ETFis Series Trust I

 

INFRACAP REIT PREFERRED ETF

VIRTUS INFRACAP U.S. PREFERRED STOCK ETF

VIRTUS LIFESCI BIOTECH CLINICAL TRIALS ETF

VIRTUS LIFESCI BIOTECH PRODUCTS ETF

VIRTUS NEWFLEET MULTI-SECTOR BOND ETF

VIRTUS PRIVATE CREDIT STRATEGY ETF

VIRTUS REAL ASSET INCOME ETF

Virtus WMC International Dividend ETF

INFRACAP MLP ETF

Table of Contents

 

Shareholder Letter (unaudited)

December 2023

Dear Shareholder:

On behalf of Virtus ETF Advisers LLC (the “Adviser”), I am pleased to present the shareholder report for the ETFis Series Trust I (the “Trust”) for the annual fiscal period ended October 31, 2023.

The Adviser is part of Virtus Investment Partners, a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors.

The report provides financial statements and portfolio information for the following funds within the Trust:

•InfraCap REIT Preferred ETF (PFFR)

•Virtus InfraCap U.S. Preferred Stock ETF (PFFA)

•Virtus LifeSci Biotech Clinical Trials ETF (BBC)

•Virtus LifeSci Biotech Products ETF (BBP)

•Virtus Newfleet Multi-Sector Bond ETF (NFLT)

•Virtus Private Credit Strategy ETF (VPC)

•Virtus Real Asset Income ETF (VRAI)

•Virtus WMC International Dividend ETF (VWID)

•InfraCap MLP ETF (AMZA)

On behalf of the Adviser and our fund Sub-Advisers, thank you for your investment. If you have questions, please contact your financial adviser, or call 1-888-383-0553. For more information about the funds and the other ETFs we offer, we invite you to visit our website, www.virtusetfs.com.

Sincerely,

William Smalley

President

ETFis Series Trust I

This material must be accompanied or preceded by the prospectus.

Management’s Discussion of Fund Performance (unaudited)

October 31, 2023

InfraCap REIT Preferred ETF (PFFR)

Management’s Discussion of Operations

Overview

The InfraCap REIT Preferred ETF (the “Fund”) seeks investment results that correspond, before fees and expenses, to the price and yield performance of an index composed of preferred shares listed on U.S. Exchanges and issued by Real Estate Investment Trusts (“REITs”), as represented by the Indxx REIT Preferred Stock Index (the “Index”). Although the Fund generally intends to replicate the component securities of the Index, the Fund may utilize a representative sampling strategy when a replication strategy might be detrimental to shareholders. The Fund may invest in a representative sample of securities included in the Index that collectively has a profile similar to the Index. If the Fund uses a representative sampling strategy, the Fund may or may not own all of the securities that are included in the Index.

Market Update

In the fiscal year ended October 31, 2023, the Fund’s total return based on market price was 8.59%, while the Index returned 8.50% during the same period. During the period, office and real estate usage increased as business activity increased from the prior periods which were impacted by the Covid-19 pandemic. Fixed and equity income investments were subject to volatility as many investors allocated to government issued bonds or money market funds at higher-than-average interest rates. Select segments of the US stock market performed well over the period such as emerging technologies (i.e., Artificial Intelligence stocks such as Nvidia) and large cap technology stocks. Global economies continued to reopen and reduce social distancing measures. The banking crisis in early 2023 caused equities and fixed income securities to sell off as investors reduce margin or risk in their portfolio. We noticed dislocations across preferred instrument types and parity preferred issues of the same issuer. Rates on 10-year and 30-year U.S. Treasury bonds increased, which put pressure on lower yielding income investments. However, near the end of the period, positive employment and economic data supported the viewpoint that the Federal Reserve would potentially pause its rate hike cycle and could cut rates in 2024.

Two of the strongest contributors to the Fund during the period were preferred securities of Hersha Hospitality Trust (“Hersha”) and DigitalBridge Group Inc. (“Digital”). Hersha is a self-advised real estate investment trust in the hospitality sector, which owns and operates luxury and lifestyle hotels in urban gateway and regional resort markets. Hersha’s 24 hotels are located in New York, Washington, DC, Boston, Philadelphia, South Florida, and California. Digital is a global REIT that owns, operates and invests across the full spectrum of digital infrastructure and real estate including cell towers, data centers, fiber, small cells and edge infrastructure. During the period, Hersha D and Digital I were up 44.68% and 19.18%, respectively.

Two of the Fund’s detractors during the period were preferred securities of Hudson Pacific Properties Inc (“Hudson”) and Global Net Lease Inc (“Global”). Hudson is a real estate investment trust with a focus on serving technology and media clients through office buildings, sound stages, and undeveloped rights to commercial property. Global is a publicly-traded real estate investment trust focused on acquiring a global portfolio of commercial properties, with an emphasis on sale-leaseback transactions involving single tenant, mission critical income producing net-leased assets across the United States and Western and Northern Europe. Global’s D, and Hudson C, were down 13.88% and 9.55%, respectively.

Preferred shares are fixed income securities, and prices are influenced by changes in long-term interest rates. During the fiscal year, the yield on the 30-year U.S. Treasury bond continued to rise which we believe is a result of a strong US economy and labor market.

Dividend Payment

In the fiscal year ended October 31, 2023, the Fund made monthly dividend payments in the amount of $0.12 per share. While the Fund plans to continue paying monthly dividends, dividends are not guaranteed. The Fund seeks to maintain relatively stable monthly distributions although the amount of income earned by the Fund varies from period to period. To achieve this objective, the Fund may distribute less than the full amount of income earned during a specific period, preserving income for distribution in future periods. Consequently, the amount of income distributed in any one period may be more or less than the actual amount of income earned in that period.

Outlook

We believe REIT preferred securities continue to offer an attractive way to access current market dislocations. Despite inflation concerns and pressures on select REIT sub-sectors, we believe investors can benefit from market rotations by investing in REIT preferreds. Given uncertainties in commercial REITs, particularly in specific subsegments, some investors may understandably exhibit hesitancy towards common equity investments. Investor hesitancy has spread to the preferred equity units as well, with certain REIT preferreds experiencing selloffs that we believe are not warranted. In our view, this presents an opportunity for investors to allocate to the preferred equity in REITs and take advantage of market dislocations. As interest rates rise from historically low levels, investors may still have difficulty finding higher yielding opportunities. Thus, we believe preferred securities will continue to offer attractive yields and investors can still access REIT preferreds at discounted prices.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

InfraCap REIT Preferred ETF (continued)

Credit quality ratings on underlying securities of the Fund are received from S&P, Moody’s, and Fitch and converted to the equivalent S&P major rating category. This breakdown is provided by Infrastructure Capital Advisors, LLC and takes the median rating of the three agencies when all three agencies rate a security, the lower of the two ratings if only two agencies rate a security, and one rating if that is all that is provided. Unrated securities do not necessarily indicate low quality. A credit rating below investment-grade is represented by a rating of BB and below. Ratings and portfolio credit quality may change over time. This discussion includes information based on data and calculations sourced from Bloomberg and index constituents. While we believe that the data is reliable, we have not sought, nor have we received, permission from any third-party to include their information.

The preceding information is the opinion of the investment adviser and sub-adviser. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Statements of fact are from sources considered reliable, but the investment adviser and sub-adviser make no representation or warranty as to their completeness or accuracy. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

Performance as of 10/31/2023

 

1The Indxx REIT Preferred Stock Index is a market cap weighted index designed to provide diversified exposure to high yielding liquid preferred securities issued by Real Estate Investment Trusts listed in the U.S. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

2February 7, 2017.

Performance data quoted represents past performance and past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. Returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. For the most current month-end performance data please visit www.virtusetfs.com or call toll free (800) 243-4361. Market price returns are based on the mid-point of the highest bid and lowest offer for Fund shares as of the scheduled close of regular trading on the New York Stock Exchange Arca (“NYSE”), ordinarily 4:00 p.m. Eastern time, on each day during which the NYSE is open for trading, and do not represent the returns an investor would receive if shares were traded at other times.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

InfraCap REIT Preferred ETF (continued)

Preferred Stocks: Preferred stocks may decline in price, fail to pay dividends, or be illiquid.

