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February 26, 2020

With equity markets at or near all-time highs, the current economic expansion spanning the longest time-period in modern history, and US equity index valuations above their long-term averages, investors may rightly question whether it is prudent to invest in the stock market.

Individuals may fear that they are investing in the equity market at the top and be concerned about declines that may significantly decrease their wealth.

The Armor US Equity Index ETF (ARMR) may be an attractive option for individuals who are looking for a defensive equity strategy that seeks to lower equity market risk.

US Equity Market Near All-Time Highs
On 12/31/19, the S&P 500 closed near its all-time high that it reached just a few days earlier. Since the bottom of the Great Financial Crisis (3/09), the S&P 500 has advanced nearly 500% through 12/31/19.

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Source: S&P Dow Jones Indices. Past performance does not guarantee future results. The referenced index is shown for informational purposes only and is not meant to represent the Fund. Investors cannot directly invest in an index.

Aging Economic Expansion
As the chart below highlights, the current economic expansion, at 126 months as of the end of 2019, is the longest in modern history. Our research, using dates from the National Bureau of Economic Research (NBER), shows that since World War II, declines in the S&P 500 associated with recessions have averaged 31%.

We are not economists and are not trying to forecast a recession. However, one will likely occur in the future.

armor etf graph

Source: Statista, as of 12/31/19.

Equity Valuations Not Cheap
While not trading at extremes, equity valuations are above their long-term averages. For example, the price-earnings ratio (P/E) of the S&P 500 was over 24.5 at the end of 2019 versus its long-term average of 15.8, according to multpl.com. The index’s price to book ratio (P/B) was 3.7 at the end of 2019 versus its long-term average of 2.8.

All of these factors may make the US equity markets vulnerable to downside risks.

How may investors gain exposure to US equity indices with potentially lower equity market risk and volatility?

Introducing the Armor US Equity Index ETF (ARMR)
The Armor US Equity Index ETF (ARMR) seeks to provide investment returns that, before fees and expenses, correspond generally to the total return performance of the Armor US Equity Index. The index is designed to provide exposure to the sectors of the US equity markets that the fund’s index provider believes are most likely to generate positive returns while providing downside protection and experiencing lower volatility than the S&P 500.

The fund looks to provide exposure to the stock market while focusing on investment risk reduction or mitigation.

Sector ETFs are utilized to gain equity sector exposure.

Summary
We believe that fear of equity market declines should not prevent individuals from investing in the stock market. However, we believe that investors should allocate at least a portion of their portfolios to a defensive equity strategy which has the potential to reduce equity market risk and volatility.

ARMR may be an attractive vehicle for individuals seeking a defensive equity strategy.

Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s prospectus and Summary Prospectus, which may be obtained by visiting https://armoretfs.com/documents. Read the prospectus and Summary Prospectus carefully before investing.

Foreside Fund Services, LLC, distributor.

Investing involves risk, including possible loss of principal. The Fund’s return may not match or achieve a high degree of correlation with the return of the Index. To the extent the Fund’s investments are concentrated in or have significant exposure to a particular issuer, industry or group of industries, or asset class, the Fund may be more vulnerable to adverse events affecting such issuer, industry or group of industries, or asset class than if the Fund’s investments were more broadly diversified. Issuer-specific events, including changes in the financial condition of an issuer, can have a negative impact on the value of the Fund.

A new or smaller fund is subject to the risk that its performance may not represent how the fund is expected to or may perform in the long term. In addition, new funds have limited operating histories for investors to evaluate and new and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies.

Shares are bought and sold at market price (closing price) not net asset value (NAV) and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00pm Eastern Time (when NAV is normally determined) and do not represent the return you would receive if you traded at other times.