Sukuk ETF seeks to track the performance of the Dow Jones Sukuk Total Return (ex-Reinvestment) Index, which is a diversified mix of sukuks from emerging market sovereigns, corporations and supranational agencies. The Sukuk ETF, though mandated to be investment grade, has an average rating of its constituents at A. It offers a high-income potential with a dividend yield for the period of 2.55%, while offering potential capital preservation relative to similar rated US treasuries. In the last six calendar months of 2021, the expected rise in longer-maturity U.S. Treasury yields created a bear market for interest rates and led to challenging conditions across fixed income. Credit spreads remained rich by historical measures. This was a broadly negative year for bonds, and we expect the volatility to continue. The long end of yield curves across developed markets significantly steepened this past quarter, creating a bear market for interest rates. In the U.S., the yield on the 10-year Treasury note increased more than 30 basis points in the fourth quarter and more than 100 basis points since the first quarter of last year. Although the yield declined somewhat in June 2021, it still remained elevated. Credit spreads remained historically tight, and inflation concerns are high. We see a moderately higher yield and steeper curve versus the current consensus. We do not believe this will result in a replay of the 2013 “taper tantrum.”

Sukuk issuance in 2021 stood at $252 billion, up from $167 billion for the same period last year, according to the “2021 Sukuk Perceptions and Forecast Study” by Refinitiv. Sukuk issuance waned during Q3 after record quarterly issuance in the previous quarter, yet the momentum remained strong. The global secondary sukuk market reached $699 billion in value outstanding in Q3 2021, having grown strongly over the past five years, fueled by the surge in sukuk issuance during the period. Looking ahead, the report projects that sukuk issuance will grow by 10 percent annually over the next five years, reaching $290 billion in 2026. This continued growth in issuance is expected to catch up with the demand for sukuk investment from institutional investors, gradually narrowing the supply-demand gap in the sukuk market from $178 billion in 2021 to $120 billion by 2026.

Central banks, governments, and multilateral institutions dominated sukuk issuances. Local-currency sukuk amounted to 80% of sukuk issuance, while hard-currency issuance amounted to 20%. Some 41.2% of all sukuk issued last year were in Indonesian rupiah, followed by U.S. dollar (19.4%), Malaysian ringgit (16.4%), Saudi riyal (13.5%), and Turkish lira (5%). The sukuk market also witnessed increased activity from sovereigns of non-core Islamic finance jurisdictions. The UK government returned to the market with a £500 million sukuk issuance, seven years after its debut issuance in 2014. Maldives issued its debut sovereign sukuk in the international sukuk market, raising $200 million.

Since inception (December 17, 2019) through the fiscal year ended November 30, 2021, the Sukuk ETF delivered a return of 1.40% (NAV) 1.44% (Market), compared to 4.29% for its index and 2.26% for the Bloomberg Barclays Global Aggregate Bond Index.

The Sukuk ETF enjoyed widespread industry recognition early in its life. ETF.com awarded the Sukuk ETF as the Best New International/Global Fixed Income ETF – 2019⁶. GIFA Islamic Social Finance Award 2020 shortly followed by naming the Sukuk ETF as the “Most Innovative Sukuk Product” of the year in 2020⁷. In roughly one year, the Sukuk ETF’s assets under management increased from $31.12 million at November 30, 2020 to $37.54 million as of November 30, 2021. Importantly, the Sukuk ETF’s assets grew consistently through the market turmoil earlier in the year, which we believe demonstrates investor confidence in its resilience. Based on both quantitative and qualitative factors, we can proudly report that the Sukuk ETF overcame the multitude of market hurdles it faced. Strong performance, substantial asset growth and industry recognition highlight the Sukuk ETF’s accomplishments in this year.

2021 Recap

For the past two years, a set of shared assumptions between market participants and policy makers helped create a somewhat benign investment environment. Inflation would be “transitory,” allowing for a prolonged period of accommodative low rates and stable rate expectations. Ample monetary liquidity would be supplied providing a tailwind for markets to continue to climb. China would answer any domestic slowdown with stimulus, helping to keep global growth on track.

Now, these key assumptions and relationships are in question. The final destination of transitory inflation remains in flux, casting central bank policy into tightening mode in some geographies and uncertainty in the U.S. and Europe. Unprecedented amounts of liquidity

⁶https://www.etf.com/sections/features-and-news/2019-etfcom-award-winners?nopaging=1

⁷https://gifaawards.com/winners.php

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are starting to slowly drain from the financial system, creating risks for market participants that have been reaching for yield. China’s reluctance to inject stimulus into its flagging economy may create waves in global growth projections.