Real Estate Investments: The Fund may be negatively affected by factors specific to the real estate market, including interest rates, leverage, property, and management.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Interest Rate Risk: The value of preferred securities will generally vary inversely with the direction of prevailing interest rates such that, generally, when interest rates rise, the value of preferred securities can be expected to decline.

Non-Diversified: The Fund is non-diversified and may be more susceptible to factors negatively impacting its holdings to the extent that each security represents a larger portion of the Fund’s assets.

Passive Strategy/Index Risk: A passive investment strategy seeking to track the performance of the Underlying Index may result in the fund holding securities regardless of market conditions or their current or projected performance. This could cause the Fund’s returns to be lower than if the Fund employed an active strategy.

Correlation to Index: The performance of the Fund and its index may vary somewhat due to factors such as Fund flows, transaction costs, and timing differences associated with additions to and deletions from its index.

Market Volatility: Securities in the Fund may go up or down in response to the prospects of individual companies and general economic conditions. Price changes may be short or long term.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Market Price/NAV: Shares of ETFs often trade at a discount to their net asset value, which may increase investors’ risk of loss. At the time of sale, an investor’s shares may have a market price that is above or below the Fund’s NAV.

No Guarantee: There is no guarantee that the Fund will meet its objective.

Prospectus: For additional information on risks, please see the Fund’s prospectus. The Fund may not be suitable for all investors.

Value of a $10,000 Investment Since Inception at Net Asset Value

The chart above represents historical performance of a hypothetical investment of $10,000 over the life of the Fund, assuming reinvestment of distributions. Past performance does not guarantee future results.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus InfraCap U.S. Preferred Stock ETF (PFFA)

Management’s Discussion of Operations

Overview

Virtus InfraCap U.S. Preferred Stock ETF (the “Fund”) seeks to provide current income and, secondarily, capital appreciation through an actively-managed portfolio of high quality U.S. preferred stocks. Callable preferred securities exhibiting a low or negative yield to call are generally excluded from the portfolio. The Fund may utilize options strategies and modest leverage to seek to enhance income and total return.

Market Update

In the twelve months ending October 31, 2023, the Fund’s total return based on market price was 8.96%. The Fund’s benchmark index, the S&P U.S. Preferred Stock Index, returned 1.60% during the same period.

We believed that active managers could seek total return and high current income over the period by considering instances when: (1) floating preferreds trade in-line with their fixed rate preferred parity issues, (2) fixed-to-floating preferreds are converting in the near future at higher coupon rates, and (3) management may be encouraged to call these floating preferreds at par value when interest rates are high.

For the fiscal year ended October 31, 2023, the Federal Reserve aggressively increased interest rates, pressures from inflation remained uncertain. While fixed and equity income investments were subject to volatility as many investors allocated to government issued bonds or money market funds at higher-than-average interest rates. We noticed dislocations across preferred instrument types and parity preferred issues of the same issuer and looked to position the portfolio to benefit from these dislocations. Rates on 10-year and 30-year U.S. Treasury bonds increased, which put pressure on lower yielding income investments. However, near the end of the period, positive employment and economic data supported the viewpoint that the Federal Reserve would potentially pause its rate hike cycle and could cut rates in 2024.

During the period, two of the Fund’s strongest contributors during the period were preferred securities of SCE Trust III, Series H (“SCE H”) and NuStar Energy LP (“NS”). Over the period SCE H continued to benefit from California’s investment in cleaner forms of energy, led by California’s economy-wide electrification goals. NuStar Energy is one of the largest independent liquids terminal and pipeline operators in the United States. NuStar continued to optimize their business expenses and benefited from refined product demand.

SCE H preferred stock benefited as its dividend rate appears that it will likely expand after its scheduled fixed-to-floating conversion in March of 2024. At that point, these preferred shares will also become callable at $25.00 per share. NS redeemed the Series D preferred units (NS PRB) in September 2023, which resulted in Fitch Ratings providing NS an upgraded credit rating by one notch to ‘BB’ and S&P Global upgrading the outlook for NS from ‘stable’ to ‘positive’. During the period, SCE H and NS PRB were up 36.47% and 32.32%, respectively.

Two of the Fund’s weaker contributors during the period were preferred securities of Telephone and Data Systems Inc (“Telephone”) and Global Net Lease, Inc. (“Global”). Telephone is a Fortune 1000 company that provides wireless products and services; cable and wireline broadband, TV and voice services; and hosted and managed services to approximately 6 million customers in the United States. Global is a publicly traded real estate investment trust focused on acquiring a global portfolio of commercial properties, with an emphasis on sale-leaseback transactions involving single tenant, mission critical income producing net-leased assets across the United States, Western and Northern Europe. Telephone’s TDS V, and Global’s GNL A were down, 18.78% and 14.87%, respectively.

The Fund’s portfolio composition emphasizes issuers that own long-lived assets that generate free cash flow. Overweight in REITs, Pipelines and Industrials companies positively contributed to Fund performance during the period. In addition, significant underweighting in financial companies, relative to the Fund’s benchmark, positively contributed to the Fund’s outperformance during the period.

Approximately 51% of the Fund’s total assets were floating or fixed-to-floating rate preferred stocks at fiscal year-end. This compares to about 32.8% for the benchmark index at fiscal year-end. These securities have a fixed rate coupon at issue but become a floating rate security after a specified period of time, typically five or ten years after issuance. This structure provides investors with some protection from a rising interest rate environment while offering a higher current yield than that available on securities with coupon rates that float currently. During the period, this overweighting positively contributed to Fund performance.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus InfraCap U.S. Preferred Stock ETF (continued)

Distribution Payments

In the fiscal year ended October 31, 2023, the Fund made distribution payments in the amount of $0.1625 per share in November and December of 2022, while paying monthly distribution payments in 2023 of $0.1650 per share for the remainder the fiscal year.

The Fund’s distribution policy is reviewed on an annual basis with the expectation that the announced distribution rate can be sustained for a period of 12 – 24 months. The Fund’s targeted distribution is expected to be covered by its investment company taxable income (which includes ordinary income and long and short-term capital gains less expenses). For the purpose of calculating income available for distribution, some cash payments from REITs or MLPs treated as Return of Capital for tax or GAAP purposes may be included. Expenses include an 80 basis point advisory fee, leverage costs, and other miscellaneous fees.

The Fund seeks to maintain relatively stable monthly distributions although the amount of income earned by the Fund varies from period-to-period. To achieve this objective, the Fund may distribute less than the full amount of income earned during a specific period to preserve income for distribution in future periods. Consequently, the amount of income distributed in any one period may be more or less than the actual amount of income earned in that period.

The Fund’s current 30-day SEC yield was 11.48% as of fiscal year end. The Fund’s distribution rate as of fiscal year end was 10.50%.

Use of Leverage

The Fund may use leverage as described in its prospectus. The Fund’s use of leverage positively contributed to Fund performance during the period.

The Fund’s cost of borrowing increased during the fiscal year. The Fund entered into Lending Agreements (each, an “Agreement”) with commercial banks (the “Banks”) that allow the Fund to borrow cash from the Banks. Borrowings under the Agreements are collateralized by investments in the Funds. If a Fund defaults with respect to any of its obligations under the Agreement, the Banks may foreclose on assets of the Fund and/or the Fund may be required to repay immediately, in part or in full, the loan balance outstanding under the Agreement, necessitating the sale of securities at potentially inopportune times. Interest is charged at the OBFR (Overnight Bank Funding Rate) plus an additional percentage rate on the amount borrowed. Each Agreement has an on-demand commitment term. As of October 31, 2023, the current cost is daily OBFR plus 1.10%, which resets daily.

Use of Options

As described in the prospectus, the Fund may utilize options strategies to seek to boost the amount of income available to distribute to shareholders. The primary activity is covered call writing, which is focused on a small number of common stocks and ETFs owned by the Fund. However, due to limited use of options during the fiscal year, the option activity did not impact on the Fund’s performance.

Outlook

We believe that there continue to be opportunities for active managers to select preferred stocks that are inefficiently priced. By managing: instrument type (i.e., fixed or fixed-to-floating or floating), security duration, credit considerations at the company or security level, sector allocations, corporate actions, liquidity, and concentrations, we seek to optimize the portfolio over time. We place special emphasis on maximizing the Fund’s yield-to-call and believe that avoiding issues that are callable and trading at prices above the call price will assist in achieving that result. We believe many preferred stock investors, including passive funds, may inadvertently ignore the risk of owning issues with a negative yield-to-call.

We generally focus on adding fixed-to-floating exposure to seek total return and high current income by arbitraging gaps that emerge when: (1) floating preferreds trade in-line with their fixed rate preferred parity issues, (2) fixed-to-floating preferreds are converting in the near future at higher coupon rates, and (3) management is encouraged to call these floating preferreds at par value when interest rates are high.

We expect the market’s uncertainty surrounding the duration and magnitude of rising inflation to be a continued leading theme for the forthcoming fiscal year. We have seen the divergence of performance based on credit ratings as lower-rated, higher-yielding credits have outperformed on correlation to equity markets and higher-rated, lower-yielding credits underperformed on correlation to treasury yields.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus InfraCap U.S. Preferred Stock ETF (continued)

We believe that high-yield preferred stocks will continue to trade higher under these market conditions, and we look to opportunistically add new issues to maintain an above-average yield-to-call versus the benchmark.

The preceding information is the opinion of the investment adviser and sub-adviser. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Statements of fact are from sources considered reliable, but the investment adviser and sub-adviser make no representation or warranty as to their completeness or accuracy. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized. This discussion includes information based on data and calculations sourced from Bloomberg and index constituents. While we believe that the data is reliable, we have not sought, nor have we received, permission from any third-party to include their information.

Performance as of 10/31/2023

 

1The S&P U.S. Preferred Stock Index measures performance of the U.S. preferred stock market. Preferred stocks pay dividends at a specified rate and receive preference over common stocks in terms of dividend payments and liquidation of assets. The index is calculated on a total return basis with dividend reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

2May 15, 2018.

Performance data quoted represents past performance and past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. Returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. For the most current month-end performance data please visit www.virtusetfs.com or call toll free (800) 243-4361. Market price returns are based on the mid-point of the highest bid and lowest offer for Fund shares as of the scheduled close of regular trading on the New York Stock Exchange Arca (“NYSE”), ordinarily 4:00 p.m. Eastern time, on each day during which the NYSE is open for trading, and do not represent the returns an investor would receive if shares were traded at other times.

Preferred Stocks: Preferred stocks may decline in price, fail to pay dividends, or be illiquid.

Derivatives: Investments in derivatives such as futures, options, forwards, and swaps may increase volatility or cause a loss greater than the principal investment.

Leverage: When a fund leverages its portfolio, the value of its shares may be more volatile and all other risks may be compounded.

Non-Diversified: The Fund is non-diversified and may be more susceptible to factors negatively impacting its holdings to the extent that each security represents a larger portion of the Fund’s assets.

Sector Focus: To the extent the Fund has significant exposure to one or more sectors, this may make the Fund particularly susceptible to adverse economic, political or regulatory occurrences and changes affecting companies in those sectors.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Market Price/NAV: Shares of ETFs often trade at a discount to their net asset value, which may increase investors’ risk of loss. At the time of sale, an investor’s shares may have a market price that is above or below the Fund’s NAV.

No Guarantee: There is no guarantee that the Fund will meet its objective.

Prospectus: For additional information on risks, please see the Fund’s prospectus. The Fund may not be suitable for all investors.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus InfraCap U.S. Preferred Stock ETF (continued)

Value of a $10,000 Investment Since Inception at Net Asset Value

The chart above represents historical performance of a hypothetical investment of $10,000 over the life of the Fund, assuming reinvestment of distributions. Past performance does not guarantee future results.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus LifeSci Biotech Clinical Trials ETF (BBC)

The Virtus LifeSci Biotech Clinical Trials ETF (the “Fund”) seeks to track the investment results, before fees and expenses, of the LifeSci Biotechnology Clinical Trials Index (the Index), which is composed of U.S.-listed biotechnology stocks with a lead drug in the clinical trial stage of development.

For the fiscal year ended October 31, 2023, the Fund’s total return based on market price was -30.92%. The Fund’s total return based on net asset value was -31.01%. The Index returned -31.81% during the same period.

A top contributor to the Fund’s performance for the fiscal year was Madrigal Pharmaceuticals, Inc. (“Madrigal”), which engages in the development and commercialization of innovative therapeutic candidates for the treatment of cardiovascular, metabolic, and liver diseases. Madrigal’s lead product, MGL-3196, is used for the treatment of non-alcoholic steatohepatitis and familial hypercholesterolemia.

Prometheus Biosciences was acquired by Merck during the period for $200 per share in cash, which contributed to the stock’s strong performance. The transaction was announced on April 16, 2023 and completed on June 20, 2023. The acquisition gives Merck access to therapeutics and diagnostics for inflammatory bowel diseases.

Another top performer was Structure Therapeutics, Inc. (“Structure”), a clinical stage global biopharmaceutical company. Structure is engaged in developing novel oral therapeutics to treat a wide range of chronic diseases with unmet medical needs.

Positive contributors for the 12-month period also included Immunovant, Inc. and TG Therapeutics, Inc.

A top detractor from Fund performance for the fiscal year was Fate Therapeutics, Inc. which engages in the development of programmed cellular immunotherapies for cancer and immune disorders. The company’s pipeline of products includes therapies to repair and regenerate body tissues with the help of stem cells.

Design Therapeutics, Inc. (“Design”) also underperformed during the period. Design operates as a biotechnology company that develops therapies for serious degenerative disorders. The company was created to design, develop and commercialize a novel class of small molecule therapeutic candidates (GeneTACs) that seek to directly address the underlying basis of genetic disease.

Seres Therapeutics, Inc. (“Seres”) detracted from Fund returns during the fiscal year. The company focuses on developing biological drugs, which are designed to restore health by repairing the function of a dysbiotic microbiome. Seres also conducts research on metabolic diseases.

Other top detractors for the 12 months included Amyris and PMV Pharmaceuticals, Inc. Amyris was sold during the reporting period.

The preceding information is the opinion of the investment adviser. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Statements of fact are from sources considered reliable, but the investment adviser makes no representation or warranty as to their completeness or accuracy. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

Performance as of 10/31/2023

 

1 The LifeSci Biotechnology Clinical Trials Index is designed to track the performance of U.S.-listed biotechnology stocks with a lead drug in the clinical trial stage of development, typically a Phase 1, Phase 2 or Phase 3 trial, but prior to receiving marketing approval. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

2 The S&P 500^® Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

3December 16, 2014.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus LifeSci Biotech Clinical Trials ETF (continued)

Performance data quoted represents past performance and past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. Returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. For the most current month-end performance data please visit www.virtusetfs.com or call toll free (800) 243-4361. Market price returns are based on the mid-point of the highest bid and lowest offer for Fund shares as of the scheduled close of regular trading on the New York Stock Exchange Arca (“NYSE”), ordinarily 4:00 p.m. Eastern time, on each day during which the NYSE is open for trading, and do not represent the returns an investor would receive if shares were traded at other times.