It has not exactly been smooth sailing for fixed income investors in 2021. Bond yields have ridden waves of optimism and pessimism about the economy for most of the year. The faster-than-expected reopening of the economy from COVID-19 shutdowns early in the year led to a surge in yields during the first quarter, only to be followed by a plunge in the summer as virus cases rebounded. By the end of the year, short-term yields have moved up to the highest levels since early 2020 in anticipation of tighter monetary policy, but 10-year Treasury yields have fallen back from the 1.70% level reached in October despite soaring inflation.

The Sukuk ETF yielded total annual return of -0.73% for the fiscal year ended November 30, 2021. Market pricing has pulled forward expectations for future rate hikes, which are running well ahead of the Federal Reserve’s forward guidance. As per market expectation, the market saw the first rate hike in the fourth quarter of 2022 and as many as three hikes in 2023. However, dot plot registered an upward shift in its slope. After a modest move higher in yields, the rates remained more range-bound for 2021. The Fed remained accommodative in 2021 but inflation risks are skewed to the upside.

Both emerging markets (“EM”) rates and currencies markets performed poorly in response to higher U.S. Treasury yields. EM central banks pivoted toward tighter monetary policy, with Brazil’s, Turkey and Russia’s central banks raising interest rates as a response to high inflation. EM bonds may face challenges over the short-term. Idiosyncratic opportunities are present across the quality spectrum and that the long-term attributes of the asset class remain compelling, especially as oil price improvement may result in spread compression in Middle East sovereign spreads. We continue to view overall credit risk of the Sukuk ETF as attractive.

Past performance does not guarantee future results.

Looking Ahead

Throughout 2020/2021, high-yield emerging market bond spreads remained elevated. There has been enormous liquidity supply from central banks to maintain low yields and to compensate any lack of demand. As current debt levels are historically high, a path to tapering stimulus is even narrower than in 2018. Consequently, rates volatility should remain elevated. We see more rough waters ahead in 2022 but also more potential opportunities for bond investors looking for income. Yields will likely move higher for all maturities with more volatility as the support from easy monetary policy ebbs. The yield curve could go through bouts of steepening from time to time, but the long-term trend is likely to be a “bear flattener,” where yields rise but the difference between short- and long-term yields narrows. The high end of the benchmark 10-year Treasury yield may reach in the 1.75% to 2.00% range.

The one trend that we believe is clear for 2022 is that the ultra-loose monetary policies pursued by central banks since the onset of the pandemic are ending. Policy rates have already begun to rise in major emerging market countries in response to rising inflation and steep currency declines. Among the developed markets, Norway and New Zealand have raised rates, while Canada recently ended its bond buying program. Whether the pace is fast or slow, the overall trend is towards “less easy” monetary policy around the globe. Less easy money circulating should mean higher interest rates and a decline in the relative value of risk assets. A low estimate of this “terminal rate” suggests investors do not believe economic growth will be strong enough on a sustained basis to warrant a policy rate much above 2% in this cycle, which is slightly lower than the previous cyclical peak in 2019 and far below the 5.25% levels seen in 2006.

⁸https://am.jpmorgan.com/us/en/asset-management/adv/products/jpmorgan-u-s-aggregate-bond-etf-etf-shares-46641q241#/performance 

⁹https://finance.yahoo.com/quote/00695B.TWO?p=00695B.TWO 

¹⁰https: https://finance.yahoo.com/quote/00695B.TWO?p=00695B.TWO //finance.yahoo.com/quote/DX-Y.NYB?p=DX-Y.NYB&.tsrc=fin-srch

¹¹https://www.bloomberg.com/quote/BUC1STAT:IND

¹²https://finance.yahoo.com/quote/TIP?p=TIP&.tsrc=fin-srch 

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Currently, inflation expectations have risen, but mostly for shorter time horizons. Since the September Federal Open Market Committee (FOMC) meeting, breakeven rates in the Treasury Inflation-Protected Securities (TIPS) market have spiked up for one- and two-year maturities relative to long-term maturities. On the employment outlook, there is still a significant gap to be filled to recover to pre-pandemic levels. It is estimated that 10-year Treasury yields could rise as high as the 1.75% to 2.00% region. Despite setbacks due to supply constraints for many goods, the drivers of economic growth—consumer spending and business investment—look poised to stay firm. Consumers have high levels of assets, the job market is strong, and wages are rising. Corporations have record amounts of liquid assets, and strong earnings, which should fuel investment and hiring. Banks are flush with cash to lend, and fiscal policy is likely to contribute to growth, as well. Financial conditions—the ease with which companies and individuals can obtain funds—are very easy. Historically, when conditions are very loose economic growth is above trend in the following twelve months.