Biotechnology Industry Risk: The Fund’s assets will be concentrated in investments in the securities of issuers engaged primarily in the biotechnology industry. Companies within the biotechnology industry spend heavily on research and development, which may not necessarily lead to commercially successful products in the near or long term. In order to fund operations, these companies may require financing from the capital markets, which may not always be available on satisfactory terms or at all. The biotechnology industry is also subject to significant governmental regulation, and the need for governmental approvals, including, without limitation, FDA approval. The securities of biotechnology companies, especially those of smaller or newer companies, tend to be more volatile than those of companies with larger capitalizations or markets generally.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Correlation to Index: The performance of the Fund and its index may vary somewhat due to factors such as Fund flows, transaction costs, and timing differences associated with additions to and deletions from its index.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Market Price/NAV: Shares of ETFs often trade at a discount to their net asset value, which may increase investors’ risk of loss. At the time of sale, an investor’s shares may have a market price that is above or below the Fund’s NAV.

No Guarantee: There is no guarantee that the Fund will meet its objective.

Prospectus: For additional information on risks, please see the Fund’s prospectus. The Fund may not be suitable for all investors.

Value of a $10,000 Investment Since Inception at Net Asset Value

The chart above represents historical performance of a hypothetical investment of $10,000 over the life of the Fund, assuming reinvestment of distributions. Past performance does not guarantee future results.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

​Virtus LifeSci Biotech Products ETF (BBP)

The Virtus LifeSci Biotech Products ETF (the “Fund”) seeks to track the investment results, before fees and expenses, of the LifeSci Biotechnology Products Index (the Index), which is composed of U.S.-listed biotechnology stocks with at least one drug therapy approved by the U.S. Food & Drug Administration (FDA) for marketing.

For the fiscal year ended October 31, 2023, the Fund’s total return based on market price was -0.14%. The Fund’s total return based on net asset value was -0.09%. The Index returned 0.78% for the same period.

Mergers & acquisitions (M&A) were a significant driver of the performance of mid- to large-cap biotechnology stocks during the fiscal year, while higher interest rates weighed on small- to mid-cap companies. A top performer for the Fund was ImmunoGen, Inc. (“ImmunoGen”), which develops anticancer therapeutics using its Targeted Antibody Payload (TAP) technology, and has expertise in monoclonal antibodies and tumor biology. ImmunoGen’s shares rose significantly after releasing top-line data from a Phase 3 confirmatory Mirasol trial of the drug, Elahere, for the treatment of ovarian cancer.

Provention Bio was acquired by Sanofi for $25 per share in a transaction that was announced on March 13, 2023, and completed on April 28, 2023. We believe the acquisition is a strategic fit for Sanofi at the intersection of the company’s growth in immune-mediated diseases and disease-modifying therapies in areas of high unmet need, along with its expertise in diabetes treatments.

Another top performer for the fiscal year was Axsome Therapeutics, Inc., which operates as a biopharmaceutical company and focuses on developing therapies for pain, neurological disorders, and other central nervous system conditions.

Other top contributors to the Fund’s performance included Bridgebio Pharma, Inc. and Reata Pharmaceuticals. Reata Pharmaceuticals was sold during the reporting period.

A detractor from Fund performance for the 12-month period was Enanta Pharmaceuticals, Inc., a biotechnology company that engages in the discovery and development of small molecule drugs for the treatment of viral infections and liver diseases.

The Fund’s position in Nektar Therapeutics was sold in the second quarter of 2023, after the company no longer met the market capitalization requirement to be included in the Index. Nektar is a research-based biopharmaceutical company that engages in discovering and developing medicines in areas of unmet medical need.

Travere Therapeutics, Inc. (“Travere”), a biopharmaceutical company, also detracted from Fund performance during the fiscal year. Travere engages in the identification, development, commercialization, and distribution of therapies to people living with rare diseases. We believe the Travere stock underperformed due to a failed Phase 3 study on kidney scarring as well as disappointing results from a late-stage trial for the company’s Filspari drug.

BioCryst Pharmaceuticals, Inc. and 2seventy bio, Inc. also detracted from performance during the fiscal year.

The preceding information is the opinion of the investment adviser. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Statements of fact are from sources considered reliable, but the investment adviser makes no representation or warranty as to their completeness or accuracy. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

Performance as of 10/31/2023

 

1 The LifeSci Biotechnology Products Index is designed to track the performance of U.S.-listed biotechnology stocks with at least one drug therapy approved by the FDA for marketing. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

2 The S&P 500^® Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

3December 16, 2014.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus LifeSci Biotech Products ETF (continued)

Performance data quoted represents past performance and past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. Returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. For the most current month-end performance data please visit www.virtusetfs.com or call toll free (800) 243-4361. Market price returns are based on the mid-point of the highest bid and lowest offer for Fund shares as of the scheduled close of regular trading on the New York Stock Exchange Arca (“NYSE”), ordinarily 4:00 p.m. Eastern time, on each day during which the NYSE is open for trading, and do not represent the returns an investor would receive if shares were traded at other times.

Biotechnology Industry Risk: The Fund’s assets will be concentrated in investments in the securities of issuers engaged primarily in the biotechnology industry. Companies within the biotechnology industry spend heavily on research and development, which may not necessarily lead to commercially successful products in the near or long term. In order to fund operations, these companies may require financing from the capital markets, which may not always be available on satisfactory terms or at all. The biotechnology industry is also subject to significant governmental regulation, and the need for governmental approvals, including, without limitation, FDA approval. The securities of biotechnology companies, especially those of smaller or newer companies, tend to be more volatile than those of companies with larger capitalizations or markets generally.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Correlation to Index: The performance of the Fund and its index may vary somewhat due to factors such as Fund flows, transaction costs, and timing differences associated with additions to and deletions from its index.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Market Price/NAV: Shares of ETFs often trade at a discount to their net asset value, which may increase investors’ risk of loss. At the time of sale, an investor’s shares may have a market price that is above or below the Fund’s NAV.

No Guarantee: There is no guarantee that the Fund will meet its objective.

Prospectus: For additional information on risks, please see the Fund’s prospectus. The Fund may not be suitable for all investors.

Value of a $10,000 Investment Since Inception at Net Asset Value

The chart above represents historical performance of a hypothetical investment of $10,000 over the life of the Fund, assuming reinvestment of distributions. Past performance does not guarantee future results.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

​Virtus Newfleet Multi-Sector Bond ETF (NFLT)

The Virtus Newfleet Multi-Sector Bond ETF (the “Fund”) seeks to provide a high level of current income and, secondarily, capital appreciation.

How did the markets perform during the Fund’s fiscal year ended October 31, 2023?

As the end of 2023 approached, economic transitions were proceeding across the globe. China was struggling with a slowing economy amid calls for more stimulus, despite having ended its strict zero-COVID policies earlier in the year. Europe, too, was wrestling with a slowing economy and inflation that remained above official targets. In the meantime, the U.S. economy proved remarkably resilient – unlike other major world economies, it defied expectations of a slowdown, leading to a growing consensus that the Federal Reserve (the Fed) might be able to pull off the often-elusive soft landing. The main risk to this scenario remained the unpredictable cumulative effect of 18 months of monetary tightening on the economy. Because monetary policy works on the economy with a lag, it presents a challenge to central bankers who are trying to return inflation to target without the associated economic pain of higher interest rates.

During the 12 months ended October 31, 2023, the Fed raised its main policy interest rate by 2.25% in its continuing fight to tame inflation. This resulted in significant progress on headline inflation readings as supply chains healed, demand shifted from goods to services, and energy prices rebalanced. Core readings of inflation, however, remained stubbornly above targets at the end of the period. That said, market expectations held that most major global central banks were approaching the end of their interest rate increases. We believe evidence of this could be found in the Fed’s most recent summary of economic projections, which indicated one more rate increase. The Bank of England (BOE) paused its rate hikes during the period, while the European Central Bank (ECB) signaled a pause. However, market expectations of a quick reversal of tighter policy moderated, and the higher-for-longer narrative was taking hold by the end of the fiscal year. The Fed tamped down expectations of rapid rate cuts in 2024 and 2025, and the ECB and BOE remained committed to the inflation fight, which could lead to their rates staying elevated for longer as well. As the fiscal year came to an end, it was clear that there was still work to be done on the inflation front.

Despite the volatility during the fiscal year, financial market performance was resilient, with most risk assets outperforming U.S. Treasuries. The U.S. Treasury yield curve shifted higher during the period and remained inverted as of October 31, 2023. The 2-year Treasury yield increased 0.60%, the 5-year Treasury yield increased by 0.62%, the 10-year Treasury yield increased by 0.88%, and the 30-year Treasury yield moved 0.93% higher.

What factors affected the Fund’s performance during its fiscal year?

For the fiscal year ended October 31, 2023, the Fund’s total return based on market price was 4.70%. The Fund’s total return based on net asset value was 4.56%. For the same period, the Fund’s benchmark, the Bloomberg U.S. Aggregate Bond Index, returned 0.36%.

The Fund outperformed its benchmark for the fiscal year. The Fund’s underweight to U.S. Treasuries contributed to relative performance during the period. Allocation and positioning within corporate high yield had a positive impact on performance for the 12-month period. The allocations to emerging markets high yield and high yield bank loans, as well as issue selection within investment grade corporate bonds, also contributed to relative performance.

The Fund’s duration, or sensitivity to changes in interest rates, and yield curve positioning within U.S. Treasuries detracted from performance. The overweight to asset-backed securities detracted during the period, however selection within the sector was positive. Selection within emerging markets securities and high yield bank loans also had a negative impact on absolute performance during the period.

The preceding information is the opinion of the investment adviser and sub-adviser. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Statements of fact are from sources considered reliable, but the investment adviser makes no representation or warranty as to their completeness or accuracy. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus Newfleet Multi-Sector Bond ETF (continued)

Performance as of 10/31/2023

 

1The Bloomberg U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

2August 10, 2015.

Performance data quoted represents past performance and past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. Returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. For the most current month-end performance data please visit www.virtusetfs.com or call toll free (800) 243-4361. Market price returns are based on the mid-point of the highest bid and lowest offer for Fund shares as of the scheduled close of regular trading on the New York Stock Exchange Arca (“NYSE”), ordinarily 4:00 p.m. Eastern time, on each day during which the NYSE is open for trading, and do not represent the returns an investor would receive if shares were traded at other times.

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

ABS/MBS: Changes in interest rates can cause both extension and prepayment risks for asset- and mortgage-backed securities. These securities are also subject to risks associated with the repayment of underlying collateral.

Bank Loans: Loans may be unsecured or not fully collateralized, may be subject to restrictions on resale and/or trade infrequently on the secondary market. Loans can carry significant credit and call risk, can be difficult to value and have longer settlement times than other investments, which can make loans relatively illiquid at times.

Market Price/NAV: Shares of ETFs often trade at a discount to their net asset value, which may increase investors’ risk of loss. At the time of sale, an investor’s shares may have a market price that is above or below the Fund’s NAV.

No Guarantee: There is no guarantee that the Fund will meet its objective.

Prospectus: For additional information on risks, please see the Fund’s prospectus. The Fund may not be suitable for all investors.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

​Virtus Newfleet Multi-Sector Bond ETF (continued)

Value of a $10,000 Investment Since Inception at Net Asset Value

The chart above represents historical performance of a hypothetical investment of $10,000 over the life of the Fund, assuming reinvestment of distributions. Past performance does not guarantee future results.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus Private Credit Strategy ETF (VPC)

The Virtus Private Credit Strategy ETF (the “Fund”) strives to deliver an alternative source of yield to traditional fixed income by focusing on the private credit market, particularly companies involved in lending to non-investment grade, small- to mid-sized U.S. companies.

The Fund seeks to track the investment results that correspond, before fees and expenses, of the Indxx Private Credit Index (the Index), which provides passive exposure to U.S.-listed instruments that emphasize private credit, including business development companies (BDCs) and closed-end funds (CEFs).

For the fiscal year ended October 31, 2023, the Fund’s total return based on market price was 11.38%. The Fund’s total return based on net asset value was 11.22%. The Index returned 11.95% for the same period.

One of the top contributors to Fund performance for the 12-month period was Nuveen Credit Strategies Income Fund (JQC), a closed-end management investment fund. The Fund invests in adjustable-rate loans, primarily secured senior loans and other debt instruments. JQC’s primary investment objective is high current income, and its secondary objective is total return.

Another top holding was New Mountain Finance Corp. (“New Mountain”), a traded BDC that invests in upper middle-market companies located in the U.S. New Mountain targets companies operating in the health care, software, and business services sectors. New Mountain’s portfolio is made up of senior secured first-lien and second-lien term loans and subordinated debt.

BlackRock Floating Rate Income Trust (BGT) also made a positive contribution to Fund performance. The investment objective of BGT is to provide a high level of current income. Its secondary objective is to seek the preservation of capital to the extent consistent with its primary objective.

Top detractors from Fund performance included BlackRock Income Trust, Inc. (BKT), a closed-end investment fund. Its investment objective is to provide total return through a combination of current income and capital appreciation. BKT seeks to achieve its investment objective by investing at least 65% of its assets in mortgage-backed securities. At least 80% of BKT’s assets are invested in securities that are issued or guaranteed by the U.S. government or one of its agencies or instrumentalities.

TriplePoint Venture Growth BDC Corp. (TPVG) also detracted from returns. TPVG is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940. TPVG is focused on technology, life sciences, and other high growth industries backed by leading venture capital investors with established track records.

Another leading detractor was Prospect Capital Corp., an externally managed business development company that primarily provides senior debt and equity investments to companies operating in the lower middle market. The firm provides debt and equity financing for buyout, growth, development, and recapitalization. It acts as a co-investor and takes a controlling interest in the companies in its portfolio.

The preceding information is the opinion of the investment adviser. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Statements of fact are from sources considered reliable, but the investment adviser makes no representation or warranty as to their completeness or accuracy. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

Performance as of 10/31/2023

 

1 The Indxx Private Credit Index is an index of listed business development companies (“BDCs”) and closed end funds (“CEFs”) with a private credit focus. The Index is designed to serve as a broad-based benchmark for long-only investments in private credit. The Index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

2February 7, 2019.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus Private Credit Strategy ETF (continued)

Performance data quoted represents past performance and past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. Returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. For the most current month-end performance data please visit www.virtusetfs.com or call toll free (800) 243-4361. Market price returns are based on the mid-point of the highest bid and lowest offer for Fund shares as of the scheduled close of regular trading on the New York Stock Exchange Arca (“NYSE”), ordinarily 4:00 p.m. Eastern time, on each day during which the NYSE is open for trading, and do not represent the returns an investor would receive if shares were traded at other times.

Private Credit Funds: Private credit funds that invest in closed-end funds and business development companies bear the risk of these underlying assets, including liquidity, industry, currency, valuation and credit risks.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

Passive Strategy/Index Risk: A passive investment strategy seeking to track the performance of the Underlying Index may result in the fund holding securities regardless of market conditions or their current or projected performance. This could cause the Fund’s returns to be lower than if the Fund employed an active strategy.

Fund of Funds: Because the Fund can invest in other funds, it indirectly bears its proportionate share of the operating expenses and management fees of the underlying fund(s).

Correlation to Index: The performance of the Fund and its index may vary somewhat due to factors such as Fund flows, transaction costs, and timing differences associated with additions to and deletions from its index.

Closed-End Funds: Closed-end funds may trade at a discount from their net asset values, which may affect whether the fund will realize gains or losses. They may also employ leverage, which may increase volatility.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Market Price/NAV: Shares of ETFs often trade at a discount to their net asset value, which may increase investors’ risk of loss. At the time of sale, an investor’s shares may have a market price that is above or below the Fund’s NAV.

No Guarantee: There is no guarantee that the Fund will meet its objective.