Similarly, the yields may close the gap with inflation expectations. Real yields have been negative since the onset of the pandemic. Widening credit spreads is another likely outcome of declining liquidity in markets. While there may be periods when the yield curve steepens, long-term demand for low-risk bonds remains strong. Aging populations around the globe are driving up savings and the demand for safe yields. Pension funds, insurance companies, and other long-term investors should continue to invest in long-term government bonds to offset their liabilities. Over the past few years, the dollar’s strength has resulted in underperformance by international developed country bonds. Relative interest rate differentials still look supportive to the U.S. bond market, but if global economic cycles and policy rates become more synchronized, the outlook could change.

Compared with a year ago, many of the uncertainties in the world economy have dissipated. Still, longer-term low growth and inflation mean that the environment remains difficult for fixed income investments with narrow spreads. There are opportunities for yield, such as subordinated bonds or emerging market debt in hard currency, along with some corporate credit, compared with sovereign debt yields. Once the 10-year US Treasury note rises closer to 2%, we think it will be time to start building longer duration positions like the Sukuk ETF. Looking forward, we expect such an environment to be favorable for the Sukuk ETF because of its diversification with exposure to assets that are biased to outperform during the expected economic outcomes. Such a balanced mix potentially allows the Sukuk ETF to preserve capital in severe market downturns and participate in stronger market periods (as has been the case in 2020 and 2021). Lot of investors may be questioning the value of including fixed income investments in their portfolios. We disagree with those who suggest abandoning fixed income, especially in exchange for more exotic—and usually more expensive—alternatives. We believe fixed income can still provide diversification against equity risk in your clients’ portfolios.

We thank you for the assets you have entrusted with us and deeply value our relationship. For any questions about the Sukuk ETF please contact your financial advisor or one of our shareholder associates. You may also visit our website at www.spfunds.com or reach us via email at [email protected].

SP Funds

The Global REIT ETF

Dear Shareholders,

The SP Funds S&P Global REIT Sharia ETF (the “Global REIT ETF”), a faith-based, high income real estate investment trust (“REIT”) fund, was launched on December 29, 2020, with a view to providing a broad exposure to global REITs, which are designed to be Sharia-compliant. The Global REIT ETF seeks to track the performance of the S&P Global All Equity REIT Sharia Capped Index, which is a diversified mix of REITs from developed and emerging markets. The Global REIT ETF is diversified in terms of different real estate sectors and contains technology and Tower REITs. It offers a high-income potential, while offering a potential capital preservation relative to the broad market.

U.S. REITs saw the deepest loss for the major asset classes in 2020 but reversed back strongly in 2021. Some of the commercial properties including Mall, Hotel and the Office REITs, suffered because of pandemic blues. The MSCI U.S. REIT Index shed 7.6% last year, even after factoring in the sector’s relatively rich distributions. A substantial number of REITS were trading below their NAVs on January 1, 2021. That set the stage for the REITs to outperform the broader market in 2021. Strong performance for real estate asset classes was the fuel that drove investors to plow money into REITs at an unprecedented clip. By many measures, investor enthusiasm at the end of 2020 was unlike anything seen in years and marked a sharp turnaround from the pessimism and despair seen at the start of the coronavirus pandemic in March. By November 30, 2021, the Global REIT ETF’s assets under management increased from $1 million at the end of 2020 to over $23.07 million. Importantly, the Global REIT ETF’s assets grew consistently through the REIT underperformance earlier in the year, which we believe demonstrates investor confidence in its resilience. The Global REIT ETF has enjoyed widespread industry recognition early in its life¹³, as this was the only Sharia-compliant REIT ETF available globally.