Prospectus: For additional information on risks, please see the Fund’s prospectus. The Fund may not be suitable for all investors.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus Private Credit Strategy ETF (continued)

Value of a $10,000 Investment Since Inception at Net Asset Value

The chart above represents historical performance of a hypothetical investment of $10,000 over the life of the Fund, assuming reinvestment of distributions. Past performance does not guarantee future results.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus Real Asset Income ETF (VRAI)

The Virtus Real Asset Income ETF (the “Fund”) aims to provide passive exposure to high income-producing real asset securities. The Fund seeks to track the investment results, before fees and expenses, of the Indxx Real Asset Income Index (the Index), which is composed of U.S.-listed securities with a history of dividend growth across three real asset categories:

•real estate, including real estate development and real estate investment trusts (REITs);

•natural resources, including oil, coal, precious metals, steel, agricultural commodities, and forest products; and

•infrastructure, including electric utilities, telecommunications, transportation, and master limited partnerships (MLPs).

For the fiscal year ended October 31, 2023, the Fund’s total return based on market price was -2.32%. The Fund’s total return based on net asset value was -2.15%. The Index returned -2.25% during the same period.

The top contributors to Fund performance for the fiscal year included integrated energy companies, gold miners, and producers of base metals. One of the leading performers was DRDGOLD Ltd. (“DRD”), which engages in the business of retreatment of surface gold. DRD’s assets include underground mines and surface retreatment operation and exploration activities in South Africa.

Gold Fields Ltd. (“Gold Fields”), a gold mining company, also made a positive contribution to Fund returns. The company engages in the production of gold and the operation of mines. Its operating mines are located in Australia, Ghana, Peru, and South Africa. Gold Fields’ annual production is approximately 2.0 million gold equivalent ounces.

Petroleo Brasileiro SA (“Petrobras”) also contributed positively to Fund performance. The Brazil corporation operates in an integrated and specialized manner in the oil, natural gas, and energy industry. Petrobras has expertise in exploration and production due to decades of development in the Brazilian basins, especially in deep and ultra-deep waters. Petrobras operates oil tankers, distribution pipelines, marine, river and lake terminals, thermal power plants, fertilizer plants, and petrochemical units.

The largest detractors from Fund performance for the 12-month period were stocks involved in real estate, communication services, and utilities. Lumen Technologies, Inc. (formerly CenturyLink), an investment holding company, was a top detractor. The company engages in the provision of integrated communications to residential and business customers.

NextEra Energy Partners LP, a growth-oriented limited partnership formed by NextEra Energy, also detracted from Fund performance. NextEra Energy Partners acquires, manages, and owns contracted clean energy projects with stable, long-term cash flows.

Another top detractor was Medical Properties Trust, Inc., a self-advised real estate investment trust that engages in the investment, acquisition, and development of net-leased health care facilities.

The preceding information is the opinion of the investment adviser. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Statements of fact are from sources considered reliable, but the investment adviser makes no representation or warranty as to their completeness or accuracy. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

Performance as of 10/31/2023

 

1 The Indxx Real Asset Income Index tracks the performance of US-listed securities in the Real Asset space (Real Estate, Natural Resources and Infrastructure) emphasizing dividend growth. The Index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

2February 7, 2019.

Performance data quoted represents past performance and past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. Returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. For the most current month-end performance data please visit www.virtusetfs.com or call toll free (800) 243-4361. Market price returns are based on the mid-point of the highest bid and lowest offer for Fund shares as of the scheduled close of regular trading on the New York Stock Exchange Arca (“NYSE”), ordinarily 4:00 p.m. Eastern time, on each day during which the NYSE is open for trading, and do not represent the returns an investor would receive if shares were traded at other times.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

​Virtus Real Asset Income ETF (continued)

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Equity REITs: The Fund may be negatively affected by factors specific to the real estate market, including interest rates, leverage, property, and management.

Natural Resources: A fund that focuses its investments in natural resources companies will be more sensitive to conditions affecting their business or operations.

Infrastructure: A fund that focuses its investments in infrastructure-related companies will be more sensitive to conditions affecting their business or operations.

MLPs: Investments in Master Limited Partnerships may be adversely impacted by tax law changes, regulation, or factors affecting underlying assets.

Passive Strategy/Index Risk: A passive investment strategy seeking to track the performance of the Underlying Index may result in the fund holding securities regardless of market conditions or their current or projected performance. This could cause the Fund’s returns to be lower than if the Fund employed an active strategy.

Correlation to Index: The performance of the Fund and its index may vary somewhat due to factors such as Fund flows, transaction costs, and timing differences associated with additions to and deletions from its index.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Market Price/NAV: Shares of ETFs often trade at a discount to their net asset value, which may increase investors’ risk of loss. At the time of sale, an investor’s shares may have a market price that is above or below the Fund’s NAV.

No Guarantee: There is no guarantee that the Fund will meet its objective.

Prospectus: For additional information on risks, please see the Fund’s prospectus. The Fund may not be suitable for all investors.

Value of a $10,000 Investment Since Inception at Net Asset Value

The chart above represents historical performance of a hypothetical investment of $10,000 over the life of the Fund, assuming reinvestment of distributions. Past performance does not guarantee future results.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus WMC International Dividend ETF (VWID)

The Virtus WMC International Dividend ETF (the “Fund”) is an actively managed ETF designed to generate a higher dividend yield than is generally provided by equity markets in developed ex-U.S. countries, as measured by the MSCI World ex USA Index, over a full market cycle within a framework that attempts to manage portfolio risk. It targets a below market beta relative to core equities. Securities that end up in the portfolio are selected because their high yield characteristics help meet the Fund’s income objective or their ability to help diversify risks in the portfolio. The names that help diversify risk in the portfolio are often names that 1) are members of the core index but not the high yield benchmark and 2) exhibit characteristics that high yielding stocks in aggregate tend to lack, such as growth.

During the period, the high yielding non-US equities, as measured by the MSCI World ex USA High Dividend Yield Index, posted positive absolute returns and outperformed core equities (as measured by MSCI World ex USA Index, respectively). Certain higher yielding and deeper value stocks, which generally make up a larger portion of the equity income universe, outperformed core indexes during the period. Meanwhile, higher growth stocks including technology companies, which are often underrepresented in the equity income universe as these companies tend to not pay dividends, lagged core equity indexes. This backdrop resulted in the strong relative outperformance of dividend paying stocks relative to core equities during the period.

During the period presented, the Fund’s NAV rose by +17.67%, underperforming its benchmark, the MSCI World ex USA High Dividend Yield Index (Net), which rose by +18.67%.

Sector allocation, which is a fallout of our portfolio construction process as we look to provide above market yield over time through a broadly diversified portfolio, detracted from relative results during the period. Our overweight exposures to the information technology and communication services sectors and an underweight exposure to the consumer discretionary sector detracted from relative results during the period. This was partially offset by stronger relative results from our underweight exposure to the consumer staples sector and an overweight exposure to the industrials sector.

Security selection detracted from relative results during the period. Our out-of-benchmark positions in Trend Micro, Inc. (information technology) and Algonquin Power & Utilities Corp. (utilities) and an overweight position in British American Tobacco PLC (consumer staples) were the three largest relative detractors over the period. Our underweight position in Anglo American (materials) and our overweight positions in Stellantis NV (consumer discretionary) and Aker BP ASA (energy) were the largest relative contributors during the period. Anglo American was sold during the reporting period.

From a regional perspective, exposures in North America, United Kingdom and Developed Asia Pacific ex Japan detracted from relative results. This was partially offset by exposures in Developed Europe ex UK and the Middle East, which contributed to relative performance.

The preceding information is the opinion of the investment adviser and sub-adviser. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Statements of fact are from sources considered reliable, but the investment adviser makes no representation or warranty as to their completeness or accuracy. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

Performance as of 10/31/2023

 

1The MSCI World Ex USA High Dividend Yield Index (net) is based on the MSCI World Index, its parent index, and includes large and mid cap stocks across 48 Developed Markets (DM) and Emerging Market (EM) countries. The index is designed to reflect the performance of equities in the parent index (excluding REITs) with higher dividend income and quality characteristics than average dividend yields that are both sustainable and persistent. The index also applies quality screens and reviews 12-month past performance to omit stocks with potentially deteriorating fundamentals that could force them to cut or reduce dividends. The index is calculated on a total return basis with net dividends reinvested; it is unmanaged; its returns do not reflect any fees, expenses or sales charges; and it is not available for direct investment.

2October 10, 2017.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

Virtus WMC International Dividend ETF (continued)

Performance data quoted represents past performance and past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. Returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. For the most current month-end performance data please visit www.virtusetfs.com or call toll free (800) 243-4361. Market price returns are based on the mid-point of the highest bid and lowest offer for Fund shares as of the scheduled close of regular trading on the Cboe BZX Exchange, Inc. (“Cboe”), ordinarily 4:00 p.m. Eastern time, on each day during which the Cboe is open for trading, and do not represent the returns an investor would receive if shares were traded at other times.

Dividend Paying Securities: Issuers that have paid regular dividends or distributions may not continue to do so in the future and can fall out of favor with the market, which may cause the portfolio to underperform. Securities with higher dividend yields can be sensitive to interest rate movements: when interest rates rise, the prices of these securities may fall.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Market Price/NAV: Shares of ETFs often trade at a discount to their net asset value, which may increase investors’ risk of loss. At the time of sale, an investor’s shares may have a market price that is above or below the Fund’s NAV.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

Geographic Concentration: Events negatively affecting the fiscal stability of a state, country, or region will cause the value of the Fund’s shares to decrease. Because the Fund concentrates its assets in a state, country, or region, the Fund is more vulnerable to those areas’ financial, economic, or other political developments.

Equity REITs: The Fund may be negatively affected by factors specific to the real estate market, including interest rates, leverage, property, and management.

Derivatives: Investments in derivatives such as futures, options, forwards, and swaps may increase volatility or cause a loss greater than the principal investment.

No Guarantee: There is no guarantee that the Fund will meet its objective.

Prospectus: For additional information on risks, please see the Fund’s prospectus. The Fund may not be suitable for all investors.

Value of a $10,000 Investment Since Inception at Net Asset Value

The chart above represents historical performance of a hypothetical investment of $10,000 over the life of the Fund, assuming reinvestment of distributions. Past performance does not guarantee future results.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

InfraCap MLP ETF (AMZA)

Management’s Discussion of Operations

Overview

InfraCap MLP ETF (the “Fund”) is an actively-managed portfolio of midstream energy master limited partnerships (“MLPs”) and related general partners. The Fund may utilize options strategies and leverage to enhance income and total return.

The Fund focuses on the midstream MLP sector because most of these companies have a long-term history of relatively stable and growing cash distributions. These companies are typically involved in the production, gathering, transportation, storage, and processing of oil, natural gas, natural gas liquids, and refined products.

Market Update

In the fiscal year ended October 31, 2023, the Fund’s total return based on market price was 12.34%. The Fund’s benchmark index, the Alerian MLP Infrastructure Index, returned 15.67% during same period, while the S&P 500 Index returned 10.14%.

Fiscal year 2023 was supportive for midstream companies. Energy prices remained elevated over the period, and WTI Crude Oil prices were $80.44 as of October 31, 2023. The return to normal business activity and OPEC+ agreements constraining supply drove oil prices higher and supported MLP stock prices as there is a long-term need for North American oil and gas. Midstream companies benefited from the defensive nature of their business model with fee based contracts and added protections like minimum volume commitments. Many midstream companies have diversified customer bases or significant exposure to investment grade counterparties. During the earnings periods, many management teams remained conservative, continuing to protect their balance sheets with cost saving initiatives and deferring capital spending. Midstream companies took steps to strengthen their financial flexibility, including streamlined maintenance capital costs and operating expenses. Cash flows remained stable during the fiscal year, with some MLPs pursuing shareholder friendly actions such as buy-backs, increased distributions or special distributions.

Over the past few years, midstream companies successfully transitioned to having positive free cash flow, sustainable dividends, and reasonable leverage levels. Earnings, which historically were low in the MLP space, are now substantially positive and companies trade at reasonable price to earnings ratios of less than 12x. Additionally, debt to EBITDA, a measure for leverage, has fallen from an average of 4.5x to 3.6x. We believe these developments could generate durable earnings and consistent distributions in the midstream energy space.

During the period, two of the Fund’s stronger performing issuers were Plains All American Pipeline LP (“Plains”) and NuStar Energy LP (“NuStar”). Plains is a publicly traded master limited partnership that owns and operates midstream energy infrastructure and provides logistics services for crude oil, natural gas liquids and natural gas. Plains owns an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and NGL producing basins and transportation corridors and at major market hubs in the United States and Canada. NuStar is a publicly traded master limited partnership. The company is one of the largest independent liquids terminal and pipeline operators in the United States. During the period, and Plains and NuStar were up 36.78% and 17.06%, respectively.

Two of the weaker performing positions during the period were New Fortress Energy Inc. (“Fortress”) and Kinder Morgan Inc. (“Kinder”). Kinder Morgan is one of the largest energy infrastructure companies in North America. Kinder has interest in or operates approximately 82,000 miles of pipelines and 140 terminals. The pipelines transport natural gas, gasoline, crude oil, carbon dioxide (CO2) and other products. The terminals store and handle renewable fuels, petroleum products, chemicals, vegetable oils and other products. Fortress is a global natural gas supply and infrastructure company with a mission to provide capital, expertise and vision to address this problem while also making positive and meaningful impacts on communities and the environment. Fortress has a focus on becoming one of the world’s leading producers of carbon-free energy (specifically through low-cost green hydrogen). During the period, Fortress and Kinder were down 39.69% and 4.60%, respectively.

During the period, despite elevated commodity prices, U.S. producers maintained capital discipline and kept their production outlook largely unchanged.

Distribution Payments

In the fiscal year ended October 31, 2023, the Fund made distribution payments in the amount of $0.22 per share in November and December of 2022, while paying monthly distribution payments in 2023 of $0.24 per share for the remainder the fiscal year.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

InfraCap MLP ETF (continued)

While the Fund plans to continue paying monthly distribution, distribution are not guaranteed. The Fund seeks to maintain relatively stable monthly distributions although the amount of income earned by the Fund varies from period-to-period. To achieve this objective, the Fund may distribute less than the full amount of income earned during a specific period, preserving income for distribution in future periods. Consequently, the amount of income distributed in any one period may be more or less than the actual amount of income earned in that period.

Use of Leverage

The Fund may use leverage as described in its prospectus. The application of leverage positively contributed to Fund performance during the period. The Fund’s cost of borrowing increased during the fiscal year. The Fund entered into Lending Agreements (each, an “Agreement”) with certain commercial banks (the “Banks”) that allow the Fund to borrow cash from the Banks. Borrowings under the Agreements are collateralized by investments in the Fund. If the Fund defaults with respect to any of its obligations under the Agreements, the Banks may foreclose on assets of the Fund and/or the Fund may be required to repay immediately, in part or in full, the loan balance outstanding under the Agreement, necessitating the sale of securities at potentially inopportune times. Interest is charged at the OBFR (Overnight Bank Funding Rate) plus an additional percentage rate on the amount borrowed. Each Agreement has an on-demand commitment term. As of October 31, 2023, the current cost is daily OBFR plus 1.10%, which resets daily. The yield on the Fund’s benchmark index, the Alerian MLP Infrastructure Index, was 7.50% on September 29, 2023.

Use of Options

The Fund seeks to generate additional income for distribution to investors by writing call and put options. The primary activity is writing “covered” call options on positions held by the Fund. However, due to high volatility within the asset class at times during the period, market conditions for covered call options were unfavorable to Fund performance for parts of the fiscal year and as a result, the Fund’s manager reduced the frequency of this activity.

During the fiscal year, the Fund’s emphasis was on writing short-duration covered call options, and the average maturity of the option portfolio was less than 30 days. The Fund’s manager used these option strategies to seek to maximize the capture of premium decay and manage short term risks.

We believe consolidation within the MLP sector enhanced the liquidity in the single-stock options market as larger MLPs typically have more liquid markets for issued options.