FY 2021 Recap

Cheered by the record levels of stimulus and improving economic activity, commercial real estate markets staged a breathtaking recovery, retracing the majority of losses experienced during the last year. This boosted the returns of real assets across the board. Thanks to central bank rate cuts, asset purchases, and special facilities, returns for all types of commercial real estate were positive in 2021. However emerging markets assets lagged the performance of developed market REITs as the emerging market rental yields widened in 2021. Since the Global REIT ETF invests across global markets, it was helped by the improvement in the real assets sentiment.

The Global REIT ETF achieved gains in every single month of 2021. The Global REIT ETF (30.35%) outperformed the S&P 500^® Index (23.18%). Corrections and Health Care REITs had the lowest average returns in 2021. Hotels rose more than twice as much as any other property type by November. 12 out of 18 Hotel REITs saw single digit share price declines, but those declines were more than offset by the magnitude of gains for the top performers. Malls, Shopping Centers and Hotels were the hardest hit during the pandemic and government-imposed lockdowns, but led the reopening recovery as they bounced back from extremely depressed share prices. Corrections remained the only REIT property type in the red after the end of year (November 30, 2021). 95% of REIT property types averaged a positive return year, with 90% achieving a double-digit gain.

Dividend yield is an important component of a REIT’s total return. The particularly high dividend yields of the REIT sector are, for many investors, the primary reason for investment in this sector. The large cap REIT premium (relative to small cap REITs) significantly increased during 2019 and further expanded during 2020. However, it narrowed at the start of 2021. Investors are now paying on average about 54% more for each dollar of 2021 funds from operations (FFO)/share to buy large cap REITs than small cap REITs.

Past performance does not guarantee future results.

¹³https://www.etf.com/sections/features-and-news/2019-etfcom-award-winners?nopaging=1

¹⁴https://www.reit.com/data-research/reit-indexes/monthly-index-values-returns

¹⁵https://www.reit.com/data-research/reit-indexes/monthly-index-values-returns

¹⁶https://www.reit.com/data-research/reit-indexes/monthly-index-values-returns

¹⁷https://www.spglobal.com/spdji/en/indices/equity/sp-global-reit/#data

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Looking Ahead

According to the National Association of Real Estate Investment Trusts’ (Nareit) annual outlook for REITs and commercial real estate, REITs entered the pandemic with historically strong balance sheets. With vaccine coverage boosting all sectors, commercial real estate is also likely to face a boost thereby pushing REIT earnings growth throughout 2022.

Lodging/resorts and retail property markets have stabilized, but are unlikely to see significant improvement until travel volumes and shopping patterns get much closer to pre-pandemic patterns. Senior housing properties within the health care sector have experienced a drop in occupancy due to a hesitancy to move in during the pandemic, and higher costs for personnel, PPE, and cleaning supplies. Demand for apartments rebounded quickly in Q1 2022 with falling vacancy rates and an acceleration in rent growth across most metro areas. The underlying assets of REITs will rise in value due to inflation, protecting investors in a way that bonds or other non-appreciating assets can. REITs present both an attractive yield and a great hedge against inflation and thus are well positioned to outperform over this and next year. Looking forward, we expect such an environment to be favorable for the Global REIT ETF because of its diversification with exposure to assets that are biased to outperform during the expected economic outcomes. Such a balanced mix potentially allows the Global REIT ETF to preserve capital in severe market downturns and participate in stronger market periods (as has been the case in 2020/2021).

We thank you for the assets you have entrusted with us and deeply value our relationship. For any questions about the Global REIT ETF please contact your financial advisor or one of our shareholder associates. You may also visit our website at www.spfunds.com or reach us via email at [email protected].

SP Funds

Past performance does not guarantee future results.

Before investing you should carefully consider the Funds’ investment objectives, risks, charges and expenses. This and other information is in the prospectus. A prospectus may be obtained by visiting www.sp-funds.com. Please read the prospectus carefully before you invest.

Opinions expressed are subject to change at any time, are not guaranteed and should not be considered investment advice. Past performance is no indication of future results. Triple-digit or high double-digit performance is attributable, in part, to unusually favorable market conditions and may not be repeated or consistently achieved in the future. Performance, especially for short time periods, should not be the sole factor in making your investment decisions.

As with all ETFs, Fund shares may be bought and sold in the secondary market at market prices. The market price normally should approximate each Fund’s net asset value per share (NAV), but the market price sometimes may be higher or lower than the NAV. Each Fund is newer with a limited operating history.

Islamic religious law commonly known as Sharia has certain restrictions regarding finance and commercial activities permitted for Muslims, including interest restrictions and prohibited industries, which reduces the size of the overall universe in which each Fund can invest. The strategy to reduce the investable universe may limit investment opportunities and adversely affect each Fund’s performance, especially in comparison to a more diversified fund.

Equity securities, such as common stocks, are subject to market, economic and business risks that may cause their prices to fluctuate.

Investments in foreign securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets.

Sukuk are financial certificates that are similar to conventional bonds but are structured to comply with Sharia law and its investments principles, which, among other things, prohibit charging or paying interest. Because no collateral is pledged as security for sukuk, purchasers of sukuk are subject to the risk that an issuer may not meet its payment obligations or that an underlying asset may not perform as expected or lose value. There may be times when the market is illiquid and it is difficult for the Sukuk ETF to make an investment in or dispose of sukuk.

A real estate investment trust (REIT) is a security of a company that invests in real estate, either through real estate property, mortgages and similar real estate investments, or all of the foregoing. The REIT ETF is expected to be concentrated in REITs. Through its investments in REITs, the Fund is subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters.

The Dow Jones Sukuk Total Return (ex-Reinvestment) is designed to track the performance of global Islamic fixed income securities, also known as sukuk. The index measures an investment (excluding reinvestment) in U.S. dollar-denominated, investment-grade sukuk that have been screened for Shariah compliance.

J.P. Morgan Global Aggregate Bond Index consists of the JPM GABI US, a U.S. dollar denominated, investment-grade index spanning asset classes from developed to emerging markets, and the JPM GABI extends the U.S. index to also include multi-currency, investment-grade instruments.

The S&P 500^® index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S.

The Bloomberg Barclays US Corporate 1-5 Years Bond Index measures the investment grade, fixed-rate, taxable corporate bond market with one to five years left to maturity. It includes USD-denominated securities publicly issued by US and non-US industrial, utility, and financial issuers.

The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.’s most significant trading partners. This index is similar to other trade-weighted indexes, which also use the exchange rates from the same major currencies.

The S&P Global REIT serves as a comprehensive benchmark of publicly traded equity REITs listed in both developed and emerging markets.

SP Funds

The MSCI US REIT Index is a free float-adjusted market capitalization weighted index that is comprised of equity Real Estate Investment Trusts (REITs). The index is based on the MSCI USA Investable Market Index (IMI), its parent index, which captures the large, mid and small cap segments of the USA market.

The FTSE Nareit Real Estate 50 Index is a headline index that consists of the largest 50 eligible REITs from the FTSE Nareit Composite Index, ranked by market capitalization.

The FTSE Nareit All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. equity REITs. Constituents of the index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property.

The S&P 500^® Shariah Industry Exclusions Index is designed to measure the constituents of the S&P 500^® Shariah, excluding companies within certain GICS^® sub-industries.

The Dow Jones Industrial Average, also known as the Dow 30, is a stock market index that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock Exchange (NYSE) and the Nasdaq.

The Nasdaq Composite Index is the market capitalization-weighted index of over 3,000 common equities listed on the Nasdaq stock exchange.

Indexes are unmanaged and cannot be invested in directly. Although index returns were gathered from reliable sources, the Fund cannot guarantee their accuracy or completeness.

Shares of the Funds are distributed by Foreside Fund Services, LLC.

Sharia ETF

This chart illustrates the performance of a hypothetical $10,000 investment made on December 17, 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 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 (425) 409-9500. The Fund’s expense ratio is 0.49% (as of the Fund’s most recently filed Prospectus dated March 31, 2021).

Sukuk ETF

This chart illustrates the performance of a hypothetical $10,000 investment made on December 27, 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 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 (425) 409-9500. The Fund’s expense ratio from December 27, 2019 through November 29, 2021 was 0.65% and, effective November 30, 2021, the Fund’s expense ratio was reduced to 0.59% (as of the Fund’s most recently filed Prospectus dated March 31, 2021, as supplemented).

Global REIT ETF

This chart illustrates the performance of a hypothetical $10,000 investment made on December 29, 2020 (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 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 (425) 409-9500. The Fund’s expense ratio is 0.69% (as of the Fund’s most recently filed Prospectus dated December 27, 2020).

SP Funds

⁽¹⁾Represents cash, short-term investments and other assets in excess of liabilities.

Sharia ETF

Sharia ETF

Sharia ETF

Sharia ETF

Sukuk ETF