Outlook

Midstream MLP companies generally have stable business, however, large fluctuations in commodity prices (as witnessed during the Covid-19 pandemic) can have material impacts on their free cash flows. Nonetheless, fee-based contracts utilized in the midstream MLP sector have helped companies protect their cash flow generation. We will continue to monitor rising or falling commodity prices, OPEC+ induced supply shocks, and macroeconomic factors related to infrastructure spending and Federal Reserve policy. Further, we expect US producers to remain disciplined and OPEC+ to slowly increase its output.

Based on our crude supply models, we still believe there is a structural deficit due to lower PMI data from China and weaker U.S. demand. We still expect general upward price pressure due to OPEC supply cuts and we believe that U.S. producers will not disrupt the cartel by increasing production. A new consideration for the next 12 months is the ongoing conflict between Israel and Hamas. While this is not our base case, there are increased risks to the production and distribution of crude oil and natural gas. Companies with pipeline and storage facilities with connectivity to export facilities for NGLs, refined products, and crude will benefit as the U.S. transitions to more exports. In our view, companies with integrated footprints spanning from producing regions to exporting facilities are best positioned with a natural hedge against these upstream and downstream fluctuations. Importantly, many midstream companies implemented measures during previous quarters to protect their balance sheets with cost saving initiatives and cancellations of growth and capital spending. In 2024, we expect midstream companies to continue transitioning to share buybacks and modest distribution growth.

We continue to believe that there will be significant asset sales and acquisitions of entire companies over the next year as private equity firms and strategic acquirers take advantage of consolidations in midstream assets. We continue to be positioned to take advantage of M&A activity that we believe may occur in the near future. In addition, we believe proposed increases in corporate taxes will decrease the advantages of MLP C-Corp conversions.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

InfraCap MLP ETF (continued)

The Fund also maintains positions in large capitalization integrated pipelines and storage companies with stronger contractual protection and visible market demand. We believe these companies are less vulnerable during heightened periods of price volatility and are best suited to take advantage of opportunities that exist in the current market environment.

We expect upward price pressure on commodities and $80-100 oil prices in 2024 due to OPEC supply cuts founded on a belief that disciplined U.S. producers will not disrupt the cartel by increasing production. A key focus in 2023 has been the current energy crisis impacting much of Europe. We believe companies with pipeline and storage facilities with connectivity to export facilities for NGLs, refined products, and crude will continue to benefit as global demand increases. Companies with integrated footprints spanning from producing regions to exporting facilities are advantageously positioned with a natural hedge against these upstream and downstream fluctuations.

We believe many management teams of midstream companies continue to maintain disciplined and conservative efforts to protect their balance sheet with cost saving initiatives and cancellations of growth and capital spending. Over the fiscal period, we have seen midstream companies pursue shareholder friendly corporate actions, including share buybacks and dividend increases. We believe these shareholder friendly activities will continue in 2024 as energy prices remain elevated.

The preceding information is the opinion of the investment adviser and sub-adviser. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Statements of fact are from sources considered reliable, but the investment adviser and sub-adviser make no representation or warranty as to their completeness or accuracy. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized. This discussion includes information based on data and calculations sourced from Bloomberg and index constituents. While we believe that the data is reliable, we have not sought, nor have we received, permission from any third-party to include their information.

Performance as of 10/31/2023

 

1 The Alerian MLP Infrastructure Index is a composite of energy infrastructure Master Limited Partnerships (MLPs), whose constituents earn the majority of their cash flow from the transportation, storage, and processing of energy commodities. The index is calculated using a float-adjusted, capitalization-weighted methodology on a total-return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

2 The S&P 500^® Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

3October 1, 2014.

Performance data quoted represents past performance and past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. Returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. For the most current month-end performance data please visit www.virtusetfs.com or call toll free (800) 243-4361. Market price returns are based on the mid-point of the highest bid and lowest offer for Fund shares as of the scheduled close of regular trading on the New York Stock Exchange Arca (“NYSE”), ordinarily 4:00 p.m. Eastern time, on each day during which the NYSE is open for trading, and do not represent the returns an investor would receive if shares were traded at other times.

Management’s Discussion of Fund Performance (unaudited) (continued)

October 31, 2023

​InfraCap MLP ETF (continued)

MLPs: Investments in Master Limited Partnerships may be adversely impacted by tax law changes, regulation, or factors affecting underlying assets.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Interest Rate Risk: As yield-based investments, MLPs carry interest rate risk and may underperform in rising interest rate environments. Additionally, when investors have heightened fears about the economy, the risk spread between MLPs and competing investment options can widen, which may have an adverse effect on the stock price of MLPs. Rising interest rates may increase the potential cost of MLPs financing projects or cost of operations, and may affect the demand for MLP investments, either of which may result in lower performance by or distributions from the Fund’s MLP investments.

Leverage: When a fund leverages its portfolio, the value of its shares may be more volatile and all other risks may be compounded.

Derivatives: Investments in derivatives such as futures, options, forwards, and swaps may increase volatility or cause a loss greater than the principal investment.

Non-Diversified: The Fund is non-diversified and may be more susceptible to factors negatively impacting its holdings to the extent that each security represents a larger portion of the Fund’s assets.

Short Sales: The Fund may engage in short sales, and may experience a loss if the price of a borrowed security increases before the date on which the Fund replaces the security.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Market Price/NAV: Shares of ETFs often trade at a discount to their net asset value, which may increase investors’ risk of loss. At the time of sale, an investor’s shares may have a market price that is above or below the Fund’s NAV.

No Guarantee: There is no guarantee that the Fund will meet its objective.

Prospectus: For additional information on risks, please see the Fund’s prospectus. The Fund may not be suitable for all investors.

Value of a $10,000 Investment Since Inception at Net Asset Value

The chart above represents historical performance of a hypothetical investment of $10,000 over the life of the Fund, assuming reinvestment of distributions. Past performance does not guarantee future results.

Portfolio Composition (unaudited)

October 31, 2023

Asset Allocation as of 10/31/2023 (based on net assets)

 

*Amounts represent investments in particular sectors. No industry within these sectors represented more than 25% of the Fund’s total assets at the time of investment.

Portfolio Composition (unaudited) (continued)

October 31, 2023

 

*Amount rounds to less than 0.05%.

Portfolio Composition (unaudited) (continued)

October 31, 2023

Asset Allocation as of 10/31/2023 (based on net assets)

Shareholder Expense Examples (unaudited)

October 31, 2023

We believe it is important for you to understand the impact of costs on your investment. All funds have operating expenses. As a shareholder of the InfraCap REIT Preferred ETF, Virtus InfraCap U .S. Preferred Stock ETF, Virtus LifeSci Biotech Clinical Trials ETF, Virtus LifeSci Biotech Products ETF, Virtus Newfleet Multi-Sector Bond ETF, Virtus Private Credit Strategy ETF, Virtus Real Asset Income ETF, Virtus WMC International Dividend ETF and InfraCap MLP ETF (each, a “Fund”) you may incur two types of costs: (1) transaction costs, which include brokerage commissions that you pay when purchasing or selling shares of a Fund; and (2) ongoing costs, which include advisory fees and other fund expenses, if any . The following example is intended to help you understand your ongoing costs (in dollars and cents) of investing in a Fund and to compare these costs with the ongoing costs of investing in other funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held throughout the entire period (May 1, 2023 to October 31, 2023).

Actual expenses

The first line under each Fund in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your Fund under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical example for comparison purposes

The second line under each Fund in the table provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in each Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of Fund shares. Therefore, the second line under each Fund in the table is useful in comparing ongoing Fund costs only and will not help you determine the relative total costs of owning different funds.

In addition, if these transactional costs were included, your costs would have been higher.

 

1Assuming 5% return before expenses.

2Annualized expense ratios reflect expenses net of waived fees or reimbursed expenses, if applicable.

3Expenses are calculated using each Fund’s annualized expense ratio, multiplied by the average account value for the period, multiplied by 184/365 (to reflect the six-month period).​

Schedule of Investments — InfraCap REIT Preferred ETF

October 31, 2023